Best and Worst Contracts 2016: Cleveland Browns

Today’s best and worst contract entry focuses on the Cleveland Browns…

Best: Joe Thomas, 7 years, $80.5 million, $10M guaranteed

There is little to choose from in this area on the Browns. There are not many veterans on the team to qualify for a pick and most of those who do qualify would be in contention for the worst contract designation. So that leaves me with Thomas, one of the few consistent performers in Cleveland. Continue reading Best and Worst Contracts 2016: Cleveland Browns »

A Close Look at the Tyron Smith Contract Extension


Since we now have the basic details of the Cowboys extension with left tackle Tyron Smith, I thought it would be worth looking at why calling him the highest paid player at the position is not exactly accurate.

Though Smith carries the highest annual value of any tackle, $12.2 million versus $11.5 million for Joe Thomas, the cash flows will tell a slightly different story. Here are the running cash flows of the two contracts:

Year 1$20,700,000$20,000,000
Year 2$30,900,000$30,000,000
Year 3$42,000,000$40,000,000
Year 4$51,000,000$50,000,000
Year 5$60,500,000$60,000,000
Year 6$70,500,000$70,500,000
Year 7$80,500,000$84,000,000
Year 8$97,600,000

For the first five years of the contract Smith will trail Thomas before pulling even in year 6 and then ahead in the seventh and final year of the contract. These numbers do not take into account the fact that Thomas has roster bonus escalators in his contract in year 6 and 7. If Thomas reaches both escalators, which are based on Pro Bowls, His six year payout will rise to $72 million and his 7th year payout to $84 million.

Those escalators are more or less built in to the Smith contract, which is likely how the Cowboys arrived at the $84 million total. If both players continue to play at a high level this deep into their contracts the contracts are at best equivalent and realistically will always favor Thomas. The final year payout for Smith will ensure that he will always be the highest paid player among the current crop of players, pushing his annual value to $12.2 million, a number Thomas can not reach with this contract.

I read some complaints on Pro Football Talk about how the contract is crazy for Smith to sign due to the length of the contract. This now ties him to the Cowboys until he is 33 years old. But that opinion fails to realize that in order to achieve this type of contract it is a concession that you must make. Thomas did the same year ago when he signed his record setting deal and he will be 35 years old when he can next hit free agency, two years older than Smith. While it is true that Smith likely had more earning potential than Thomas, who was 23 when he entered the NFL and signed until he was 27, this is the path to the big contract.

Thomas is not the only individual who sacrificed years to gain big money.  D’Brickashaw Fergsuon of the Jets signed a six year $10 million contract extension in 2010 that would tie him to the Jets until he was 34. Like Smith, Ferguson was under contract for two more years when he signed the deal. Ferguson was generally considered overpaid (though his annual value is inflated by around $750,000), but he clearly sacrificed to get that $10 million number. These are concessions that must be made especially since the limited injury risk is now being taken off the player and absorbed onto the team.

One player who took a different route was Ryan Clady of the Denver Broncos. Clady was a franchise player and considered the best tackle in the game outside of Joe Thomas. Clady opted for the traditional five year deal (though it’s doubtful the Broncos offered other options) which gets him to free agency at 32, a bit younger than the others on this list. When we look at the percentage of payout over the five year value we see the big difference. Smith will consistently get a larger percentage of his contract over the first few years of the deal, with it not really smoothing out until the fourth season of the contract.


Year 133.3%28.6%
Year 250.0%43.8%
Year 366.7%62.9%
Year 483.3%81.0%
Year 5100.0%100.0%

The other thing that we should do when looking at Smith’s extension is an alternative cash flow analysis. In this case we hold off on the extension because we are unhappy with the length of the contract being offered by the Cowboys. Here we play out the contract and will be subject to the franchise tag in 2016 and potentially 2017. For all the issues that may exist with the Dallas Cowboys salary cap they have already shown a willingness to use the tag multiple times on one player (Anthony Spencer) in years where the cap was difficult to navigate. If anything their cap will be better in the future.

Assuming the tag jumps by around $2.5 million in 2016 here will be the new money cash flows over the next four years:


If we discount these at a 7% rate the earnings in the current contract are actually higher than in the second scenario by about $700,000.  We have also eliminated our risks of injury or skill decline during that period. In the above analysis Smith would likely sign a contract in either 2017 or 2018. The terms would be 5 years at that point, which would bring him to either 2021 or 2022. Is that really a material difference than being under contract in 2023? Probably not.

