Cash Flows of NFL Contracts

Had a really good conversation on contracts with the guys at PFF today and right at the end of it some wacky news popped up about Dak Prescott that didn’t make much sense to me (and later I along with some others found it was a false rumor) but really opened up some strange discussions on Twitter about contracts. This also ties in with one of the first things we talked about on todays podcast which is what are the things you first look at when you see a contract and this seemed like as good a time as any to talk about that further using Prescott as example.

While reports on contracts often are about annual values, maximum values, and/or injury protection the real meat of the contract is the cash flow of the contract. From the perspective of the agent the more money up front the better. From the team side the opposite is true and they want to push more money to the back. All the other things are important to some extent but how the players get paid is really the primary factor with things like guarantees and structure being used as a way to mitigate the risk for the sides to some extent.

For the most part when we benchmark contracts we look at what’s referred to is “new money”. For whatever reason a lot of people find this confusing and get all mixed up with it but basically all this means is if a player is already under an existing contract we back the existing money and years out of the contract.  When analyzing a contract I usually refer to the money earned over and above what was called for in their prior contract the “Year 0” earnings. For example if a player had $25M remaining on his old contract and his new contract called for a $49M payment in the same year he would have a “Year 0” salary of $24 million. It’s essentially a prepayment on the new contract years. Year 1 of the contract would be the first year the player would have been eligible to be a free agent has he simply played out his prior contract.

If you are looking to sign a top market contract your goal is to also likely set new cash benchmarks at the various points of a contract. The following is the breakdown of the running cash new money cash flows of the top multi-year QB contracts of currently active players.

PlayerYear 0Year 1Year 2Year 3Year 4Year 5
Russell Wilson$53,000,000$71,000,000$90,000,000$114,000,000$140,000,000
Jared Goff$30,000,000$57,500,000$83,000,000$108,000,000$134,000,064
Aaron Rodgers$39,900,000$61,000,000$83,000,000$108,500,000$134,000,000
Carson Wentz$29,600,000$55,000,000$77,001,000$102,001,000$128,001,000
Matt Ryan$33,250,000$54,750,000$75,250,000$98,250,000$122,000,000$150,000,000

As you can see the numbers that are on the front end of these contracts are massive. The average of the group is about $60 million in new money earned by the time they have finished what would have been the first year of a contract signed in free agency. Since Dak does not have a “Year 0” to consider you can jump right into Year 1 to see the kind of money he would be looking at. This is one of the reasons why I found the statements I was reading about a $45M salary being selfish. You can not find any QB on a big contract that doesn’t earn much more than that on the front end of the contract.

The reason why the front end numbers are important for a player is because those are the years of a contract that are easier to earn. Even if a player’s salary is not protected by a guarantee the front end contract years are usually where the player is more effective. There is usually still a honeymoon period between the team and player at that point. Usually the players dead money at that point is often so high that it is harder for the team to move on anyway.

Getting back to the benchmarks the top line numbers are basically Wilson at every level with $71M, $90M, $114M, and $140M. Those numbers are gigantic and lap the field. Its $10M more than any other player at the start of the contract and $7M more in the 2nd year. One of the best ways to compare this is to break down the contract into value per year at every stage of the contract.

PlayerYear 1Year 2Year 3Year 4
Russell Wilson$71,000,000$45,000,000$38,000,000$35,000,000
Jared Goff$57,500,000$41,500,000$36,000,000$33,500,016
Aaron Rodgers$61,000,000$41,500,000$36,166,667$33,500,000
Carson Wentz$55,000,000$38,500,500$34,000,333$32,000,250
Matt Ryan$54,750,000$37,625,000$32,750,000$30,500,000

While Wilson did not earn anything close to the supposed demands of a contract that fluctuated with the cap and other oddball things you can see how strong it is. His contract on a per year basis is $1.5M per year more than Goff and Rodgers but the gap is much wider on the front end, which are the most likely years that the players will earn. It is important to note that QB is a little different than other positions because the career is much longer than other positions but the concept still remains the same.

When constructing an offer for Prescott his numbers have to fit somewhere in here. That is another reason why the $45M final year was kind of ludicrous. If its part of the $175M he would wind up well below the average for the other players until that last year since you would be taking $20M of money in the first four years out so you could throw it in the final year of the contract. That is maybe a tactic for a lesser player at a lesser position but would probably be considered somewhat insulting for a QB.

Don’t be surprised if one of the hardest parts of any offer is first bridging the gap as to where these cash flows wind up. The compromises are generally what you see with the others. Goff and Rodgers have contracts that average the same amount of money but if there was an epic disaster that caused the teams to bail (and there were no full salary guarantees) the Rams would have saved $3.5M because they were able to push some money later into the deal. Similarly if you look at Matt Ryan and Carson Wentz you can see an average per year that has Wentz earning $2M more per season. Yet the two earn basically the same number through two years and its not until the end of Wentz’ contract that there is more divergence. These are all ways to find compromises so that both sides come out of the negotiation happy. But those are moderate deferrals not millions upon millions.

If you base an offer on the structures of the other contracts you would wind up with cash flows in the range of $60M, $87M, $113M, and then $140M. That gives you the average per year of the Wilson contract but a cash structure that is better than most of the others but only catches up with Wilson on the backend.

The fifth year is an interesting topic. The big contract change in the movement from 5 to 4 year contracts really began with Wentz and Goff with an assist from the three year contract signed by Kirk Cousins in free agency. The Seahawks were a four year contract team and there was nothing unique about Wilson getting a four year contract. The older guard on four year contracts were old players. There was no reason for teams to really worry about five years there as they are a different subset of comparables.

The difference you get with Wentz and Goff is that those players were obligated for at least 5 years of control due to the fact that they had option years in their rookie contracts. So a four year extension represented 9 years of a players career. For Prescott a four year contract represents 8 years of control. If four years is a sticking point I would imagine that Dallas’ argument is what’s the difference between tagging Prescott this year and then doing a four year deal next year?  They risk prices going up due to team success but the only real market risk is Deshaun Watson with the Texans. Personally if I was a team I would prefer to get in before that only because the Texans have shown some odd tendencies at times but I would not go crazy about it.

