Next week I will be appearing on my friend Jack Duffin‘s podcast titled, “The Paul Brown Show,” so I’m looking over some of his questions for the upcoming episode to prepare. I hope you’ll be able to listen, I love talking about the Browns and the process they’ve gone through over the last few years; I’ll post a link on my Twitter when it’s up.
Dead money has historically served as an impediment to the consummation of player-related trades in the NFL, but recent trends in contract structuring have opened up the possibility for the opposite outcome to take place: dead money as a driver of player-related trades. The new, and increasingly common, contract structures employed by NFL teams allow for dead money to be assigned to any team, whereas traditional contract structures rendered dead money “stuck” with the team which had originally signed the player. As a result, much dead money is now “tradable,” allowing for NBA-style transactions in which one team provides compensation to another team in return for taking on cap-clogging contracts.
Prior to the trade deadline of the 2013 season, the Philadelphia Eagles traded Isaac Sopoaga to the New England Patriots for marginal draft pick compensation. At first glance, the trade seemed fairly inconsequential. Sopoaga, while a starter, had not received a substantial amount of playing time for the Eagles, and the Patriots did not send a noteworthy amount of compensation in return. However, the transaction was somewhat surprising due to the fact that the Eagles had just signed Sopoaga to a three-year contract in free agency prior to the season. The contract, worth a total of $11 million, included $4.75 million worth of guaranteed money. The guaranteed money came in the form of a $2.75 million roster bonus in 2013, a $1 million guaranteed base salary in 2013, and $1 million of the $3.75 million 2014 base salary guaranteed.
This final portion of guaranteed money is what makes this transaction interesting and potentially precedent setting. The Eagles, having apparently decided that they did not want Sopoaga on the team anymore, managed to trade not only the player, but also the $1 million worth of guaranteed money, to the Patriots. If the Eagles had released Sopoaga in the spring of 2014, this $1 million worth of guaranteed money would have become $1 million worth of dead money for the Eagles. Instead, the Patriots released Sopoaga in the spring of 2014 and absorbed the dead money.
Under a “traditional” contract structure, the $4.75 million guaranteed (let’s use $4.8 million for the sake of round numbers) would have come in the form of a signing bonus, with $1.6 million counting against the cap each of the 3 seasons of the contract. If the player were to be traded or released prior to completion of the contract, the yet unaccounted for $1.6 million amounts would accelerate against the salary cap in the year of the transaction (or in the following year if the June 1st rule is applicable). With such a structure, the Eagles-Patriots trade would most likely not have taken place, because the Eagles would incur $3.2 million worth of dead money in 2014 had they traded Sopoaga during the 2013 regular season. The Patriots would receive a salary cap windfall – a player on a contract stripped of all prorated signing bonus amounts and without any potential to generate subsequent dead money – but the Eagles would receive a substantial salary cap hit.
An alternative traditional structure would have involved including the entire $4.8 million guarantee as a roster bonus in 2013. Such a structure would preclude any future dead money, but it also requires more salary cap space in the year of signing. Teams have also traditionally used a combination of signing bonus and first-year roster bonus, with the aforementioned pros and cons of each present to the degree of distribution between the two.
However, in the years since the 2011 CBA was signed, a new type of contract structure has emerged. With Sopoaga’s contract being an example, this new contract structure typically features a fully guaranteed first year base salary, a first-year roster bonus, and full or partial guarantees on subsequent-year base salaries. Under this structure, the salary cap allocation of the guaranteed money – and the potential dead money associated with such guaranteed money – is spread over multiple years. But because the guaranteed money comes in the form of guaranteed base salary, it can be traded to another team, whereas prorated signing bonus guaranteed money and first-year roster bonus guaranteed money cannot be.
These charts demonstrate the difference in potential Sopoaga contract structures:
Traditional Signing Bonus Structure
|Season||Salary Cap Allocation||Potential Dead Money||Tradable?|
Traditional Roster Bonus Structure
|Season||Salary Cap Allocation||Potential Dead Money||Tradable?|
2011 CBA Style Structure
|Season||Salary Cap Allocation||Potential Dead Money||Tradable?|
These effects have already been seen to some degree in trades involving failed rookies drafted under the new CBA, such as Trent Richardson and AJ Jenkins, but those trades still resulted in dead money for the player’s former team, and the contracts were not specifically designed to facilitate dead money trading. Isaac Sopoaga’s contract is insignificant within the context of a $133,000,000 salary cap, but one can imagine a scenario in which this new type of contract structure paves the way for significant dead money dumping deals.
The contract Alex Mack signed with Jacksonville, and which Cleveland matched, contains $8 million worth of guaranteed money in 2015, but it did not include a signing bonus. If Alex Mack the football player becomes worthless during the 2014 season, how much compensation would Cleveland be willing to provide to another team in order for that team to trade for Mack’s contract and then release him, thereby absorbing the dead money instead of Cleveland? In other words, how much (in terms of draft picks or young players) is $8 million in cap room worth?
