Guaranteed Salaries and the NFL

I actually wrote this up a few weeks ago when Tom Brady’s wife mentioned him playing with concussions and there was talk on the prospect of players hiding injuries because contracts are not guaranteed. I’m not sure why I never got around to publishing it, but it kind of fell by the wayside. With the NBA free agent deals in the news guarantees have become a hot topic so I figured I could post this now and just give some thoughts as to why the guaranteed system won’t really work in the NFL.

The major issue at play is the basic lifecycle of the NFL player. For even the best players at most positons the cycle is pretty similar- development year or two on a rookie contract, peak in years 3-5, begin noticeable decline in year 7, keep fighting for a job until no teams want you anymore.

The way current contracts are primarily negotiated is that teams pay a large premium on the frontend of a contract in hopes of receiving a benefit on the backend of the contract if the player breaks out from the cycle mentioned above and is still playing at a really high level in year 8 and 9.

For example look at the Patriots contract with Stephon Gilmore. The Patriots are paying him $32 million in the first two years of his contract and guaranteed him $40 million across three years with the hope to gain a benefit on the backend of salaries of $11 and $12 million at a time when cornerbacks will likely be earning $17-18 million a year. If Gilmore flops terribly the Patriots will have overpaid him by millions but at least be free in years 4 and 5. If he does well they have a great deal.

Once you move to a fully guaranteed structure teams are going to adjust accordingly. Once you remove the benefit of the backend teams aren’t going to pay as much up front because there won’t be a year four or five in the contract. As they absorb more risk they are going to be less likely to inflate the front end of the contract. The contract will only go as far as the current guaranteed deal likely goes (the exception being the QB position).

Right now we can look at Gilmore as being paid about 7.9% of the projected cap in the first three years of the deal for the possible benefit of paying him just 5.7% of the cap at the end of the contract. Remove the benefit and the team is going to cut the first three year’s salary from $42 million to $36 or $37 million to limit their risk and eliminate years 4 and 5.

How much would a team pay on a 5 year contract in that situation?  Well we knew the Patriots were willing to take on an effective $42 million of risk to invoke those final two year options so at least $42 million. But beyond that they will probably use the cost of a replacement level talent which for that position is in the ballpark of $3 million a season. So lets call it a five year contract worth $48 million.

What is better for the player?  $42 million guaranteed with the potential to earn $65 million over 5 years or a straight five year contract with $48 million fully guaranteed at signing?  Or is the player better off taking the $36 million over three years with the potential of free agency awaiting?

Those are all really interesting questions for someone to answer but the NFL is not going to just take the current contract structure and ever just make them guaranteed. Might a few teams go for broke and not care about the future like the Redskins and Cowboys?  Anything is possible, but when those teams falter due to age you can guarantee they wont do it again.

If contracts were fully guaranteed the following players would still be on the Jets this upcoming season- Darrelle Revis, D’Brickashaw Ferguson, Antonio Cromartie, Brandon Marshall, Nick Mangold, Marcus Gilchrist, Breno Giacomini, and Jeremy Kerley. Most of those players aren’t even in the NFL right now. And oh yeah, Mark Sanchez would have been the Jets QB last season.  The Jets stink as it is but it would have been completely hopeless if the contracts were guaranteed at signing.

For fun I decided to actually put together a group of starters based on contracts who would still be in the NFL this season around the league if contracts were guaranteed. Most would have high cap charges along with the salary.

QBRyan FitzpatrickBills
RBAdrian PetersonVikings
WRPercy HarvinJets
WRGreg JenningsVikings
WRDwayne BoweChiefs
LTRyan CladyBroncos
RTGosder CherilusLions
CNick MangoldJets
RGDavin JosephBuccaneers
LGBen GrubbsChiefs
TEOwen DanielsBroncos
DEJason HatcherRedskins
DEJunior GaletteSaints
DTArthur JonesColts
DTJay RatliffCowboys
LBJerod MayoPatriots
LBPaul KrugerBrowns
LBPhilip WheelerDolphins
CBDarrelle RevisBuccaneers
CBAntonio CromartieJets
SJairus ByrdSaints
SDashon GoldsonBuccaneers

That would also be a lot of money tied up in players who either do not belong in the NFL or at best belong as backups and it would be coming out of the pockets of players who did deserve raises.

If the goal is to find more injury protection for players there are other ways to do that, in my opinion.  The NFLPA has already made movement in this regard with their injury protection benefit that they negotiated into the CBA. This was a real win for the union which somehow never gets any attention. It basically protects up to $1 million of salary for players on multi year contracts with a chance at a smaller second year payment as well.

The NFLPA could probably look into lowering some of the other benefits such as the performance based pay pool and using that money to help fund insurance policies for their players that cover loss of job due to injury.

There are probably ways to manipulate the salary cap to eliminate the massive carryovers and force teams into using more signing bonus money and functionally guaranteeing 3 years of most contracts or to lower the cap limits and taking that unused money to fund players whose contracts were terminated for injury.

