Contract Showdown: The $14 Million Players

With Dez Bryant and Demaryius Thomas joining the $14 million club today, I thought it would be interesting to see how their money breaks down compared to some other players. I think that helps us draw some perspective on the negotiating process and the way various contracts can be used to help constuct a deal acceptable to both sides. So let’s see how things break down for the players/

Continue reading Contract Showdown: The $14 Million Players »

Thoughts on Robert Quinn’s Contract Extension with the Rams

The numbers are now in for the Rams star Defensive End Robert Quinn and it’s a very interesting contract that I think benefits both sides. First let us go over the particulars of the contract. Quinn receives a signing bonus worth $4,776,774 to go along with a guaranteed base salary of $608,608 (prorated from a base rate of $646,646) and a guaranteed roster bonus in 2015 of $10,233,201.  That brings Quinn’s full guarantee to $15,618,583.  The reason for the small bonus and salary in 2014 is likely to maintain a near identical salary cap charge as the Rams are right up against the salary cap this year, though in general the Rams are not a team big on the signing bonus.

In 2015 Quinn has a base salary that will become fully guaranteed that is worth $5,555,555 (yes in case you were wondering the Rams made sure to get every palindrome reference possible in this contract). For all realistic purposes this is guaranteed. In 2016 and 2017 his base salaries are $7,777,777 and $6,161,616 and can become guaranteed if on the roster at the start of that League Year. There are also roster bonuses of $2,424,242 and $3,633,363 that will also be guaranteed. His cash salary in 2018 and 2019 is $11,444,412 and $12,932,332.

[adsenseyu6]

The contract is closer to what I believed JJ Watt would have signed with the Texans in that the player is probably undervalued in terms of production but the window is open for another mega-contract in a few years which comes with the shorter term extension. The guarantee package for Quinn is decent with the early vesting roster bonuses helping protect his salary. I think these are all benefits for the player. The Rams get Quinn essentially on their terms (minimal signing bonus, vesting guarantees, contract flexibility) and I think at a bargain price, all things considered.

In the following chart I compare the new money in Quinn’s contract to that received by other players who signed extensions this year. Those players are JJ Watt, Patrick Peterson, Richard Sherman, and Joe Haden. Since Quinn’s contract is 4 years I just want to look at the 4 year values to compare apples to apples.  For players with two years remaining under contract, such as Quinn, I consider the first two years as year -1 and year 0 of the contract. Year 1 is when the extension kicks in. The colors represent the likelihood of earning the salary with a green essentially meaning it’s a virtual certainty, yellow meaning the player has to maintain a solid level of play, and red meaning the player will need to be at a high level to continue the contract.

Robert Quinn Salary

You can see the favorable structure, from the Rams perspective, of the deal with Quinn compared to some of the other players. Despite the higher annual value on the contract Quinn will trail all but Sherman in terms of new money made during the original contract years and in the first year of the contract. By year 2 Quinn will trail all of the newly signed cornerbacks in earnings, a trend that continues through year 3. By year 4 he will pull ahead of Sherman and barely ahead of Haden.

[adsenseyu2]

Because of the low signing bonus in the contract Id would consider Quinn’s earning potential to be less than the corners just based on contract structure. That does not mean he will not get there, but he will basically have each year of his contract tied solely to his performance on the field. Though the early vesting roster bonus is a nice addition for Quinn the Rams have already set a precedent through the release of Cortland Finnegan that the bonus will not be a barrier to release.

For the other pass rushers looking for new contracts Quinn’s deal is probably a major disappointment Once teams get past the annual value of the contract, there is not much there besides potential guarantees on a relatively short term extension. The contract by no means built on the Watt contract that way the cornerback contracts, which all shattered the existing market, built upon each other. More importantly it also did not advance the market beyond what already existed.

Why do I say that?  Lets look at this contract compared to the extension signed by Clay Matthews in 2013 (he had one year remaining) and new contract signed by Charles Johnson in 2011. Both were signed at a time when the salary cap was significantly lower and neither as productive as Quinn.

Quinn Pass Rushers 2

Granted these players had varying degrees of leverage (Quinn by far had the least), but the effective impact is that his contract is not all that different than what already existed in the NFL. I do think that brings up the major question of if it is truly beneficial for the player to be looking for a contract extension so quickly when the team holds all the leverage. That was another point I discussed in the Watt contract that a player is going to give a discount in these spots, the question is just how much. Johnson gave up none because he was going to be a free agent. Matthews had one year left. Quinn had two.

