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Apr 17

Valuation Metrics for the Clay Matthews Extension

After weeks of rumored contract negotiations between the Green Bay Packers and LB Clay Matthews, the two sides made it official that Matthews would not become the highest paid outside linebacker in the NFL, surpassing the $13 million per year that the Cowboys DeMarcus Ware received in his 2009 contract extension. While no numbers are in as I am writing this (who knows by the time I’m finished) I wanted to look at the two real benchmark deals ahead of time so that we can get a better idea of just how strong the contract really is. The two deals I want to look at are those of Ware and the Ravens’ Terrell Suggs.

When I evaluate high level deals like this for the site I like to look at two sets of numbers- yearly cash flow and functional guarantees. The cash flows are pretty self explanatory. Functional guarantees are the amount of money that a player will actually earn not just because of the guarantee but because of the structure of the contract which comes with prorated bonus protections that leads to excessive dead money if cut.

Ware’s case is more similar to Matthews in that both were currently under contract to their teams on rookie contracts when they signed their extensions. Suggs had gone beyond the rookie deal and was on a franchise tag. The following cash flows represent the new money totals per year for the players

 

Ware

Ware Total

Suggs

Suggs Total

Year 1

$32,800,000

$32,800,000

$15,100,000

$15,100,000

Year 2

$7,200,000

$40,000,000

$24,900,000

$40,000,000

Year 3

$5,000,000

$45,000,000

$3,400,000

$43,400,000

Year 4

$6,000,000

$51,000,000

$4,900,000

$48,300,000

Year 5

$12,750,000

$63,750,000

$6,400,000

$54,700,000

Year 6

$14,250,000

$78,000,000

$7,800,000

$62,500,000

 

The first benchmark for Matthews is clearly the $40 million over a two year period, matching what both Ware and Suggs received. Ware’s number is a bit more misleading since it actually took him 3 years to reach $40 million due to the prior year contract not counting in the calculation. If Matthews surpasses $45 million over his first three extension years he will get the best deal of the group. Matthews was already set to earn over $3 million this season which would mean his 4 year total would surpass Suggs’ 4 year if he gets $45 million over the first three new years of the contract. Ware’s contract was filled with big money at the end which normally wont be earned which is why I want to go to the functional guarantees next, first with Ware and then with Suggs.

 

Ware:

Base

Prorated Money

Misc.

Cap Number

Dead

Savings

Year 1

$7,800,000

$5,430,693

$0

$13,230,693

$25,226,772

($11,996,079)

Year 2

$6,700,000

$3,998,693

$500,000

$11,198,693

$11,996,079

($797,386)

Year 3

$4,500,000

$3,998,693

$500,000

$8,998,693

$7,997,386

$1,001,307

Year 4

$5,500,000

$3,998,693

$500,000

$9,998,693

$3,998,693

$6,000,000

Year 5

$12,250,000

$0

$500,000

$12,750,000

$0

$12,750,000

Year 6

$13,750,000

$0

$500,000

$14,250,000

$0

$14,250,000

 

Suggs:

Base

Prorated Money

Misc.

Cap Number

Dead

Savings

Year 1

$1,000,000

$2,020,000

$4,000,000

$7,020,000

$14,100,000

($7,080,000)

Year 2

$1,900,000

$6,620,000

$0

$8,520,000

$31,080,000

($22,560,000)

Year 3

$3,400,000

$6,620,000

$0

$10,020,000

$24,460,000

($14,440,000)

Year 4

$4,900,000

$6,620,000

$0

$11,520,000

$17,840,000

($6,320,000)

Year 5

$6,400,000

$6,620,000

$0

$13,020,000

$11,220,000

$1,800,000

Year 6

$7,800,000

$4,600,000

$0

$12,400,000

$4,600,000

$7,800,000

 

This actually drives home a major difference between the two contracts. The fact that Suggs got massive prorated bonus money rather than base salary guarantees in the first two years of his deal make him virtually uncuttable for the first 4 years of his contract and even Year 5 is a difficult choice. This would be a functional guarantee of $48.3 million with a decent chance of earning $54.7 million before being released.

Ware, before Jerry Jones went wild with the restructures, did not have that protection upon signing. In this case I would consider the first two years functionally guaranteed with a decent chance of the third year being earned.  So the reality is its $40 million and a good chance at $45. If his play trailed off he would have been a prime candidate for a restructure in year 4 and easily cut beyond that. In reality his year 5 and 6 were nothing but funny money. Now Dallas has virtually guaranteed the whole contract because of their cap problems, but when signed Suggs had the far better contract structure despite lower money totals.

For Matthews to come out on top of the market he needs a structure that is closer to that of Suggs. Something that functionally guarantees him those first four years and a great chance at 5 years. If he can reach that $51 million over 4 year plateau and have a structure that makes it difficult for the Packers to wave good bye in 2018 he will truly have the best contract in recent memory at the position. If the Packers have outs early on and his cash flow is similar to that of Ware it may be a case where it’s a deal that looks better on paper than it plays out in real life, especially since the Packers are not going to get in a deep mess the way the Cowboys did.