Looking Ahead to Von Miller’s Upcoming Contract Negotiation

Von Miller had one of the more historic playoff runs you will ever see for a defender. Between the AFC Championship and the Super Bowl Miller recorded 5 sacks, two forced fumbles, one interception and topped it off by being named MVP of the Super Bowl. In Miller’s five seasons in the NFL he has been a devastating force whose ability to pressure the quarterback is arguably tops in the NFL. He has thrived in multiple defensive schemes and might be the most dangerous defensive player in the NFL. He is up for a new contract this year and will look to set the market for defensive players. We’ll examine some of the particulars that may go into his contract talks and see if we can come up with something that might be reasonable for both sides.

The Market

We don’t need to use any kind of statistics to discredit or improve the standing of a player of Miller’s stature. In his three healthy seasons he has had a total of 43 sacks and 85 QB Hits. He’s simply one of the best in the game and that should just be accepted. He isn’t like other players at other positions where there is often a large number of players who put up comparable numbers or make a comparable impact. Miller transcends that type of play.

In looking at Miller I think we define the market by simply looking at the big money contracts on the defensive side of the ball.

PlayerTypeYear SignedYearsAge at SigningTotalAPYMax ValueInflation Adjusted APY
Ndamukong SuhUFA2015628$114,375,000$19,062,500$114,375,000$19,956,554
Justin HoustonFranchise2015626$101,000,000$16,833,333$101,000,000$17,622,836
JJ WattExtension2016625$100,000,000$16,666,667$100,000,000$18,796,993
Mario WilliamsUFA2012627$96,000,000$16,000,000$100,800,000$19,900,498
Marcell DareusExtension2016625$95,100,000$15,850,000$100,350,000$16,593,384
Average626.2$101,295,000$16,882,500$103,305,000$18,574,053

The Franchise Tag Dilemma

Miller’s goal in any contract is going to be to exceed the $19 million number received by Suh from the Miami Dolphins. The question is will that be feasible when no other player on our list has an annual value in excess of $17 million a year?

If we include an adjustment for salary cap inflation the numbers become a little more clear. Assuming a conservative $150M cap this season the Suh and Williams contracts work out to nearly $20 million a year in today’s cap era.  Next would be Watt, also considered a generational player, at about $1 million less and then Houston and Dareus trailing further.

What stands out the most is that the reason Suh and Williams stand out so far above the rest, despite neither being the best player of the group, is because they made it to unrestricted free agency. Both the Bills and the Dolphins signed the players to contracts I call “position busters” in which the size of the contract is so enormous compared to others at the position there is generally no realistic justification for the team to do the deal. These contracts rarely exist in the NFL and never seem to manifest themselves for a defensive player unless he is a bonafide free agent.

Though Miller is set to be a free agent it is clear that he will never actually see free agency. The Broncos will control his rights for the next two seasons using the franchise tag and essentially block him from free agency.  Since there are no albatross cap figures expected for next season it may even be of the exclusive variety. The franchise tag for Miller next season will be about $14 million and the year thereafter just under $17. The Broncos could probably take it another year further and consider applying it a third time for around $23 million in 2018.  To see how much leverage the Broncos would have here is how the cash aspect of the franchise tag would work out for Miller compared to the other players:

PlayerYear 1Year 2Year 3
Ndamukong Suh$26,500,000$50,000,000$60,000,000
Marcell Dareus$35,090,000$45,090,000$55,265,000
Justin Houston$21,500,000$36,500,000$53,000,000
Mario Williams$25,000,000$40,000,000$53,000,000
JJ Watt$32,500,000$43,000,000$54,000,000
Average$28,118,000$42,918,000$55,053,000
Miller Tag$14,000,000$30,800,000$53,800,000
Difference-50.2%-28.2%-2.3%

It’s pretty simple to see when looking at the numbers why the Broncos would have zero incentive to offer Miller a contract where Suh is considered a comp. By playing the tag game Denver saves themselves huge money on the front end of the contract and still would pay  almost the lowest three year total if they decided to tag him three years in a row. They also guarantee the player nothing for the future by applying the tag so the risk of injury falls solely on Miller.