Might he be trading off some money in this situation?  Its possible. The 2018 through 2022 seasons would see him earn $54 million. Would the market jump higher than that in that time?  Im not sure. Clady’s deal was worth $52.5 million over five years and would be used as the barometer, which would indicate $54 million is a fair number. The salary cap will be rising (by how much nobody knows), but we cant be sure if money will funnel to this position or simply go to higher quarterback wages.

All things considered this is a good contract for both sides. Dallas has a bit more control over his salary cap charges and will pay a bit more now to potentially lock up a player at what might be reasonable terms in the future. Smith has more or less reduced risk in the short term and not really sacrificed much in his overall earning potential to do it. While he may not really be the highest paid player, he can now claim he is based on that additional contract year. He’s not the first nor will he be the last player to do that.




The Difficulty of Valuing and Comparing Contracts


Whenever a new contract pops up our immediate reaction is to compare it with someone else often in an effort to make it sound greater than it really is. The reality is that it is often very difficult to compare contracts and one or two numbers is never going to paint the real picture. There are many factors that come into play with a deal and you may often come up with two answers based on how you decide to value a contract. I can safely say that Aaron Rodgers contract is worth far more money than Joe Flacco’s, but I can also safely say that Flacco’s deal is far more player friendly and has a higher likelihood of being earned. While I’m as guilty as anyone with the comparisons I do try to paint a complete picture of contract comparisons.  With Ryan Clady’s contract being the latest “biggest deal” I thought it was worth walking through some of the comparison difficulties.

New Money vs Total Money

This is the most difficult concept to work into contract comparisons. Contract extensions for the most part are contracts signed that have time remaining on the contract, often one year and sometimes more. When we value a deal we report the new money in the contract. To calculate new money you add together the yearly cash flows of the entire deal (for a 5 year extension with 1 year remaining that would be 6 years) and subtract out of that the cash flow component of the old contract. When we report on items like three year totals we are really adding many more years than three and subtracting the old money from the deal.

But is that fair?  Take Joe Thomas for example as he is the most likely comparison to Clady. His three year “new money” total is $42 million. Clady’s deal can’t compare with that, but Thomas’ take is over a 4 year period. His actual three year salary on the total contract is $38.9 million. Again that is more than Clady but it’s much closer. In order to really put the “new” money valuations in perspective you have to look at contract structure which we will touch on in a bit.

Length of Contract

The initial comparisons of deals often come in terms of annual value per year and guaranteed salary. But there are major differences in those numbers based on years. APY can be misleading. Is the deal frontloaded?  Is it backloaded?  Do the additional years bring up the value or diminish the value. The great player contracts have backend numbers that diminish the value which we can calculate by items such as percent paid out over x amount of years or APY per each year. Thomas’ deal fits into this category and so should Clady’s. The great team deal has backend salary that artificially inflates the APY, an example of which was D’Brickashaw Fergusons contract with the Jets.

Guarantees can also be misstated. I like to look at guarantee per year or percent guaranteed more than the total guarantee. If I am giving up 7 years of my career to a team I need to be compensated for it. Thomas’ contract contained a whopping $44 million in guarantees, but that is on a 7 year deal. On a per year basis that is $6.28 million. On a percentage basis its 54.6%. If we just take into account potential full guarantees those numbers reduce. With a reported $33 million in guarantees on a 5 year deal Clady’s guarantee is as high as $6.6 million a year and 62.9% of the total contract. Now which sounds better?

You can take it a step further as well and factor in life earnings. Assuming players complete their deals how old will they be when they can re-sign. Clady will be 32 when he re-enters free agency. Thomas will be 35. Who has a better chance of earning another deal?  Clearly the 32 year old. If the cap ever increases maybe Clady can make up that additional money Thomas received in his contract.

Contractual Structure

It is also important to take into consideration what happens if the player is not a great player over the life of the deal. Things change rapidly in the league and a deal that offers as much protection to the player as possible may be worth more than the deal with little protection that is valued higher. I often like to look at deals in terms of “virtual” guarantees, the point at which the salary cap implications begin to favor the release of the player. I tend to look at a few items when it comes to determining what is the true value of the contract.

Cap Savings- This is your very basic cap charge minus dead money in a given a year. Once it turns positive leverage goes from the player to the team and makes releasing the player more likely.

CSC Ratio- This calculation I use is the cap savings plus the cash savings divided by a players cap charge. I consider this to be a measurement of overall worth to a team to cutting a player. Remember a contract has both a cash and a cap component when you cut a player you save cash and may save or lose cap space. If the number is greater than the cap charge a team has reason to release.

Replacement Cost- While it is impossible to project this number ahead of time it puts more depth to the cap savings. This can be calculated by taking the cap savings of a release and subtracting out what cost a replacement player is. If you only save $2 million but the cost of a replacement is $5 million in cap dollars it is likely not worth cutting the player unless the cash component is that significant.