There is leverage in that scenario for Dallas at least to a point. Dallas will have Prescott under contract this year for $31.4M. That number is far far far less than any of the other players on this list. Even f the tag dragged for two years the two year salary of $69.08M is way way way less than the two year salary of any of the players on the chart as well. If they tag this year and do a deal next year at $35M per year for four years its an average of $34.3M over five seasons. As long as Dallas keeps the salary down under $35.9M the five year value would not exceed $175M or exactly what he would earn taking a five year contract now.

Even if prices go up there is value in getting that fifth year under contract. Lets say Dallas had to go to a $38M offer that ran from 2021-2024. That would average out to $36.7M per year from 2020-2024. While that may be more on paper than what Dallas is offering now they would get that final year under contract. Even if that final year costs say $35-$38M it is probably less than it would cost to tag Prescott in 2024 if they agreed to a four year contract today.

The franchise tag is really only a benefit for the player if they are playing the long game. That is something you can do better at QB than any other position but you basically are giving up money now for the chance at earning it two years later. The odds would be against a team using a third franchise tag so you would be free to cash in on the market. That’s big. Take in $69M and then another $60-70M in the first year of a contract in 2022.  If you are willing to wait and leave for another team that is the most lucrative path but its not one that most players take.

I would think the key to a five year contract is to take into account what the market would be next year if he played out this tag. In essence value this as “old money” and negotiate a four year extension on top of it. If they take $38M as the number its going to be five years for $36.7M mentioned above. Its not that far off a $35M per year contract. Bring it down to $36M and its effectively a four year, $37.2M extension.

From there you can go back to the cash flows to find a way to make it worthwhile to do the longer term beside the fifth year. Based on the Ryan contract I would assume a fair 5th year salary to be around $33.5M. That leaves the four year number at $146.5M. Let year 1 trail Wilson and run around $63M to be closer to what the rest of the market is. By year two he earns slightly more than Wilson ($90.75M to $90M), and then $4M more over the three year period and the $6.5M more in year four. That would likely give both sides positives in the contract and different ways to value the deal to make everyone happy about what they wound up doing rather than playing out the season and then going back to the drawing board.

But whenever you hear a leak about an offer see if you can find any rumors of the contract breakdown before you really evaluate it. And when something sounds completely out of whack like a back end $45M payment its probably worth questioning completely before really running with it as anything remotely valid.

Winning with Expensive QB’s

The Dak Prescott story continues to give us some things to talk about with the discussions today turning to the salary cap impact of a contract extension hurting the teams chances to win. There was a post on Twitter looking at the lack of Super Bowl wins for top QBs since 2014 which garnered a great deal of attention todat so I wanted to expand on that a little.

While the Super Bowl is certainly aspirational it is so difficult that using that as the only judge of success can be limiting. So I wanted to look at what teams have spent and how much success they have had over that 14-19 timeframe. For the most part I think we measure success as making deep runs in the playoffs. So I awarded each team 1 point for completing the regular season, 2 points for losing in the wildcard round, 4 points for losing in the divisional round, 6 points for losing the conference championship, 8 points for losing the Super Bowl, and 10 points for the ultimate Super Bowl winner.

The following chart shows the results (yes I know its old logos) with the exception of the Patriots who throw everything out of whack. If you want to know where they would be its nearly 50 points with just slightly above league average QB spending.

The data pretty much indicates no correlation between spending and success. There are teams that spend big that are consistent deep playoff teams and those like the Lions and Giants who have basically stunk. There are teams with cheap QB rooms that do well and others on the Jets line who spend little and win little.

Still this can be a bit misleading because for many of these teams the arbitrary timeframe overlaps rookie contracts and non-rookie ones. So what if we just look at veteran players? Here is the list of QB’s who have totaled more than $25M in cap charges on veteran contracts (meaning Russell Wilsons 2014 would not count but 2015 would), played at least three “veteran years” and how they performed. I pulled Brady out from here just because he completely changes the ranges we have to show since he has been so successful.

Again it is basically the same story. You can win or lose with expensive QBs. Its more about who you spend it on than the cost itself. That brings up the other questions which is should you just draft or not? Here is how the average yearly performance of teams with rookies who primarily started matched up with the average performance of these veterans (again I took Brady out).

This gets a bit messy since I didn’t take out the names and so many rookies make little but I do think there is some evidence to suggest what intuitively makes sense- having so little spent on the QB position relative to the veteran should give teams more opportunities for success during that short window of time where they are on a rookie contract, which usually is years 2 to at the most 4, so a two to three year window. Even when a team is playing a sub par QB like Bortles and Mariota they may have had enough resources to use elsewhere to build a team that hides the QB. Of course many teams then make the mistake the Jaguars made and assume a Bortles can be successful when the reality is they were only successful because of what was built around him.

This is of course a completely different question for a team like Dallas. Its not an option to get Prescott under $10 million nor is it an option to land a top 10 pick which is where most of the good rookies come from. The question is does Prescott lock them into that bottom right area?  If they think it does then bail, but if they thought that way the time to be auditioning replacements was 2018 and 2019, not waiting until 2021. It’s the one area that the Patriots did a good job which is somehow overlooked because of Bradys longevity- they were always looking to have a young guy behind Brady so they have an opportunity to have already looked at his replacement for a year or two in their system.

It’s a completely different strategy discussion but the concept would be to take a player like Prescott (or Goff or Wentz) and see before their fourth year how many first round picks you could turn them into. If its more than one you are probably giving yourself the ammunition to potentially upgrade the position at a far cheaper cost. Basically you are trying to exploit the fact that desperate teams that have failed in their quest to find a QB would be desperate in a trade and give the farm. That’s a topic for a different day.

But for today’s topic I don’t think that any of the data backs up the point that dropping from a Prescott to a cheap option like Dalton or Fitzpatrick type players will lead to any success nor that paying a QB completely eliminates the chance of winning. Its about finding the right players to pay and making the very difficult decisions on those who are not worth it.