I know just yesterday former NFLer Terrance Knighton put out a series of tweets talking about how ridiculous it is that Aaron Rodgers is earning so much less than NBA players. Part of that stems from Rodgers being willing, due to the system and general belief in the way the NFL works, to take a contract extension that was so long at a younger age. Is it good for the game is Rodgers goes from being a Packer one year to a Dolphin the next and then a 49er the year after that? Probably not but eventually that will likely stabilize, but that is going to be the way to maximize money. Still that may not benefit the overall general population of the NFL.

The players need to stand firm, threaten a strike, and demand that teams remove the franchise tag provision from the CBA and secondly make a move to reduce the length of rookie contracts to two or three years.  That allows players to gain much more negotiating leverage and begin to force the issue on contracts outside their home organization. Unless players get to free agency at a younger age they simply don’t have the expected careers to justify big “guaranteed” investments for any period of time.  Teams say that it takes three years to evaluate a player. If so then there is no reason for them to control those same players for up to 7 years through long contracts and franchise tag mechanisms.

Most people call free agency fool’s gold because the decline in those free agents is just too rapid. That’s because players are hitting free agency at 27, 28 and 29 years of age. But what if you had a system where Odell Beckham, Khalil Mack, Jadeveon Clowney, Mike Evans, etc… all in their early 20s were free agents this year?  That’s a different story whether we are talking teams fully guaranteeing a four year deal or simply doing a massive 1, 2, or 3 year contract. None of those players will ever hit free agency in this system. That probably even gives the mid tier guys a chance for bigger paydays with teams who don’t value the superstar as much.

But just saying that the NFL needs to guarantee contracts isn’t going to fix the problems. It will fundamentally change the way that the league does business and put pressure on players to take much lower contracts or be willing to go year to year. Either way the players are still going to be at risk. The whole system needs to be changed at its got to begin at the bargaining table when negotiating how much control teams have over their players careers once they draft them.

  • McGeorge

    Jason,
    If rookie contract lengths are shortened then that demphasizes good scouting and player development. A team realizes less surplus value from hitting on a 3rd round pick. This would make “all teams more equal” but not in a good way because it would remove some of the benefit from drafting well and not penalize the teams that draft and develop poorly.

    Considering the damaging nature of the game, I think players should get more of the cap, the owners get too much. And that extra money could be used for injuries.

    • Absolutely it kills it. I mean Lebron James is what now? 32 and arguably in the prime of his career. In the NFL, other than a handful of QBs and other players, 32 is the end of a stars career, not the prime of it. Thats why I think you need to allow the opportunity for the players to cash in earlier. I was a proponent in the last CBA of limiting rookie salaries but where contracts contained a negotiable option contract that was picked up after the 2nd or 3rd contract year. This would work in practice similar to the old void/buyback provisions of the rookie contracts and give guys more opportunity to earn.

      That said I dont think it would hurt a team drafting well. It just makes them have to be better and more creative with extensions to keep guys. One of the things with the NFL unlike baseball and basketball is that the system these guys are in really benefits a number of players. With much less travel than other sports I think players can also grow more used to their communities and locations which can play a role in staying. I think in temrs of maximizing long term money most players would find its best to stay put but they need that threat of being able to walk to get the real contract that they want.

  • Werner

    Jason,
    excellent article. Think you position yourself well as part of an independent arbitration committee called in to avoid lockout at end of current CBA. As you rightly diagnose it is 1st the short life span of Careers and the misbalanced demand/supply situation that holds salaries down. Where quality supply is scarce (think QB, Pass Rush, OL), prices go up (Carr, Von Miller) plus career life span is stretched to the max (Whitworth). Now what to do:
    – Reduce Contract Duration starting with 1st round to 3+1 (Option) year. Make the option more expensive by putting it equal to Franchise Tag. –
    – Remove Transition Tag opportunity
    – Abolish RFA in favor of an option year that equates to the current 1st year option of 1st rounders value for drafts of rounds 2 – 7 after 3 years
    – Abolish Performance based Pool for the right to void the remaining contract unless again the 1st year option (plus 25% increase YoY) is applied
    – Create automatic void entitlement for Players for not fully (SIC) guaranteed contract years if Player is voted into Pro Bowl, ROY, MVP, Player of the
    year
    – Define one (high) Minimum Salary Cap Charge regardless of actual Minimum Salary Pay
    ….

  • LM

    Awesome writeup that should be on the desk of every nfl team and player.

  • Ken Leung

    Jason, what happened to second year option bonus? it used to be popular with players but not anymore.

    The option bonus is much better than a signing bonus because it is not subject to suspension or early retirement clause. If calvin johnson took a option bonus rather than signing bonus, he wouldn’t have to pay the Lions on anything.

    If a player has a guarantee first year salary and a big option bonus at the first day of the second season, isn’t he lock in with the team for the first 3 years of contract?

    • Because teams dont have the same cap issues as before most have abandoned them because they are so player friendly. The exceptions are the Bills and Falcons and Id imagine the Bills wont use them anymore now. Carolina may still have been using them too