While the franchise tag carries a massive cap number, which can be difficult for a team, the Broncos probably have the leverage to bluff that they are prepared to set aside the huge cap figures for Miller.  The reason for this goes back to Peyton Manning contract which was essentially a pay as you go deal as well. The team was willing to set aside $18 million in 2012 and $20 million over the next two seasons for one player.

While that one player was a quarterback the Broncos won’t have that type of player in the future. Manning will likely retire or be released if he does not retire. The Broncos don’t have another big money QB on the horizon. Brock Osweiler, who was benched late in the year for Manning, is probably looking at a two to three year contract for maybe $7 million a season plus incentives.  They can afford for the next few years a player like Miller at astronomical cap figures.

The Broncos have also usually kept the extended franchise player year 1 cap numbers similar to the cap number of the franchise tag. In negotiations that strongly shows that they are not going to compromise their cap for one year relief.

In my opinion this immediately pulls Suh off the table as an overall goal.

Some basics

I think there are a few easy things for both sides to agree on once we knock out the $114 million contract from the mix. This is going to be a 6 year contract and has to exceed the $101 million received by Justin Houston. I think going for $17 million is certainly feasible but could see $17.75M being a number floated because of the cap increase. My feeling is the $19 million number will simply be too hard to reach unless they just throw a huge number in the last two years of the contract. So I think a fair range to work in is between $102 and $106.5 million.

How to Maximize the Value

While I don’t believe that the Broncos will reach the Suh numbers I still think it may be possible to use some of the numbers in that contract. I think the place to start here is looking at the cash compensation and work from the bottom up. Miller needs to find a way to improve on the early cash flows of all the players on that list and possibly Suh.

Miller’s best argument may lie in the recent extension for Demaryius Thomas. Thomas faced a similar situation in that he was considered one of the best at the position but was tagged which caused him to miss free agency. At the time Thomas signed his contract, Calvin Johnson was considered the high water mark for receivers. Like Suh, Johnson was a position buster and when it came to matching annual contract values (Johnson was at $16.2 million a year) and the Broncos rightfully refused. However there was a clear compromise to be worked out.

PlayerYear 1Year 2Year 3
Demaryius Thomas$22,000,000$35,000,000$47,500,000
Calvin Johnson$28,250,000$33,250,000$45,750,000

The Broncos were willing to give Thomas market setting numbers in the two and three year running cash metrics before using the backend of the contract to keep the overall value more in line with the rest of the market. While Denver may regret that contract right now, the fact of the matter is they signed it and they should be willing to use a similar structure here.

Thomas’ eventual five year, 14 million per year contract represented about a 10.5% discount over Johnson’s comparable five year value.  The same discount here would put Miller at $17.06 million per year which is right in the range of what we said should be an easy to agree to basic of the contract. So if we need a justification to use Suh’s contract for something we now have it.

From here I want to work from the bottom up and find a way to try to surpass the two and three year cash flows of Suh’s contract. I’ll call that my max range. As my minimum I’ll be willing to work off what I consider the second priced contract which is Watts’ (technically Dareus’ has the second best contract, but I could see that being considered an outlier as well).  That now gives me a floor of $45.2 million and $56.1 million for the two and three year floor and $52.6 and $62.3 million two and three year max.

Obviously these are massive numbers and getting them to work for Denver is going to be a challenge. To try to justify it I will attempt to work on their terms with structure that may be considered reasonable based on their recent contract structures.

The biggest thing to probably consider is how to schedule the payout on the contract. There are a few ways we can look at that based on percentages of contract values and total values, but the thing that stood out to me the most about the Broncos is a pretty standardized format that they use for the payouts over the first three seasons. Here is the percentage paid of the three year total for their biggest players.

