2015 NFL Stock Down: Week 1

Every week during the season I’ll take a look back at the games and select three players who are entering important stages of their contract that could have hurt their upcoming negotiations with their play on gameday. In addition we will also look at one player signed in the offseason to a new contract that did not live up to his new contract.

Stock Down

Russell Okung– Okung is in his contract season and given some of the recent contracts doled out these last two weeks, likely playing for some big money. The Seahawks line looked overwhelmed by the Rams defensive front this week and Okung was credited with allowing two sacks and 5 hurries by Pro Football Focus. That isn’t the kind of performance needed to earn $10+ million on his new deal. Continue reading 2015 NFL Stock Down: Week 1 »

Can a Premier Contract Player Really be a Bargain?

I read an article by Jimmy Kempski of the Philadelphia Voice the other day about Fletcher Cox and came across an interesting quote by former NFL executive Joe Banner regarding the franchise signings.

Teams signing deals today are doing so because the contracts will be looked upon as cheap down the line given the rising salary cap. I think that’s true to an extent when discussing extensions, but I think application across the board doesn’t really work and in most cases does not work for the franchise tag contracts.

Continue reading Can a Premier Contract Player Really be a Bargain? »

Adrian Peterson Restructures Contract With Vikings

According to Mike Florio of ProFootballTalk, Adrian Peterson has agreed to a new contract with the Vikings worth $44 million over the next three seasons. Florio further goes on to discuss potential escalators and de-escalators within the contract worth $4 million. While much is being made of the potential loss of about $2 million for Peterson, the basics of the contract are identical to the massive extension signed by Peterson in 2011. I’ll explain in more detail in the body of the post but in general Peterson will defer some money to 2017 in return for better timing of payments in 2016. Continue reading Adrian Peterson Restructures Contract With Vikings »

Should the Cowboys Pursue Adrian Peterson

One question that is consistently coming up on my Twitter feed or in my email inbox is “how can the Cowboys afford to get Adrian Peterson”.  Dallas has been linked to the Vikings running back for the last year and Peterson has made it very clear that he no longer wants to play in Minnesota. The Vikings hold his rights for the next three seasons and would likely trade him before releasing him, but can Dallas really fit him in their salary cap?  Let’s explore.

The Peterson Contract

Peterson is set to earn $45 million in non-guaranteed salary over the next three years. That includes a $13 million salary in 2015. Normally I would have said nobody in the NFL would consider that salary and Peterson would need to take a stiff pay cut, but given decisions made by the Seahawks, Eagles, and Bills I can’t consider that to be the case anymore. Since the Vikings have shown a willingness to keep him at his current $13 million salary and Peterson is not moving off his stance for a trade it would seem likely that Peterson knows there is at least that much awaiting him from another team.

Here is what the current top end running backs are earning on their recent contracts:

PlayerAgeYear 1Year 2Year 3Year 4Year 5
Murray27$9,000,000$16,000,000$24,000,000$32,000,000$40,000,000
McCoy27$16,000,000$21,050,000$27,300,000$33,625,000$40,050,000
Lynch29$12,000,000$21,000,000$31,000,000

While none of these numbers are close to the $45 million currently in Peterson’s contract they probably give us an idea of what would be an acceptable contract for Peterson who will argue that he is the best of the group. My feeling is that given his age (30) all sides will look at this as a maximum three year contract with anything additional really just being there for cap purposes and/or to inflate a contract number.

Given the above chart I would expect Peterson to definitely not compromise at all on a two year total which will need to be at least $21.1 million to surpass McCoy, the way McCoy did Lynch. I would expect a three year total to surpass Lynch’s by a few million. My guess is this year’s salary is something he can be more flexible with but it will need to be at least the $13 million he is already slated to earn. At $33 million over three years he can reach a tidy three year value of $11 million per year so I would likely consider that a decent estimate. Those last two years will just be used for cap purposes.  (As a sidenote for those asking why I would say McCoy’s contract was far worse than Murray’s, just look at the above chart).

The Cowboys Salary Cap Situation

Dallas is currently pressed right up against the salary cap with about $1.7 million in cap space. Once they sign their rookies they will be in the ballpark of $300,000 in space. None of this takes into account the contract potential of Greg Hardy. Hardy currently counts for $3,217,850 against the Cowboys salary cap, but that number can rise as high as $11,311,600 by the end of the year. Factor in roster expansion to 53 players, Practice Squad salaries, and a few injuries and Dallas is effectively $9-10 million over the salary cap.  On a standard contract Peterson would likely have to count for at least $5 million in cap room, so this is a tough situation.

