Friday, November 13, 2009

Interview on The Mike Wise Show on WJFK

In case you missed it live, you can listen to the podcast at: http://www.cbssports.com/local/dc/podcasts/mike-wise-show/nov_2009 (Segments 11 & 12 under "NFL Salary Cap")

Follow J.I. Halsell on Twitter: @SalaryCap101

Under the Cap: Top 10 Defensive Ends

To view this analysis, go to:
http://www.footballoutsiders.com/under-cap/2009/under-cap-top-ten-defensive-ends

Also, visit www.SalaryCap101.com if you are interested in registering for tomorrow's (1pm - 3pm ET) Salary Cap 101 webinar.

Follow J.I. Halsell on Twitter: @SalaryCap101

Friday, November 6, 2009

Under the Cap: Top 10 Starting Interior Offensive Linemen

To view this analysis, go to:
http://www.footballoutsiders.com/under-cap/2009/under-cap-top-ten-interior-offensive-linemen

Also, visit www.SalaryCap101.com if you are interested in registering for the November 14th (1pm - 3pm ET) Salary Cap 101 webinar.

Follow J.I. Halsell on Twitter: @SalaryCap101

Monday, November 2, 2009

Friday's Interview on The Sports Reporters on ESPN980

In case you missed it live, here is the link to the interview in which I discuss the ramifications of the uncapped year on the Redskins.
http://www.youtube.com/watch?v=wJFSsc0zF78

Follow J.I. Halsell on Twitter: @SalaryCap101

Thursday, October 29, 2009

Upcoming Salary Cap 101 Webinar & Interview on ESPN980

I'll be conducting another live Salary Cap 101 webinar on Saturday, November 14th from 1pm - 3pm ET. For more information and to register visit: www.SalaryCap101.com .

Also, I'll be on The Sports Reporters on ESPN980 on Friday, October 30th at 4:25pm . You can listen live at www.ESPN980.com .

Follow me on Twitter: @SalaryCap101

Thursday, October 22, 2009

The Redskins' Approach to Roster Building

In my interview yesterday on ESPN980, one of the prominent issues we discussed was the Redskins' heavy investment in a few players and how this impacts the overall roster and the depth and quality of that roster.

One perspective in this regard that I failed to mention is how this approach impacts your Salary Cap particularly when you don't have draft picks to fill out your roster. Lets look at the Indianapolis Colts, who have spent a ton of money on a few players (ie, Manning, Clark, Sanders, Freeney), but yet are in contention year in & year out. So the heavy investment in a few isn't the problem; although a great quarterback can cover up a lot of deficiencies. The key to the Colts and the key to effective salary cap management is the ability to find skilled cheap labor. This skilled cheap labor comes in the form of draft picks. When you build your reserves through the draft, not only are you saving a ton of money on the cap, but you're hopefully developing your next solid starter or maybe your next great starter. In Tennessee, they drafted a corner named Cortland Finnegan in the 7th round, who made cap-friendly peanuts relatively speaking on his rookie contract, before getting a lucrative contract extension after proving to be a Pro Bowl caliber player. Similarly, in Philadelphia, the Eagles drafted starting guard Todd Herremans late in the draft; thereby allowing them the benefit of a cap-friendly contract, before signing him to a lucrative extension.

In Washington, aside from the 2006 draft class' late round selection that netted the team solid contributors Kedric Golston, Reed Doughty, and (up until this year) Anthony Montgomery, the team has failed to 1.) have draft picks to use 2.) when they did have picks, use the picks on players that stayed with the team. In 2007, we used a 5th round pick on Dallas Sartz; he didn't make it past training camp. In 2008, in the 3rd round we drafted Chad Rinehart, who was inactive the entire season, and appears to have been benched this year after getting an opportunity to fill in for Randy Thomas. In 2009, the Redskins used a 3rd round pick on Kevin Barnes; he has yet to be active for one game this season. All of that said, when you have these issues in the draft, you then have to fill your roster with more expensive veteran back ups, and this is the point I failed to make in the interview yesterday. For example, because a Dallas Sartz, who would've had a cap number of under $300K as a reserve linebacker, doesn't make the team in 2007, you then are forced to sign a veteran linebacker such as a Randall Godfrey for a $1M cap number. Or instead of drafting an inexpensive offensive lineman in any of the recent drafts, in order to build depth and hopefully develop that draft pick into a starter, the Redskins have been forced to sign more expensive veterans such as Jason Fabini, Todd Wade, or Will Montgomery.

