With the Legion of Boom no longer patrolling the Seahawks’ secondary and Marshawn Lynch years removed from playing in the Pacific Northwest, the Hawks have inarguably become Russell Wilson’s franchise…at least for now. Rumors have swirled for months with respect to Wilson’s future with the team, as the star quarterback’s contract expires after the upcoming 2019 season. With Wilson’s camp making it clear that they want a new deal done now or otherwise to put talks on the shelf until the next offseason, let’s work out contract extension terms that should work for both sides. Block out all the noise, and the teams have a reasonable path to getting an agreement done.
Wilson has a salary of $17 million for the 2019 season. That’s an absolute bargain for one of the top five quarterbacks in the league. Before we dive into extension proposals for the Seahawks quarterback, we need to examine what Wilson would earn under the franchise tag over the next few years if the parties couldn’t reach a deal. The Hawks would have the option of using either the non-exclusive franchise tag or the exclusive franchise tag, with the latter being the one they’ll use. For the non-exclusive tag, other teams may sign the player and forfeit two first round picks to the team holding the tagged player’s rights if such team doesn’t match the offer. Do you think the Seahawks will allow the Patriots or some other team drafting late in the first round to enter into a contract designed specifically to make it prohibitive to the Seahawks to match, and thus obtain Wilson for the price of two late firsts? Me neither. There are also slight differences in the compensation for non-exclusive versus exclusive tags, but we will only dive into the calculation for the exclusive tag here.
While Wilson has a salary of $17 million for 2019, his salary will skyrocket in 2020 once the Seahawks apply the exclusive franchise tag if the parties can’t agree to an extension. Per Section 2(a)(ii) of the NFL’s collective bargaining agreement (the “CBA”), the exclusive franchise tag must be the higher number of (i) average of the top five 2020 quarterback salaries when the restricted free-agent signing period ends (typically in late April), and (ii) one hundred twenty percent (120%) of the player’s previous year’s salary. Note however, that the CBA’s definition of the previous year’s salary includes not only Paragraph 5 salary (i.e. $17 million in this case), but also roster and reporting bonuses, pro-rata portion of signing bonus, and certain other payments to players in compensation for the playing of professional football for the last year. In this case, Wilson’s previous year’s salary as defined in the CBA amounts to $25,286,766, which matches his cap number for 2019 – but be aware the cap number doesn’t always equal the previous year’s salary. Now while we can’t precisely determine the top five 2020 quarterback salaries at this time, we can make a reasonable estimate in the $31 million range, while one hundred twenty percent of Wilson’s previous year’s salary equals $30,344,119. The top five 2020 QB number will be higher, so let’s proceed with a cool $31 million as Wilson’s 2020 tag number.
We next need to take a quick look at Wilson’s estimated tag number for 2021. The process repeats for year two of the franchise tag, and unless QB salaries explode, it’s likely that applying the 120% multiplier to Wilson’s 2020 salary will be the likely calculation necessary for Wilson’s 2021 franchise tag amount. This number escalates to $37.2 million for 2021 salary if you base the calculation on a $31 salary for Wilson in 2020. Now to apply the tag yet again to a player for a 3rd year in 2022, the multiplier escalates to 144%, which elevates Wilson to a whopping $53.568 million salary for 2022. Never say never, but the Seahawks are not likely to place the tag on Wilson for a third consecutive year in 2022. Note that for purposes of this exercise, we have assumed the CBA provisions governing the franchise tag remain largely unchanged when the new CBA is negotiated, as the current CBA will expire in 2020.
The information fleshed out above certainly has been discussed between Wilson’s team and the Seahawks negotiators, so none of this will be a surprise for the key players in the room. Now melding the yearly numbers together, if the team applies the exclusive franchise tag in 2020 and 2021, Wilson will make roughly $68.2 million over the 2020-2021 seasons. Going one step further, if the Seahawks were to apply the tag in 2022, Wilson’s take would equal just under $122 million for the three seasons following the end of his contract, which would average out to roughly $40.6 million per year. The $40 million plus number could present a problem in negotiations, but that doesn’t mean a solution sits out of reach. Now that we’ve set forth Russell Wilson’s alternative to a contract extension with the Seahawks, let’s take a look at the top quarterback salaries in the existing NFL landscape. For this exercise, we really just need to examine two QBs – Aaron Rodgers, who has the highest average annual salary, and Matt Ryan, who has the most dollars guaranteed. The key terms of the contracts for each player are as follows:
|Aaron Rodgers, Green Bay Packers|
4 years, $134M extension signed in 2018 (kicks in for 2020)
Percentage of 2019 cap using AAV: 17.8%
|$98.2 million in guarantees including a $57.5M signing bonus. $78.7 million is fully guaranteed at signing, with roster each year. The first two years of roster bonuses are fully guaranteed. The $19.5 million in 2020 is virtually guaranteed at signing and officially becomes fully guaranteed on the 3rd day of the waiver period in 2019.|
|Matt Ryan, Atlanta Falcons|
5 years, $150M extension signed in 2018 (kicks in for 2019)
Percentage of 2019 cap using AAV: 15.9%
|$94.5 million fully guaranteed at signing, consisting of Ryan’s 2018, 2019, and 2020 base salaries plus his $46.5 million signing bonus and a $10 million option bonus. $5.5 million of his 2021 salary is guaranteed for injury and will become fully guaranteed on the 3rd day of the 2019 league year.|
Any contract agreeable to Wilson’s camp will need to exceed Aaron Rodgers’ AAV, and will need to hover around or exceed Matty Ice’s full guaranteed amount – and hovering will only be tolerable if Wilson agrees to an extension shorter than five years. As for why Wilson will need to set the market in order to agree to forego the franchise tag route, it starts with the fact that he has established himself as a top five quarterback in the NFL. Skeptics of his game do remain, but those individuals represent the minority of folks within the NFL world. Next, as established above, Wilson has significant leverage with the franchise tag game at his disposal. Imagine Wilson hitting unrestricted free agency in 2022 as a 33 year old QB. Kirk Cousins’ three year, $84 million fully guaranteed contract will look like a tip left at a diner after Wilson’s contract comes through. One final reason why Wilson will set the market and eclipse the great Aaron Rodgers’ contract is his age. Wilson sits at 30 years old, and is just starting his prime as a QB, while Rodgers is 35 years old and faces the back nine of his prime.
