Chase Stuart of Footballperspective.com has a really interesting article up, looking at the market ineffeciences of the rookie salary system as it relates to Cam Newton. Clearly there is no arguing that a rookie contract is market inefficient- rookies make pennies on the dollar compared to their equivalent veterans, but the recent attack on rookie pay has been based on the 2006 CBA system versus the 2011 CBA system. My belief for some time has been that rookies drafted top 7 or top 8 did lose salary, but for decent players it was not as drastic as many made it out to be. In reading Chase’s article (and I recommend you do the same) that gave me an idea to at least put that to a (limited) test. The end result is Newton lost much more than I would have thought.
The contracts for rookies drafted in the first round were, for the most part, the only ones to see any changes. Large contracts were slashed on the front end of the draft via the elimination of any incentivized contract mechanisms that were used to manipulate contracts in the former CBA. The remainder of the draft largely remained unchanged unless you were drafted by one of the few teams that signed players to three rather than four year contracts.
People focus on the annual value of the rookie contract a bit too much though when comparing deals. The goal of any player should be the quickest avenue possible to free agency and the new CBA did help top picks in that regard. Most of the players in the 2006 CBA, signed at the top of the draft, were signed to 6 year, rather than 5 year contracts. Now players are signed for 5 years, assuming an option year is picked up on the back end of the deal. So thats a soft advantage that most are failing to consider when looking at rookie deals.
Newton’s is probably the easiest contract to now judge because he was picked first overall and plays the same position as the last two number 1 picks of the old system: Matthew Stafford and Sam Bradford. Let’s look at what they received and the increase in numbers from 2009 to 2010.
The cap actually retreated in 2011 when Newton was drafted, but its lets assume a similar raise for Newton. If we do that Newton’s rookie contract would have likely totaled just over $82.2 million over six seasons. Provided Carolina did not restrutcure the deal the way the Lions did Stafford, odds are Newton would have made the sixth year of the contract before an extension was discussed (the Lions cap situation and team cap managment more or less forced their hand with Stafford).
With Newton’s extension in hand I think Stafford now becomes a very clear comparison point as a former number 1 pick. Here is how the salaries stacked up from one CBA to the next:
So as I looked through this I said, ok great point proven its not a dramatic change. Its a few million and like I originally said the player is hurt but not that badly. But the above chart makes no adjustment from 2013 to 2015 for Stafford. Stafford signed a contract after Aaron Rodgers and Joe Flacco both raised the market, which is still intact at the top, but before Matt Ryan signed and then a slew of mid grade players signed for $19 million a year. Newton and Stafford should be similar players. Both former number 1 picks. Both have struggled at times. Neither has had great playoff success or anything. In hindsight, Stafford’s contract really wasnt market efficient either, all things considered, if he and Newton are virtually the same player.
So instead of this analysis lets change the view to what Newton likely would have received if the rookie pay system remained the same in 2011. To do that we simply adjust his rookie numbers using the change from Stafford to Bradford and delay his extension until 2016 (what would have been the final year of the rookie deal). I think its fair to assume what Cam earned in 2015 would still be valid in 2016.
|Year||Newton Actual||Newton Old CBA||Difference|
Ouch. The number 1 pick in the draft ends up out in the ballpark of $26 million over a 10 year career. The only real benefit was getting much more money in year 1 than in the old CBA where players waited until pricey options were exercised in the second contract year. Newton would have to earn an additional $45.5 million in his 11th NFL season to balance the numbers out, and those would just drop again the following season.
The problem here is that the “option year” is not that much more expensive than the 6th year salary contained in the old CBA. So there is really not that much of an increase due to the option to make up some money nor leverage for the player to get a new contract that much faster. Looking back clearly the option should have been tied to the current year franchise rather than prior year transition tag (it was about $4 million more in 2015 for the QB), and there probably should have been a non-guaranteed escaltor in place for the fourth contract year for the top 10 picks for high end playtime to balance things out.
That doesn’t mean this works this way for all draft picks, however. Let’s look at Jimmy Smith of the Ravens who recently signed an extension. His slot was the same as Devin McCourty and Donald Brown so Ill adjust his contract assuming the same percentage increase from 2009 to 2010. Neither player had a large year 5 escalator in their deal to facilitate the early extension and both had to wait until after they completed their final year to sign a new deal.
|Year||Smith Actual||Smith Old CBA||Change|
Smith makes out better in the old CBA if he was just a mediocre player, but we flip the script if he becomes a good player. He has a nearly $7 million option exercised in year 5 compared to the $3.97M salary received by McCourty (who more or less maxed out his escaltors, something Smith probably would not have done). That larger salary helps force the hand of the team to commit a year early to the player, doubling, in this case, his cash to $14 million and getting more team cap flexibility. Unlike the top part of the draft, the bigger option at the end makes up the difference and gives the player added leverage, which was a win for the rookies. So Smith likely ends up well ahead of the game in terms of when he earns his money. Even if Smith was extended early under the old CBA he still comes out ahead (about $930,000).
Maybe Ill do this for a few other players in the future, but it is pretty clear that a player like Newton got railroaded with the CBA while the lower picks do have an opportunity, as was pointed out by both the NFL and the NFLPA back in 2011, to earn back any money lost plus more.
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.