PlayerYear 1Year 2Year 3
Demaryius Thomas46.3%27.4%26.3%
Ryan Clady45.5%24.2%30.3%
Aqib Talib44.4%22.2%33.3%
DeMarcus Ware43.3%23.3%33.3%
Derek Wolfe44.6%21.5%33.9%
Chris Harris, Jr.42.1%26.8%31.0%
Average44.4%24.2%31.4%

That first year number is really rock solid around 44%. Clady and Thomas were both franchise players and hit the high marks around 46%, which I would say is definitely the max that Miller could get. The Broncos also favor a pretty massive decrease between year 1 and year 2 which could prove difficult in reaching the two year totals that were my goals. Thomas was the exception so there may be an avenue to reach the floor numbers. Here would be the baseline numbers:

RangeYear 1Year 2Year 3
Max27.6M42.8M62.3M
Min24.9M38.5M56.1M

As stated above I’m going to miss on my two year total with this, though if the Broncos are really willing to go to $62.3 million it’s probably not a big deal. Pushing hard on the Thomas contract can probably get close to the floor with around $44 million over two years. I think if the Broncos refused to go up to the $62.3M three year total they would need to significantly increase the $38.5 million two year number.

The Broncos generally use a combination signing bonus and roster bonus in the first year of their contracts which we should be able to use to set a range for our bonus money.

Player1st Year Bonus (% of Total Value)1st Year Bonus (% of 1Y Value)
Demaryius Thomas25.00%79.5%
Ryan Clady25.70%90.0%
Aqib Talib12.28%58.3%
DeMarcus Ware33.30%76.9%
Derek Wolfe20.40%59.8%
Chris Harris, Jr.23.50%90.9%
Average23.36%75.9%

From the group I would throw out Talib as a completely different type of contract and Ware because it was just a three year deal. We are probably looking at bonus money ranging from $20 to $22 million with an outside chance at $24 million.

Beyond that the Broncos don’t really do much else besides the base salaries. They did include an option bonus for Thomas and that could be in play here for cap considerations, though I don’t think they would call it an option since Miller could be a slight suspension risk. They have also begun using those late contract options that seem to be catching on in popularity seemingly as ways to manipulate the comp pick system so I’d expect one in this contract too.

As for the backend years I think you can basically use the Thomas/Johnson comparison and apply that to Suh’s contract to get years 4, 5, and 6. I’d expect the guarantees to be in the ballpark of 55% of the total contract number.

The Cap Impact

Using some of the numbers above here would be a deal that maybe would be acceptable to both sides. This would be a $102 million contract with $35.1 million fully guaranteed upon signing and another $21.1 million becoming fully guaranteed the following March. In 2019 there would be a $2 million option bonus that would be paid the final day of the 2019 LY (meaning March of 2020).

YearBaseSigning BonusRoster BonusOption BonusCapDeadSaved
2016$5,600,000$3,400,000$5,000,000$0$14,000,000$35,100,000-$21,100,000
2017$15,100,000$3,400,000$0$0$18,500,000$21,100,000-$2,600,000
2018$19,500,000$3,400,000$0$0$22,900,000$10,200,000$12,700,000
2019$7,600,000$3,400,000$0$666,666$11,666,666$8,800,000$2,866,666
2020$16,000,000$3,400,000$0$666,666$20,066,666$4,733,334$15,333,332
2021$14,200,000$0$0$666,668$14,866,668$666,668$14,200,000

Here is how the cash flows of the contract would work:

YearCashTotal
2016$27,600,000$27,600,000
2017$15,100,000$42,700,000
2018$19,500,000$62,200,000
2019$9,600,000$71,800,000
2020$16,000,000$87,800,000
2021$14,200,000$102,000,000

You can tinker with some of the backend numbers to balance out the cap a bit but this cash flow gives me the case to say I beat Suh in some regard and will maintain a comfortable margin above Houston and the rest of the market until the final year of the contract while allowing the Broncos to keep the contract within the market.

