On Maurkice Pouncey, Center Salaries, and How the Annual Value Can Be Misleading

Posted on June 13, 2014June 13, 2014 by Jason Fitzgerald

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With Maurkice Pouncey locked up and surpassing Alex Mack as the highest paid center in the NFL I thought it would be a good time to dissect the contracts at the top of the position and see why looking at annual value can sometimes be very misleading.

For the prior three years the Panthers’ Ryan Kalil has been the top earner at the center position. Carolina signed him to a six year contract in 2011 that would pay Kalil $49.116 million which worked out to be $8.186 million per year. It seemed like a number that would never be touched until the Jacksonville Jaguars offered Alex Mack a five year deal worth $8.4 million per year. Mack was a transition player so the Cleveland Browns matched the offer and made Mack the top paid in the game. That distinction did not last long as the Pittsburgh Steelers quickly signed Pouncey to a five year deal worth $8.827 million a season.

But numbers can sometimes be misleading and in the NFL we have to look at all kinds of aspects of a contract. To best compare apples to apples when looking at Pouncey’s contract we need to take into account the new money in the contract. This simple adjustment is made by adding Pouncey’s cash salaries in 2014 (the final year of his old contract) and 2015 (technically the first year of his new contract) and subtracting the money he was already going to earn in 2014. For Pouncey that works out to be $15,636,625. Lets look at the five year cash flows for each player.

	Pouncey	Mack	Kalil
Year 1	$15,636,625	$10,000,000	$19,000,000
Year 2	$22,636,625	$18,000,000	$20,750,000
Year 3	$30,136,625	$26,000,000	$30,750,000
Year 4	$37,136,625	$34,000,000	$35,750,000
Year 5	$44,136,625	$42,000,000	$41,366,000

There are a few things we should find interesting with this chart. The first one actually concerns Mack. Despite having the highest annual valued contract for a few months, this was an inferior contract to Kalil’s through the first four years of the contract. Considering the life of an NFL player is not the longest it would be pretty easy to argue that Kalil never really lost his standing as highest paid player at the position.

Between Pouncey and Kalil the results are a bit muddles. Kalil earned more in his first year than Pouncey, but Pouncey will exceed his cash flows in year two, only to trail him again in year three. Provided Pouncey gets to year four this is where he lays claim to being the highest paid player. That’s certainly not guaranteed.

Looking further into the contracts we need to look at two other factors when determining the true value of a contract and those factors are the guaranteed dollars and the dead money protections that come in the contract structure. Teams do not like to pay players to not play on the team nor do they want to carry excessive salary cap charges for a player no longer on the team. This further muddies the waters as to highest and not highest paid players.

Pouncey received no contract guarantees beyond a $13 million signing bonus that will be prorated through the fourth year of his contract. Mack received no signing bonus but did receive a full guarantee on his year one and two salaries. Kalil hit the jackpot receiving an $18 million signing bonus, prorated through the fifth year of his deal, and another $5 million bonus in the third year of his contract that would be prorated over the remaining four years of his contract.

Remember that money not yet accounted for on the salary cap or money owed accelerates onto the salary cap when the player is released. Here are the dead money charges that would be associated with releasing the player.

	Pouncey	Mack	Kalil
Year 1	$10,400,000	$18,000,000	$19,000,000
Year 2	$7,800,000	$8,000,000	$14,400,000
Year 3	$5,200,000	$0	$15,800,000
Year 4	$2,600,000	$0	$10,950,000
Year 5	$0	$0	$6,100,000

These numbers paint an entirely different picture for the players. Pouncey’s contract is a little different in year one since his deal is an extension where proration begins in 2014, but I think its safe to say he would not be cut that year even though his protection is much less than the other two.

In year two Pouncey has the least secure contract for a few reasons. For Pouncey the $7.8 million dead figure represents money already paid to the player. If his play declined greatly their option is to save $7 million in real cash plus another $1.8 million in cap room. To see the magnitude of this I try to compare the savings to the players cap charge (this is the CSC ratio you see on the cap pages) where I’ll add the players cash plus cap savings and divide it by his salary cap charge. For Pouncey it’s a 0.92, which is close to the range where releasing a player is somewhat feasible.