Matthews does have $500,000 per year tied to games active which Quinn does not which does make Quinn’s contract structure more player friendly, but overall Matthews seemed to get the stronger and more secure contract. It just does not have the upside value, if all things are equal and the players continue to be strong. I have to think if Quinn gets through the 15 remaining games his contract would have shattered the Matthews one.

[adsenseyu2]

I’d say that this also sends the message to the other rushers (and rookie contract guys too) that the Watt contract may be looked at as an aberration. The Texans did not do much to utilize their leverage in that case and seemed to give in on a number of key parameters. Maybe that did not do as much to change the market as I had thought.

The Rams were likely not coming close to the Mario Williams/Watt numbers which is probably what helped lead to this contract.  It’s the same approach I thought would happen in Houston where the compromise would be a high valued contract but for a shorter term. In that respect this is a very good contract for the player. Johnson and Matthews do give up years of free agency for those big initial cash flows. Quinn does not and if he maintains exceptional levels of play he will cash in again and likely get close to Watts numbers over the same time period, especially if the salary cap keeps inflating. The other two are stuck at figures agreed upon years before.

For that reason I’d classify the contract as a good deal for both sides, but by no means is this a game changer. It’s really just opening a door for large cash flows on the front end of a short term contract rather than forcing a player into a longer term deal, which backend years are rarely seen from a practical perspective but could hinder a player if he maintains high levels of play for his career.

[adsenseyu4]

Cornerback Contract Rundown: Peterson, Sherman, Haden and Who Has the Best Deal

With Patrick Peterson signing a five year contract extension worth $70 million on Wednesday, the NFL now has officially set the market for the young stud cornerback in the NFL. Peterson marks the third of the big three young corners (Peterson, Richard Sherman, and Joe Haden) to sign a contract which refreshed what had been a stagnant and declining market.

The debate between Peterson and Sherman over who is better has been a hot one over the last two seasons. It was a natural comparison since they play in the same division. Haden was not considered the same level of player, but financially was in the same class as the other two. So in a league where the size of the paycheck often means the perceived worth of the player let’s look put the new contracts in a fair perspective.

Now when we discuss these deals what we are looking at is the new money included in the contract, as each player had at least one year remaining on their contracts when they signed the extensions. By pulling the old money out, which is highly dependent on draft position, we can do our best to compare apples to apples on each deal.

Despite the popular opinion that Sherman had the highest paying contract in the NFL at the position that distinction really belonged to Haden. Haden received more money over the first four years of his contract than Sherman did in his. The difference in annual value is because Haden had to accept a fifth contract year at a lower value while Sherman will be an unrestricted free agent that year.

When Peterson was negotiating his contract there were likely two important concerns to take into account: the yearly cash flows of the Haden contract and the annual value of the Sherman one.  His goal was to exceed both, thus making him the highest paid player at the position and justifying his take that he is the best in the NFL. So how do the deals compare in terms of cash flows?

PlayerYear 1Year 2Year 3Year 4Year 5
Peterson$25,000,000$35,000,000$46,250,000$57,500,000$70,050,000
Haden$24,400,000$34,600,000$45,800,000$57,000,000$67,500,000
Sherman$21,000,000$33,569,000$45,000,000$56,000,000

For the most part Peterson will always be about $500,000 higher in his running cash total than Haden until year five, at which point he will increase that by about $2 million. The reason for that increase was the Sherman APY. In order to get a five year annual value to read as larger than Sherman’s he needed a much larger salary than Haden in the fifth year, which he received.

Peterson is a consistently higher earner than Sherman over the comparable time frame (in the range of $1.5 million) and Sherman will need to earn $14 million in the first year of his next extension to match the total Peterson will receive over five years.

The second thing we should look at is guaranteed salary. Each player has a high level of guarantees in his contract, but almost all are of the “injury only” variety, at least initially. An injury only guarantee is one that protects a player from essentially catastrophic injury that prevents him from passing a physical to play in the NFL. While it does bring added security to the contract in most cases it would be rare for a player to collect on future injury guarantees. For the most part each player is protected in a similar manner with a relatively strong signing bonus and guarantees which become fully guaranteed just a few days following the Super Bowl. Considering each player had their contracts essentially guaranteed for 2014 already (none was going to be released) the best way to look at this is to look at the amount of new money paid out in the current year, the only year for each player that is guaranteed.