Another dynamic to acquiring quality cheap labor is that because this cheap labor isn't significantly impacting your cap, you then have unused cap space that you can then roll-over into the next capped year. Again using the Eagles as an example, they build through the draft cultivating young talent (particularly on both the offensive & defensives lines) and then roll-over the unused cap space into the subsequent years. This additional cap space allows the team to have a salary cap of $148M this year, while a lot of clubs, including the Redskins, have a salary cap of less than $130M. In the case of the Eagles, this higher cap gives them an advantage in that, they can continue to acquire cheap talent, but at the same time take their shots on, as I said yesterday, an Asante Samuel in 2008 or a Jason Peters in 2009 (or even a Michael Vick). In Minnesota, where they've got a $139M cap, this advantage allows them, after signing Sage Rosenfels to a relatively expensive #2 quarterback contract, to still have the means to sign a Brett Favre without hesitation to a $12M contract. This is where effective and efficient cap management gives you the means to dramatically improve your club.

Another flaw to the Redskins' approach to roster building particularly as it relates to its impact on the cap is that instead of signing Albert Haynesworth to a lucrative free agent contract, the club should be seeking to reap the same inexpensive benefits that the Titans were able to reap when they drafted Albert Haynesworth. Meaning instead of signing a hugely expensive Albert Haynesworth via free agency, the Redskins should be trying to find the next Albert Haynesworth in the draft. That way, if the kid turns into a star, you've had him under contract for about three seasons at a low cap number, yet receiving high-quality play. Moreover, unlike signing a veteran from another team and system, before investing a ton of money, you'll know whether or not that player is a good fit for your organization and your system; you're not going to have this same assurance with a veteran from another team (ie, Adam Archuleta amongst others). In Tennessee, Finnegan was a home-grown talent, meaning drafted and cultivated by the club; the same can be said for Herremans in Philly. How many late round or undrafted guys (because there's no excuse for missing on guys in the first two rounds) have the Redskins cultivated into starters or contributors at a cheap price? Heyer, Golston, Doughty, Horton, and that's about it.

Until there is a fundamental change in philosophy on how the Redskins approach roster building, one cannot expect for this team to be a consistent winning organization.

Follow J.I. Halsell on Twitter: @SalaryCap101

The Sports Fix Interview on YouTube

In case you missed the interview live that I did with Kevin Sheehan & Thom Loverro of the ESPN980 and The Sports Fix, you can listen to the interview, in which I discuss the Redskins' approach to Salary Cap management, at: http://www.youtube.com/watch?v=Q-m8o5WLWIY

Special thanks to ESPN980, Kevin Sheehan, and Thom Loverro.

Wednesday, October 21, 2009

Tuesday, October 20, 2009

Radio Appearance, 10.21 @ 1pm: ESPN 980, The Sports Fix

I'll be on The Sports Fix with Kevin Sheehan & Thom Loverro on ESPN 980 (www.ESPN980.com) on 10.21 @ 1pm discussing the ramifications of an Uncapped 2010. Should be an interesting discussion.