Mack’s year two salary is protected by a guarantee so the Browns will be ambivalent on releasing him. They gain no cap and save no cash giving a 0.00 ratio. Kalil, assuming he was released before his year three guarantee kicked in, would cost the team $14.4 million in dead money which amounts to a loss of $9.05 million in cap room with a savings of just $1.75 million in cash. We don’t need to look at any ratio to realize Kalil is protected as well from release.

Mack loses almost all protection from that point forward (he has a vesting guarantee in year three but that would not save him from release), giving Pouncey more security from the dead money in his deal, but Pouncey would never come close to the security that Kalil has. Here are the yearly cap plus cash savings if the team released the player:

	Pouncey	Mack	Kalil
Year 1	$3,200,000	($8,000,000)	($14,400,000)
Year 2	$8,800,000	$0	($7,300,000)
Year 3	$12,400,000	$8,000,000	($950,000)
Year 4	$14,000,000	$8,000,000	$3,900,000
Year 5	$14,000,000	$8,000,000	$9,982,000

When looking at these numbers we would consider Kalil’s three year payout “virtually guaranteed”. Pouncey and Mack’s are anything but. The magnitude of Kalil’s savings were so small in year four that payout would also likely be considered “virtually guaranteed”. If the contracts are never touched there is no arguing who has the more valuable contract regardless of what the cash flows might say. Pouncey needs four years to best Kalil and the current contract structure is nowhere near as solid to make that happen. In fairness to Pouncey he will likely get that protection since the Steelers, like the Panthers, over-rely on using yearly prorated bonuses to deal with their salary cap problems. Once that happens the dead money will soar thus reducing the cap savings the Steelers would see.

All of this doesn’t mean we should not consider Pouncey the highest paid (we should as the four year is significantly better than the four year for Kalil unlike Mack’s contract), but it should give some pause when we value the contract or criticize the Steelers for the final five year number. The goal for the next center to sign (likely Pouncey’s brother) is to exceed the $30.75 million paid over three years to Kalil or get significantly more virtual protection in the contract that matches the Kalil protection That really sets a complete new standard when that happens.

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Poison Pills and Alex Mack

Posted on April 10, 2014April 10, 2014 by Jason Fitzgerald

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With the news of the Alex Mack contract with the Jacksonville Jaguars fresh in the news a phrase I had not heard in some time is resurfacing- “poison pill”. A poison pill contract is a type of contract that is given to a player whose rights are still controlled, whether by the restricted, franchise, or transition designations, by another team. The offer sheet is then written with a specific clause that does not allow the other team to match the offer sheet.

The most famous “poision pill” contracts were used by the Seattle Seahawks and Minnesota Vikings who got into a bit of a struggle over free agents. Minnesota fired the first shot when they signed Seahawks G Steve Hutchinson to a $49 million contract, which contained the stipulation that if Hutchinson was not the highest paid offensive lineman on the team the entire contract would guarantee. Seattle already had a highly compensated lineman (Walter Jones) and thus could not match the offer sheet. Seattle fired back signing Vikings WR Nate Burleson to a similar deal that would guarantee if he played at least five games in the state of Minnesota. Burleson quickly became a Viking.

The NFL would eventually ban this practice, explicitly stating “no poison pills”. Now the terms of an offer sheet must apply equally to both teams. That means you can not craft an offer sheet that gives bonuses for playing games in a certain state or guarantee if the contract is higher than a specific positional players already on another team. For the most part the practice was gone.

Based on some rumors it sounds as if Mack and the Jaguars are going back to an offer sheet made by the New York Jets in 1998 to Patriots’ running back Curtis Martin as a basis for Mack’s offer sheet. The Jets devised a contract where Martin would be paid $4 million guaranteed for the 1998 season, which was a pretty high number in 1998 and near impossible for the Patriots to fit in their cap, but with a twist.

