The other day Julio Jones signed a massive $71.25 million contract that will make him the 2nd highest paid receiver in the NFL. It is a very strong contract for Jones who will have $47 million guaranteed early in 2016, $2 million more than Dez Bryant’s recent extension. Normally when we value contracts that are extended we look at “new money” which is the additional money added to the existing value of the contract. That provides us the best way to compare pure free agent style contracts with those of players who have years remaining. But Jones’ contract situation was unique which led to a “win-win” negotiation where the two sides probably have somewhat different valuations on the contract.
The natural comparisons for Jones were Dez Bryant and DeMaryius Thomas, who signed contracts this year while having their rights held under the franchise tag. Because neither Bryant nor Thomas signed their franchise tenders prior to signing new contracts their deals were essentially valued the same as a free agent. All the money in the contract was considered “new” since they had no other contractually agreed up salary.
Jones was playing under the fifth year option in 2015. The 5th year option is a special contract provision that is included in all rookie contracts for players drafted in the first round. For Jones that meant a fully guaranteed salary of $10.176 million. This money is considered “old” money when valuing a contract. When we use that as the baseline, we come up with a contract for Jones that is much stronger than his comparables. In fact the three year new valuation for Jones will exceed the three year limit of Calvin Johnson’s record setting 2012 extension with Detroit, before trailing off in years 4 and 5. Clearly this is a big win for Jones in a negotiation.
But in looking at the numbers and thinking about the situation, something stood out to me: is there really a difference between Jones not having a choice but to play on a CBA mandated, non-negotiated salary and Bryant and Thomas being tagged? The answer is no and that brings us to the way Atlanta likely negotiated the contract. If we simply take Jones’ contract as a new deal, the same way we take Bryant and Thomas what do our cash flows look like?
And now I think we see where the structure comes from. Jones effectively matches the Thomas contract over the first two seasons and then gets the Johnson $47 million over three, which is Atlantas concession, but to them the new money is, in this case, just a way to bring more value from the player perspective. When you get to year 4, it is simply identical to Bryant’s and in year 5, all three contracts are equal in total value at $70 million. I think it is clear what Atlanta was doing when negotiating the contract.
Normally I wouldn’t compare contracts this way, but this is a special set of circumstances because there is virtually no difference between the franchise tag and option year, only the ability to not sign the franchise tag. Don’t get me wrong- this is an incredibly strong contract for Jones with a great three year payout, but when teams, namely the Bengals with AJ Green, begin negotiating with players on the 5th year option they might want to take a bit of a different approach when doing the contract just like Atlanta did.
You probably wont have a lot of circumstances where all the stars align to compare this way, but I thought it was an interesting little topic that is hidden in the contract structure worth discussing. Here is the breakdown of Jones contract:
Jason is the founder of OTC and has been studying NFL contracts and the salary cap for over 15 years. Jason has co-authored two books about the NFL, Crunching Numbers and the Drafting Stage, which are widely circulated in the industry and hosts the OTC Podcast. Jason’s work has been featured in various publications including the Sporting News, Sports Illustrated, NFL Network and more. OTC is widely considered the leading authority on contract matters in the NFL.