Thursday, September 17, 2009

What Free Agency Will Look Like in an Uncapped Year: The Final Eight Plan

In my August 26th entry titled “Uncapped Leverage” on FootballOutsiders.com I discussed the change in the Accrued Season requirement from four seasons to six seasons in order for players to be eligible for free agency. This change is mandated by the Collective Bargaining Agreement to take effect in the uncapped year, currently slated for 2010. As I discussed in my earlier column, this tremendously hinders free agency from the players’ perspectives by forcing them to wait longer for their much anticipated second pay day. The uncapped year obviously presents the players and clubs with an environment without a salary cap or team salary minimum; this environment has been discussed extensively in the media. However, another aspect of the uncapped year that has received very little coverage in the media is what is called the Final Eight Plan; this change mandated by the Collective Bargaining Agreement completely changes the rules of free agency for clubs.

As it is today with a salary cap, when free agent season begins in March, all 32 clubs have the opportunity to acquire unrestricted free agents (UFA) in an open, competitive market. In an uncapped year of 2010, the Final Eight teams in the 2009 playoffs, meaning those teams participating in the Divisional round in both the AFC & NFC, will be limited in their ability to acquire free agents in the offseason after their post-season run.

For the four clubs that make it to the Conference Championships in the 2010 offseason, they can sign the following three types of UFAs: any UFA who became a free agent by virtue of their contract being terminated before its expiration; any of the club’s own UFAs; and a UFA to replace each UFA lost by the club. Regarding this one-for-one UFA replacement, the contracts signed by the UFA replacement player must fall within the following parameters: the first year salary must not exceed the first year salary contained in the new contract of the UFA lost by the team; salaries in the future years of the replacement UFA’s contract may not increase by more than 30 percent of the first year’s salary; and the contract cannot be renegotiated until one year after the signing date.

For the four clubs that lose in the Divisional round, they can sign the same three types of UFAs as the clubs that advanced to the Conference Championships. However, additionally, these four clubs may also sign one UFA for a first year salary of more than roughly $6 million and any number of UFAs for first year salaries of no more than approximately $4 million. The $6 million and $4 million amounts are approximations because they will be determined by projected Total Revenues in the uncapped year.

So lets say the Arizona Cardinals lose in the Divisional round of the 2009 playoffs, and they subsequently lose their kicker Neil Rackers via free agency to a contract that has a first year value of $3 million. Under this scenario, the Cardinals could sign a replacement UFA to compensate for Rackers’ departure. This replacement UFA does not have to be a kicker and their first year salary cannot exceed $3 million. Moreover, the replacement UFA’s contract cannot provide for annual increases in excess of $900,000 in order to comply with the 30 percent provision. Additionally, in free agency, the Cardinals would be able to sign the other types of UFAs available to Divisional round clubs.

Another rule applied to the Final Eight clubs is a prohibition of the those clubs from trading for UFAs they otherwise would not be eligible to sign as a result of the rules of the Final Eight Plan.

The Final Eight Plan takes the NFL from an even-playing-field version of free agency to an unleveled playing field that is designed to be in the favor of the 24 clubs that do not make it to the Divisional round; the spirit of which is to try to keep some level of competitive parity in an uncapped world. Essentially, the Final Eight Plan, amongst other things, places a salary cap on free agency for the final eight clubs, despite the non-existence of a league-wide salary cap. It’ll be a brave new free agent world in the 2010 uncapped year; should be very intriguing if we get to that point.

Follow J.I. Halsell on Twitter: @SalaryCap101

Friday, September 4, 2009

Injury Settlements for Waived Players

The deadline to cut down to 53-man Active rosters is upon us; meaning clubs will have to waive or terminate 22 players. For those players who are vested veterans, upon being cut they instantly become free agents. For non-vested players, they must first pass through waivers, where they can be claimed by another team, before becoming a free agent. But what about those players who may have gotten hurt in their final preseason game and are subsequently waived by their club?

In this case, the club will waive the player with the designation "Waived-Injured." This designation means that if the injured player clears waivers, then that player will revert to the club's Reserve-Injured list. So in the case of Redskins quarterback Colt Brennan, who tweaked his hamstring in the club's preseason game against Jacksonville, if the club were to waive Brennan (and I'm not saying that Brennan's going to get waived), then, upon the certification of the athletic training staff, the club would waive Brennan injured. Assuming he passes through waivers, he would then revert to & remain on the club's IR list until he's given a clean bill of health.

