Looking Closer at the Colin Kaepernick Contract Extension


Pro Football Talk earlier today broke down the $126 million contract extension given to 49ers QB Colin Kaepernick. That gives us the ability to better understand the work that went into negotiating the contract. You can either read the PFT piece for the full breakdown or view his cap page at OTC for the cap hits, but the cliff notes version is as follows:

The full guarantee on the contract is around $13 million with $60 million being an injury only guarantee

Those injury guarantees vest on April 1 of each season

$12 million in total value is tied to per game active roster bonuses.

$12 million in total value is tied to relatively high percentages of playing time and various honors or team success

The basics of the deal go back to the point I made in the Kaepernick piece I wrote last season that the higher the overall contract value the more team friendly it would be in terms of structure and escape points, which is exactly what this contract is.

The 49ers could have used the franchise tag on Kaepernick to hold his rights for next year. This year the tag was around $17 million so next year it would likely have been around $18.5 million and fully guaranteed once signed. They also could have used the exclusive franchise tag which would have cost closer to $20 million assuming the Dallas Cowboys again restructure the contract of Tony Romo in 2015.

For cap purposes the 49ers will basically settle in between those numbers, spending an additional $19.4 million in cap room in 2014 and 2015 on their QB of which very little is guaranteed and $2 million is tied to incentives, essentially bringing him to the original tag numbers. If this went catastrophically bad in 2014 the 49ers could release Kaepernick next season and absorb just a $9.8 million dead money charge or immediately discuss a restructured deal. In essence that would mean they paid him an additional $12 million for his work in 2012 and 2013. While in practice we know this is not happening, it is a benefit to the team. Front end cash flows for Kaepernick are very low compared to his peers.

For Kaepernick to get the large contract value that he wanted there were things he had to give up, primarily guaranteed money and normal injury protections. This is a risky move for the player and a big bet on himself. He has catastrophic injury protection for career ending type injuries but small injuries can cost him millions.

The true guarantees in his contract are far less than what the number 1 pick in the draft would earn. My guess is if he came in at a much lower annual number (say $18 to $19 million a year) he would have received $40 million or so in fully guaranteed salary. As a comparison players like Jay Cutler received $38.5 million in fully guaranteed salary while Aaron Rodgers leads the way with $54 million. Even the last eras great young class of QBs to be extended (the 2004 draft class) all got over $30 million in full guarantees.

So I would say Kaepernick gave up $27 million in full protection. There is nothing wrong with that as long as you are confident in your abilities to remain a dynamic player. If you are a good player the guarantees mean nothing outside of injury protection since the team is more than happy to pay you. If you are the type to be changed by the big contract then giving up those guarantees is a problem.  For Colin as long as he lasts out the 2015 and 2016 seasons then the guarantee issue will be moot.

Kaepernick also had to give a great deal of team protection in the event of injury.  He has $2 million per year in roster bonuses tied to being active. That is a huge figure. The only other player at the position to have numbers that high is Cutler who has them at $2.5 million a year, but those are not included in the first three years of his contract. For Kaepernick they are there from day 1. The only other notable player to have such roster bonuses is Rodgers at just $600,000 per year in every year of his contract.

Now the 49ers do seem to make the gameday roster bonuses mandatory in their contracts as do the Packers, but the difference in amounts is staggering. At the least we would say he made a $1.4 million concession with this structure. It might be even more.  Most likely he’ll miss a few games over the course of his career as most do, but hopefully it won’t be significant time for his sake.

(Edit: I had mis-read the makeup of the contract for Kaepernick when initially writing this. This is now fixed. H/T to Jakob for pointing it out).

The $2 million a year in de-escalator clauses is also an unheard of thing for the position. It is basically a way to inflate the full value of the contract and reward him if he was to appear in a Super Bowl.  It’s basically a built in incentive that allows him to not miss out on the big contract he would receive if he won the Super Bowl.

Those concessions all benefit the team as does the initial cash flow of the contract, but as we move into year 3 the contract takes a turn to benefit Kaepernick, as it should if he is perfectly healthy and continues to develop into an All Pro type player. The three year total on the contract matches Joe Flacco’s take of $62 million. I am sure that is no accident as Flacco I think is recognized as the baseline number for a good QB whose money was mainly earned in the postseason on a successful team.  In that year Kaepernick breaks away from the Romo’s and Cutler’s of the world (who have better cash flows early on) in terms of earnings.

Starting in his 4th season (assuming again health throughout his contract and a big 2014 season) he will begin to distance himself from Flacco. Surpassing Flacco seemed to be the big concession from San Francisco on the contract if it plays out perfectly. Despite the higher annual value on the deal he will never surpass Matt Ryan in real earnings. Matt Ryan will earn $103.75 million in 5 years while Kaepernick maxes out at $102.6 million. In a league where QB salaries are built on postseason success that is a big one for San Francisco as Ryan’s teams have been a disappointment in the playoffs and were eliminated by Kaepernick’s team two years ago.  Rodgers makes $110 million in the same timeframe so Kaepernick lags greatly there.

Here is the full yearly cash flow breakdown across the position that illustrates when the Kaepernick deal has the potential to make him one of the biggest earners

Kaepernick cash

I would not expect this type of contract to become a standard in the NFL. I think the Matt Stafford and Mark Sanchez models of higher guarantees on short term “evaluation” extensions are probably more in line with what teams would prefer for their younger QB’s. This contract to me is more about creative ways to make a contract that makes both sides happy.

San Francisco gets their guy at pretty reasonable figures during the “evaluation” period with outs coming every season and virtually nothing guaranteed. They are protected from injury. Kaepernick gets the huge money if his “evaluation period” goes well and he does get $60 million safeguarded from a career ender.

If we treat the $2 million de-escalators as incentives then we bring the total down to a more reasonable $19 million a season. If he never makes it back to the Super Bowl or gets the honors brought his way the cash flows are much closer to Romo and Cutler than the Super Bowl winners.

Kaepernick cash 2

I would not picture Andrew Luck or Russell Wilson having to use this type of contract structure. RGIII with his injury potential might have to look more at something like this and Carolina can argue with Cam Newton about the same. The interesting thing is that Kaepernick has never really been hurt, it’s more like an assumption that he could get hurt with his playing style.

Often we hear in contracts that the team is paying for what they think the player will be. In this case it’s more the player showing a real belief in who he will be. They knew the 49ers did not want distractions this year going into what is probably the last year that they can afford a deep roster so it made for a good time to make a deal that makes both sides happy.