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Feb 13

Looking At Terrance Knighton’s Contract Decision

With free agency rapidly approaching this should be time that those non-household names are discussing the pros and cons of their various contract options. I think a good topical example to illustrate some of the considerations is the case of the Broncos’ Terrance Knighton versus that of the Jaguars’ Sen’Derrick Marks.

Last March both Knighton and Marks were free agents.  Knighton , a 3rd round draft pick in 2009, had spent four seasons in Jacksonville, starting 49 games in four years, though just four of them came in his final season.  Marks was a 2nd round pick in 2009 and started just 26 games in Tennessee, with 14 of those coming in 2012. The two were relatively comparable players of similar age and draft status. Both were looking for new homes.

Knighton would be the first to find a home, taking a two year offer from the Broncos on March 14. Only $500,000 of the contract was guaranteed, but he could earn up to $2 million in 2013 and another $2.5 million in 2014, an annual value of $2.25 million. Marks, on the other hand, took a one year offer much later in free agency from Jacksonville. It was said that he wanted to bet on himself that he could earn more money if given more opportunities and Jacksonville, in a state of rebuilding, would certainly give him that chance. The Jaguars would guarantee Marks’ entire contract, a one year deal worth $1.475 million. His potential earnings in 2013 were not as strong as the $2 million that Knighton could earn, but by taking less money for the season he was able to keep his 2014 season open for a new contract.

Both players would have solid seasons in 2013. According to Pro Football Focus,  Marks was the 9th best pass rushing defensive tackle in the NFL while Knighton was the 9th best overall player at the position. Marks would end up cashing in on his season by negotiating a four year contract extension worth a base value of $18 million with $8 million in various guarantees. By the end of 2014 Marks will earn slightly over $5 million in new money, which ranks about 7th in the position in 2014.

Knighton, on the other hand, reportedly would like a new contract to reward him for his season with Denver. Unfortunately Denver has no incentive to budge since they were able to lock him up for two seasons at very favorable terms. His $2.5 million salary is around 22nd in the league. By no means is that terrible but he seemed to favor a different path than Marks and it likely will not work out as well since the NFL is all about striking when the iron is hot and he may not be hotter than he was in 2013.

Knighton’s deal proved to be a very team friendly contract. Knighton essentially gave the Broncos a free lost cost option on his career in 2014 based on the contract structure he accepted. When negotiating a plan for free agency both Knighton and Marks, assuming they would be offered similar deals early in free agency, needed to weigh what benefits, if any, would come from a multiple year contract. In planning for a two year scenario I would plan for three scenarios:

Scenario 1: There is a good chance that the player fails to perform in 2013. He may be a bad fit, injured, or simply is not as good as he hoped. In this case the 2014 year is meaningless because the team will release him. My best opportunity here is to maximize my 2013 earnings.

Scenario 2: The player has a decent season, similar to the one he had in the final year of his prior contract. In this case there is a strong possibility that 2014 will occur with this team. It’s worth negotiating enough of a raise to increase the players’ earnings but not so high that it may entice the team to release him. Getting a slightly higher signing bonus is probably beneficial to keeping the player in uniform in 2014.

Scenario 3: The player has a very good 2013 season and outperforms the contract. Odds are the player ends up playing a cheap 2014 season for the team in the event that this occurs. Maybe consider working incentives into the deal that reward some type of higher end play.

The thing that jumps out to me in the three options here is that in two of those three scenarios the 2014 year is essentially worthless to the player.  If scenario 1 occurs the player will be cut. Sure it sounds great to get a contract for two years, but that second year is about as worthless as a piece of paper. In scenario 3 the contract becomes a detriment to the player because he would earn much more as a free agent than he would under the terms of the contract.

When we go back and look at Marks’ decision he clearly felt that scenario 3 had the most appeal and reward was high enough to take a smaller financial risk. Marks took a very risky approach to free agency. Marks did not sign in the first wave or even second wave of free agents. He waited until early April to pick out a situation that would benefit him the best in the long term. At that stage money could have been so dried up that he would have taken even less money in 2013 than he actually did. As things turned out he only took about $500,000 less in maximum compensation than Knighton did and got his entire deal guaranteed such that if he bombed in the summer he was going to get paid. This was a strong players’ contract where upside value was protected.

Knighton jumped into free agency quickly and signed the contract with the Broncos within the first few days of the signing period. It was a big win for Denver who gave him a very low guarantee of just $500,000 with the upside value of $2 million. For that consideration Knighton was willing to give up a potential year of freedom for a $500,000 raise in 2014. It would seem as if his side banked very strongly on scenario 2 being the most likely scenario and put more weight on scenario 1 than 3.

Knighton’s deal has very little protection for the player. Only 11.1% of the deal was guaranteed upon signing. The signing bonus was low making it easy to release him or ask for a paycut in 2014. The upside here was that he could earn up to $2 million if he made the team in 2013 and by signing quickly he landed a deal before the money may have dried up. There were no incentives or escalators based on the information I have on the contract despite the fact that the Broncos often use those mechanisms to get deals done.

That was a lot to give up in the event scenario 3 played out, which is what happened. The Broncos had all the leverage in the deal from day 1 and will likely use that leverage to maintain his contract. Knighton gave that leverage all up to accept the contract in 2013. About the only thing Knighton can do is threaten a holdout, but when you consider that the Broncos are a team that released their second best pass rusher over money concerns and held the Jets feet to the fire to get payback money for Tim Tebow, you should understand that this is not a team likely to give in to such tactics.

Could Knighton have landed a more player friendly contract had he waited a bit longer or took a one year deal?  We can’t answer that but the various scenarios are things we need to consider when understanding why certain contracts happen the way they do.  Because contracts in the NFL are not guaranteed players rarely have leverage when signing multi-year contracts with minimal signing bonuses or future salary guarantees. Sometimes it might be beneficial to leave a few dollars on the table to maintain as much leverage as possible for the future rather than finding yourself in a situation where you feel bound by a contract that causes you to be underpaid, which is the situation where Knighton has found himself. People may gang up on the Broncos if they don’t rework this contract but the fact is they are reaping the reward of a well negotiated contract.


 

  • Ox

    It’s crazy how little guys make in the NFL compared to MLB. Both annually and career. Mid tier infielders making a 12 yr career averaging $4-5mil

    • Anthony

      Stronger Union, No cap, salary arbitration is an hilarios method by which to determine a players cost. Its also a much smaller league(not including the minors) with way more games and the skill cap I think may be higher.

    • ShadowStalker

      You have 162 games (81 home games) a year to generate income in baseball.
      Roster size is also only 25 players for baseball.

  • Jason Gillcok

    ”About the only thing Knighton can do is threaten a holdout, but when you consider that the Broncos are a team that released their second best pass rusher over money concerns” Who was that? the second best pass rusher? I can’t think of who you are referring to.