The Dak Prescott Contract Situation

With all the Dak Prescott discussion dominating the news cycle today with so many ranges of opinions I wanted to go back and look at some notable 2nd contracts signed in the last 8 years and if they can give us a more logical way to look at the situation.

Jared Goff, September 2019, $33.5 Million/4 Years

Goff was the first overall draft pick in 2016 and had completed three years in the NFL at the time of his signing. Goff’s contract did not set the market coming in at 4.3% less than the contract signed by Russell Wilson in 2018, but did expand on fellow draftee Carson Wentz’ $32.5 million contract signed three months earlier. Goff’s contract was worth about 4.7% more than Wentz’ deal. Goff also set a record for injury protection in a contract though the figure included money already guaranteed on his rookie contract. Goff had come off of back to back division titles and had played in the 2018 Super Bowl. Goff was selected to a Pro Bowl in 2018 as well.

Carson Wentz, June 2019, $32.5 Million/4 years

Wentz, the 2nd overall pick in the 2016 draft, signed a contract that was worth 8.6% less than the top of the market at the time of signing while narrowly setting a record for injury protection, though like with Goff above included significant money from his rookie deal. Wentz’ contract was the first young player of note to do a deal after Kirk Cousins’ three year contract signed in free agency in 2018. Wentz’ contract would average 14.3% more than Cousins contract. It also represented a jump of 6.7% over Matt Ryan’s 2018 contract that made him the NFL’s first $30M per year player. Wentz was a Pro Bowl player in 2017 and a candidate to win the NFL MVP when he was injured. The Eagles would go on to win the Super Bowl with Nick Foles that season. Wentz’ team did make the playoffs the following year but he was injured again and Foles was the driver of their regular season finish.

Kirk Cousins, March 2018, $28 Million/3 years

Cousins was the first QB of note to hit free agency since Peyton Manning in 2012. Cousins is in many ways the most comparable player to Dak Prescott. Cousins was a 4th round draft pick with no playoff success leading into his free agent seasons. Cousins was older than Prescott and tagged multiple times by the Redskins but in his career only had one playoff appearance which came along with a division title in 2016. Cousins was probably looked at as someone who was going to be a perennial 7 to 9 win QB unless he found himself in the optimum situation. Cousin’s had the unique distinction of having his entire three year term fully guaranteed at signing and getting an early opportunity at a second free agency which effectively made up for lost time due to the multiple tags used by the Redskins. Though the guarantee gets the focus on this contract the real lasting impact on the NFL was the term. At the time the norm was 5 seasons. After Cousins the norm dropped to 4. Cousins contract represented a 1.8% increase in annual value over Jimmy Garoppolo, making him the highest paid player in the NFL for a short period of time.

Jimmy Garoppolo, February 2018, $27.5 Million/5 years

This was a stunning contract by the 49ers who made Garoppolo with all of 7 career starts the highest paid player in the NFL. Garoppolo was a former 2nd round pick of the Patriots and the 49ers made an in-season trade for a 2nd round draft pick to acquire him in 2017. This contract was a 1.8% bump in annual value over Matt Stafford’s 2017 contract extension with the Lions. The only logic behind the 49ers going this high was the fear that the market dynamics could dramatically change with Cousins free agency which was coming a month later. The 49ers did get exceptional terms on the guarantee and per game bonus aspect of this contract as a tradeoff for the very bullish annual value on the contract. There are some similarities to the situation between Garoppolo and Prescott when it comes to leverage.

Derek Carr, June 2017, $25 million/5 years

Carr’s contract was the first real jump for a non-elite quarterback in quite some time. Carr was drafted in the 2nd round of the 2014 draft and quickly became the Raiders starter as a rookie. Carr led the team to a respectable 7 wins in 2015 and was named as an injury replacement to the Pro Bowl. He really came into his own in 2016 leading the Raiders to 12 win season before an injury ended his season before the playoffs. In many ways his career is a bit of a poor mans Carson Wentz in that his entire success was linked to that one season and post injury never really had that same form, but his extension came before that. Still the Raiders, who were just digging out of one of the darkest periods ever for an NFL franchise, had little reason to not extend him after a playoff loss without Carr had their offense looking minor league. Carr’s contract was a 1.7% raise over that of Andrew Luck.

Andrew Luck, June 2016, $24.6 Million/5 years

Luck’s contract was an interesting one. This was the first contract that significantly moved the QB market that had been completely stagnant for some time with the contract raising the market by 11.1% while carrying a record setting $87 million in guarantees. Still it was surprising he did not get more. Luck was considered the perfect prototype for what you want in a QB. He was the first overall pick in the NFL draft and unlike Carr was looked to be a prolific passer with two seasons over 4,000 yards and a few Pro Bowls thrown in. Prior to injury Luck had won 11 games in three straight seasons and led his team to the Conference Championship round in 2014 (where they got pummeled). I remember back around this time discussing that Luck should only take a short term contract from the Colts to play the tag game so I was surprised to see him sign this contract even though this is what set the stage for the run up to $30 million within two years after it took three years to get from $22 million to this contract.

Russell Wilson, July 2015, $21.9 Million/4 Years

This is probably the contract that gives Prescott’s group the most trouble even though its so old. By 2015 Wilson had won no less than 11 games, won two division titles, appeared three times in the playoffs, and twice in the Super Bowl, winning one and losing the second on a last second interception. There were only two possible reasons for Wilson to not have been the highest paid player in the NFL- one being that he was not yet throwing for a ton of yards a game and the second is that he was only a 3rd round draft selection. Wilson wound up signing for slightly less than Aaron Rodgers who capped the market off for ages on an extension signed in 2013.

Cam Newton, June 2015, $20.76 Million/5 Years

Newton was a former number one overall draft pick and while the face of the Panthers franchise still had his doubters. Newton’s teams had been pretty up and down winning 6, 7, 12, and 5 games prior to this extension. They had won the division in 2013 but failed to advance past the Wildcard round and went 1-1 in the 2014 playoffs winning a historically bad division at 7-9. Newton was probably not considered the typical passer but was a dual threat at QB that did win the offensive rookie of the year award in 2011. This fell about 5.5% short of Rodgers’ top market contract but did just beat out Matt Ryan’s 2013 contract. Ryan was much more accomplished as a passer at the time he signed his deal and I’m sure it was considered a win by him to get an offer for more. Newton would likely regret it a year later winning the NFL MVP award and leading the Panthers to the Super Bowl. Injuries piled up and Newton now has a road to climb to get to a third big contract.

