June 9, 2011
Playoff Perks For Pro Athletes
By MICHAEL MACKLON, Investopedia.com
Professional athletes are often criticized for making too much money to play a "game." Some superstar athletes, such as the NFL's Peyton Manning, are paid almost $1 million per game to lead their teams to the playoffs, where they have the chance to compete for a championship. But for all the money that team owners invest in top-flight talent just to make the playoffs, players receive relatively little compensation for playoff games. With the exception of some players who have negotiated bonus clauses for the playoffs, most professional athletes aren't paid by their teams for playoff games. But don't send relief funds to the Red Cross just yet. America's major sports leagues have generously created individual revenue-sharing programs that reward teams for playoff success. Here's a look at the playoff payouts for America's favourite pro sports. (People often compare stocks to gambling, but how close are they really? Check out Going All-In: Comparing Investing And Gambling.)
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The National Football League
With a 17-game season, NFL players pull down some of the top dollars-per-game contracts in sports. But once the playoffs start, NFL players are among the lowest compensated athletes in any major U.S. sport. With only 11 single-elimination games in the NFL playoffs, the league's playoff format simply isn't generating as much money as lengthier setups such as the NBA's 15 best-of-seven series, which allow for over 100 post-season games. However, this football scarcity creates fanatical interest for each do-or-die game, which generates plenty of money to spread around. According to Mike Mulligan of the Chicago Sun-Times, "(NFL) players earn $21,000 for winning a wild-card game and $19,000 for losing one. That rises to $21,000 for the divisional round and $38,000 for the conference championship game. Players on a Super Bowl winner receive $83,000 each; the losers get $42,000 each." For many of us, these single-game paychecks equate to a year's work or more, and it's not likely that your hard work is going to see your mug on a Wheaties box any time soon. Maybe next time, champ.
Major League Baseball
While NFL players are paid for a 17-game season with games played weekly, MLB players are paid to compete over a 162-game schedule, with games often played on back-to-back days or even doubleheaders. But once the playoffs start, baseball players are mostly in it for the chance to raise the Commissioner's Trophy as MLB champions. According to the MLB Players' Association, the league pays out playoff bonuses based on a percentage of revenue generated throughout the playoff year: "The Players' pool is created from 60% of the total gate receipts from the first four World Series games; 60% of the total gate receipts from the first four games of each League Championship Series; and 60% of the total gate receipts from the first three games of each Division Series. The pool is distributed as follows: World Series Winning Team: 36%; World Series Loser: 24%; League Championship Series Losers (two teams): 12% each; Division Series losers (four teams): 3% each; Non-wild Card second place teams (four teams): 1% each." To create more incentive, teams vote as to how to divvy up the bonus cash, allowing top performers to earn a bigger piece of the pie than the pine-jockeys.
The 2010 World Series brought about a unique situation in which the Texas Ranger's Bengie Molina stood to gain a championship ring and a cut of the bonus cash – win or lose. Molina split his season between the eventual 2010 champions, the San Francisco Giants, and the runner-up Rangers, and it's suspected that his close relationship with the Giants team secured him a share of the bonus money. Considering each member of the 2009 Championship Yankees squad received $365,052.73, Molina likely pocketed a tidy payday for coming up short in the big game. (We show you how to hit the millionaire mark step by step. Check out The Millionaire's Retirement Plan.)
The National Hockey League
It's said that the NHL playoffs is the most grueling championship tournament in sports. To win the Stanley Cup, a team must win four best-of-seven series in one of the roughest games in North America (when was the last time you saw two quarterbacks have a bare-knuckles fist fight?) However, hockey's popularity is far below that of baseball, football or basketball, which means that there is less revenue to trickle down to the players. According to the NHL's collective bargaining agreement, "A single lump-sum payment of $6,500,000 shall be made by the NHL to the players on account of a player fund, which shall be allocated to the players on clubs participating in the various playoff rounds and/or based upon club finish, as shall be determined by the NHLPA, subject to approval by the League."
Beyond the league revenue sharing incentives, individual contract clauses can motivate many players. Money might have played a small part in the Chicago Blackhawks' 2010 Cup win, as the team's captain, Jonathan Toews, collected a $1.3 million bonus from the team for winning the Conn Smythe trophy as the playoff's MVP.
The National Basketball Association
The NBA's salary cap restricts teams from providing significant bonuses to players for post-season performances, but there is a league-wide playoff kitty, similar to the previously mentioned leagues. 2010's playoff pool reached a record $12 million, but not all of that money is allotted for playoff performances. Last year $346,105 was awarded to the Cleveland Cavaliers for having the best record in the regular season, as well as a share of the $179,092 that's guaranteed to playoff-bound teams. The teams that made it to the quarter-finals split $213,095, and teams in the semi-finals divvied $352,137. Last year's finalists, the Los Angeles Lakers and Boston Celtics, split $1.4 million, with the Lakers netting an additional $2.1 million for taking home the Larry O'Brien trophy.
This year's final may be able to produce even more revenue that last year's, as fans will be curious to see if the Miami Heat's $43 million "Dream Team" of LeBron James, Dwayne Wade and Chris Bosch (and 12 other guys who've forgotten what a basketball feels like) can beat Mark Cuban's Dallas Mavericks.
The Bottom Line
Athletes in the playoffs may not be playing for regular paychecks, but jobs are still on the line. Athletes who fail to gain playoff experience aren't as valuable as proven playoff performers and when a team fails to be competitive, numerous player, coaching and management changes are inevitable. But if personal pride, a stellar resume and increased job security aren't enough incentive for some pro athletes, each league has reserved a bit of lunch money to up the ante and help tide athletes over for the long off-season. (Net worth provides a road map for retirement -- learn if you're headed in the right direction. See What's Your Net Worth Telling You?)