These types of trades have long been a feature of the NBA, where salary cap space is harder to come by and the guaranteed portions of contracts extend longer than the types of NFL contracts discussed here. In the upcoming NBA draft the Detroit Pistons will send the 9th pick to the Charlotte Hornets as a result of a June 2012 trade in which the Pistons traded the two years remaining on Ben Gordon’s contract for the one year remaining on Cory Maggette’s contract. Detroit essentially traded a future first round pick in exchange for dumping two year’s worth of dead money onto Charlotte in exchange for only one year’s worth of dead money.
Perhaps the opportunity to have the flexibility to engage in this type of transaction will encourage teams to implement this type of contract structure more often. The teams that have gotten into serious salary cap trouble have done so because they were forced to release players with large cap numbers but did not recoup a corresponding amount of cap room because of high dead money acceleration. If these teams could trade the dead money to other teams, they could buy themselves another year or two of contention at the expense of draft picks. This most likely exacerbates the problem in the long-term, but it’s a strategy nonetheless.
Perhaps a rebuilding team with ample cap room will determine that its best long-term strategy is to utilize its cap room to take on dead money contracts in trades in exchange for draft picks instead of utilizing the cap room to sign free agents or re-sign its own players. The merits of such a strategy are debatable, but it is a strategy that a patient organization could potentially utilize to success.
Perhaps the term “expiring contract” will enter the NFL lexicon for the same reason it has become widespread in that of the NBA. But unlike the Sopoaga trade, dead money trades will likely feature the team alleviating itself of the dead money surrendering the draft pick compensation. As a result, a market will emerge in which amounts of cap room can be priced in terms of draft picks and/or young players.
Having established the foundation for this concept, in my next piece I will propose a new contract structure that takes this notion to its logical extreme in allowing for maximum flexibility in trading and timing the effect of dead money.
Apparently the NFL is slowly turning into MLB with all the trade activity of the past few weeks. Trades, with the exception of draft day trading, have always been pretty rare in the NFL. In season trades for starters were almost unheard of due to the difficulties in sometimes fitting new players into a system, but the times are changing.
It began with the big trade of Trent Richardson from the Cleveland Browns to the Indianapolis Colts which was followed up by back to back moves that brought starting Left Tackles to the Pittsburgh Steelers and Baltimore Ravens. There are plenty of more rumored trades on the horizon and with weeks to go until the trading deadline maybe some more materialize. So why the seeming increase in trade activity? Let’s look at some of the reasons.
The 2011 CBA plays two major roles in facilitating trades. The first is the rookie wage scale which applies to Richardson and should play more of a role in future years. I touched on this when looking at the Richardson trade, but essentially the new CBA has eliminated the use of the option bonus and not likely to be earned incentives and escalators from all rookie contracts. While the trade of Richardson was certainly expensive in cap dollars for Cleveland it was a few million less than it would have been in the old CBA. For the acquiring team they only take on reasonable base salaries rather than highly escalated salaries of the old style rookie contracts, giving them reason to take a chance on what seems to be an underperforming player. I’d expect to see more trades of high draft picks like this in the future.
Perhaps the biggest reason lies in the changing of the spending requirements of the CBA. Under the old CBA team spending was tied to salary cap dollars. Teams were required to spend around 90% of the unadjusted salary cap number. That, in turn, led to less carryover for each NFL team and the utilization of a good chunk of cap space by the time the season began. Trading away a piece that saves you a few million dollars likely meant that you would need to find a way to re-spend those cap dollars to be compliant with the salary cap limits by the end of the season, making you think twice about such a move.
The way that the salary cap is structured for most teams now makes it easier to make these moves. There are no salary cap minimums and the cash minimums are maintained over 4 year periods. You no longer have to sink money into players you do not want in a given year. Now teams can just perform a salary dump while they prepare to rebuild. Huge carryovers give teams added cap space to absorb large accelerated charges with minimal problems and may give teams more room to absorb new players. While the latter was not the case with the Steelers and Ravens, in the future my guess is teams with cap space to spare will be making these trades, and some of those teams would not have existed before 2011.
I tend to think the trades also show the more progressive movements and general youth in the front offices. I certainly think there was a time when the NFL front office looked at everyone not in the NFL as a complete outsider to the NFL system. What they did or suggested would never work because they have never been on a sideline or in a huddle. Much of the league has moved away from that. Many GM’s in the NFL come from financial management backgrounds much moreso than football backgrounds. They have a much different approach to managing contracts and the risk management associated with cap structure than before.
In my years of primarily following the Jets salary cap I used to note how the team was using guaranteed salary in lieu of large signing bonuses to get players under contract. They were not the only team doing this by any means, but it was a very different approach than the traditional “give a star a monster bonus” approach that was used for many years. Teams like Tampa Bay have taken it a step further and eliminated signing bonuses entirely. While these contracts can be a problem if the players fail to perform they are all very open ended for trade possibilities. The dead money of the trade in these scenarios is limited giving teams every opportunity to move a player. While it has not happened yet, I would imagine it is something that may happen more in the future. It’s an example of the league moving forward.
