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Are Tom Brady and The Patriots Circumventing the Salary Cap?

It’s time to start connecting the dots between Brady’s insanely team-friendly deal and the Patriots’ relationship with his growing TB12 fitness/health brand:

What do you think is the salary cap hit for helping someone build a billion dollar business? The answer is apparently $0, at least judging from the way the NFL has treated the Patriots’ relationship with their franchise QB. Brady may be years away from retiring, but that doesn’t mean he hasn’t spent time plotting his post-NFL career. At this point it appears that career will consist of leading his TB12 health and fitness brand – that he started with his disgraced but talented trainer Alex Guerrero, a.k.a. the first guy to greet Brady after he beat the Falcons – into an international colossus. By the way, notice the official sideline pass and Patriots jacket Guerrero is rocking.

Skeptical? You shouldn’t be. Both the Health & Fitness and Consumer Products sectors are red-hot right now, and if apps like MyFitnessPal are selling for $475 million to Under Armour (think Brady knows anyone there?) and Jessica Alba can turn her startup Honest into a company worth nearly $2 billion, the sky is literally the limit for TB12 (the company).

The same TB12 to which Patriots owner Bob Kraft has provided numerous tangible (and not so tangible) benefits over the years, while simultaneously keeping Brady on the Patriots squad with extremely team-friendly deals. Hmmmm…

The NFL says that the Patriots aren’t violating the salary cap, and the NFLPA concurs. Until their tune changes and that change is put into writing by Park Avenue lawyers charging $1,200 an hour, it can’t be said that they’ve broken the rules. As for whether the arrangement between Brady and Kraft violates the spirit of the salary cap and should in fact be against the rules, you can decide for yourself:

Starting in 2013, Tom Brady signed a series of team-friendly contracts and restructures that have resulted in his being paid significantly less than his true market value. Over the past three years he’s had a cap hit of about $14 million per season from the Patriots if you average his total compensation (including signing bonus). In 2015 that was good enough for 32nd in the league and 16th among QBs, while in 2016 it was 27th in the league, and both Colin Kaepernick and Jay Cutler had bigger numbers.

According to Jason Fitzgerald, NFL Cap Expert and Founder of OverTheCap.com, Brady agreed to lower his take-home from $18 million to $9 million in the 2013 restructure, which resulted in his making approximately $19 million less than Peyton Manning between 2012 and 2015. Brady’s most recent contract extension, signed in March of 2016, is similarly team-friendly, according to Fitzgerald and Andrew Brandt of ESPN and The MMQB.com. Fitzgerald says that the new restructure could save even more for the Patriots over the 2015-2018 time period than the 2012-2015 deals.

Look, we aren’t into breaking down the NFL salary cap any more than you probably are – that’s why we found a couple of experts to do it for us. The point is, over the past few years Tom Brady has voluntarily taken tens of millions less than “comparable” players like Peyton Manning and Drew Brees. He has probably left more money on the table than any elite athlete in the history of American professional sports. On the MMQB, Brandt said that “in 25 years of being on both sides of the business of football and now analyzing it, I have not seen such a harsh discount, with Brady earning roughly $10 million per year below his market value.” He also stated that “Brady’s 2015, 2016 and 2017 compensation levels are true mysteries in the business of football.”

The closest comparisons are probably the team-friendly deals signed by Tim Duncan and Dirk Nowitzki in recent years, but even before his epic comeback against the Falcons en route to his fifth Super Bowl title, it was clear that Brady had regressed less as a player than either of them. In fact, he has actually improved in the past couple of years.

So why would the greatest player in the history of the sport take a pay cut that leaves him making as much as a fourth starter in MLB? That’s where the story gets interesting.

If you take Brady and Bob Kraft at face value, the reason for the voluntary pay cut is some combination of Brady wanting to free up cap room so Belichick could build a Super Bowl-worthy roster around him (see Darrelle Revis in 2014-15 and probably extensions for Hightower and Butler this offseason), Kraft wanting to protect Brady from eventually being cut down the line, and Brady’s willingness to accept up-front guaranteed cash in return for a lower salary overall.