PlayerYear 0 New MoneyPer Year% of Total Contract
Peterson$13,362,000$2,672,40019.1%
Haden$16,000,000$3,200,00023.7%
Sherman$11,000,000$2,750,00019.6%

Peterson, in this case, actually received the least impressive payout in the signing year of his contract even though it is a higher number than Sherman. Haden received a very impressive figure. In Peterson’s case this is partially because his contract has two “year 0’s”, but for the purposes of guaranteed salary we can not consider that.

One of the metrics that I like to use to identify true earnings in a contract is what I consider the “virtually guaranteed” portion of a contract. This is essentially based on the dead money in a contract that makes it a negative against the salary cap to release a player, something I call “dead money protection”.

This protection is one of the reasons why the early vesting guarantee for Peterson and Sherman is extremely important (I don’t know the specific dates of Hadens guarantees so I cant speak on his). Both players will see a portion of their 2017 become fully guaranteed in 2016 which immediately adds to the dead money in 2017. Because the balance of their 2017 salary becomes guaranteed in February rather than March the teams are blocked from using a June 1 designation to try to minimize some of the salary cap charges.

Prior to any vesting guarantees here are the dead money charges associated with each player’s contract.

PlayerYear 1 DeadYear 2 DeadYear 3 DeadYear 4 DeadYear 5 Dead
Peterson$9,216,600$6,144,400$3,072,200$0$0
Haden$12,800,000$9,600,000$6,400,000$3,200,000$0
Sherman$8,800,000$6,600,000$4,400,000$2,200,000N/A

These numbers all present somewhat of a different story on the contract. Peterson is going to have to play at a much higher level to actually earn the full value of his contract than the other players.  Most teams do not like to carry large sums of dead money on their books and with these numbers I would lean towards Haden’s money being well protected through three years, Sherman’s early vesting guarantee of $5 million for Year 3 on his contract should protect his  third year salary, while Peterson is really only protected through two extension years.

Of course teams will carry dead money if the actual cash and/or cap savings are significant as that money can get rolled back into the payroll to make a team more competitive . Not counting those vesting guarantees here are the cap plus cash savings associated with a release over the extension years of the contract.

PlayerYear 1 SavingsYear 2 SavingsYear 3 SavingsYear 4 SavingsYear 5 Savings
Peterson$13,855,600$16,927,800$22,500,000$22,500,000$25,100,000
Haden$7,200,000$14,000,000$19,200,000$22,400,000$21,000,000
Sherman$13,400,000$20,738,000$20,662,000$22,000,000N/A

I think this table helps illustrate why the backend numbers in most contracts is worthless. If we look at the 4th year for these players, which are all essentially equal, a team would have an option of carrying this player or going out and paying someone $11 million (about half the savings with 50% going to cash and 50% to cap) to play for a year or finding creative ways to fit better talent into the salary cap slot. Again Haden probably got the best deal out of the group while Sherman will need the vesting guarantees to ensure the team has no reason to move on early in the contract.

Peterson, in particular, should be pushing for a contract restructure early in the contract to virtually guarantee himself more money. His best opportunity for that will be in 2015 when he carries a $14.79 million cap charge for a team with a pretty high payroll and no quarterback under contract. If Arizona can get past next season then Peterson will likely never get another string chance for more protection. He simply has to keep up a very high level  of play.

Overall I think that the strongest contract of the group is held by Haden. Despite the fact that almost everyone believes he is inferior to the other two he is the one who landed the most protected contract upon signing and has the best opportunity to earn three years salary as long as he is adequate (not great just adequate) on the field. His salary is also right on par with the others until the final year, which is not really likely for anyone to earn if there is any decline in play. There is no arguing that Peterson is the highest paid player, but he has to keep up the highest level of play to match the earnings of the others. The team is holding out more cash for him in the event he does play well, but he is going to have to earn every penny of it.

One last thing that I think is worth noting when discussing the cornerback market is what these contracts do with Darrelle Revis who is older than these players but generally regarded as the best in the NFL. Revis’ true contract value with New England is $12 million as he opted to sign a short term deal that carried a paper value of $16 million a season rather than taking a lower offer. I believe this was a calculated risk by Revis who has always demanded to be the highest paid defender in the NFL, a demand only one team has caved in on and they released him after just one season.

