With Derek Carr eligible for a contract extension upon completion of this season, his third in the NFL, the Oakland Raiders and Carr’s representatives will likely sit down this offseason and try to hammer out a deal.  The Raiders have managed their salary cap in fantastic fashion and are poised to extend Carr without too much difficulty.  What will the extension terms look like?  Much depends on how this season finishes out for Carr, but if he continues to play at a high level, he will be one of the highest paid players in the NFL.

Derek Carr was selected by the Raiders with their second round pick in 2014, behind fellow quarterbacks Blake Bortles (Jacksonville) and Teddy Bridgewater (Minnesota).  By virtually any metrics you consider, Carr has outperformed his draft mates, and Carr should be the first contract extension recipient from that group. As first round picks, Bortles and Bridgewater’s contracts also come with a fifth year team option, unlike Carr’s contract as a second rounder, so that further adds to the likelihood that Carr will be extended first.

Carr has significantly improved each year in the league, as have the Raiders’ fortunes.  His career numbers[1] consist of the following (with the 2016 season through 7 games):

So the task at hand here is to put together the terms of a contract extension for an ascending twenty-five year old franchise quarterback.  As mentioned above, with Carr almost certain to be the first quarterback in his class to receive an extension, along with Carr sitting at the head of his quarterback draft class, we must look outside his class for meaningful comparisons.  We need to examine top performing quarterbacks of similar league experience who recently entered into their first contract extensions.  The appropriate list comprises of gaudy names and an up-and-coming starter – Cam Newton, Russell Wilson, Andrew Luck and Tyrod Taylor.  Please note that for purposes of this article, we will assume that Derek Carr maintains his current level of performance for the duration of the 2016 season.  This is an important assumption, but not an unfair one.

Player Comparisons:

Without any further delay, let’s take a close look at how Carr’s numbers stack up next to his contemporaries.  First, please take note that the relevant stats for his comps are those accumulated prior to the player signing an extension.  Since the teams were agreeable to extending the player based on such player’s performance at that point in time, that’s the timeline that requires our attention.  Next, we’ll look at two snapshots in time for each player’s stats – 1) the last completed season prior to the extension and 2) his cumulative stats in the years prior. Extra weight is given to the player’s most recent season since that best demonstrates a young quarterback’s growth as a player and what lies ahead.  Moving on to the comparisons, let’s start with Cam Newton.

Carr vs Newton:

From an aggregate view, Carr’s body of work falls a bit short of Newton’s, but not by a significant margin.  While Newton’s early numbers beat those of Carr, the 2016 pace that Carr finds himself on is better than any season Newton had prior to his extension.  One key caveat here is that, except for QBR, Newton’s stats below don’t account for his rushing game, which obviously plays a big role in Newton’s value.  Even taking into account Newton’s rushing statistics, Carr’s 2016 pace, were he to continue it, would top any of Newton’s first four seasons.  Overall, the edge here goes to Newton, but the key takeaway here is that Carr’s 2016 season, and the major growth Carr has shown between seasons 2 and 3, puts him in the same ballpark. Thus Carr’s representatives can rightfully bring up Newton’s contract as highly relevant for contract extension discussions.

Carr vs Wilson:

This comparison can be summed up quite succinctly, as Wilson has Carr beat in virtually any way you view the numbers, including in the battle of Super Bowl championships.  Similar to Newton, Wilson’s full value hides with his rushing statistics not displayed. Nevertheless, this comparison was important to make, since Carr will ask for, and likely receive, contract terms that come close to those of Wilson.  Carr’s side will argue hard for his breakout 2016 season as evidence that he’s in Wilson’s neighborhood, even if it’s without the lakefront view.

Carr vs Luck:

The Derek Carr to Andrew Luck comparison is particularly interesting in that Luck started out with relatively strong numbers in his first three years, followed by a poor, injury riddled season right before his contract extension.  As for Carr, his projected 2016 season favors comparably to any of Luck’s best seasons. However, the other seasons do matter, and Luck has proven that despite his subpar 2015 season, he’s a franchise quarterback with talent to match any quarterback in the NFL.  Being the first pick overall in the NFL draft also provides cache. But if Carr continues with his strong 2016 season and gets the Raiders to the playoffs, the Luck contract will be relevant in discussions.  So the takeaway here is that Luck’s bargaining power clearly exceeded what Carr will have this offseason, although the gap is not as large as some may think.  Carr can rightfully ask for contract numbers within striking distance of what Luck received.