Matt Ryan, July 2013, $20.75 Million/5 Years

Ryan, a 3rd overall draft pick, was firmly entrenched as a big QB by this time. In his five years in the NFL Ryan had twice thrown for over 4,000 yards and appeared in two Pro Bowls. Ryan’s teams were always successful. His win totals went 11-9-13-10-13 and his team made the playoffs in four of those five years- twice as a division winner and twice as a wildcard. The question around Ryan was whether or not those regular season successes would translate into playoff wins as the Falcons playoff record was poor. It was the lack of playoff success that saw Ryan fall about 5.5% short of Rodgers while increasing 3.2% over Joe Flacco who was the reverse of Ryan was a lower drafted 1st round with playoff success but a much more limited passing resume. Ryan eventually became the first $30 million player.

Joe Flacco, March 2013, $20.1 Million/6 years

The contract that really changed things for everyone Flacco rode an extremely successful playoff run that peaked at a time when he was set to be a free agent and his current team was in really bad salary cap shape. He used that to his advantage to be just the second player to sign for at least $20 million a season edging out Drew Brees by 0.5% in becoming the NFL’s highest paid player. Flacco really changed the dynamics of what does and does not define a QB contract as he never had a 4,000 yard season, never made a Pro Bowl, never threw for more than 25 touchdowns, and wasn’t a top 5 draft pick, all things that usually seemed to indicate financial success. His teams were very successful with two division titles, perennial appearances in the playoffs, and advancement in the playoffs as well as that Super Bowl win. I personally always consider this contract as the game changer for the position that really kicked us off into the modern era of QB contracts.

Ryan Tannehill, May 2015, $19.75 Million/4 Years

By this point in time QB contracts were usually driven by players who either had sustained runs of playoff success or some type of big statistical success until Tannehill who had neither. The former 8th overall pick has finished with no better than 8 wins in his first three years in the NFL and peaked with a 4,045/27TD season when Miami locked Tannehill up hoping to get a rising player on the cheap. Tannehill’s contract was a 0.2% raise over Colin Kaepernick’s 2014 contract and 4.5% less than Flacco’s contract. This started the push to where every QB that would be a starter was going to earn at least $20 million a season.

Colin Kaepernick, June 2014, $19 Million/5 Years

Kaepernick was a very interesting case at the time. Kaepernick was absolutely dynamic as a runner for San Francisco and while raw as a passer certainly had his moments. Since replacing Alex Smith he had been very successful leading the 49ers into the Super Bowl in 2012 and to a 12-4 record and NFC Conference Championship game performance. At the time it was a question mark as to whether or not Kaepernick could get to the $20 million mark the way Flacco did a year earlier. Flacco had higher draft pedigree and a much higher floor as a passer but Kaepernick’s ceiling seemed much higher. At the end of the day they came to an agreement with a big incentive package that could move him into that Flacco range. Many criticized the contract at the time as being too team friendly and there was probably some truth to that criticism.

Where Does Prescott Fit?

Here is the breakdown of the various deals and how much they were above or below the top market deal at the time.

PlayerSignedYearsAPYCap Inflated APY% of Top Market
Jared GoffSep-194$33,500,000$35,280,021-4.3%
Carson WentzJun-194$32,000,000$33,700,319-8.6%
Matt RyanJul-135$20,750,000$33,436,179-5.7%
Joe FlaccoMar-136$20,100,000$32,388,7800.5%
Andrew LuckJun-165$24,594,000$31,393,90011.1%
Kirk CousinsMar-183$28,000,000$31,318,2840.1%
Jimmy GaroppoloFeb-185$27,500,000$30,759,0291.9%
Russell WilsonJul-154$21,900,000$30,294,389-0.5%
Derek CarrJun-175$25,005,000$29,676,5931.7%
Cam NewtonJun-155$20,760,000$28,717,420-5.4%
Colin KaepernickJun-146$19,000,000$28,314,286-13.6%
Ryan TannehillMay-154$19,250,000$26,628,629-12.5%

I think the first takeaway that I would have looking at this breakdown is that while there may be a case to be made for being the highest paid player in the NFL there amount of an increase based on past history would be very small and certainly under $36 million a year. The only first contract QB to earn a significant jump in salary was Luck. Luck’s contract came at a time when the QB market was flat for many years and had seen enough backend changes that were going to force a market correction. I’m not sure that exists right now unless one considers Cousins most recent contract to be a difference maker (I would not). Prescott is not Luck and I don’t think anyone would argue that. Luck’s number would be the equivalent to around a $39M per year contract and will be the starting point for Patrick Mahomes not Dak Prescott.

There probably also is justification for Dallas seeking a less favorable contract than what many say for Prescott. Prescott’s career is probably somewhat on par with that of Goff and Wentz as well as Newton and to a much lesser extent Ryan a generation ago. None set the market and on average wound up 6% under the top of that market. That would indicate something along the lines of a $33 million per year deal being a fair offer. The negative for Prescott when comparing to those players is that he does not have the draft status and perceived ceiling that any of those players had.

The question though is where was the market back then compared to where it is now because while those players did not reset there market we do have three comparable players who did and those players are actual better comparisons for Prescott. Those three are Cousins, Carr, and Garoppolo who each grew the market and that averages out to a 1.2% bump which works out to about $35.5M a season.

In the case of the players not resetting the market I think you had situations where the market itself was pretty set with a recent contract for a gold standard player setting a ceiling (Wilson in 2019 at the top and Rodgers in 2013 at the top) and enough of a gap between the top and bottom to negotiate somewhere in between (Cousins in 2018 and a bunch of deals at $18M for the earlier players). When the others moved the market I think you had projected market movement and changing dynamics with Carr really being the catalyst making up for Luck not pushing even higher.