The cornerback market had been stagnant for some time in the $9-10 million region and for Revis to get back to a real contract worth $16 million or more a year would be impossible with the majority of players earning $9 million. Knowing that these three players had the chance to up the market it would give Revis the added leverage he needs to push for the higher contract rather than being stuck on a deal that probably would have paid him around $12-13 million a season for the next five years. Rather than asking for $7 million more a year than a top player he will now be asking for $2-3 million more, which is much more reasonable. That’s a situation that will play out next year, but he now has more ammunition to be seeking Mario Williams money, unless JJ Watt signs a new contract, leading to him asking for Watt money. It’s a story to keep an eye on over the next season.

[subscribe2]

Stock Up: Week 4

[adsenseyu1]

Every Monday during the season we will take a look back at three players who are entering important stages of their contract that may have helped their stock in upcoming negotiations with their play on Sunday. In addition we will also look at one player signed in the offseason to a new contract that exceeded all expectations and provided exceptional value to his team.

Stock Up

Patrick Peterson– Though many who grade players at the position will point out the flaws with Peterson, the fact is he does the things in the NFL that get a player paid mega dollars at the position. His two interception performance stole the game from the Tampa Bay Buccaneers on Sunday and it cements his reputation as one of the biggest playmakers in the NFL. While being a solid corner is always appreciated players who have made impact plays often stand out when it comes to signing deals, such as Cortland Finnegan’s seemingly absurd contract in St Louis. Following the game he was getting the same praise from his coach that Rex Ryan used to throw on Darrelle Revis which helped give Revis all kinds of ammunition to force a contract. With Peterson capable of being extended after the season is over expect he and Seahawks corner Richard Sherman to reset the non-Revis portion of the cornerback market.

Tamba HaliThis is actually a bit of an off the wall selection, not because of how he is playing, but because of his contract status. Hali actually has two years left on his contract after this season with the Chiefs and he will be set to earn $8.5 million in salary next year on a cap figure of $11 million. With the Chiefs cap situation being so tight I don’t think they can go another year with him in double digit cap totals. Hali is putting together a monster season across from Justin Houston, another player who is going to command huge dollars from the Chiefs, and yesterday Hali absolutely destroyed the Giants. He had 2 sacks and caused another 8 hurried throws by Eli Manning, which puts his total at 24 for the season according to stats maintained by Pro Football Focus. Hali is going to be 31 next season which is going to make this the last time he may be able to expect a big contract and he should push the Chiefs for one rather than any restructure for cap relief if this type of performance keeps up. I think this is going to be a pretty interesting year for Hali even though his contract may not be on the radar like some others.

Julian Edelman– I’m not sure that there were many expectations for Edelman when he re-signed with the Patriots for the season. There were questions about his ability to remain healthy and he was low on the depth charts. At one point he had a workout bonus converted into a bonus that would only be paid if he made the roster in week 1, often a sign that the player is on the fringe. A few injuries later and he has become an integral part of the offense and it is hard to imagine that New England would consider not playing him. Since becoming a starter in week 2 Edelman has caught 75% of the passes that have been fired his way and he is averaging just under 92 yards a game. Against Atlanta he had a career high 118 yards on 7 receptions, which allowed him to earn his first small bonus of the season. But the big bonus comes after this year when he is scheduled to become a free agent and he is going to make a push to make the same kind of money the Patriots paid Danny Amendola. Nobody would have thought that before the season, but his stock is going to keep rising, especially to a team with a quality QB situation.

New Contract Player Of The Week

Brian Hoyer– In two weeks Hoyer has led the seemingly hopeless Browns to two wins and made a bunch of receivers nobody felt were very good look like real top quality NFL players. Hoyer dominated the Bengals and easily outplayed Andy Dalton as he threw for nearly 270 yards and kept the ball from the hands of the Bengals. Hoyer’s rise is pretty shocking. Hoyer was undrafted in 2009 but made the Patriots as  a backup to Tom Brady, a role he kept until being released in 2012. Hoyer then bounced around the NFL signing with the Steelers for a few weeks and then subsequently claimed by the Cardinals where he started two pretty non-descript games at the end of the season. Due to spending so many weeks out of the NFL in 2012 Hoyer maintained RFA status and was tendered by the Cardinals who ended up releasing him after they traded for Carson Palmer, which led him to signing with the Browns. While nobody knows how the story will end for Hoyer, and most times they don’t end well, he’s providing the Browns with a spark and giving them an opportunity to compete for a division title. At a salary of $715,000 he is quite the bargain.

Follow @Jason_OTC

[subscribe2]