With Patrick Peterson signing a five year contract extension worth $70 million on Wednesday, the NFL now has officially set the market for the young stud cornerback in the NFL. Peterson marks the third of the big three young corners (Peterson, Richard Sherman, and Joe Haden) to sign a contract which refreshed what had been a stagnant and declining market.
The debate between Peterson and Sherman over who is better has been a hot one over the last two seasons. It was a natural comparison since they play in the same division. Haden was not considered the same level of player, but financially was in the same class as the other two. So in a league where the size of the paycheck often means the perceived worth of the player let’s look put the new contracts in a fair perspective.
Now when we discuss these deals what we are looking at is the new money included in the contract, as each player had at least one year remaining on their contracts when they signed the extensions. By pulling the old money out, which is highly dependent on draft position, we can do our best to compare apples to apples on each deal.
Despite the popular opinion that Sherman had the highest paying contract in the NFL at the position that distinction really belonged to Haden. Haden received more money over the first four years of his contract than Sherman did in his. The difference in annual value is because Haden had to accept a fifth contract year at a lower value while Sherman will be an unrestricted free agent that year.
When Peterson was negotiating his contract there were likely two important concerns to take into account: the yearly cash flows of the Haden contract and the annual value of the Sherman one. His goal was to exceed both, thus making him the highest paid player at the position and justifying his take that he is the best in the NFL. So how do the deals compare in terms of cash flows?
For the most part Peterson will always be about $500,000 higher in his running cash total than Haden until year five, at which point he will increase that by about $2 million. The reason for that increase was the Sherman APY. In order to get a five year annual value to read as larger than Sherman’s he needed a much larger salary than Haden in the fifth year, which he received.
Peterson is a consistently higher earner than Sherman over the comparable time frame (in the range of $1.5 million) and Sherman will need to earn $14 million in the first year of his next extension to match the total Peterson will receive over five years.
The second thing we should look at is guaranteed salary. Each player has a high level of guarantees in his contract, but almost all are of the “injury only” variety, at least initially. An injury only guarantee is one that protects a player from essentially catastrophic injury that prevents him from passing a physical to play in the NFL. While it does bring added security to the contract in most cases it would be rare for a player to collect on future injury guarantees. For the most part each player is protected in a similar manner with a relatively strong signing bonus and guarantees which become fully guaranteed just a few days following the Super Bowl. Considering each player had their contracts essentially guaranteed for 2014 already (none was going to be released) the best way to look at this is to look at the amount of new money paid out in the current year, the only year for each player that is guaranteed.
|Year 0 New Money
|% of Total Contract
Peterson, in this case, actually received the least impressive payout in the signing year of his contract even though it is a higher number than Sherman. Haden received a very impressive figure. In Peterson’s case this is partially because his contract has two “year 0’s”, but for the purposes of guaranteed salary we can not consider that.
One of the metrics that I like to use to identify true earnings in a contract is what I consider the “virtually guaranteed” portion of a contract. This is essentially based on the dead money in a contract that makes it a negative against the salary cap to release a player, something I call “dead money protection”.
This protection is one of the reasons why the early vesting guarantee for Peterson and Sherman is extremely important (I don’t know the specific dates of Hadens guarantees so I cant speak on his). Both players will see a portion of their 2017 become fully guaranteed in 2016 which immediately adds to the dead money in 2017. Because the balance of their 2017 salary becomes guaranteed in February rather than March the teams are blocked from using a June 1 designation to try to minimize some of the salary cap charges.
Prior to any vesting guarantees here are the dead money charges associated with each player’s contract.
|Year 1 Dead
|Year 2 Dead
|Year 3 Dead
|Year 4 Dead
|Year 5 Dead
These numbers all present somewhat of a different story on the contract. Peterson is going to have to play at a much higher level to actually earn the full value of his contract than the other players. Most teams do not like to carry large sums of dead money on their books and with these numbers I would lean towards Haden’s money being well protected through three years, Sherman’s early vesting guarantee of $5 million for Year 3 on his contract should protect his third year salary, while Peterson is really only protected through two extension years.
Of course teams will carry dead money if the actual cash and/or cap savings are significant as that money can get rolled back into the payroll to make a team more competitive . Not counting those vesting guarantees here are the cap plus cash savings associated with a release over the extension years of the contract.
|Year 1 Savings
|Year 2 Savings
|Year 3 Savings
|Year 4 Savings
|Year 5 Savings
I think this table helps illustrate why the backend numbers in most contracts is worthless. If we look at the 4th year for these players, which are all essentially equal, a team would have an option of carrying this player or going out and paying someone $11 million (about half the savings with 50% going to cash and 50% to cap) to play for a year or finding creative ways to fit better talent into the salary cap slot. Again Haden probably got the best deal out of the group while Sherman will need the vesting guarantees to ensure the team has no reason to move on early in the contract.
Peterson, in particular, should be pushing for a contract restructure early in the contract to virtually guarantee himself more money. His best opportunity for that will be in 2015 when he carries a $14.79 million cap charge for a team with a pretty high payroll and no quarterback under contract. If Arizona can get past next season then Peterson will likely never get another string chance for more protection. He simply has to keep up a very high level of play.
Overall I think that the strongest contract of the group is held by Haden. Despite the fact that almost everyone believes he is inferior to the other two he is the one who landed the most protected contract upon signing and has the best opportunity to earn three years salary as long as he is adequate (not great just adequate) on the field. His salary is also right on par with the others until the final year, which is not really likely for anyone to earn if there is any decline in play. There is no arguing that Peterson is the highest paid player, but he has to keep up the highest level of play to match the earnings of the others. The team is holding out more cash for him in the event he does play well, but he is going to have to earn every penny of it.
One last thing that I think is worth noting when discussing the cornerback market is what these contracts do with Darrelle Revis who is older than these players but generally regarded as the best in the NFL. Revis’ true contract value with New England is $12 million as he opted to sign a short term deal that carried a paper value of $16 million a season rather than taking a lower offer. I believe this was a calculated risk by Revis who has always demanded to be the highest paid defender in the NFL, a demand only one team has caved in on and they released him after just one season.
The cornerback market had been stagnant for some time in the $9-10 million region and for Revis to get back to a real contract worth $16 million or more a year would be impossible with the majority of players earning $9 million. Knowing that these three players had the chance to up the market it would give Revis the added leverage he needs to push for the higher contract rather than being stuck on a deal that probably would have paid him around $12-13 million a season for the next five years. Rather than asking for $7 million more a year than a top player he will now be asking for $2-3 million more, which is much more reasonable. That’s a situation that will play out next year, but he now has more ammunition to be seeking Mario Williams money, unless JJ Watt signs a new contract, leading to him asking for Watt money. It’s a story to keep an eye on over the next season.