It is hard to say whether or not the market has changed enough to justify a new top deal. It really all depends on how one views Cousins’ two year, $33 million extension. Two years is such a short term that using the annual value as a benchmark really is not the proper way to do it. If I were in Dallas’ shoes I would probably look at the contract as a five year, $30 million deal and predate the whole thing back to 2018. That still pushes the market but not to some massive extent. Ryan Tannehill at just under $30 million also would be considered a backend market pusher. But if you take Cousins at $33M (or even a 3 year $32M per year deal) combined with Tannehill I think you get enough to justify a contract over Goff and Wentz even if the success is less and the draft pedigree is much less. I think more would agree with that viewpoint than the market has not changed one.

As far as situations go Prescott’s is most comparable to Garoppolo’s in that Garoppolo would have likely been franchise tagged to block him from free agency. While Cousins may be a more comparable player the fact that he was a pure free agent takes that situation away. If you look at the Carr and Garoppolo deals you will see aspects that were team friendly. Carr got a miniscule signing bonus and had no prior year vesting guarantees (he did have waiver wire guarantees though). Garoppolo’s was similar with the mini signing bonus and unfavorable vesting schedule and $800K a year in per game bonuses.

Both ran 5 years and while the 4 year movement was not as prevalent as it is now there were a series of 4 years deals on the books at that point in time with Wilson being at the top followed by a number of big name veterans on their third contract. So I think there are logical reasons to say that if Prescott does wind up the highest paid it would likely be on a five rather than a four year deal. There is zero logic behind agreeing to a 3 year deal from Dallas’ perspective.  

I think for Prescott to hit a new high he would need to concede on two issues. One is the years. I think it has to be five years if he gets the APY concession. The second is that the guarantees would vest similar to the Carr contract with vesting dates in February but in the year of the guarantee.

There isn’t really a reason to justify a massive increase over Wilson’s contract at all. As stated above it would be in the $35.4-$35.5M per year range. As far as guarantees go those would also likely be under Wentz and Goff who had million from their old contracts included in their guarantees. Neither Cousins nor Garoppolo reached Staffords number nor did Carr reach Luck. You would probably be looking at a guarantee in the $90M range rather than $110M range.  When you look at the cap inflated values for the contracts I could see why Dallas would hedge at these numbers but I think there is enough reason for Prescott to dig in until that is offered. If he is looking for far more than this there should likewise be reason for Dallas to dig in and say no and force the year on the tag.

What Could Happen to the Salary Cap in 2021

One of the questions I have been getting over and over recently has been what happens to the salary cap next year if the NFL season is impacted by the Covid-19 pandemic. I talked about it a little bit on last weeks podcast and thought I would expand on it In a post. Obviously this isn’t something I (or anyone at the moment) would have a firm answer on but it is something that we can at least speculate about and discuss.

While the topic of cancelled games and their impact on the salaries of NFL players, contract length of NFL player contracts is not defined there is one section of the CBA where they do discuss the potential impact of cancelled games,

“Cancelled Games. If one or more weeks of any NFL season are cancelled or AR for any League Year substantially decreases, in either case due to a terrorist or military action, natural disaster, or similar event, the parties shall engage in good faith negotiations to adjust the provisions of this Agreement with respect to the projection of AR and the Salary Cap for the following League Year so that AR for the following League Year is projected in a fair manner consistent with the changed revenue projection caused by such action.”

What that tells me is that one the salary cap for 2020 by no means will be changed and that two the salary cap in 2021 can be changed, significantly, based on how much revenue is lost this season.

There are a few scenarios that are at play here. One is we have a major recovery by mid July and everything proceeds as normal with the NFL getting a full preseason, training camp, and so on. In that scenario nothing changes beyond just whatever lingering impacts there may be that drive certain sales and ad revenues down. In every other scenario the results should be much more impactful.

The other options would be some type of shortened season where they pick up camp in the fall and start the year in late October or early November. Perhaps a full season with no spectators or very limited spectators (say 1/3 capacity).  That could happen either at home or in some type of neutral site season if some states do not allow sports while others do.  Of course there could be no season at all which I think is the most unlikely but would certainly hurt the league.

The NFL essentially makes its revenue, which is what is used to calculate the salary cap, through three sources. Two are national in scope. The Tv Rights package is the big money numbers we always here thrown around about how much NBC, CBS, Fox, ESPN, DirectTV, and various internet properties and national radio entities pay for the NFL. In the prior lockout of 2011 there was talk that the TV contracts called for payment even if the NFL doesn’t play so perhaps these revenues are safe but we don’t really know one way or the other. For the sake of this lets assume they are ok if the NFL plays a majority of the year.

The second source is NFL Ventures. This is the revenue associated with the NFL Network and Red Zone channels along with money paid for the postseason, Game Pass, NFL Network games. etc…The impacts here probably depend on how much of a season there is. If there is no season I would guess people will begin to cancel their various subscriptions. Who know if there will or wont be a Thursday game package to license. My guess is most people are like myself and only carry the NFL Network and Red Zone packages through cable for the access to Thursday games and in season programming. The offseason stuff is fine and something to throw on the TV once in awhile but if there were no games on the Network I doubt I would subscribe and obviously Im a big fan of football. Still its hard to project what is and is not tied to these revenues.

The third source is local revenues. Local revenues are those that come for the operation of games . Ticket sales, stadium sales, merchandise, preseason rights fees, local radio rights, sponsorships, and so on… This would seem to be the things most impacted by any season that doesn’t take place in the home market or does not allow the attendance of fans to watch the games. There is potential for this part of the equation to more or less vanish.

The NFL has a formula by which they allocated the money from the various sources but with bands that essentially keep spending no matter what at 47% of revenues we can guesstimate that 47% of lost revenues will be allocated to the players.

How much will that be is a good question. The best that we can do to estimate anything is to look at the Packers financials which separate their revenue into National and Local income. Last year the Packers received National revenue of $274.3 million with $203.7 million coming from local income. The prior year the numbers were $255.9 and $199 million. Now the Packers may be understated a bit since they are considered a smaller market team and I don’t think these numbers would make it to the players share the last few years, but it would be close so lets say a fair estimate is that 45% of the league revenue is made up of local revenues and the rest comes from the revenue share from the big media packages.

