Thoughts on Mahomes $450 Million Contract

So the numbers are in on Patrick Mahomes monster $450 million contract extension thanks to NFL Network’s Tom Pelissero.

My initial thought on the contract is that it’s a very good deal for the Chiefs. First of all the length of the contract is 10 new years, tying Mahomes to the Chiefs for 12 years. This length of contract is something that hasn’t been done in basically 20 years mainly because players would prefer multiple bites at contracts. For example if Mahomes had signed a contract that ran for five years at $38 million and followed the career path of Aaron Rodgers he likely would have earned nearly $47M per year over the course of the contract rather than $45 million a year.

This contract is essentially two contracts in one. The first five years of the contract will average under $40 million per year ($39.55 million to be exact) which is essentially in line with the current market which has Russell Wilson at $35 million a year as the top player. The next five years of the contract average $50.45 million and kick off with a year in which Mahomes will earn $59.95 million in cash and cap. This is one of the stronger aspects of the contract for Mahomes because it gives him the chance to basically get restructured or find his way to free agency due to the high cap charge.

The cash flows up front are light given the magnitude of the contract. I had speculated that if he took a four year contract that Mahomes would earn $80M by the first new year of the contract, $100M by year 2 and $120 million by year 3. Instead his contract will not surpass Wilson in most of the key points. Here are the running cash flows of the top compensated QBs in the NFL.

PlayerYear 0Year 1Year 2Year 3Year 4
Patrick Mahomes$6,000,000$35,450,000$75,900,000$113,850,000$155,800,000
Russell Wilson$53,000,000$71,000,000$90,000,000$114,000,000$140,000,000
Jared Goff$30,000,000$57,500,000$83,000,000$108,000,000$134,000,064
Aaron Rodgers$39,900,000$61,000,000$83,000,000$108,500,000$134,000,000
Carson Wentz$29,600,000$55,000,000$77,001,000$102,001,000$128,001,000
Matt Ryan$33,250,000$54,750,000$75,250,000$98,250,000$122,000,000
Ryan Tannehill$0$37,500,000$62,000,000$91,000,000$118,000,000

Mahomes only received a $6.0 million raise over the terms of his existing contract which my be Covid related and/or have to do with the Chiefs cap situation. His cap numbers the next two years are virtually unchanged. The first year new money is dramatically lower than other players in similar situations while he will trail Jared Goff through two years. By the third year he matches Wilson before taking the big turn ahead in the fourth year of the contract.

The contract itself has $140 million guaranteed for injury which is a decent guarantee. While it is very low relative to the size of the contract it does represent 70% of the five year value which is in line with the guarantees for most of the others. Mahomes makes up for it with some type of rolling guarantees that kick in at various points of the contract.

At the time of writing this I don’t have the particulars but Jason Cole indicated that by March of 2023 $183M in guarantees will have been earned. Based on the cash flow of the contract that means in 2023 the Chiefs will guarantee his 2024 salary and his 2025 $38.9M roster bonus. So for all intents and purposes Mahomes has the first six seasons of the contract guaranteed for about $185 million which is certainly a good thing.

Im not sure what the triggers are for the remaining guarantees but they would likely be somewhat important. If for some bizarre reason the market were to crash having an early vesting guarantee would be important. If Mahomes continues to be awesome it doesn’t make a different because he isn’t going to be cut. Tom Brady had similar contract mechanisms in one of his old contracts where his contract would become guaranteed for the next year if on the roster in the final week of a season so perhaps these will be somewhat similar throughout most of the contract other than the 2027 season. If they are just 1st day of the league year guarantees they are basically functionally the same as having a roster bonus and much ado bout nothing.

EDIT: Since writing the guarantee structure was reported on and it is very strong for Mahomes. Basically with the exception of the final year of the contract any release of Mahomes would require payment of his entire next years salary. For the most part he is likely virtually guaranteed to earn all but the paragraph 5 of the 2031 season. For the Chiefs there is no out unless they can convince him to agree to a trade.

A lot is being made of the roster bonuses in the contract which total more than $337 million but that seems to be something that the Chiefs are leaning toward doing. They did the same with Tyreek Hill last season and it gives teams flexibility to convert salary if needed for cap relief while also giving players assurances early on. So this may be a Kansas City thing moving forward. The Chiefs did get their usual workout bonuses in the contract and there are no per game bonuses which is good for Mahomes since the Chiefs often use them.

As I mentioned above look for 2027 which has a near $60M cap charge to be the prime decision year. This is a classic mechanism used by an agent to try to force the issue in some manner on a player. It can open the door to many possibilities for the player, none of which are negative.

Another $25 million in incentives are tied to appearing in the Super Bowl and winning the MVP. These start in 2022 and will not be easy to earn. The $503 million number being thrown around is the sum of the $450 million in new money, $27 million in old money and $25 million in incentives.

Though the numbers are eye popping my guess is around the league teams will be very receptive of this contract. While contracts have turned to shorter terms this contract runs 10 additional years. That gives a team like the Cowboys a stronger argument for asking Dak Prescott for five years. The just under $40 million per year five year total is right around what most franchises would have expected for Mahomes while the cash flow breakdown is much more team friendly than anyone could have anticipated. . I would expect the $39.5M/5 figure to be a major block on QB salaries moving forward much in the way Aaron Rodgers blocked the market for years with his 2013 extension and the team friendly cash flows could impact offers during the covid timeframe. Most will probably be neutral on the guarantee structure though I think some teams would be more than happy to guarantee five years if it means 10 years of cost certainty

The question as to whether or not this is a good contract for Mahomes will likely boil down to what you would expect the market to do in five years as well as health. From an injury perspective Mahomes is protected like nobody in history. Though those type of injuries are rare they can certainly happen and he is covered for that. As for the market he is probably undercutting himself. A five year extension would have run 7 years from now. Here are a few notable contracts signed at the turn of the last decade and where top market players were just 7 years later.

PlayerAPYHigh APY +7Change% Increase
Eli Manning (2009)$16,250,000$22,500,000$6,250,00038.5%
Tom Brady (2010)$18,000,000$24,594,000$6,594,00036.6%
Drew Brees (2012)$20,000,000$33,500,000$13,500,00067.5%
Aaron Rodgers (2013)$22,500,000$35,000,000$12,500,00055.6%

In every scenario the expected growth would average more than he will earn in the base value of this contract. In general QB salaries are not slowing down- Matt Ryan was the highest paid player at $30M in 2018 and that jumped $5 million in just a year.

All eyes now will be on Deshaun Watson and Lamar Jackson if Jackson duplicates his MVP season. The Texans likely already shot themselves in the foot with the Tunsil extension when it comes to Watson. If I were the Texans or the Ravens next year I would look at these up front numbers and try to jump on a contract that runs along that Wilson deal in return for added years. If those teams can convince those players to do something like this these long contracts might become the norm again in the NFL. If they don’t then this will just be a one off outlier contract that will have some saying Mahomes is a even more of a bargain 5 or 6 years from now.