In an effort to cut ties with the player and to allow him to pursue opportunities once he's healthy, the club and agent will then initiate Injury Settlement negotiations. So in the case of Brennan, if he's diagnosed with a 4-week hamstring injury, then the club and agent will work towards a settlement that compensates Brennan for those 4 weeks; once a settlement is agreed upon, then the club can waive Brennan with the designation "Waived-Injury Settlement," which then severs ties between the player and club. Brennan can then pursue opportunities with another club.

Sometimes a player who is compensated for, say, a 4-week injury by virtue of his injury settlement, may sign a contract with another team within those 4 weeks because he (surprise, surprise) got healthier faster than expected. To manage this scenario, a lot of clubs will put "off-set" language in their settlements that articulate that the club will no longer be responsible for the amount of money due to him while he's receiving payments from his new club as a result of his new deal. This prevents the player from "double-dipping," meaning receiving payments from his old team and new team simultaneously.

With these settlements available to players who are on the bubble, there's a certain up-tick in the number of players who report to the training room the day after a club's final preseason game. There are definitely legitimate injuries, but one would be naive to think that some "injuries" are in the "milk-this-thing-as-long-as-I-can" vain.

It's definitely an interesting dynamic to the weekend of final roster cut-downs.

Saturday, August 29, 2009

The Affluent Quarterback Class of 2004

Class of 2004 Quarterback Contract Extensions

Player

Roethlisberger

Manning

Rivers

Club

PIT

NYG

SD

Sign Date

3/3/2008

8/14/2009

8/25/2009

New Years

6

6

6

Guarantee

$33,200,000

$35,000,000

$38,150,000

Guarantee/Year

$5,533,333

$5,833,333

$6,358,333

Guarantee vs Total New Money

37.7%

35.9%

41.6%

Non-Guaranteed Money

$54,786,502

$62,500,000

$53,650,000

Total New Money

$87,986,502

$97,500,000

$91,800,000

Average Per Year

$14,664,417

$16,250,000

$15,300,000

Three-Year Total

$52,686,501

$50,850,000

$50,250,000

Guarantee vs Three Year Total

63.0%

68.8%

75.9%



One could make the argument that what the 1983 Quarterback draft class is to Hall of Famers, the 2004 Quarterback draft class is to hefty contract extensions. With Philip Rivers signing his contract earlier this week, it makes sense to compare the contracts of this highly compensated group of quarterbacks.

Given the unguaranteed nature of NFL contracts, I’m of the opinion that guaranteed money is the most important metric by which to judge contracts. With that in mind, when one compares the three contracts, Philip Rivers’ deal comes out on top. In my Eli Manning analysis article from earlier this month, I wrote that Rivers’ contract could “approach $40 million guaranteed and $100 million in new money…Sounds a lot like the Haynesworth contract.” While Rivers did not get nearly $100 million in new money, he did get $38.15 million guaranteed - $3 million more than Manning and nearly $5 million more than Roethlisberger. Another good metric is to look at how much guaranteed money a player is getting compared to the number of years they are obligating themselves to; in the case of Rivers, his guarantee per year of $6.36 million easily exceeds Manning and Roethlisberger and Haynesworth ($5.86 million) for that matter.

The give and take of Rivers’ contract appears to be that in exchange for his high guaranteed money, he sacrificed the total value of his contract. Of the three contracts, Manning’s contract easily has the highest total new money value, $97.5 million; however, Manning also has the lowest percentage of his contract guaranteed, 35.9%. Conversely, Rivers has a total new money value that is nearly $6 million less than Manning, but the 41.6% of his contract that is guaranteed is the highest amongst this group. One could surmise that the fact that so much of Manning’s contract, relative to his quarterback peers of 2004, is non-guaranteed reflects the inconsistency of his play compared to that of his peers.