Would the Broncos do a deal similar to this?  I guess we’ll wait and see. They seem to be one of the tougher teams to work with but they have gotten big deals done before and shown a willingness to compromise so I’d think this is a deal that gets done, if not now then by July.

I could see Denver still throwing out the Suh numbers and trying to get the lesser totals over the first three years that I discussed above. In that case you would see a smoothing between 2018 and 2019 on the cash flows. One of the differences between Johnson and Suh is that Johnson’s contract was a few years old when they agreed to use it whereas Suh’s is a relatively new contract. That would make JJ Watt the numbers Denver will want to work off of since that was also signed a few years back. Those are still massive numbers and as long as the prorated money is large in the contract Miller should have no problem earning the first four years of the contract which in both cases would likely have a similar number.

Any thoughts on where you see Miller’s deal ending up feel free to leave them in the comments or send me an email.

  • NW86

    Excellent analysis Jason. I think your ideas of matching the 2-3 year cash flow of Suh might be on the money, but I think the overall value of the deal would be right around $18M/yr, and here is why: Justin Houston is the best comp to use for this deal. Like Miller, Houston is a OLB pass rusher, both are young coming off their first contract, both put up similar numbers, and most importantly, both will be negotiating under the franchise tag. If you take Houston’s $16.83M average and add a 7% increase to match the cap increase, you end up right at $18M.

  • Werner

    Indeed very well done. Poor Suh fails both to be a market setter as well as an impact player in Miami (as of now). Will have to console himself with the fresh money from the impending restructure…

  • Werner

    Actually Suh may have destroyed the market upside. Seeing the mess he (had) created for Lions and Dolphins, three consecutive years of franchise tag are a credible threat now

  • Werner

    Given the actual performance of D. Thomas, Broncos may already having regrets paying him in the Megatron Level. Assume they will rid Manning, Ware and Clady with big money contracts..

    • Guest

      I doubt it. He did have some struggles with drops and in the postseason, but he did still catch 100 passes for 1,300 yards on the 31st rated passing offense in football this year. He’s averaged 100 catches, 1,447 yards and 10 TD’s over the last 4 seasons. He’ll bounce back strong next year. And did you see how back their OT’s were in the Super Bowl?? They need to restructure Clady, not get rid of him. He’s already said he’ll rework his deal, that’s definitely the route they should choose.

      • Werner

        I tend to agree, but unfortunately it’s hard to restructure his health. No point of him on IR again for lesser money. Somewhat like Jarod Mayo, who can’t make it thru a season anymore.

      • Jim

        You make it sound like a top 3 WR totally disappearing in the playoffs is no big deal because his overall regular season numbers? I think Broncos fans are going to have to come to grips with the fact, that D. Thomas can not get open against top tier DB’s (aka, most playoff teams).

        • Guest

          Dude, he had a rough postseason, that’s all it is. What about 2013?? 28 catches, 306 yards and 3 TDs in 3 postseason games.

  • Rick

    Huge leverage with the tags and I think if he tests positive again it’s a long suspension. I’d be scared to sink big dead money into him when triple tag seems viable. Great job with the writeup and comparisons!

  • eddiea

    I know he’s a risk,in another positive test,but all in all he should end up between Houston and Watt. He compares more to Houston, but doesn’t have his stats. Watt has several DPYs but is a fulltime DL player. So $106M w/$45M-$55M guaranteed seems “fair” in current NFL Pay.

  • D-Bo

    This might change the discussion a bit, as he is no longer one test away from suspension. This article says if he tests positive he starts at the beginning, i.e. Stage 1: http://www.denverpost.com/broncos/ci_28574928/von-miller-released-from-nfls-drug-program

  • Tannim

    OK, with the events of the past month with Miller getting franchised, Manning retiring, and Johnson retiring, and so on, what’s the revisit on this?