Thoughts on Jaylon Smith’s Contract Extension

The Cowboys announced a big extension yesterday, not for one of the big name offensive players, but instead for star linebacker Jaylon Smith. Smith was in an interesting position when it came to a contract extension. Though he was entering the final season of his four year contract he was technically not eligible for unrestricted free agency due to spending his rookie year on the NFI list and would thus have been a restricted free agent. Rather than having the whole RFA tender process play out the sides agreed to what is technically a six year extension, but is being valued as a five year, $63.75 million contract as if the RFA tender and season occurred.

When the contract for Smith was first announced and numbers started leaking in the $13 million a year range with over $30 million in guarantees there were immediately some critics of the contract because the Cowboys controlled Smith’s rights this year and next. The first with the full contract numbers was Mike Florio of PFT who reported it as a $12.75 million a year contract but when you added up the numbers you realized you were pulling up short of that figure and that the average per year was around $11.4 million a season.

Based on Smith’s status as a RFA in 2020 the Cowboys could have used either the original draft round compensation tender (worth around $2.15 million), a first round tender (worth around $4.7 million), or the franchise tag (worth around $16.7 million) on Smith. The franchise tag clearly never would have happened but from the numbers being reported it is clear that the two sides agreed that Smith would have been given a RFA tender at the first round level and played next year at $4.71 million. Once you add that into the contract the value hits the reported $12.75 million.

It is an interesting way to approach a contract extension. While things like the tag and tenders do certainly come up in and influence negotiations this is the first time I’ve really seen a contract reported in this manner with the tender being used before its applied.  We’ll be running with that on OTC since that was the clear intent of the contract but most times it really isn’t. It is certainly a fine way for the players side to inflate the new money APY of a contract while at the same time eliminate the riskiness of playing out a season.

At $12.75 million Smith will be the 6th highest paid linebackers in the NFL. His APY will rank behind that of Bobby Wagner, CJ Mosley, Deion Jones, Kwon Alexander, and Anthony Barr. His $35.4 million in injury protection ranks second.  That guarantee number is I think what is still setting people off on the Cowboys handling of the contract.

When you do early extensions with players, IMO, there are a number of factors you take into account. One of the primary ones should be market inflation. The market for linebackers had been relatively stagnant for four or five years. There were, however, signs of life in 2018 was a handful of linebackers made it to free agency and landed contracts that were probably $3 million per year increases over what similar players had signed for the last few seasons. The market exploded in 2019 with the Jets going to a stunning $17 million for Mosley, the 49ers going to $13.5 on Alexander, and the Vikings, with an assist from the Jets, to $13.5 million on Barr.   The Wagner and Jones contracts continued to move the market.

The point is that the prices at this position may be moving forward and at the very least Smith should compare favorably Jones who signed an extension with Atlanta worth over $14 million a season. So whether you value the contract at $11.4 or $12.75 million in either case you are getting about a 10% discount on a stagnant market and probably a 15 to 20% one if the market grows over the next two seasons.

Dallas also has two other situations regarding new contracts. With Dak Prescott, Ezekiel Elliott, and Amari Cooper all looking for contract extensions that will cost the team in the ballpark of $67 million a season you do not want to necessarily compromise the rest of your roster. If you can get an easier extension done you should get that out of the way and get that player situated within your salary cap structure. It also protects you from losing a player like Smith in the RFA process due to cap considerations (and this is the only reason besides the Cowboys throwing Smith a bone that I would see using a first round tender).

Secondly two of those pending three free agent discussions have gotten a little ugly, especially in the case of Elliott.  Sometimes you just want to send a good message through your locker room and to the outside about how you are dealing with your players. This certainly accomplishes that goal.

When we get into guaranteed salary sometimes we get wrapped up in overall numbers. We learned years ago with contracts not to get wrapped up in the total value of deals yet never did the same with guarantees. We also, rightfully so, try to value deals in new money terms to better compare free agents with extended players. Yet with guarantees that isn’t the case. We do this with our premium section but realistically when we look at guarantees you should be looking at the new guarantee as well as the guarantee per year on a contract.

The guarantee is essentially a tradeoff of risk. The player had the risk of injury. The burden now falls to the team. As a tradeoff teams will receive either a better annual value on the contract or better terms. For the big priced linebackers here is how the guarantees really work out.

Player Guaranteed New Guarantee Fully Guaranteed Injury Guarantee per year Full Guarantee Per Year
Mosley $51,000,000 $51,000,000 $43,000,000 $10,200,000 $8,600,000
Wagner $40,250,000 $38,750,000 $24,500,000 $13,416,667 $8,166,667
Smith $35,400,000 $29,400,000 $19,000,000 $7,081,000 $3,800,000
Jones $34,000,000 $32,930,000 $18,800,000 $8,500,000 $4,700,000
Barr $33,000,000 $33,000,000 $15,900,000 $6,600,000 $3,180,000
Alexander $27,500,000 $27,500,000 $14,250,000 $6,875,000 $3,562,500

When you use those numbers you see that the Smith contract, because it runs five rather than four years and because it has two years of existing salaries baked into the guarantee the monster $35.5 million doesn’t stand out as much. Dallas gets an added year of cost control on a player and throws in a guarantee label on salary he was already expected to make.

The only risk for Dallas here is that they are more or less pre-buying into a franchise tag in 2021 (Smiths new money through the end of 2021, when he would have been tag eligible) is $20.2 million. If things were to go south this year or next that is a lot of coin to pay for a player, but that is a risk you take when you get what is a discount.

On a year by year cash flow basis there are advantages for Smith. Here is the market comparison.

Player Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
C.J. Mosley $0 $19,000,000 $35,000,000 $51,000,000 $68,000,000 $85,000,000
Bobby Wagner $13,000,000 $24,000,000 $37,400,000 $54,000,000
Deion Jones $12,380,140 $25,750,140 $34,430,140 $44,570,140 $57,000,000
Anthony Barr $0 $16,000,000 $26,100,000 $39,000,000 $52,000,000 $67,500,000
Kwon Alexander $0 $15,000,000 $27,100,000 $40,500,000 $54,000,000
Jaylon Smith $13,000,000 $20,200,000 $29,400,000 $40,400,000 $51,400,000 $63,750,000

His extension year salaries are solid and his first year number beats out Mosley. He will out earn two higher priced players through year 2 and will still top Barr in year 3. Those are the most important years for a player, though less important for an extension like this than a pure free agent contract. The turn to the Cowboys favor comes in year 4 and especially year 5 where most of the other players will get another chance at free agency.

From a cap standpoint there isn’t anything too wild. The team had to use an option in 2020 to make the 30% rule work but $13 million in staggered prorated money is workable. Despite the $12.75 million valuation only once will the cap rise above that figure and the front end is very manageable.

Overall Dallas should be pretty happy because this is a PR win and they get a pretty deep discount assuming Smith remains healthy. Like with the La’el Collins contract a few years ago they also send a message to the locker room of trust. Smith should be happy as well with some financial certainty and up front numbers for someone who a few years ago wasn’t sure if he would be playing again.