The three-year total metric is often the most utilized and practical barometer of total contract value since the likelihood of a player making it to the latter years of a deal isn’t very likely. That said, Roethlisberger is going to make the most new money over the first three years of the contract, $52.67 million, while Rivers is going to make the least of this group of quarterbacks, $50.25 million. However, Rivers’ 75.9% of his three-year total being guarantee leads this group, which goes back to the point that Rivers sacrificed non-guaranteed money for more guaranteed money.

So what does this mean for the Tom Bradys and Peyton Mannings of the world? Given that quarterbacks can play well into their 30’s, perhaps six year extensions can be in their futures despite their ages (Brady, 32; Manning, 34). Moreover, if the quarterback class of 2004 is getting around $6 million per year in guaranteed money, then Brady and Manning could easily command $7 million per year in guaranteed money (particularly if Matthew Stafford got $6.95 million per year). Another possible structure could be an average new money per year of nearly $20 million per year, but with roughly 25% of the total new money guaranteed (roughly $30 million guaranteed on a six year deal). This is the approach the Packers took with 31-year old Brett Favre in 2001; it’s called the “pay as you go approach,” which seems fitting for a player heading towards the perceived twilight of their career.

With the rare exception of the Albert Haynesworth’s of the world, it’s clear, and not necessarily a surprise, that quarterback is the money position in the NFL. Many front offices believe that a legitimate franchise quarterback single-handedly gives your club a better chance of succeeding; which makes the trade of Jay Cutler somewhat of an eyebrow raiser, but the subscription to this philosophy is also reflected in the value of the quarterback market. The 2004 quarterback draft class exemplifies this fact; stay tuned to see if in 2014, the 2009 quarterback draft class of Stafford, Sanchez, and Freeman cash in like their 2004 predecessors.

Monday, August 24, 2009

How Clubs Have Unprecedented Leverage by the Looming Uncapped Year

Once the cash honeymoon of a young player’s rookie contract has subsided, young players in the league who have made a name for themselves then turn their attention towards earning that lucrative second contract via a contract extension or unrestricted free agency. Philip Rivers, Eli Manning, Roddy White, Matt Cassel, and Albert Haynesworth all cashed in this off-season with lucrative second contracts. However, it remains to be seen if players like Shawn Merriman and DeMarcus Ware also cash in, or if their respective clubs utilize the unprecedented leverage created by the looming uncapped year.

The 2010 league year, if uncapped as a result of a failure to negotiate a new Collective Bargaining Agreement, will change the rules of free agency. As has been widely reported, the uncapped year will change the requirement for unrestricted free agency from four accrued seasons to six accrued seasons; meaning unlike today where a player hits the open market prior to their fifth NFL season, a player will not hit the market until they are entering their seventh season. Similarly, and most impactful to players in the 2005 and 2006 draft classes whose rookie contracts are expiring after 2009, the requirement for restricted free agency in an uncapped year goes from three accrued seasons to three through five accrued seasons. As an example, DeMarcus Ware is on track to become an unrestricted free agent after the 2009 season; however, if 2010 is uncapped, then Ware instead becomes a restricted free agent.

Restricted free agency simply gives Club A the right of first refusal should another team extend an offer to Club A’s restricted free agent. In the event that Club A chooses not to match the offer of Club B, then depending upon which one-year restricted free agent tender Club A extended to its player, that will then determine what draft picks Club A receives in return from Club B. For example, prior to signing him to a contract extension, the Cowboys utilized the 1st & 3rd Round tender on running back Marion Barber, meaning if another club had signed Barber to an offer sheet, then, if the Cowboys chose not to match the offer sheet, they then would have received a 1st & 3rd round pick from the club that signed Barber. However, if a restricted free agent is not signed to an offer sheet and instead plays under the one-year tender, then depending upon the tender extended, in 2009, the player will earn one of the salary amounts below.