Carr vs. Taylor:

While Taylor has been in the NFL since 2011, he threw for less than 200 yards combined from 2011 through 2014 and did not start a game until 2015. As such, we will only look at his 2015 numbers, as there’s not much else to consider statistically. The comparison between Carr and Taylor here is rather tricky, as we don’t have an apples to apples comparison with Taylor just having the one year in the books. Along those lines, Carr’s side will make a strong argument that only his most recent season (2016) should be given significant weight in comparison to Taylor, and this is a fair argument. Carr’s 2016 statistics do match up comparably with those of Taylor’s in 2015.  While Taylor’s 2015 numbers beat Carr’s earlier stats, Carr has shown continued growth as a QB, and it can be argued that he’s provides both the safer option and the higher ceiling for ascension, based on his age, draft prowess, physique and two additional years of quarterbacking experience.

Contract Analysis:

Having looked at how Carr compares to other top young signal callers on the field who have recently been extended, now let’s take a high level look at the contracts signed by each player in the table below.

Next, using the above contract figures for Newton, Wilson and Luck as high end parameters for Derek Carr’s extension, and Taylor’s as the floor, we know that Carr’s numbers will fit somewhere within these parameters. Carr will almost certainly come in lower than Newton, Wilson or Luck from a cap percentage perspective, but perhaps not from a cash perspective.  On the flip side, Carr’s contract extension will exceed what Taylor received, which is actually quite a generous payout from the Bills in the event that the team picks up his 2017 option. The Bills structured Taylor’s contract to provide for a second guarantee trigger in 2017 largely since he only had the one season as a starter.  The thought process makes sense – Taylor receives an initial reward for his first strong season, with the rest of the goodies unlocked upon a second strong season in 2016.

Circling back to what Carr’s ultimate contract numbers will look like, a key point needs to be highlighted here – with the cap having increased substantially over the last few years and likely to do so again next year, including a projected 16% increase from 2015 to 2017, we could see Carr receive higher annual average values for his contract than those of Newton or Wilson, which is due to NFL inflation.  However, when calculated as a percentage of the cap, Carr’s numbers should absolutely be less.

Carr’s Contract Extension:

Now let’s put some numbers in place for Carr.  For purposes of this exercise, we will assume a 2017 salary cap number of $166 million, which would be in line with projected revenue growth for the NFL.  And we will also assume, just as occurred with the other quarterbacks, that Carr’s extension will not impact Carr’s base salary for his remaining year under contract (in Carr’s case, for 2017), but rather it will simply be an extension of his existing contract.  With the table set, here’s the general structure for Carr’s contract extension:

5 years, $114 million, with $38 million fully guaranteed and $60 million guaranteed for injury, including a $12 million signing bonus and $10 million roster bonus in 2017 (included as part of the full guarantee), structured as follows:

2017:  existing contract remains in place, plus $12 million immediate signing bonus and $10 million roster bonus for 2017

2018:  $16 million base salary fully guaranteed

2019:  $16 million base salary, all of which is guaranteed for injury

2020:  $20 million base salary, $6 million of which is guaranteed for injury

2021:  $20 million base salary

2022:  $20 million base salary

Why a small signing bonus, relatively speaking, as part of the structure?  If you take a close look at how the Raiders have structured their most recent contracts under general manager Reggie McKenzie, you’ll see that the team has smartly adopted a pay-as-you-go structure.  The idea here is that the team wants to keep its books as clean as possible and incur minimal dead money in the event the team elects to part ways with a player.  With a signing bonus, while the bonus amount is prorated for up to five years on a team’s cap, if a player is cut prior to the contract expiring, the team takes an immediate hit to its cap in the year that the player is released.  That being said, the team will understand that Carr’s side will want as much cash up front as possible.  By agreeing to a $12 million signing bonus and $10 million roster bonus for 2017, as opposed to a $22 million (or larger) signing bonus, the Raiders can incur more of the cap burden in the early years, while still making a strong payout to Carr up front.