About one month after signing the contract, Martin would have to decide whether or not to exercise a player option that kept in place the remaining five years of the contract. If he did not invoke the option he would become a free agent in 1999 and the team would not have the ability to name him a Franchise or Transition player. If he did exercise the option the remaining years would stay and Martin would be paid an option bonus of over $7 million.

From the Patriots perspective what the contract was trying to accomplish was clear. Because the decision period was so short, it was almost a given that Martin would void the contract and waltz to the Jets in 1999 if they matched the offer. Since he could not be declared a Franchise player the Patriots would get no compensation when that occurred. In addition if Martin did invoke the option the Patriots would have serious maneuvering to do to get their roster cap compliant. They also knew that Martin was going to exercise the option once he was a member of the Jets. In essence, Eugene Parker (Martin’s agent), Bill Parcells, and Jets cap manager Mike Tannenbaum crafted two contracts- one that would apply to New England and one to the Jets- in one offer sheet. New England protested but eventually Martin became a member of the Jets, who he would finish a Hal of Fame career with. This type of “poison pill” is not banned by the NFL, since it treats both teams equally on paper.

With the Cleveland Browns having so much salary cap space, the only way to steal Mack away is to craft an offer sheet that they can’t match for other reasons. I thought this might be accomplished through well above market cash flows on the front end of the contract, but it sounds as if the Jaguars want to be more certain. Most reports make it sound as if Mack does not want to return to Cleveland primarily because they did not show real interest in keeping him long term at the start of the process. Perhaps the constant turnover in the front office also plays a role in the decision. Using Martin’s contract as a template essentially gives Mack the out he wants. Questions of injury would certainly be an issue but that would be the risk that one takes. They could push the option date further thus giving him time to assess his health and the market, but the further that’s pushed out the more chance there is that the Mack would stay in Cleveland which does not protect the Jaguars interests, though they would likely have moved on by 2015 anyway.

If the Browns lose Mack they have nobody to blame but themselves. Because of the disparity in costs between a center and elite tackle, the tag game should have never really entered the equation. At a $10 million contract Mack would be one of the most overpaid players in the NFL. It is a position where you simply should begin negotiations as soon as you know you want the player. Considering the cap space and low payroll the Browns have if they must have gone the tag route they should have used the franchise tag to protect their interest. The cost of the franchise tag was only $1.6 million more and it gave the team the ability to receive two first round draft picks if Mack signed with another team. Now they get nothing if they do not match the offer sheet. The Browns have been poorly managed for years with a revolving cast of characters in charge of the franchise and this is just the latest potential mishap for the team.

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Can the Jaguars Sign Alex Mack Away from the Browns?

Posted on April 6, 2014 by Jason Fitzgerald

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Apparently the Jacksonville Jaguars are going to make an attempt to sign center Alex Mack away from the Cleveland Browns. Mack had been designated a Transition players by Cleveland, which gives the Browns the right to match any offer sheet that Mack signs from another NFL team. So for Jacksonville to be able to sign Mack away the Jaguars need to craft an offer sheet that the Browns will find difficult to match. I want to look at some of the considerations that may go into this.

When teams do make moves on Restricted Free Agents, which are essentially the same as Transition players from a compensation standpoint, it often comes by attacking a team with limited cap room. The Patriots attempted to do that with Emmanuel Sanders in 2013 and the Falcons are currently doing that to the Saints with Rafael Bush. A team simply drives the price up slightly and hopes the other team cant match. When the Baltimore Ravens signed Joe Flacco to his incredibly player friendly contract it was in part because they were fearful another team could make an offer sheet that their cap did not allow them to match.

The cap space is of no concern for either franchise and will not play a role in the Mack decision. The Browns have the most cap room in the NFL , nearly $31 million. The Jaguars are third with about $26 million. The Browns cap space already includes Mack at $10 million, so to compare situations the Browns are really sitting at $41 million in cap space. They have one of the lowest payrolls in the NFL and will likely lead the league in cap room next year as well. So the Jaguars can not muscle the Browns into not matching a contract.