These are all important items to look at especially when we look at new money deals and seeing just how long those “new” years will really run. By agreeing to early extensions your contract structure is going to be much weaker than a newly signed deal.

Incentive Structures

This is often another big portion of confusion with a deal. We saw that tonight with Clady where the deal was originally reported as $57.5 million only to quickly learn that number included $5 million in potential escalators. Until earned we should always value at the base value of the contract. That $57.5 figure is likely important to Clady because it gives them a chance to reach the same APY as Thomas. The problem with that and as its being reported is that Thomas deal also contains $3.5 million in escalators, which , if earned, make his deal impossible to match.

With these escalators in place the details of earning them becomes important. Thomas’ are easier to earn because they are tied to Pro Bowls rather than All Pro nods, which is the condition of Clady’s. But Thomas’ seem to be tied to making Pro Bowls very late in his contract, which could be very difficult. Clady’s are reported to be available in tiers for each season and since his deal is only 5 years has more of a likelihood of actually being earned and paid.


These are just a few of the items that make comparisons difficult. It’s never as black and white as we like to make it seem when we quickly compare contracts, which is the best that can be done in 140 characters or a quick Sportscenter soundbite discussing how historic a contract is. With that in mind we will do our best when Clady’s details are made public to do as good a comparison as possible with the other big money deals on the market and try to determine just how much of the deal he will like see and when Denvers options to move on really begin.



Vesting vs Full Guarantees Focusing on the Broncos and Ryan Clady


One of our Twitter buddies had the following tidbit regarding Ryan Clady and his contract discussions:

On the surface that seems like a no-brainer of a contract for Clady. An $11 million APY in this market with $33 million guaranteed is a heist for the player. But whenever you see reports like this the first thing that should come into mind is whether the guarantees are real guarantees or not?

Guaranteed salary can take on many forms, only one type of which is truly guaranteed. We touch on this more in depth in our Caponomics videos, but the basics are that in the NFL you can be cut for skill, injury, or salary cap reasoning. Unless upon signing your salary is guaranteed for all three terminations the guarantees are nothing more than fancy words designed to make a deal sound amazing in the press when in reality the deal may be worth nothing close to the reported numbers.

The Broncos in particular rarely seem to fully guarantee players salary. They often use a “vesting” mechanism in which the player will convert a partial guarantee into a full guarantee by meeting some condition, typically being on the roster on a certain date. The vesting guarantees can be long horizon (more team friendly) or short horizon (more player friendly).  In the Broncos case it is normally the latter.  The structure of such guarantees are of even more importance when dealing with the Broncos who do not usually give their players large signing bonuses, which act as a deterrent towards early release due to salary cap implications.

So how do these deals work in practice?  We can first look at Peyton Manning who received a $96 million dollar contract. Technically the deal contains $96 million in guarantees, but the reality was just the first season was guaranteed. If released after that season and before the trigger event Manning would not have received another penny. To trigger his guarantees Manning has to pass a physical before the 2013 LY which activated $40 million in full guarantees, unless an injury occurs related to his original neck injury.  In 2015 and 2016 he has the ability to lock in yearly guarantees by passing a physical. This was both a player friendly structure (frontside) and team friendly (backside) with the rolling guarantee structure.

Wes Welker signed a 2 year $12 million dollar contract that was reported to be 100% guaranteed. That was only the case in regards to injury.  If Welker makes it thru the season in one piece and is released prior to the start of the 2014 League Year the Broncos will not owe him a penny. He needs to be on the roster to activate his guarantee.

Former Bronco Elvis Dumervil received tremendous press coverage when it was reported that his contract contained over $43 million in guaranteed money. As things turned out most of those guarantees were against injury only with him required to be on the roster every year for the guarantees to really mean anything. Dumervil missed out on $12 million in 2013 when he was released before the vesting date. Dumervil’s contract was incredibly team friendly.

So as we turn to Clady the question is just how much of the $33 million will be truly guaranteed and how much will need to be earned?  I would think it is doubtful that it would be fully guaranteed as the Broncos simply do not concede on that point. On top of that there is considerable precedence at the position. Joe Thomas,  D’Brickashaw Ferguson, Jake Long, and Duane Brown all have partial guaranteed contracts with possibilities of earning full guarantees along the way. None had their deals fully guaranteed upon signing.