Dallas has three places where they can primarily find savings. One is the release of Brandon Carr after June 1. Designating him a June 1 frees up $8 million in cap space over the summer.  That does not help them for acquiring Peterson over the draft weekend, however, as they would still be around that $1.7 million figure they are at now.

The second option is restructuring the contract of Tony Romo. I’ve discussed that in detail before and there is no need to rewrite it all here, but in a standard restructure the team saves $12.824 million. That is certainly dangerous for an older quarterback with a bad back, but is likely a strong consideration even if they don’t acquire Peterson.

The third option would be negotiating a contract extension with Dez Bryant, currently the teams franchise player and taking up nearly $13 million in cap space. I think it is worth noting that bringing in Peterson on anything more than a one year contract would be a determent to any negotiation with Bryant if the Cowboys main stance is off the field issues concern them with a long term contract with Bryant. In addition the recent contracts for Jeremy Maclin and Randall Cobb make this even more difficult. I would consider this the least likely of the three options to happen even though it makes more sense than a Romo restructure.

Outside of these three avenues there are no real major cap savings that can be found. To bring in Peterson they will likely need to do two of these three things.

How to Squeeze Peterson in

Assuming they do the first two moves discussed above Dallas will have somewhere in the ballpark of $8-9 million in effective cap space to set aside for Peterson. That would allow Dallas to do a relatively standard contract that might not hurt them badly in the future with a moderate signing bonus and escalating salaries.

But is there a way to do the move without touching more than just one of the above players?  That would depend on Peterson and the Cowboy’s tolerance for pushing money into 2016. The Hardy structure allowed Dallas to bring Hardy to the team now while they wait for the NFL to determine Hardy’s fate. That gives Dallas ample time to decide what to do with Carr, Romo, and/or Bryant. But all Dallas did was delay the inevitable (assuming Hardy can play) until the season.

I guess we can draw some parallels here since Peterson is not guaranteed to be moved off the exempt list by the start of the year and the team could use a similar structure on a restructured deal to almost fit him into their existing $1.7M of cap room (they would likely need to include someone like a Morris Claiborne in a trade to do that), but again it is just delaying the inevitable for the season.

Dallas could attempt to exploit the incentive system to their advantage in crafting a contract to help defer costs to 2015 to lessen the size of a Romo restructure. Because Peterson only rushed for 75 yards in 2014, in theory the Cowboys could give Peterson gigantic payments for rushing for something like 100 yards in a year. The NFL only counts such incentives against the cap if the player reached the performance level the year before so a $10 million bonus for 200 yards on the season would not count against the salary cap until after the season when final adjustments are made. Such incentives would be virtually guaranteed to earn but this allows the team to manipulate the cap for one year. In 2016 the team would take on a large charge for the incentive that was earned but didn’t count in 2015.

I’m not sure that Peterson would be willing to take such a contract. For one this would significantly defer payment until after the season. Secondly the incentives are not really going to be counted as part of his base contract so from an on paper standpoint he will be taking a lower cost contract which is never a good for an ego. He would also run the risk of a preseason injury making the incentive null which is a major risk. Though the team can include rolling incentives to ensure that it will always be available for him to earn once in the future it is still a risky option.  Still this is a way to squeeze him in now without major contract changes, but more likely they will need to rework contracts to get him under the cap.

Should the Cowboys Do It?

While Peterson may be a once in a generation player the fact is he will be 30 years old and only once in the last five years played 16 games. While the Cowboys personnel is superior to the Vikings Id imagine at best you would be looking at a 1,250-1,300 yard year (which is certainly excellent), which is probably not far off from where Murray might be unless his body breaks down from the high use last year. Dallas showed no inclination to make a big commitment to a younger player so I can’t see why they would do it here unless its really just filling a fantasy dream. They would have to be certain that, if healthy, Peterson can produce over 1,500 yards and 15 touchdowns to potentially justify the long term cap damage that can arise from  the move.

Dallas has worked hard to get their salary cap back in order and this move would probably wreck most of that work. It would compromise their positions with their future salary cap and likely tie them to Romo for an additional season. I also believe it would have a negative impact on any negotiation with Bryant who is more important long term to this team than Peterson would be.

Peterson to the Cowboys may sound like a dream come true, but the team will be better off staying the course and finding someone else to play the position

Seahawks and Marshawn Lynch Agree On Contract

According to Pro Football Talk, Marshawn Lynch and the Seattle Seahawks seem to have agreed in principle on a new contract extension that will pay Lynch up to $24 million in new money over the next three seasons. The delay on officially agreeing, one would think, is on the forfeiture provisions in the event Lynch were to retire after this season. Lynch will receive, according to PFT, a $7.5 million signing bonus of which $2.5M a year could be tied to wanting to play football.