The most common narrative regarding Brady’s below-market contract is that he and Gisele are already so rich that he doesn’t mind playing for less if it means the team will have a better chance at winning another Super Bowl. This is from CBS Sports (referring to executives from rival teams, not the Patriots):

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The idea is that more cash won’t affect his quality of life or legacy one iota, but more rings would. That might be a lovely sentiment, but there’s a reason that mentality hasn’t caught on. Pro athletes don’t think like that. They want to get paid and win. LeBron has enough money for life; would anyone expect him to take anything less than the max in order to help the Cavs’ salary cap?

Interestingly, Bob Kraft says he brought up the idea of a discount contract to Brady. According to him, he broached the subject with Brady on a cross-country flight after the 2013 AFC Championship Game loss and suggested that a good way to ensure that Brady could stay with the team long-term was for him to take a market friendly deal. From Kraft’s own mouth per Gary Dzen of the Boston Globe:

“I was just trying to stay ahead of the curve,” said Kraft. “If we were going to have to pay him elite-quarterback money and have elite-quarterback cap numbers, I just didn’t think we would be able to build a team. We don’t want to have a team where we’re paying 18 to 20 percent to a player on the cap. I wanted to do something elegant that would work for everybody. I had been talking to him off and on for maybe 18 months, about how I wanted him to finish his career here, and about how we both have to be smart about it. I just really want him to end his career a Patriot.”

Translated: he is definitely going to get worse soon, and when he does, we can’t be left in a Kobe/Laker-type situation, paying a washed up ex-star way too much for past performance. Kraft said he didn’t want to have one player earning 18-20% of the cap. What he meant was that he didn’t want to have one player earning 18-20% of the cap when that player is no longer super-elite. Otherwise he never would have paid Brady as an elite player in the first place (because it wouldn’t have fit into his philosophy) and the contract wouldn’t have needed lowering.

Obviously Kraft was wrong (assuming what he told the Globe was true and not just a smoke signal for a secret agreement – obviously I’m skeptical): Brady wasn’t regressing then, and after watching him against the Falcons, I’ll go out on a limb and say he still isn’t now. Players just don’t accept pay cuts before they start regressing. More likely, they demand to get paid like a star after the descent begins, a la Kobe and Peyton Manning.

This CBS Sports article by former agent Joel Corry explains really well just how shocking and out of the ordinary Brady’s deal is.

So we’ve established that Brady has left a lot of money on the table for seemingly little in return. But a quid without a pro or a quo is no big deal, so what about that other part of the story, the part about Bob Kraft and the Patriots helping TB12, and more than just a little bit? Glad you asked.

Bob Kraft has repeatedly called Tom Brady his fifth son, and over the past few years has intervened on Brady’s behalf before the Brookline, MA, planning board to secure the location for Brady’s new mansion, and more importantly, over the same time period has worked below the radar to provide financial, legal, organizational, and reputation assistance to TB12, Tom Brady’s fitness/health/wellness startup. They now even live in the same neighborhood, thanks to Kraft’s lobbying. To quote Kevin Bacon from A Few Good Men, “These are the facts of the case. They are undisputed.”

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TB12 is located in Patriot Place, the complex around Gillette Stadium (you can see close it is to the actual field above) and according to Bob Hohler of the Boston Globe (whose original article is the gold standard on the subject and without whom this piece wouldn’t exist) has a services contract with the New England Patriots for an unspecified amount to work with their players.

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When news of the original team-friendly contract began trickling out, many people suspected that Brady had made a side deal with Kraft to be able to buy into the team at a later date, perhaps at a pre-arranged price. This may still be true, but all indications from Brady are that he considers TB12 his post-career mission, and that includes a hell of a lot more than one clinic in sleepy Foxboro, MA.

The possibilities are endless. The website is already up. An app should follow. What about private clubs in tony locales or rich consulting contracts with dozens of North American pro teams? What about a paid fitness app that is downloaded by half of all high school football players in the country? How about a meal plan app that can be sold to anyone delusional enough to think they have what it takes to eat like Tom?

