Free Agency Recap- the Cornerback Valuations

Now that the dust has started to settle around free agency I wanted to start to look at some of the bigger contracts and how they fit within the market. I wanted to start with cornerback because it’s one of the positions that did well in free agency this year and also because it can help illustrate some of the ways that one can value a contract as the biggest when in reality the numbers that most often talked about can be misleading.

This year we had four big contract signed: AJ Bouye ($13.5M/year), Stephon Gilmore ($13M/year), Dre Kirkpatrick ($10.5M/year) and Logan Ryan ($10M/year) with each coming with its own set of hyperbole. Bouye’s, since it carried the highest APY, got the most positive feedback while Gilmore dominated the news cycle because he signed with one of the biggest teams. A closer look at those two contracts should really flip the order in which we view those two contracts.

In recent years I think the two metrics that get widely reported on in the NFL are annual contract values and guaranteed salary. In general those are the two metrics that are front and center on the reporting of every contract. Both of those metrics can be a bit limited at times and often offer a way to bridge a divide in a negotiation. I think more and more it has become important for a number of players to be considered “highest paid” or to push beyond values of a contract signed the year before, even if the actual end result may not be the best contract for a player.

Bouye and Ryan were two of the more interesting candidates for me going into free agency. Bouye had a surprisingly good season and was considered a breakout performer by the end of the year. He was also very young. Ryan is also young and was a two year starter on a very Patriots team. Given the recent money paid to corners it would seem logical that he would look to earn a double digit APY, even if his role in New England was probably suited more towards the $8 million a year tier of players.

I looked at Bouye as a bit of a test case. Given the lack of a track record (he only had 8 starts coming into the year) and draft status I wondered if he would break the barrier by getting into the upper echelon off the one season. Historically I don’t think a player like Bouye would have gotten there but to his credit he did. How he got there explains a lot about why it happened.

Using our player comparison module I can quickly break down the most important aspect of the contract signed by the player- the cash flows. So here is the way the group stacks up compared to the gold standard in the NFL, Josh Norman, and to last years gold standard in free agency, Janoris Jenkins.

PlayerYear 1Year 2Year 3Year 4Year 5
Josh Norman$20,000,000$37,000,000$51,000,000$62,500,000$75,000,000
Janoris Jenkins$16,000,000$29,000,000$40,000,000$51,250,000$62,500,000
A.J. Bouye$13,500,000$27,000,000$40,500,000$54,000,000$67,500,000
Stephon Gilmore$23,000,000$32,000,000$42,000,000$53,000,000$65,000,000
Dre Kirkpatrick$15,000,000$23,200,000$32,800,000$42,650,000$52,500,000
Logan Ryan$10,000,000$20,500,000$30,000,000

The majority of a contract in the NFL is not guaranteed and often by the time the second year of a contract is complete, with the exception of the highest level stars or those whose agent’s do a very good job in structuring the contract, questions begin to arise about the player’s long term status. In some cases they are asked to take a pay cut and in others they are released. Its even more questionable in year 4.

The Gilmore contract is the one that truly builds on the Jenkins deal from the year before. Not only did he surpass Jenkins and Norman in first year cash, but his three year is still $2 million above Jenkins. Bouye’s structure is completely different at a flat rate of $13.5M per year. The first year payout is actually under that of Kirkpatrick and he will barely surpass Jenkins in the 3rd contract year despite the superior APY. All things considered Bouye’s contract does not take over as the best of the bunch until year 4, which is often fantasy land in the NFL.

Ryan’s contract is also clearly a tier below. His also uses a relative straight line method of payment and his initial salary is more in line with the $8.5-$9M per year contracts signed by players like Kareem Jackson, David Amerson, and Vontae Davis. I think Ryan’s has an interesting wrinkle in that it is just three years which actually gives him some added upside if he plays well (it gives him the chance to hit a second free agency while the others are locked for 4 or 5 years) but the Titans may have actually preferred this structure rather than adding in another year and haggling over money.

The payment structure I think gives a far better indication of the demand for a player than the APY. The more that you can defer to the future the better. If you are paying a fortune up front it means you had to find a way to really make the contract stand out.  One of the best ways to really look at that is to see the “APY premium” a team is offering in the contract. This is simply the APY over the stated timeframe divided by the final contract APY.

Player1 Year Premium2 Year Premium3 Year Premium4 year Premium
Josh Norman33.3%23.3%13.3%4.2%
Janoris Jenkins28.0%16.0%6.7%2.5%
A.J. Bouye0.0%0.0%0.0%0.0%
Stephon Gilmore76.9%23.1%7.7%1.9%
Dre Kirkpatrick42.9%10.5%4.1%1.5%
Logan Ryan0.0%2.5%0.0%NA

When you view things this way you can see just how big a premium the team was willing to pay to get the player under contract. For example its not really until the 3rd year of the contract that the Giants, Patriots and Bengals start to derive more value out of the contract.  For Washington they probably have to hit four years. The other two contracts more or less contain no premium. It is a good mechanism for a team to hit an APY number that makes a player happy while at the same time actually striking a (somewhat) conservative contract. For Gilmore and Kirkpatrick it probably made far more sense to take these contracts than potentially fighting for a higher APY but taking less beneficial up front payment terms to get there.

The same valuation concepts more or less show up in the guarantee packages

Player% Injury Guaranteed% Fully Guaranteed% Paid as Signing Bonus
Josh Norman66.7%48.7%20.0%
Janoris Jenkins46.1%46.1%16.0%
A.J. Bouye38.5%38.5%14.8%
Stephon Gilmore61.5%47.7%27.7%
Dre Kirkpatrick22.9%22.9%13.3%
Logan Ryan53.3%40.0%6.7%

Gilmore, Jenkins, and Norman are more or less in their own class and Norman and Gilmore received pretty high end signing bonuses. While the signing bonus no longer offers the protection, whether from a mental standpoint or as dead money, that it used to I think it still is an important component to help drive worth. Its also important because in the event of a default on the contract through suspension only a portion of the prorated bonus can be forfeited while the loss of base salary guarantees and weekly salary can be pretty substantial.  Kirkpatrick fared substantially worse in this regard in part because it seems as if his highest end market came from the Bengals who are generally adverse to using big bonuses.

I think it should be pretty clear that Gilmore got the best contract of the group and really the only one that should be considered a market mover up from Jenkins. It is the contract that should be used to try to negotiate any future deals for a cornerback that is perceived to be in the top tier but perhaps a notch down from the ultra elite group like a Patrick Peterson.

In a few days Ill try to run something similar with the left tackles and I would suspect a similar showing in that some of the lesser valued contracts may end up paying more than the higher valued ones.