We see more openness in the NFL now than ever before. The opinions of those in the media or sitting in the seats maybe has some merit to it. Teams are embracing statistical analysis and “outside the NFL” evaluations and thoughts. That would have been unheard of 15 years ago. Teams are starting in analytical departments, giving credence to various people who don’t work in the NFL but immerse themselves in a facet of the NFL such as statistics. That type of change also means more outside the box thinking that sees the regularity of trades in the NBA and MLB and begins to think “why not” the NFL. I mean if you can sign a player off the street in September and get him up to speed why not simply execute a trade? It’s just a matter of making the financials work and teams are getting more advanced with that every year.
Now for all I know this will be the end of the trades for this season in the NFL, but I think we are beginning to see the start of a new direction in the NFL, one that is open to trades and constructing contracts to facilitate them.
With the Darrelle Revis trade about to go down I wanted to go back and look at some of the trades for players over the last 10 years or so as we begin to make early judgments on who got the better or worse value in the trade. Id say in general none of the trades have been franchise defining for the team giving away the first round pick. Based on the fact that Revis is looking for a new deal and is considered a top defensive talent I would look at the Jared Allen trade as a trade that might hold some weight in terms of compensation. Gut feeling is that some combination of a 1st, 3rd, and 4th/5th would be considered a pretty fair trade. Two first round picks would be an absolute steal for the Jets.
Here are the player for 1st round pick trades I could come up with since 2000, plus some brief comments on each. (Credit to Pro Sports Transactions for making it easy on me to look these up)
Jets trade WR Keyshawn Johnson to the Buccaneers for the 13th and 27th pick. Johnson did win a Super Bowl in Tampa and have two productive seasons before being shut down by the head coach in 2003 and traded that offseason;
Seahawks trade WR Joey Galloway to Cowboys for a first rounder in 2000 and 2001. The picks are the 19th and 7th picks in the draft. Galloway was a total bust for the Cowboys
Rams traded QB Trent Green to the Chiefs for the 12th and 150th pick in the draft. Green was productive with the Chiefs even if the playoff results were not there
Rams traded DE Kevin Carter to the Titans for the 29th pick in the draft. Carter didn’t put up the sack numbers in Tennessee but was a solid starter on a good defense though only there for 4 seasons
Saints traded RB Ricky Williams and a 4th round pick to the Dolphins for the 25th pick in the draft and a conditional 2003 first round pick that ended up being the 18th pick in the draft. Williams’ first year in Miami was great, but within 2 years he retired from football. He returned in 2005 only to get suspended for drugs in 2006.
Jets received the 13th pick in the draft as compensation from the Redskins for RFA WR Laveranues Coles. Coles made 1 Pro Bowl with the Redskins before being traded back to the Jets in 2005
Patriots traded QB Drew Bledsoe to the Bills for the 14th pick in the draft. Bledsoe lasted three years as a Bills starter producing 1 Pro Bowl and 0 playoff appearances.
Vikings traded WR Randy Moss to the Raiders for the 7th and 219th picks. Moss was a complete bomb for Oakland, quitting on his team until a trade to New England saved his career.
Raiders traded TE Doug Jolley, the 47th pick, the 182nd and 185th pick to the Jets for the 26th pick and the 230th pick. This was harder to include since it did involve a 2nd rounder that was close to the 1st the Jets gave up, but Jolley was such an epic failure and this such a bad trade I wanted to include it.
Jets trade DE John Abraham to the Falcons for the 29th pick in the draft. Abraham had a long and productive career in Atlanta that saw multiple playoff appearances and 4 double digit sack seasons
Patriots trade WR Deion Branch to the Seahawks for a 2007 1st round pick that proved to be the 24th pick in the draft. Branch was a bust for the Seahawks and sent back to the Patriots after 4 unproductive seasons.
Chiefs trade DE Jared Allen and the 187th pick to Vikings for the 17th, 73rd, 82nd, and 182nd pick. Allen has been one of the most dominant pressure generating ends in the league since being acquired by the Vikings
Bills trade LT Jason Peters to Eagles for the 28th and 121st pick. Peters had 3 Pro Bowl seasons for the Eagles before being injured off the field this past season.
Broncos trade QB Jay Cutler and the 140th pick to the Bears for the 18th pick , 84th pick and Kyle Orton. The Broncos also received a 2010 first rounder that was the 11th pick in the draft. Cutler has twice led the Bears to the playoffs though he has not been considered a top tier QB.
Raiders trade a 1st rounder in 2012 and 2nd rounder in 2013 to the Bengals for QB Carson Palmer. The picks end up being the 17th and 37th picks in the draft. Palmer was traded off the Raiders before they even accounted for the 2nd round pick involved in this trade