Clearly this is going to be a big number. Based on the recent growth I think the Packers would likely have expected around $208 or $209 million in revenues. Lets just call it $210 and pretend that that goes for all teams. If you eliminate 70% of that figure about $78M of the losses would be attributed to the owners and $69M would be attributed to the players. Currently there is about an 80-20 split between salary cap and benefits for the player distribution which would mean we would be look at a decrease of around $55 million in cap space, assuming that the benefits are not sunk at a certain number, in which case the cap loss would be more. If you lost all local revenues you would probably be looking at an $80 million loss in cap space while a 40% loss would result in a $31 million drop in cap room.

None of this takes into account the loss of national revenues but even if that is a small number (and there will likely be some loss) my guess is that you are looking at the cap to drop anywhere from $40 million from projections to $85 million from projections for 2021. This would assume that 2021 growth remains steady pace from where 2020 was expected to be. We had projected a cap of about $215 million in 2021 based on players share increasing from 47 to 48% so anywhere from $130 million to $175 million. $130 million is where the NFL was in 2014 to give some context to it.

The higher number would result in about 14 teams projecting to be over the salary cap in 2021 and that doesn’t include rookies from this year since none are signed yet, so probably half the NFL. The big number would see all but four teams over the cap and really is not even workable.

Now the way that clause is written in the CBA it sounds as if the entire loss would be reflected the following year but I would imagine there has to be some wiggle room for a side negotiation to find a way to basically borrow from future salary caps to prevent teams from cutting most of their roster. Owners would probably hold more of the cards in this situation since they are the ones taking the massive hit and can start cutting players.

This is a situation that probably should be discussed now with the union rather than waiting. Why do I say this?  The main reason is because as teams become more aware of this seasons outcome they will likely begin cutting veterans with non guaranteed contracts left and right to cut down on costs for the year and to maximize cap carryover for 2021. Almost every team in the NFL has already met the spending threshold for the current four year spending period so they can almost all run like the Dolphins did last season without worry.

But would there really be a reason to carry the player who is going to earn between $3 and $9 million who may be a situational player or one only on the team due to some cap considerations in 2020? Teams keep players sometimes hoping they can get one last year out of them if the cost to cut and cost to keep are close, but you can probably throw all of that out the window if you are expected to lose $100 million on the year and still face a situation next year where you have to make crazy decisions to be cap compliant and to find ways to make up for all the money that was lost in the Covid crisis. Cutting now and saving the salary lessens your losses on the year and increases your cap room the next year assuming the player was a likely cut anyway.

In addition if there is no season there is no reason to even consider paying players in the last year of their contract if their contracts will expire anyway or paying players who are of limited contribution anyway to the team.

The thing is the owners will have an idea by mid summer as to how dire the situation is and what their legal options are with these contracts. There should be a way to avoid this and make everyone make the best of a bad situation but if they don’t negotiate it early there are going to be some players whose fate is simply going to be a byproduct of the projected revenue loss and concerns for 2021. They can always hire the players back if the season returns or if they need them the next year, likely at a reduced cost.  Waiting until the season is on the brink to figure out the plan would be negligent on both sides. Perhaps they are already discussing this but they have to determine how to handle this years contracts and next years salary cap if they land in a situation where the season is going to be very different than usual. If they aren’t discussing it someone should get them to the table ASAP to do just that.

The Benefits of the Packers and Eagles Draft Strategy

Two of the most controversial picks in last weeks draft were the selections of two quarterbacks, Jordan Love and Jalen Hurts, in the early stages of the draft. The reason they are so controversial is because both the Packers and Eagles already have their starting QB’s under contract for the foreseeable future and it becomes a waste of a draft pick and salary cap space to draft another QB. So let’s examine a few sides to this story.

While the two starting QB’s (Aaron Rodgers and Carson Wentz) are at different stages of their career both are very expensive players- Rodgers’ contract averages $33.5 million a season while Wentz’ contract averages $32 million a season. That is what brings up the primary argument that the teams are already so invested at the position that they are harming their own salary cap by adding another QB to the mix.

This is one of those areas where I think people lose sight of market values and realities across the NFL. Drafting a QB is basically the exact opposite of drafting a RB. A RB’s value relative to the market requires a player to be a top tier back, while a QB is closer to the low salaried rung of players. At the worst Love and Hurts will be expected to be the primary backups for their clubs. Love will sign a contract that averages $3.096 million a season and Hurts will sign for $1.506 million a season. The average NFL backup in 2020 will play on a contract that averages $2.879 million (that number does not include the Colts salary structure nor the fact that the Seahawks don’t have a backup).  So from an salary standpoint the Eagles will have a cheaper than average backup and the Packers will be paying about the league average.  

The Packers will be second in the NFL on average spending on top two QB’s while the Eagles will be eighth. Are either of those absurd? Not really. Think about it this way. Did anyone accuse the Colts of irresponsible spending on quarterbacks by signing Philip Rivers when they already had an expensive QB on the roster?  The Colts have nearly $53 million invested in QB this year, why wasn’t it criticized?  Because Jacoby Brissett wasn’t any good last year and if they went into the 2020 season with him as QB they likely were not going to make the playoffs. They needed a starter and they got one. It was the best move to give them a chance in 2020.

Given the importance of the QB position there is no reason to not find a way to get the best possible backup possible and the best chance you have to find a backup that can really fill a void is in the draft.  This probably applies to the Eagles pick more than the Packers one due to the age disparity between Rodgers and Wentz but the strategy could be the same. The option for both is to buy a backup QB and then pray that the QB never has to see the field because generally the starter going down means death to the team’s chances.

Backups that cost more than Love include AJ McCarron, Chase Daniel, Josh Rosen, Taysom Hill, Case Keenum, Nick Foles, and Marcus Mariota. Hurts will cost less than players like Matt Barkley, RGIII, Nathan Peterman, Cooper Rush, Colt McCoy, Jeff Driskel, Matt Schaub and Nathan Peterman, the Eagles current backup QB. The draft is the only spot in the NFL where you are likely going to have access to a potential legit option to cover for an injured starter and in most cases it is cheaper than signing the backup that makes you cringe when he takes the field. In both cases the teams at the least potentially signed themselves the best cheap backups in the NFL.

