The Cash Flow Structure of a Russell Wilson Contract

According to a report by Ian Rapoport of NFL Network and, a big disconnect that currently exists between Russell Wilson and the Seahawks is because of the year by year breakdown of the Seahawks contract, specifically the payments made in 2015. Rapoport indicated that the Seahawks offer would pay Wilson less than $20 million this season, which is a far cry from the $28 million earned by Matt Ryan and $30 million earned by Cam Newton on their extensions. This is something I had discussed as a potential problem a few weeks ago. The problem lies primarily in the other two contracts having large on the book salaries when they signed their deals compared to Wilson’s $1.542 million salary. So let’s look closer at those two contracts and see what the Seahawks are likely offering compared to what Wilson may want.

The inequity in existing money in contract extensions is one of the prime reasons we try to compare contracts in terms of new money. The concept of new money can seem complex but it really is an easy calculation. You simply take a players new contract salary and subtract the money he was already going to earn if he played the contract out. When we look at Ryan and Newton here is the year by year breakdown of “new money” and the percentage of contract paid each year.

YearNewton SalaryNewton % of TotalRyan SalaryRyan % of Total
Year 0$16,334,00015.7%$20,000,00019.3%
Year 1$23,000,00022.2%$21,500,00020.7%
Year 2$13,666,00013.2%$11,500,00011.1%
Year 3$15,000,00014.5%$15,750,00015.2%
Year 4$16,700,00016.1%$15,750,00015.2%
Year 5$19,100,00018.4%$19,250,00018.6%

As you can see by the numbers neither player approached $30 million in new money paid in the year they signed the extension. The reason their salary ended up there was because of large salaries that were byproducts of being top 10 draft picks. From Seattle’s standpoint this is the marketplace they seem  to be working from if the report of a $21 million offer being accurate. What happens if we apply the average of these numbers to Wilson?

YearWilson Salary
Year 0$18,400,000
Year 1$22,500,000
Year 2$12,700,000
Year 3$15,600,000
Year 4$16,400,000
Year 5$19,400,000

On a $21 million per year extension, Wilson should earn $18.4 million in new money in 2015. That equates to a full salary of $19,542,500 when we add in his existing money to the contract. That number falls right in line with the report and I would imagine the structure I am proposing here is probably very typical of the Seahawks offer.

We can apply the same line of thinking to the guaranteed portion of the contract which is reported to be much less than the Newton/Ryan one. The way to properly look at the guarantee of those contracts is not the total guarantee but the new guarantee on the deal. Neither team was releasing that player so even though Newton’s $14.6 million salary and Ryan’s $10 million salary were not guaranteed on paper they were already guaranteed by any reasonable standard.

For Ryan his stated guarantee is $59 million in total injury protection and he has a realistic full guarantee of about $42 million, however in terms of new money its $49 million and $32 million. Newton’s deal has $60 million in injury guarantees with $41 million fully guaranteed. In new money, though, its just  $45 million and $26.3 million. Apply those numbers to Wilson and we are probably looking at something like $50 million in injury guarantees and $30.5 million fully guaranteed.

I would expect Seattle to be somewhat higher than what I have there (they did similar for Richard Sherman), but if we analyze the new money aspect of the contract it is understandable why the team is so much lower. That doesnt mean they are low balling  player-it just means they are trying to work within the framework provided by those two contracts when analyzed a specific way.

Another way to look at this, and how I would think Wilson’s camp looks at it, is to analyze the contract from a total value perspective. This means you can wrap up all the money in the contract and use that to determine a market based strategy for cash compensation.

YearNewton SalaryNewton % of TotalRyan SalaryRyan % of Total
Year 0$31,000,00026.2%$30,000,00026.4%
Year 1$23,000,00019.4%$21,500,00018.9%
Year 2$13,666,00011.5%$11,500,00010.1%
Year 3$15,000,00012.7%$15,750,00013.8%
Year 4$16,700,00014.1%$15,750,00013.8%
Year 5$19,100,00016.1%$19,250,00016.9%

As you can see there is very little variance between these two contracts. For Wilson his total value on a $21M per year contract extension will be $106,542,000.  Here are the Wilson numbers calculated with this breakdown:

YearWilson SalaryWison New
Year 0$27,992,000$26,450,000
Year 1$20,410,000$20,410,000
Year 2$11,530,000$11,530,000
Year 3$14,120,000$14,120,000
Year 4$14,890,000$14,890,000
Year 5$17,600,000$17,600,000

When the contract is done this way the numbers come much closer to the $30 million in the other two deals. It should be noted he won’t reach $30 million, but it is more in line. I would think this is similar to the Wilson offer.

The difficulty with this contract is how much new money is put in the front of the contract. Wilson’s one year new money total is nearly $47 million compared to $41.5 for Ryan. He would be $5 million over on the two year totals and $4 million on the three year total. This type of cash flow exceeds the contracts of Aaron Rodgers and Ben Roethlisberger in that three year period as well. While I don’t have an issue with that, if the sides are agreeing that the latter two are worth more it is hard to justify this total.

If we break down the guarantees as percentage of the full contract, we should get a total guarantee of $54 million and full guarantee of $38 million. Again not as lofty as the other two but it is close. I think this would be an easier concession point for Seattle.

The final difference is probably the amount that is prorated in the contract.  Both Newton and Ryan received second year option bonuses in their contract qnd had almost their entire first year salary given as a signing bonus. The signing bonus should not be a problem. Seattle’s big extensions with Sherman and Earl Thomas didnt really see the team touch the original P5 and simply add the new money as a signing bonus. Given the Seahawks cap situation this year that also is the only way to realistically give him $20-28 million in new salary this season.

But the team traditionally doesn’t do options and that, to me, is a losing battle for Wilson. Normally when you deal with teams, you deal on their terms so if a team doesnt do options then a team isnt going to do an option. This is why a Rodgers has per game active roster bonuses in his contract. It’s important to understand that an option bonus isnt necessarily paid when exercised. Much like a signing bonus a majority of these payments are deferred for a year so there are multiple mechanisms that can do the same. It is possible that a normal P5 salary, which is usually not deferred, can actually put money in a player’s pocket faster than the bonus.

If the sides have come close to an agreement on the $21 million annual figure then there is little reason for the sides to not get a deal done. Its probably simply splitting the differences of some of the numbers presented here. Maybe being a little less player friendly in year one and two and evening things out in years three and four. Both sides benefit from an extension this season for a number of reasons and both should compromise to make it happen.