The guy already has a $200 “nutrition manual” that sold out on pre-order. This is also Tom Fucking Brady we’re talking about – the chances he half-asses this thing are nil. That alone doesn’t guarantee success, but if he goes out and does smart things like getting Bob Kraft – a powerful billionaire with a serious interest in protecting his own reputation – to publicly attach himself to the project, he will improve his chances immeasurably.

Kraft helping Brady get this project off the ground could be his version of letting him buy into the team. Patriots General Counsel Robyn Glaser is also the Counsel at TB12. It is unclear what she is paid for in this role, if anything, but we know from emails that Brady turned over as part of the Deflategate investigation that she offered “to be involved as much, or as little, as [Brady] wanted,” with TB12.

If Glaser is not being compensated for her work at TB12, Bob Kraft is providing top-notch legal advice for free to Brady’s startup fitness brand. That alone could be worth equity on the open market. He also has provided prime office space (the Patriots say Brady pays “market rent”) and has already become the TB12 center’s biggest customer, supplying it with streams of players to treat and key early cash flow.

There is also an intangible (but even more valuable) service Kraft and the Patriots provide TB12 by allowing it to be associated with the team. Think about it: physical therapy centers pay other teams lots of money to be their “Official Physical Therapy Provider” while TB12 basically gets that association free of charge. It screams “this company is legitimate” to the broader business community, as well as the general public. Kraft can also pave relationships with the investors, VCs, device makers, and institutional media contacts that TB12 will need help from along the way. There is almost no limit to the help someone as well-connected as Kraft can provide to a company like TB12.

After all, this is not a normal player-owner relationship. When Brady emailed the Patriots (Glaser) about an overdue invoice for TB12 services, Kraft himself wrote back promising to pay right away, and treating Brady with the kind of deference you would expect him to reserve for President Trump. Or Vladimir Putin.

Does Brady get paid to keep himself in shape? (It kind of sounds like the answer is yes on that one.) Is there any limit to what the NFL would be okay with in terms of a team paying a company owned by a current player for “services”? What if the Patriots helped Brady set up a concession company, and then signed it to a multi-year deal worth tens of millions of dollars to provide food at Gillette Stadium? Granted, the average Pats fan isn’t looking for avocado ice cream to go alongside their beer, but you get the point.

And how would that be different from what’s going on now? Would the concession thing be against the salary cap? The NFL told the Boston Globe the arrangement does not violate the salary cap, but would there be a dollar amount that would trigger a threshold? What if TB12 starts training all New England Revolution players (another Kraft team)?

Is there a limit to how much business can be done between the team and a player without it counting against the salary cap? And if so, then why is any business allowed? It’s a slippery slope, and for that very reason, the NBA’s collective bargaining agreement specifically outlaws business relationships between teams and players. Think about it: Tom Brady takes the most team-friendly deal in sports history while at the very same time Bob Kraft is giving his startup business invaluable early support. By definition it CAN’T be a coincidence, because both parties were involved in both agreements. The NBA’s reasons for banning this are quite sound.

So far Brady has pocketed a bunch of cash and received a perfect lot for his dream house, a jump-start on his post-career business, and a fourth and fifth Super Bowl title. The Patriots got a happy QB and the requisite cap space to surround him with enough talent to keep winning big. They will also enjoy the benefit of a relatively cheap superstar QB for as long as Tom Brady is playing well, an advantage any other team would kill for.

As to what specifically went on between Kraft and Brady, what was promised and what was negotiated, don’t hold your breath for details. There’s no way to know for sure. Perhaps nothing even needed to be said. For my money, ex-Patriots TE Christian Fauria, currently a popular Boston radio host and admirer of both Brady and Kraft, said it best in late February of 2016, after the latest contract extension was signed:

“I always felt that…there is some other way he is getting his money. Whether it’s TB12, cheap lease [for TB12], whether it’s land here, some kind of deal here. Use the private jet? I don’t know. I don’t know what it is. But there is no way Tom Brady is going to take less money just to be a good guy. He’s looking at all those other salaries and he’s competitive and he knows he’s better than those other guys and in the end, I don’t care how we draw it up, I don’t care where you put the zeros or how you differ the money, I’m going to get paid more than those guys. Figure it out.”

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