2009 RFA Tenders: Salary*
- Right of First Refusal (ROFR) only: $1,010,000
- ROFR + Original Round: $1,010,000
- ROFR + 2nd Round: $1,545,000
- ROFR + 1st Round: $2,198,000
- ROFR + 1st & 3rd Round: $2,792,000
* Note: Greater of amount listed or 110% of Previous Year’s Salary

Going into an uncapped 2010 League Year, if a club is uncertain as to the long-term future of a player such that they are unwilling to commit to a long-term extension, they can then retain the player’s exclusive rights by offering him a restricted free agent tender. The upside for the club is that if a club signs this player to an offer sheet and the club chooses not to match, then they receive draft pick compensation for a player who they were uncertain of from a long-term perspective. If the player isn’t signed to an offer sheet, then the club keeps this player at a relative bargain. The downside to this approach is that a club runs the risk of having a disgruntled player walking around their facility, as surely the player will be frustrated by the club’s utilization of this change in the free agency system which ultimately postponed the player’s next big payday. It is this leveraging of the change in the free agency rules that some clubs are considering when determining whether or not they are going to extend players in 2009.

In the case of, say, Washington cornerback Carlos Rogers, the Redskins could sign Rogers to a 2nd Round tender, which would give Rogers a 2010 tender salary of $1.684 million. This proposition works out as a win-win for the club, as they either get Rogers, a cornerback who some front office personnel rate highly in spite of his lack of interceptions, at a bargain rate for one year relative to the current cornerback market, or they get a second round pick for him if he were to leave via restricted free agency. All of this said, front offices recognize the unique leverage presented by the uncapped year in this regard; accordingly, some are willing to utilize this technique to further the long-term goals of the organization, even if in the short-term it results in a disgruntled player. Atlanta was not willing to go this route with Roddy White, but one can be assured that a club will utilize this technique with a player and acrimony will exist thereafter as a result.

Much like Roddy White and Steelers tight end Heath Miller, one would think that players like Merriman and Ware will receive contract extensions in the near future, as they have proved to be integral members of their respective clubs. However, the following players could find themselves disgruntled and disappointed by an uncapped year:

· NO left tackle Jammal Brown
· NE guard Logan Mankins
· WAS quarterback Jason Campbell
· WAS cornerback Carlos Rogers
· SD wide receiver Vincent Jackson
· CLV wide receiver Braylon Edwards
· DEN wide receiver Brandon Marshall
· HST linebacker DeMeco Ryans
· SD left tackle Marcus McNeill

Follow J.I. on Twitter @SalaryCap101

Wednesday, August 19, 2009

"Follow Me" on Twitter

I finally gave into the peer pressure and have started tweeting; you can find me at: http://twitter.com/SalaryCap101. I'll be posting random contract and salary cap nuggets of info there (and of course advertising my Salary Cap 101 webinar) in the process. FYI, I'm teaching a live Salary Cap 101 webinar this Saturday, 8.22.09 @ 1pm EST. Visit http://www.salarycap101.com/ for more information and to register.

Friday, August 14, 2009

The Contracts of Mike Vick & Roddy White

Vick’s Contract Structure
On the first night of the first full weekend of pre-season football, the games of the evening took a backseat to the signing of quarterback Michael Vick by the Philadelphia Eagles. While the numbers are generally being reported by various outlets as $1.6 million for year one and $5.2 million for the option year of year two, I’ll reserve comment on the compensation aspect of the deal until I can get the specific details of the contract, as the numbers reported are very vague and tell one nothing about how those amounts are broken out amongst guaranteed and non-guaranteed money.

