Julio Jones, “Updated” Contracts, and Contract Decisions

It was just three years ago that Julio Jones agreed to a five year contract extension worth $14.25 million a season with the Falcons and now he is looking for an “update” to his contract, despite having three years remaining on the contract. I think it’s a good situation to examine and a good illustration as to why some players should consider thinking outside the box when it comes to contracts.

Generally when players look for a new contract they generally have to fit in one of three categories. One is that they have grossly outperformed their contract and deserve a raise. This usually happens when a player either signs a very early extension (think Rob Gronkowski and Antonio Brown) or was a late bloomer of sorts (think Doug Baldwin). Occasionally it just happens when someone signs a bad contract from day 1 (Adam Thielen or historically someone like Andre Johnson). The final category occurs when the market explodes and the player’s contract is no longer really in line with the market (think someone like Aaron Rodgers whose contract pays $8M a year less than Matt Ryan) and teams should consider an upgrade just to be fair.

Do any of these three situations apply to Jones?  The answer is no. Jones’ $14.25M per year figure represented a peak dollar figure at a time when he was playing at a peak level. He was in the final year of his rookie deal and playing at an elite level. He signed his contract coming off a near 1,600 yard season and finished last year with close to 1,500 yards. He isn’t better or worse than he was. If anything he is as advertised. It certainly was not a bad contract. The market hasn’t changed that much. His contract still ranks 8th in APY, 4th in 1st year cash, 7th in 3 year cash, and 3rd in both injury and full guarantees, so he hasn’t fallen out of the top 10 in any key metric. Quite frankly there is no realistic reason to stage a holdout especially when you have three years left on a contract.

Perhaps this is where the word “update” comes into play. Update isn’t necessarily the same as receiving a big new five year contract with three new years of guarantees to make a player happy. The lone contract indicator than Jones can look at as needing a fix (and even this may be a stretch) is 2018 cash. His $10.5M salary in 2018 ranks 12th among wide receivers in the NFL. By no means is that awful (and he was 12th last year as well) but at least it’s something tangible.

There are two recent examples of a team seeing an important player with multiple contract years remaining and finding a way to make him happy. The Steelers twice moved money forward in Brown’s contract to prevent a player from being unhappy. In 2015 the Steelers moved $2 million from 2016 up to 2015 and in 2016 they moved $4 million from 2017 into 2016. Overall the team fronted him $4 million and then extended him in 2017. The other example was Gronkowski who convinced the Patriots to add $5.5 million in realistically attainable incentives to his existing contract in 2017.

From the Falcons standpoint really this should be the only consideration. The Brown route is more feasible for the Falcons who are tight on cap room and would likely need to count any incentive on the cap immediately. Otherwise a legit reworking of a contract sets a bad precedent for the organization and could put them in a negative position down the line with a player who will soon turn 30. While there are some short extensions that could avoid that precedent it is doubtful that an experienced agent would agree to that kind of structure.

I don’t blame Jones for trying this strategy. The Falcons are a win now team and win now teams generally want to avoid distractions. I’d think they would find it reasonable to do a deal that sees him increase his salary by $2 or $3 million this season to make sure he is happy when camp rolls around. I also wouldn’t blame the Falcons for playing hardball here too, though I think they will compromise on a raise.

This again brings up the point that players sometimes should think big picture instead of the initial buzz of a big contract. Jones’ contract was effectively a six year contract when he signed it (his one existing rookie contract year and five new extension years) which is an eternity in the NFL. In general when teams do long term contracts for elite level players it is the team that stands to benefit the most from the contract.

While the risk of injury is transferred from the player to the team when an extension is signed, more often than not the backend of a contract sees a player play at a relatively low cost level. For a player like Jones, the realistic contract potential is two franchise tags and then free agency. Jones would have earned about $42.3 million from 2015 to 2017 had he followed that path. He would have likely hit free agency this year where he would have probably earned $30 million this year and $56M by 2020, most of which would be guaranteed. Somewhere in the interim he also would have put the Falcons under some intense salary cap pressure which may have helped him if he decided to do an earlier extension rather than play out the tag process.

The tradeoff for the two sides here is that Jones locked in about $47M rather than $42M through 2017 but in return agrees to max his compensation out through 2020 at $81.43M rather than open the door to about $99M by 2020 and a giant windfall in 2018. Here is the estimated breakdown of the two scenarios.

Scenario 2015 2016 2017 2018 2019 2020
Current $22,000,000 $35,500,000 $47,000,000 $57,500,000 $70,000,000 $81,426,000
Tag $10,176,000 $24,775,000 $42,294,000 $72,294,000 $87,794,000 $99,294,000

As you look at the cash breakdowns you can see why I say that the team reaps the backend benefits. As long as the team sees fit for the player to play in the third new contract year the benefit dramatically shifts to the team.

When the cash disparity up front is very large its probably worth taking the deal but $5M by the 2nd year for a relatively young wide receiver who is a clear ultra elite player?  I can see the logic in playing it out and putting yourself in a situation to avoid being unhappy two years into a new deal.

The reality of the NFL is that guaranteed contracts will never happen at least in the current way teams do contracts. The goal of every player and agent should be to put yourself in the position to either hit free agency as many times as possible or put the team in a salary cap bind as many times as possible to effectively guarantee a contract. Doing a big deal just for the sake of doing a big deal isn’t in anyones best interests and contracts should never extend more than two years beyond expiring guarantees in any scenario unless compensation is tied to performance.

Teams hold almost all the cards with long term contracts and they really shouldn’t. When a few players force the issue overall I firmly believe that most will earn more money. Jones could have been one of those players.