The contract itself, despite the high $24 million new money pricetag, is most likey going to simply be a raise for Lynch of $5 million for this year to entice Lynch to come back to the Seahawks. He was previously under contract for $7 million and had indicated he might retire. The way the contract is structured the Seahawks would keep the same cap charge for Lynch in 2015 as if they never reworked the contract. That leads me to believe that they are just dumping some added cap charges into 2016 when he retires/is released.

Lynch’s $12 million payout this year is essentially what would be paid to a “franchise player” on a one year contract. The fact that the new money annual value works out to an even $12 million a year also indicates what the intention is here and they will deal with next season when it happens.

The big question is will this impact the running back market?  Probably not. This salary moves Lynch into the class of recent contracts signed by Adrian Peterson and Chris Johnson, both of which were considered outliers in the market. Lynch is in a very unique situation in Seattle where he clearly is their most important offensive player and his style is not really “plug and play” like most of the players currently in the NFL. Peterson would be the one player who could potentially argue that this makes his $13 million salary legit for the 2015 season based on his projected significance to an offense and his past performance.

View Marshawn Lynch’s Projected Contract Details

Trading Adrian Peterson Only Real Option for Vikings

There were some reports yesterday that the Minnesota Vikings were considering releasing running back Adrian Peterson in light of his recent charges of child abuse.  This morning Pro Football Talk clarified those rumors as the Vikings being open to trading Peterson but not necessarily releasing the running back.

The reason for this is more or less financial. Had the Vikings been aware of the severity of the charges or the fact that he would be indicted about a week ago they could have released Peterson and taken a $2.4 million salary cap charge in each of the next two seasons and washed their hands of him. However, the fact that this occurred after the first game of the season entitles Peterson to Termination Pay under the terms of the CBA.

Termination Pay protects the entire salary of a veteran player in the event he is on the active roster for the first game of the season, which Peterson was. Once Peterson suited up for the game against the Rams, his $11.75 million base salary was guaranteed for the season. Any release of Peterson puts the Vikings on the hook for paying him the large salary while still allowing him to go and seek employment and a further paycheck from another NFL team that is willing to deal with the charges and negative PR associated with the move. This was different than the situation of Ravens running back Ray Rice who was on a reserve list in week 1 and thus not entitled to Termination Pay.

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By trading Peterson they are relieved of the salary obligation, which now transfers to a new team. The difficulty in trading Peterson lies in finding a trade partner. Besides the fact that certain teams would not be willing to touch him due to the charges, the team in question must also have about $10 million in cap space if that trade was to be executed this week. Based on our estimates the only teams capable of doing that trade would be  the Jaguars, Jets, Browns, Eagles, Titans, Bengals and maybe Patriots. Of those teams the Jets, Bengals, Eagles, and Patriots would likely have no interest from a football perspective.

Each week that Peterson remains on the Vikings roster reduces the cap space required to execute the trade by just over $690,000. If they carried him to the trade deadline (which would require paying him an extra $4.14 million) teams would need around $6 million in cap room to execute the trade. That would open up about half the NFL to being financial able to trade for him.

So this is a complex issue for the Vikings that goes far beyond just cutting a player because it seems the right thing to do. There may be more justice in letting the legal system play out and allowing the NFL to potentially suspend Peterson without pay than being in a position where they pay Peterson millions of dollars to go away.

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Declining RB Production and NFL Contract Modeling

Though plenty has been written on the decline of the running back at 30, I figured why not add to that with a focus on the contract and likelihood of players performing. It’s a good topic if you are interested in working in the NFL, simply like Fantasy Football, or are going to take a more holistic look at Fantex valuations in the future. Plus with all the discussion on giving Seahawks’ RB Marshawn Lynch a raise and a new contract to reflect what he has accomplished combined with fact that a number of solid NFL running backs are about to make that turn into the late 20’s, it’s a good time to look at those late 20 years.

As a quick study I wanted to go back and look at all running backs between the year 2000 and 2013 that had at least one 100 carry season between the ages of 25 and 27. There is no magic to the 100 carries as it was just an arbitrary cutoff point that I figured would at least let us focus on players who do get reasonable use in the NFL.  I also just wanted to look at players whose age 25-27 seasons all occurred in the 2000’s (so no Curtis Martin types).