For Jacksonville to sign Mack away from the Browns they likely have to craft an offer sheet that pushes the value on the player beyond what the other team feels is a reasonable offer. The Browns just did this when they signed Andrew Hawkins away from the Cincinnati Bengals. The Bengals had more than enough cap space to match any offer sheet for Hawkins so the Browns hit the Bengals through the cash flows of the contract.

Hawkins would be considered a low, mid-grade receiver who had one decent year with the Bengals before getting injured. Such a player might warrant a contract worth around $3 million a season with limited guarantees since you may want to part ways after just one season if improvements do not continue. The Browns got the annual value of the deal close to that level, but they paid him an average of $5.4 million over the first two years of the deal with $6.8 million guaranteed. He would be dirt cheap in 2016 and 2017($1.4 million a season), but the odds of getting to those years to realize that benefit would be slim. The $5.4 million true contract number would be in the same ballpark as players like Danny Amendola, Emmanuel Sanders, Jordy Nelson, Riley Cooper, and Julian Edelman all players who were more established and considered better players at time of signing. In no way could the Bengals justify paying a fourth or fifth receiver top “number 2” money. Cap space did not matter. It was simply a bad investment for the team.

Jacksonville will likely need to take a similar approach. They already know that the Browns are willing to pay Mack $10 million this season. Mack’s agent can probably give an overview (though that has to be taken with a cautious eye) of the range that the Browns have found acceptable in earlier negotiations. The Jaguars need to exceed that and push the market the way that the Browns did with Hawkins.

The top end of the Center market is led by the Panthers’ Ryan Kalil($8.186M) and the Jets’ Nick Mangold ($7.725M). Those two would be followed by the more recent contracts of Max Unger ($6.583M) and Erik Wood($6.512M). Lets quickly do a very basic breakdown of the players prior to extension.

	Age (1^st extension year)	Game Started	Pro Bowl	All Pro
Mack	29	80	2	0
Kalil	26	47	2	0
Mangold	27	64	2	1
Unger	27	32	0	0
Wood	28	47	0	0

The two things three things that jump out to me here are the games, pro bowls, and his age. The only other player on the list to start every game prior to extension was Mangold who played four years when he was extended. Mack’s two pro bowl selections compare to the highest end players, though he had one more year to accomplish that feat than they did. Age is a negative, though, as I could reasonably expect multiple years out of these other players and cant have the same expectation of a player who will turn 29 by the end of the 2014 season.

Mack probably has a strong argument that he should be paid above Unger but there is likely an equal argument that he should not be the market setter at the position. This is where I would probably take the Browns approach and find a way to make him a market setter in realistic cash terms and bring the annual value down in end of contract terms. Lets look at the year by year cash breakdowns of the four players:

	Year 1	Year 2	Year 3	Year 4
Kalil	$19,000,000	$20,750,000	$30,750,000	$35,750,000
Mangold	$15,987,000	$18,670,000	$24,780,000	$29,000,000
Unger	$12,335,000	$17,335,000	$21,835,000	$26,335,000
Wood	$13,050,000	$17,250,000	$21,525,000	$26,050,000

For creating an offer sheet I think that year 2 total is extremely important. The Browns would lily consider something in the $18 million range a “fair value” for Mack. The Jaguars can push that past Kalil and start turning the contract in their favor. Moving into the $22 to $23 million territory, all of which could be guarantees, sets a new market point at the position. Year 3 is likely important as well but I think that is the stage at where you begin to pull back a little and start to bring him under Kalil. By year 5 I would get him under Mangold. How would we structure such a deal?

Year	Age	Salary	Cumulative Cash	APY
2014	29	$18,000,000	$18,000,000	$18,000,000
2015	30	$5,000,000	$23,000,000	$11,500,000
2016	31	$7,000,000	$30,000,000	$10,000,000
2017	32	$4,000,000	$34,000,000	$8,500,000
2018	33	$4,000,000	$38,000,000	$7,600,000

So in this case we are creating a contract that does bring the annual value down below Mangold so the team is not really setting a new level for the position, but we are doing it in a manner that will give the Browns some real consideration before matching the offer sheet, just like the Browns gave the Bengals a few weeks ago.