The second criticism is that the teams don’t have the ability to walk away from their current starters even if they wanted to and thus you waste the cheap years for the rookie. That’s true for 2020 but not so much in 2021 and 2022. In both cases the closest comparable from a cap perspective is the situation the Cowboys had when Dak Prescott established himself as a starter with a very expensive Tony Romo still on the roster. Dallas made the decision to release Romo after Prescott’s first year taking on $19.6 million in dead money across two seasons. That would be the equivalent of about $24 million in dead money today. Rodgers next year would be around $30M and both would be under the Romo threshold by 2022, so at worst it would be two years sitting on a bench and starting in year 3.

Considering most think of a rookie season as a waste on the field anyway is waiting until the third year a problem?  I wouldn’t think so. Baker Mayfield, Sam Darnold, and Josh Allen have pretty much struggled through two years on the field. Lamar Jackson only saw action as a rookie due to injury. Pat Mahomes took a redshirt first year. Deshaun Watson missed most of his rookie season with an injury. At the most they are losing one year with their current roster construction. They also will be getting a chance to evaluate the players in practice and in some game situations without having to expose to the critisicms the first three names have gotten for struggling through two seasons.

Would the dead money put the teams at a disadvantage compared to say the Chiefs with Mahomes while Mahomes was a rookie?  Maybe a bit, but in general the dead money is sunk cost for Rodgers and Wentz. By cutting (or trading) the players you are going to open up far more cap space one season later because you are taking the base salary off the books plus you are now in a position to plan for that which is different than Dallas. In that respect this is probably closer to the Ravens with Jackson and Joe Flacco as the Ravens after making that pick on Jackson were able to plan around the Flacco release (Flacco was $16M dead).

Dallas did waste some of the cap benefits of Prescott but it wasn’t because of Romo alone. It was because they also had a bad situation with Dez Bryant and some other deals on the team. Imagine how much worse Dallas would have been if they continued to trot out a breaking down Romo or the Ravens kept going with Flacco?  This allowed the teams to take one big cap hit while freeing up millions in actual salary that could be used in the future.

The rookie QB basically allows you to take more risks in free agency because you can tolerate mistakes easier, but it can also allow a team that maybe already has some mistakes on the roster an easier path out. The Eagles in particular have a more dire salary cap outlook in the future with millions of sunk costs all over the roster. If they ever decide to make the switch from Wentz in many ways this is likely the cure for some of those contracts.

Name quarterbacks will always have trade value. Aaron Rodgers would likely have tremendous trade value just based on name alone. Wentz would also have solid trade value. If the players happen to excel you can also showcase the rookies in the preseason and likely recover the pick. No player in recent memory had a worse rookie season than Rosen and even he fetched a 2nd round pick. While obviously that is effectively deferring a draft pick you can probably get most of the value back unless the player just looks terrible for multiple preseasons and the front office does a poor job hiding their disdain for the player.

When it comes to the QB position you should stock up as much as you can. Years ago I had speculated that maybe the path for most teams should just be to keep drafting and playing younger cheaper talent unless they hit on a real star. This was something I wrote about when salaries for the position all started to get bunched together and it was impossible to derive any value from the veteran contract. In a sense I think this may be just that.

Both Rodgers and Wentz are big names but Rodgers at this stage is not what he was a few years ago. He’s fine but so are probably 10 other QB’s in the NFL.  Wentz is younger but in the same boat. I’m not sure either is special and special is what is going to consistently dominate in the NFL. While I’ve softened on my original stance that you probably should just walk away from the Wentz level player, if these moves are successful I think it goes back to what I was saying all year about Prescott. Pay him whatever he wants but structure it so he can be cut/traded within two years and don’t avoid the position in the draft. You may find an upgrade or a cheaper lateral movement.

The third criticism is probably the funniest one. This is the one that we always hear when the team drafts a QB an then refuses to add another player to a mix. What does it do to the QB’s ego or attitude to see competition. We don’t say that about any other position on the field. We will wax poetic about Rodgers ability to play with ice water in his veins in the last two minutes on the road but someone he cant handle looking at a 23 year old kid taking reps as a backup. Please that’s just silly. If a young player cant handle it then they are never going to be good. If a veteran cant it probably says something about where his game is at this stage of his career.

The one criticism that I think is valid is what is the opportunity cost that is being wasted with the selections though its probably being overstated. Per the research Brad and I did the expected value at Love’s selection is about 44% of a top five player, so basically a lower level starter or situational player. There is about a 25% chance of finding an elite player and 20% chance of a total bust. Of course those percentages apply to Love as well but on average the Packers could be giving up a player that would likely be worth $7.5 and $10M a season. The breakeven on that would probably require Love to start 4-6 games a year before becoming a full starter (this is assuming he is decent of course). But the Packers were likely not passing up on Reggie White here but more along the lines of adding a replacement for a Blake Martinez.

For Philadelphia the expected return is 33% of a top five player with about a 20% chance of finding a star. That’s basically an expected return of a $5 to $7 million player. That’s not passing up on the next Darius Slay but more the next Buster Skrine. A few productive gadget plays and a few starts on offense would likely level out that loss.

Again there is no guarantee that either QB will be a productive pro (those same percentages of finding a star apply here) and while everyone is going to point to Jackson many QBs in this stage of the draft end up not playing well, but the strategy isn’t crazy. At worst they will provide the same salary and skill set as a typical NFL backup. At their best the teams have laid out a potential path to gain a few draft picks while finding to a cheaper solution at the position without having to struggle through multiple bad years to convince themselves that the current QB isn’t worth it anymore. I’m not sure why that’s a stupid way to plan for the next two to five years, which is what everyone seems to think.

Giants Tender Markus Golden

According to ESPN’s Field Yates the New York Giants extended the “UFA Tender” to Markus Golden today. I touched on this tender yesterday but for those unfamiliar basically it is an offer that can be extended to a veteran free agent who has yet to sign a new contract by the end of the compensatory free agent period, which ended today at 4PM. Once this offer is made the team maintains some control over their free agent and maintains the right to a compensatory draft selection if the player signed a contract between now and July 22.