Regarding the reported structure of the contract, in an article that I penned for the The Washington Post, I discussed the advantages of signing Vick to a one-year “prove it” contract with a club option for multiple years thereafter. In the end, Vick and the Eagles did indeed agree to this type of structure, but instead of an option for multiple years, Vick’s agreement is only for one option year. Without re-hashing the Washington Post article, the spirit of the “prove-it” option structure is that it allows the club to get a one year evaluation of the player, without the commitment of a substantial amount of guaranteed money and contractual years, and more importantly, this structure allows the club to be in complete control should they decide they would like to retain the player after year one. In his one year with the Patriots, Donte Stallworth signed a one year “prove it” contract with an option for multiple years thereafter; the Patriots chose not to exercise the option. Conversely, Saints quarterback Drew Brees also signed a contract with this structure after coming off of off-season shoulder surgery; the Saints opted to exercise Brees’ option.

In short, if the player stinks, then with this structure the club doesn’t pay the option bonus and the player becomes a free agent, but if the player turns out to be good, then the club pays the negotiated option bonus and retains the services of the player. If the retention of the player equates to multiple years, then this is to the advantage of the club, as they’ve locked in the future value of the player’s contract. To this point, it makes sense that Vick’s option is only for one additional year. Assuming Vick proves to be a high-level player, then the agent’s responsibility is to get his player to free agency as soon as possible, hence the one option year agreed to by Vick’s agent Joel Segal in lieu of multiple years. If Vick is playing at a high level through 2010, he’ll be in line for a potentially lucrative deal as he enters 2011. However, if Vick proves otherwise, then the club has protected its interests by not committing a lot to Vick beyond 2009.

All in all, the contract structure agreed to by Vick and the Eagles seems to be mutually beneficial. Given the well documented history of the Eagles’ propensity for locking up players for an extended amount of years, it’s interesting that Segal was able to obtain an agreement to one option year. One would have thought that the Eagles would have wanted the option to secure Vick’s services for a longer period of time after the “prove it” year.

Coincidentally, or maybe not, both Eagles starting quarterback Donovan McNabb’s and Vick’s contracts expire after 2010, assuming a Vick option. Come 2011, it’ll be interesting to see which one of these two end up with a new contract with the Eagles as the starter, or if neither is the 2011 starter or on the team for that matter.


Roddy White Analysis
While the NFL news headlines are filled with the signing of a former member of the Atlanta Falcons, lets take a look at the contract signed by current Falcon wide receiver Roddy White.

Wide Receiver Roddy White
Club: ATL
Analysis Peer Group: Wide Receiver Contract Extensions

Contract Length: Five new years

Total Guarantee: $18,600,000 (Peer: BUF Wide Receiver Lee Evans, $18,250,000; New England Wide Receiver Randy Moss, $15,000,000)
Guarantee Per Year: $3,720,000 (Peers: CHI Wide Receiver Devin Hester, $3,750,000; NO Wide Receiver Marques Colston, $3,333,333)
Guarantee vs. Total New Money Value: 43.5% (Peer: ARZ Wide Receiver Anquan Boldin, 44.1%)

Total New Money Value: $42,720,000 (Peers: HST Wide Receiver Andre Johnson, $42,600,000; MIN Wide Receiver Bernard Berrian, $42,000,000)
Average Per Year (APY): $8,544,000 (Peers: DAL Wide Receiver Roy Williams, $9,000,000; Evans, $8,250,000)

Three-Year Total: (estimate) $31,120,000 (Peers: ARZ Wide Receiver Larry Fitzgerald, $33,000,000; Moss, $27,000,000)
Guarantee vs. Three-Year Total: 59.8% (Peers: ATL Wide Receiver Michael Jenkins, 63.4%; Moss, 55.6%)

Analysis:
The first thing that stands out about the contract extension signed by Falcons wide receiver Roddy White is his three-year total of $31,120,000. At the wide receiver position, this amount is only rivaled and surpassed by the contract of Arizona wide receiver Larry Fitzgerald, $33,000,000. This three-year total is an aspect of the contract that White’s agent Neil Schwartz can hang his hat on when selling this contract to the media or prospective clients.