One thing about the above offer that could be a problem is the fact that the Jaguars would be unable to use the all cash contract structure that they typically utilize with the above cash schedule. This is because of a rule that causes the difference in salary between year 1 and year 2 to be treated as signing bonus. To avoid that Jacksonville would have to make the offer sheet contain something along the lines of a year 1 salary of $15,000,000 and year two salary of $8 million. That is still probably strong enough to make it work, but a small signing bonus to drive the first year cash might not be out of the realm of possibilities.

If the Jaguars can make the above numbers work in their all cash system they won’t be hampered by the contract as Mack gets older and his play tails off. Cap charges of $4 million on the back end will probably match his performance on the field. If he agrees to the low backend salaries it also has him setting a max level that he could expect if he is still performing well and the Jaguars want to consider an extension to allow him to play until he is 35. The Jaguars should not have any significant contracts coming due in the next two years to where high cap charges impact them in any way. Provided Mack continues to play well and be a near the top player he can greatly benefit an offensive line that is being revamped.

So let’s see how this plays out but I tend to think if you want the player in this instance you need to make some concessions on front end cost to make the other team avoid re-signing the player. We don’t see these offers often in the NFL so it’s a good thing to study in the rare events when they do occur.

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Franchise Tags, Lower Valued Positions and Alex Mack

Posted on November 5, 2013 by Jason Fitzgerald

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Had an interesting question today from a fan of the site regarding the odds that the Browns would use the Franchise Tag on Center Alex Mack. I thought it was an interesting topic to write about since it involves a number of considerations a team must make in regards to certain positions.

When the NFL instituted the Franchise Tag provision they grouped players into a number of positions. The tag itself is more or less calculated based on the top 5 salaries at the position, but due to the way the market and the game has changed over the years it has made the system in some way obsolete for some positions.

The NFL groups all offensive lineman and linebackers as their own individual price points. For linemen there has been a growing disparity between left tackles and the interior linemen on a team. In recent years teams have pulled back on spending on the guard and center position. For linebackers the 34 defensive system has become dominant and the 34 outside linebacker overshadows inside linebackers and 43 outside linebackers. It makes the decision to use the tag on the Guard, Center, Right Tackle, 43 outside linebacker, Inside linebacker, and 34 Defensive End (who is lumped in with pass rushers and in most cases they have a different role) very difficult. Here are my annual value estimates for the top 5 players at various positions on the offensive line:

Position	Salary
Left Tackle	$10,970,000
Right Tackle	$6,400,000
Guard	$8,020,000
Center	$6,990,000

As you can see this is a pretty major disparity. The Franchise tag in 2013 for an offensive lineman is $9.828 million. The largest salary cap hit for a Center in 2013 was $9.117 for Nick Mangold and the second highest just $6.5 million. So using a tag on a Center requires a heavy one year investment at a position that normally does not receive that type of salary.

The secondary concern is while most player dislike the tag because it offers no long term job security, it can be different for some of these other positions. If Mack was to be tagged and to run out and sign his tender the Browns are now locked in for the year at close to $10 million a season. Even if they come to a long term agreement following that, the $10 million figure will need to be worked into the contract.

I think many people consider Mack to be the best Center in the NFL. Financially that distinction belongs to Ryan Kalil at nearly $8.2 million a year, but the way the league has pulled back since then probably puts his pricetag closer to $7 million a year, which would be nearly $500,000 more a season than Max Unger. Once that tender is in play you are now going from a 4 year $28 million dollar contract to a 5 year $38 million dollar contract. That’s a major difference.

So financially there are many considerations that have to be taken both from a short and a long term perspective when using the tag on one of these secondary positions whose tag value is tied to a prime salaried position.