As mentioned yesterday this date is mainly a formality and to the best of my recollection was last used in 2017 for LeGarrette Blount when he was a Patriot. The reason it is rarely used is because the cost is potentially high. The tender amount is equal to 110% of his prior year salary. For Golden he earned last year $3.725M so the tender for him is well under what he was expected to earn as a free agent making it a reasonable cost. Golden’s tender should equal $4.098 million plus a $25,000 workout bonus and $1 million in incentives. That is likely a reason why the Giants chose to do this while teams like the Seahawks passed on extending a tender to Jadeveon Clowney.

The Giants, because they signed so many free agents this offseason, don’t stand to gain any compensatory draft selections even if Golden signs with another team so it is doubtful that they care about the compensatory aspect of this unless they simply do not want a rival to get away with signing a player and not having it impact their compensatory selections for the year. For example lets say they had word that a team like the Cowboys was going to sign Golden but were waiting to execute it to protect their four projected 2021 comp picks. This doesn’t allow the Cowboys to do that kind of move so I guess it could be gamesmanship on the Giants part but more likely they just want to hold his rights.

If Golden goes unsigned through the early summer the UFA tender blocks him from negotiating with other teams after July 22. Once that date hits the Giants are the only team he can sign with unless they withdraw the tender. So they get exclusive rights on Golden if he remains a free agent through the summer. Considering they have holes at pass rusher Im sure they are perfectly fine with having him back this year on essentially the same contract he was on last year and this gives them the easiest chance to get him to come back down the line for a contract around this price.

However between now and July 22 nothing changes for anyone. Golden is still a free agent. He can sign with anyone and the Giants don’t get an option to match an offer. I don’t believe he would count on the Giants salary cap until July 15 so there should be no cap impact. The only thing that I think he will count on is the Giants 90 man roster but Im not 100% sure on that. The only change is if there was a team hoping to sign him on Tuesday and not lose a comp pick they cant don’t that anymore.

Personally I’ve been surprised that Golden has been unable to find a home. He took a one year prove it deal, played well enough, and plays a position that usually gets interest. While some may look at the stats as blown up a bit normally rushers like Golden would earn at least $7 million a year and in most cases more. We’ll see if he can land a deal in the coming weeks or if he now sits down again with the Giants to work out a contract.

Salary Lost vs Salary Gained in 2020

Now that the draft is complete I wanted to use the work that Brad and I had done in The Drafting Stage to see what kind of implied value teams added in the draft as well as how the teams rosters look compared to 2020.

In the Drafting Stage we used the second contract values of drafted players to identify the expected value of every draft pick in the NFL Draft. Rather than working solely with the salary numbers as I had done in the past we adjusted the values for position to assign a percentage to each slot that can be then used to determine the expected value of the pick based on the position he is projected to play at the NFL level. Now that we have an idea of the positions each team addressed in the draft we can use that data along with our salary database data to get those projected values.

TeamDraft Value

What this table tells us is that the Dolphins, who had the highest valued draft class, should get the same value that would be received by signing $64.3M per year of free agents onto the team. That is more than double the average of around $31M. Since rookies actually cost pennies this is one of the reasons why they are so valuable since Miami is not spending $64M for their rookies. Of course this does not mean the Dolphins will wind up with $64M in value or that the Saints will wind up with under $15M just that if every player was an average performer this is where they would be 4 years from now. The Saints could very well wind up with $40M in value if some of their picks play way over the draft slot while Miami could be at $15M if their first round picks bust. But the numbers should be a good gauge of how much a team stands to improve over the next few years and how well they allocated their draft picks on expensive (think QB and Edge rushers) positions rather than low valued ones (tight end and running back or special teams).

Doing this got me to thinking where do teams stand in relation to last year?  One of the ways I thought we could estimate that was by looking at free agency. If a team lost a player this year in free agency (or trade) I figured the annual value of the new contract would indicate how much value they lost from last years roster. To account for retirements I used the players old salary since they were playing at a high level. The team that lost the most was the Panthers at $79M followed by the Cowboy and Patriots. The team that lost the least was Miami (under $1M) as nobody wanted whatever few free agents they had.

The second thing to calculate was salary gained in free agency or via trade. This was the reverse of the above. If the player was not on the team last year and signed a veteran free agent contract that salary was counted as salary gained. Miami added $75M per year in new deals to top the NFL. The least active team was the cap strapped Chiefs adding just $4.2M.

I was initially going to just add the draft values to that number but while the impact of free agents are immediate the impact of draft picks are not. In most cases they take two or three years to meet their peak performance which is what is reflected in our draft chart. So for each class I adjusted the value down, admittedly in a very arbitrary manner. Special teams were counted at full value, running backs 90%, O line and linebackers at 50%, QBs at 25%, and everyone else at 35%.

Here is how the teams look.

Basically what the chart tells us is that if you are in the top left you should improve from last year. You lost less than the NFL average and gained more than the average NFL team. Miami in particular should be really improved basically breaking the chart with their additions vs subtractions. Those in the top right are pretty much adding a slight amount overall and really changing the mix. Lose a bunch of faces and replace them with a near equal valued group of faces.

The bottom left are the teams that didn’t lose much nor gain much. They probably have the most chance of showing similar results as last season. Bottom right lost a lot and did not gain much and would likely be the teams that would project to take the biggest steps backwards unless players play well above their salary levels. Those in the bottom will likely be relying on 2nd year players to make a big leap from their rookie seasons while also being hopeful that this years rookies play above whatever numbers we project.

The teams with the most positive disparity between 2019 and 2020 are the Dolphins, Raiders, Giants, Colts, and Bills. The bottom teams are the Patriots, Cowboys, Rams, 49ers, and Vikings. These numbers will change over the coming weeks as players sign now that the comp session is over and other new signings get cut but I thought it might give a little perspective as to where teams stand going into the summer months.

Here are the gained and lost numbers in a table form.

TeamSalary LostSalary GainedDifference