Now let’s briefly look at how the Seahawks prefer to structure their contracts before we unveil the proposed extension for Wilson. Over the last few years, the Hawks have stuck closely to limiting fully guaranteed salary to first year base salary and signing bonus. A few examples include the new contracts given out to Duane Brown and Tyler Lockett, with $1,750,000 of Brown’s second year salary guaranteed for injury only. This structure protects the Seahawks from getting saddled with a large cap hit if the team wants to move on from a player, except in the case of a serious injury (i.e. see Kam Chancellor’s salary). But this encapsulates the Seahawks preferred approach to contracts.
Having considered the Seahawks desired contract structure, the quarterback salary landscape and the franchise tag game at Russell Wilson’s disposal, here’s where we land:
|Russell Wilson, Seattle Seahawks|
3 years, $105M extension; to be signed in 2019 and kick in for 2020
Percentage of 2019 cap using AAV: 18.6%
|$80 million fully guaranteed, comprising of $32 million signing bonus, $23 million 2020 base salary and $25 million 2021 base salary all fully guaranteed, plus 2022 base salary guaranteed by fifth day of 2021 season if Wilson remains on roster; $10 million injury guarantee for 2022 season prior to 2022 full guarantee kicking in, resulting in $90 million guaranteed for injury|
So each side makes a few key sacrifices here, but both parties win. The key here is that the extension falls on the shorter side. This allows Russell Wilson to set the market at quarterback at $35 million per season, but doesn’t restrict him from potentially reaping the benefits of the influx of gambling money that will pour into the NFL over the next few years, inevitably pushing the salary cap to unprecedented heights. The signing bonus at $32 million isn’t quite as high as may be expected, and $80 million fully guaranteed doesn’t set the top of the market, but consider again that Wilson’s extension would only cover three years. Also consider that Wilson will know by early 2021 if his salary for 2022 becomes guaranteed by the team. While Wilson would forego a more lucrative path via the franchise tag game, he will remain in a city and an organization for which he has professed his love and in which has had enormous success. Plus, he will become a free agent again at the age of 33, still directly in his prime. And in case he gets franchise tagged at that point, the numbers will result in top of the market one year salaries or another lucrative extension.
The Seahawks obviously win here as well, as they lock up their franchise QB through 2022 at salaries that beat what they’d have to pay if the franchise tag was applied for three consecutive years. Plus, they will enter negotiations for Wilson’s next contract, covering Wilson’s 2023 and beyond, with much better leverage than if Wilson plays under a $53 million plus tag in 2022 – in the unlikely event the team would even retain him at that amount. The team will be pushed out of its negotiation comfort zone by fully guaranteeing Wilson’s second year salary, but that can be explained as an exception rather than new precedent since the term was conceded to a star quarterback. While the extension is certainly shorter than the Seahawks would have hoped, it still guarantees Wilson will remain with the team for four more years, with presumably the franchise tag at the team’s disposal once Wilson’s contract expires in 2022.
Using the numbers above, Wilson’s cash flow would look as follows:
|Year||Base Salary (Gtd.)||SB||RB||Cap||Dead||Saved||Running Cash|
* Fully guaranteed base salary from contract extension
** Becomes fully guaranteed by fifth day of 2021 league year if Wilson remains on the roster at that time
*** Guaranteed for injury only, subject to full guarantee referenced directly above
The Seahawks would increase Wilson’s cap number by $8 million for 2019 with this structure, which is manageable for the team if it’s accompanied by a few minor moves to open up room for signing draft picks and setting aside injury contingencies. A larger signing bonus would thus require heavier restructuring, which the team would like to avoid. While Wilson would prefer a larger cash payment up front, he will take home an additional $32 million prior to the extension kicking in, and will have received $65 million in new money after one year of his extension, and $90 million in new money following year two. Note the running cash totals above include the $17,000,000 that Wilson is set to receive this season.
One relevant aspect of the CBA to highlight here is the final league year rule. The relevant provision in the CBA provides that for any player under contract in the final league year (so 2020) whose contract extends beyond that season cannot earn a salary increase of more than 30% of his 2020 salary. So that played an important role in Wilson’s proposed contract here, as we can’t start with a low P5 salary for 2020 only to jump up in 2021. Looking at the proposed terms above, this contract is in compliance with the final league year rule, since 1) Wilson’s 2021 salary of $25 million is well within 30% of his 2020 salary of $23 million, and 2) Wilson’s 2022 salary of $26 million is equal to this 2021 salary. The final league year rule is an important provision to be aware of with NFL contracts straddling the CBA expiration, and in this case the proposed terms are compliant with the rule.
That’s it – Russell Wilson gets his new extension, one with the highest AAV in NFL history and one that still allows him to capitalize on any explosion of revenue that could come in the early stages of the next CBA due to gambling and other revenue boosters. The Seahawks get their best quarterback under contract locked up through 2022 and avoid having to partake in the franchise tag game. While a three year extension falls short of the optimal duration for the Seahawks, it still beats the alternative, and sets the parties up to work together again for another extension when this new pact is up.