So I would think most teams would not consider using a tag on a Center. The Browns could be of a completely different mindset however. The team has over $20 million in cap room to carry over to 2014 and they will likely hit 2014 with nearly $45 million in salary cap space. For this particular team they may not see the harm in overpaying for a position.

They could also consider the rarely used Transition tag allowing Mack to “get what he is worth” and then deciding if they want to match the offer. This tag will cost $1 million less than the Franchise tag and for the Browns no team could frontload a contract offer that they could not match since the Browns salary cap space is so high. The risk you run with that is losing a 3rd round max compensatory pick, but with so much money in cap space and holes to fill getting a compensatory pick could prove difficult. I’d personally prefer that option, but I guess we’ll need to wait and see what the Browns consider the optimal decision for Mack.

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Examining Eric Wood’s Extension with the Buffalo Bills

Posted on September 3, 2013 by Jason Fitzgerald

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The Bills had recently extended C Eric Wood to a 4 year contract worth a reported $24.5 million. We were able to nail down some of the specifics of the contract extension. Per a league source, Wood’s contract contains $14.5 million in guarantees, comprised of a signing bonus of $9 million and his first two years base salaries. Woods will receive workout bonuses of $150,000 in each extension year and will receive a $250,000 roster bonus if he is on the roster in the final year of his contract. The Bills used up an additional $1.7 million of their salary cap space in 2013 on the extension.

The closest comparison to Wood would be the Seahawks’ Max Unger. Unger was a second round pick who, like Wood, began he career at Guard before moving to Center for his team. Unger would be injured in 2010 but reclaimed the starting job in 2011 and started 15 games for the Seahawks. Seattle paid Unger in part based on expectations when they extended him in the summer of 2012 to a 4 year contract extension worth a base value of $24.935 million.

Wood has a bit more pedigree than Unger since he was a late first round selection in the draft, though it did not seem to translate into more money as is sometimes the case when extending players in the final season of their rookie contracts. That partially could be because He is 27 while Unger was 25 when signing his contract extension. Teams can afford to be more forward looking with some of the financials when players are that young.

In terms of cash flow Wood will earn $12.4 million in year 1, $16.6 million through year 2, $20.875 million through year 3, and finally $25.4 million if he completes the contract. Unger’s contract contained $11.435 million in the first year prior to his earning a $900,000 escalator. Wood also has escalators in his contract based on playing time, which could be difficult to earn considering he has yet to play in more than 14 games in a season. He will need to earn the escalators to keep pace with Unger.

In terms of contractual protection and likelihood of cash flows, Wood’s contract is more player friendly than Unger’s. In 2015 the savings for cutting Wood are only $600,000 due to $5.4 million in potential dead money in his contract. In the same contract season Unger would save the team $2.3 million giving the Seahawks much more incentive to cut Unger if the play declines. That also holds true in the 3rd extension years with cost savings on Wood being just $2.475 million compared to $3.4 million for Unger. The discrepancy is because of the disparity in signing bonus money given to the two players. Wood’s workout bonus also give him early access to cash in the event of a summertime cut. Unger’s contract contains no such bonuses. Both have a final year roster bonus.

Both contracts are a far cry from the major deals given to Nick Mangold and Ryan Kalil. These are contract figures that likely will not be approached again as teams have begun to reassess both the time and financial commitments made to Center position. Both Unger and Wood signed 4 year extensions whereas Mangold and Kalil received 7 and 6 year contracts.

Wood’s deal should set the stage for an extension for Cleveland Center Alex Mack. Mack is also a former 1st round draft selection but has been more durable than both Wood and Unger, starting 16 games in every season for the Browns. He also has a Pro Bowl nod. Mack will be a free agent after this season and should receive a deal that surpasses these contracts. Mack’s durability should be a point of negotiation in which his contract should not require the playtime escalation that the other two contract’s contain. The question will then be if he can push the base value of his contract over $7 million a year and get closer to the Mangold numbers on an annual basis.

View Eric Wood’s Salary Cap and Contract Page

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