Thomas’ deal could be a good starting point for an idea of potential structures.  Thomas’ contract was reported to contain $44 million in guaranteed money. The only amount fully guaranteed upon signing was a $6 million dollar signing bonus, $4 million roster bonus, and $8 million dollar Paragraph 5 salary. Another $20.5 million was guaranteed for injury and would become fully guaranteed by being on the roster a few days following the Super Bowl each year, a date that is considered more player friendly that dates pushing into the actual league year. $5.5 million was only guaranteed for injury.

Using that same structure and eliminating the portion of the guarantee that simply doesn’t vest we can get a signing bonus around $5 million and $10 million in fully guaranteed money that will be paid out in 2013. His 2014 salary would be $9.3 million and 2015 salary would be $8.7 million, both of which would be guaranteed for injury only and converted to full guarantees if he is on the roster in February of each year. Using that structure Clady’s cap charges would be $11 million, $10.3 million, and $9.7 million with backend charges of $11.5 and $12.5 million. His dead money in those last two years would only be $2 million and $1 million respectively which would fit in with the Broncos current Manning window.

So I’ll be very interested to see how it all breaks down, but I would not be surprised if its something similar to what I have outlined above.I think the key is just how much money they can push the Broncos on in the first two years. Those are two seasons where the guarantees are most likely to be realized. If Denver tries to push more vesting guarantees into 2015 then it is a deal Clady may reject unless he can earn those guarantees by being on the roster in 2014 rather than 2015.



Best & Worst Contracts: The Cleveland Browns


A few weeks ago Jason LaCanfora published a list of best and worst contracts in the NFL so I thought it might make a good idea for us to do the same here at OTC, with a team by team approach. I’ll try to be a bit more analytical in terms of why money was paid and how it fits in the market, but the general premise is the same. The one key difference is outside of restructured rookie contracts under the old CBA we will only use veteran contracts as there is a big difference between best draft picks and best contracts.  Please note that there is a difference between a bad player and a bad contract when discussing some of the selections. Clicking on a players name will take you to his salary cap page.

Best Contract: Joe Thomas

There is little to choose from in this area on the Browns. The team is made up of rookie contracts and lower cost players with minimal futures on the team, so we’ll go with Thomas, the highest priced player on the team.

Often times we overrate our stars due to draft status but that is not the case for Thomas. Thomas has proven to be the best Left Tackle in the NFL and most consistent player at the position. It is more or less a given that each year nobody will be better, making him irreplaceable.  Because the Browns were willing to spend so much money on Thomas the contract had the potential to be a weight around the neck of the organization, but by acting proactively the Browns received a cap friendly contract despite the high price tag.

The Browns extended Thomas with one year remaining on his contract and used large guarantees in the front end of the contract rather than a large signing bonus, making the cap hits very affordable throughout the life of the deal. While this strategy can prove risky, with Thomas’ 4 year track record he was the ideal candidate for the move.

Thomas is now under contract until the age of 34 and with no dead money from 2016-2018 the Browns could easily escape the deal in the event Thomas was ever injured or became less effective when older. In fact the deal was structured in a way where the Browns could have moved on without issue by 2013. If the market for tackles continues to deteriorate the lack of prorated money in the deal at least gives the Browns a possibility to work his figures down as well.

paul krugerWorst Contract: Paul Kruger

The Browns are a team in a position where they likely have to overpay to attract players and they did just that with the signing of Kruger. Kruger had a terrific season in 2013 with a great late season push for the Ravens that saw his name becoming a common point of discussion among announcers. It is certainly easy to look at that and think that Kruger is a dominant player, but he really is not, at least not yet.

The Browns pounced quickly on Kruger before realizing that the rest of the NFL was no longer going crazy in terms of dollars for anyone who can sack a QB. Kruger only has 6 career starts and has yet to post more than 9 sacks in a given year. The Browns were willing to shell out over $40 million for Kruger of which nearly half is guaranteed.

As a point of reference Cameron Wake the prior year signed a deal worth only $8.3 million a year and far less in guarantees. Wake was a proven starter that had produced 22.5 sacks in the two years leading up to his new deal as well as multiple pressures. His former team replaced him with Elvis Dumervil, who had 20.5 sacks over the prior two seasons, for $5.2 million a year and $11 million in guaranteed salary.

Though Kruger’s deal will allow the team to escape it in 2015 and the team is so filled with young talent that their salary cap can absorb a bad deal if Kruger does not work out, the Browns could have negotiated a far better more team friendly contract with Kruger.

Check out Our Other Best & Worst Contract Articles

AFC East: Buffalo BillsMiami DolphinsNew England PatriotsNew York Jets

AFC North: Baltimore RavensCincinnati Bengals, Cleveland Browns, Pittsburgh Steelers (July 1)