To further illustrate this important point, let’s apply this to Carr’s hypothetical bonus structure.  If a player receives a $22 million signing bonus over a five year contract, the cap charge relating to the signing bonus will be $4.4 million per season.  Next, say that after year two of the contract, the team wants to cut the player.  In such a case, the team will have to absorb a $13.2 million cap hit in the year the player is cut[3].  With the use of a $10 million roster bonus and only a $12 million signing bonus, the Raiders absorb the full $10 million roster bonus against their cap in 2017, along with $2.4 million of the signing bonus.  If the team decides to move on from Carr after two years (very unlikely, but nevertheless not an impossibility), the team will only incur a $7.2 million cap hit, which is quite manageable, at least compared to the alternate scenario.  By incorporating roster bonuses and guarantees of base salaries in early years in lieu of large signing bonuses, the Raiders will keep the cap cleaner in case the team wants to move on, and the team will have more cap room in future years to pay other players.  Why don’t other teams do this?  Well, many teams can’t do this because they’ve got serious cap problems.  In order to structure big contracts as the Raiders have been doing, you must have immediate room under your cap to withstand high cap numbers early in the contract.

Here is how the contract will look on the salary cap plus the running new cash totals for the deal.

With the terms for Carr’s contract extenstion set, let’s see how this contract looks for the parties. First for Derek Carr, he’s fully guaranteed $38 million, which is less than Andrew Luck but more than Cam Newton, Russell Wilson (who it should be noted only signed a four year extension, which also factors into why his signing bonus is not higher) and Tyrod Taylor.  In terms of cash flow, Carr receives $22 million in the year he signs the extension, plus another $16 million in each of the first two years of the extension. So, that means that at the completion of his first two years of the extension, Carr will have already taken home $54 million, which puts him comfortably ahead of Tyrod Taylor during the same period, even with Taylor’s option picked up (noted since Taylor’s contract serves as our floor).  Carr receives a full guaranty for his first year salary in 2018, an injury guaranty for the full $16 million salary in 2019 and additional protection with $6 million of his 2020 salary guaranteed for injury.  While Carr ideally would like to receive more cash at signing, the generous guarantee amounts, both full and injury, should placate him.  Also his average annual value beats Cam Newton and Russell Wilson – not a small procurement there.

Now for the Raiders, this deal also works quite well.  As mentioned above, the team keeps its future cap situation in great shape, absorbing higher cap numbers early in the deal and having the ability to walk away without too much penalty in later years of the contract in case it’s needed.  As of now, the Raiders only have $123.6 million committed to their cap in 2017, and just under $90 million committed in 2018 – so they can avoid gigantic, unmanageable cap numbers for the back years of Carr’s contract by absorbing healthy cap numbers in the early years of the deal.  Additionally, the good news for both sides is that good quarterbacks tend to retain their value, and suffer less career altering injuries than other skill position players.  Thus the likelihood of the Raiders needing to cut Carr early is reduced compared to other skill position players.  Nevertheless, the option is there for the Raiders should something change down the line.  Further, while the team will pay a higher AAV to Carr than Newton or Wilson received, his salary will constitute a smaller percentage of the cap at the time of signing (13.73% for Carr vs 14.38% for Newton and 15.28% for Wilson).  So the Raiders have plenty of reasons to be happy with this deal as well.

Other Factors For Consideration:

Before we conclude this article, it’s important to give consideration to a few additional factors that could impact contract discussions, both in terms of structure and timing.  First off, Carr may elect to wait for Blake Bortles to sign a contract extension with the Jaguars before Carr moves forward on his deal. With each passing week, this scenario becomes more unlikely with Bortles struggling in 2016 and with Bortles having a team option, albeit at a sky high price, in place for 2018. However, the Jaguars did spend the number 3 overall pick on Bortles in 2014, may feel pressure to extend him to try to show that the house is in order. If such a scenario occurs, the Jaguars have not been shy about slinging around eyebrow raising contracts, and could potentially do the same here. Carr would certainly capitalize in such a scenario.

Next, while we don’t have access to the league calculations, the Raiders may be a bit under the aggregate 2013 through 2016 CBA minimum spending floor, which requires teams to spend an average of 89% of the cap for the four year period. In such a case, the team will likely choose to allocate a portion of the signing bonus mentioned above to its 2016 cap, which would in turn reduce the team’s future cap obligations by a small amount.

Conclusion:

We’ll ultimately see what happens when Carr’s representatives sit down with the Raiders’ brass to discuss a contract extension in early 2017.  The good news for both sides is that a deal satisfying both is eminently reachable.  As for what the deal will look like, the terms proposed above would be a good structure.

[1] All stats for this article have been obtained from the site profootballreference.com.

[2] In the case of Passer Rating and QBR calculations covering multiple seasons, the final stats from each year were averaged together to come to the representative amount.

[3] For purposes of this article, we won’t go into June 1 Designation Cuts, which would defer a portion of the cap hit for the particular season mentioned to the next season.