All told 70 players qualified for the study. Since originally I did this with Lynch in mind I wanted to look at a three year weighted average with a team placing 50% on the 27 year old season, 35% on the 26 year old season, and 15% on the 25 year old season to set a baseline performance. I also included the regular three year average. Here is the group of players and the resulting stats:

Age 25-27 RB Stats

The top of the list is a who’s-who in fantasy magazine covers and I forgot just how great LaDainian Tomlinson and Larry Johnson were for a period of time. Adrian Peterson’s numbers would have been even more ridiculous if he would (or could) have been pushed the same way those others were.  The first thing I want to look at is what percentage of the group (with the top number adjusted for removal of active players) remained in the NFL at each age bracket.

RB lifecycle

A majority of NFL teams have decided that by 31 most of the players no longer belong in the league, though a few make it to 33 and beyond.

How do the players fare when compared to their 25-27 weighted averages?  Not very good. Here is the percentage decline for the players that remain at each age:

rb percent declines

If we just look at higher end players (average above 750 yards) the declines are more or less just as steep, with slightly better yardage drops but massive drops in touchdowns, which is a huge deal for the fantasy folks.

High end RB declines

Very few players were more productive with age. Thomas Jones, Tiki Barber, Warrick Dunn, and Frank Gore were the guys who were more productive as they got older in terms of overall yardage production. Most of the other players saw major declines.

So if we expect average performance where does that leave Marshawn Lynch and some of the comparable players going forward?  I have 13 current players here that should be 28 or 29 this year and here is what the team would expect from the player in terms of yards, assuming he doesn’t flame out:

Current RB Projections

So if we are acting as the cap manager of the team it’s this forward look that we need to make when we decide on signing a player to a new contract. That’s not to say that Peterson will degrade this badly, but the expectation moving forward would be closer to this rather than where he has been for most of his career.

Of course a team should take on all factors into account when arriving at a price and the above chart gives numbers based on average performance and not being released. The threat of release has to be taken into account as does the chance of both better and worse than average performances.

Though the sample size is not that large we can illustrate a way that a team should price point a player. We’ll use Lynch as an example because he’s somewhat relevant. What I want to do is determine likelihood of various events by breaking expectations up into 4 categories: catastrophic (cut necessary), bad (falls off cliff performance/injury), average (mid grade performance), and great (top performers).  We can assign odds of the performance based on number of players who rate in that level, but to make things easier Ill just break the non-release categories into three groups and use the average of each. This is more or less what I would refer to as using financial scenario modeling to build a contract value.

Here are the expected increase or decrease in yards (based on the 3 year weighted average) per year:

Performance expectations

Combining that with the life cycle numbers from above we would need to weigh Lynch’s yardage as follows:

Lynch Scenario Analysis

When I come up with a value for a contract I need to base my thoughts on getting around 2,500 yards over a 4 year period from Lynch. More likely I would look at this chart and say he will likely be worthless to the team at the age of 30 and 31. Of course we can adjust various scenarios by varying the expectation levels beyond here, which is probably wise to do if in a bidding war with another team or you reach an impasse and need to determine how far you can go.

Using these numbers I would match a contract with each figure. Just as a rough estimate I would say a 1,000 yard runner is worth around $5.5 million, a 750 yard runner around $3 million and the last two years the minimum which is around $1 million. All told I would not offer a contract more than 4 years for $10.5 million in realistic dollars.

What I mean by realistic dollars is that the salary offered in 2016 and especially 2017 is worthless since he will likely be cut. If I believe strongly in Lynch I might offer close to $10.5 million over the first two years and fluff up the rest of the deal with money that I know will never be earned.

Now the other day I did say that perhaps a solution to the Lynch situation might include a signing bonus and we can use these charts to provide guidance on that. Knowing the odds of needing to release him the following year we can come up with an average amount of dead money we would anticipate based on signing bonus levels. The following table shows how much dead money we would allocate to Lynch in each year based on signing bonuses of $6, $4, and $2 million on a two year extension. Please note the age 29 row includes dead money from his current signing bonus as well.

Lynch dead money forecast

Based on these numbers I would say that the team should consider no more than a $4 million signing bonus, half of which will likely result in dead money. Using a format like this can actually help identify how much dead money a team can anticipate each year on the books if we analyze every player on a roster and assume teams did not let the cap dictate roster status.

Lynch is already scheduled to earn $5.5 million this year so there would be basically no reason to touch Lynch’s contract at all right now as he is valued right in 2014 and there would be no benefit to a signing bonus to pacify him unless he reduced his salary in 2015 to the $4 million level. Considering he is looking for a raise I cant see him being agreeable to any deal.  About the only way to get a deal both sides would be happy with is to include escalators or incentives that paid Lynch larger sums of money if he was in that rare group that continued to play well into their 30’s. Otherwise it’s contract reduction not increase for him and likely for many others who will soon be in similar situations.

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