However, from the club’s perspective, this is a good deal because even though Roddy White can earn a lot of money over the course of this contract, particularly over the first three years; he’s going to have to do just that, earn it via salary and not guaranteed money. While players like Saints wide receiver Marques Colston and Bears wide receiver Devin Hester are guaranteed in excess of 85% of the first three years of their contract, White is only guaranteed 59.8% of his three-year total. In the case of White and the Falcons, this agreement benefits the club in that the player should be satisfied with a guarantee amount as a whole that is going to pay him as an upper-tier wide receiver but at the same time doesn’t over expose the club from a guaranteed compensation standpoint should Roddy White’s development regress. Sounds like a win-win deal.

Thursday, August 6, 2009

Eli Manning: Elite Quarterback?


On Wednesday, word broke of the contract extension of Giants quarterback Eli Manning. Unlike free agent contracts or draft pick contracts, when one determines the value of an extension contract, they must subtract from the total value of the contract, the amount of money the player was due to earn on their previous contract over the common years of both contracts. In the case of Manning, 2009 was the final year of his rookie contract, in which he was due to earn $9.4 million. The contract signed by Manning this week was reported as a seven year agreement with a total value of $106.9 million. Subtracting out the $9.4 million of old money and the old year of 2009; Manning’s contract is valued as six-new years with a new money value of $97.5 million.

Another interesting aspect of contract extensions is that they often lead to the lowering of a player’s cap number; meaning Manning’s 2009 cap number of $13.8 million could possibly have been reduced as a result of a contract that has made him a richer man. How does this happen you may ask? Often the money that is guaranteed to the player is accounted for in the future years of the new contract, thereby reducing the player’s impact on the club’s cap in the first year of the deal. Given that the Giants, as of the date of this posting, have only $4 million in cap space, I’m almost certain that Manning’s new contract is providing the club a few million in cap relief.

Below is an analysis of Manning’s contract relative to other quarterbacks who have signed contract extensions. You’ll see that it’s definitely a lucrative contract and a top-market deal, but it may not necessarily be the market setting contract that it’s being made out to be.

QB ELI MANNING
Club: NYG
Analysis Peer Group: QB Contract Extensions

Contract Length: 6 new years

Total Guarantee: (reported) $35,000,000 (Peers: IND QB Peyton Manning, $34,500,000; PIT QB Ben Roethlisberger, $33,200,000)
Guarantee Per Year: $5,833,333 (Peers: NE QB Tom Brady, $6,625,000; Roethlisberger, $5,533,333)
Guarantee vs. Total New Money Value: 35.9% (Peers: DAL QB Tony Romo, 43.4%; Roethlisberger, 37.7%)

Total New Money Value: (reported) $97,500,000 (Peers: Manning, $98,000,000; Palmer, $97,000,000)
Average Per Year (APY): $16,250,000 (Peers: Palmer, $16,166,667; Roethlisberger, $14,664,417)

Three-Year Total: (estimate) $50,000,000 (Peers: Palmer, $55,500,000; Roethlisberger, $52,686,501)

Analysis:
As I looked at putting into context quarterback Eli Manning’s 6-year, $97.5 million contract, it really made me appreciate the contract that Bengals quarterback Carson Palmer got in 2005. Four seasons ago, Palmer got a 6-year extension worth $97 million in new money; fast forward four seasons and Manning essentially gets the same contract with the difference being the guaranteed money. Palmer’s 2005 contract awarded him $24 million guaranteed, while Manning’s contract awards him $35 million.

Given the $40-plus million guarantees of defensive tackle Albert Haynesworth and number-one overall pick, quarterback Matthew Stafford, one would think that a franchise quarterback extension would garner Manning a guarantee in excess of $40 million. However, coincidentally or not, if you analyze Haynesworth’s $41 million guarantee over his seven contract years, it gives you a guarantee per year of $5.86 million. Comparatively, Manning’s $35 million guarantee over six years equates to $5.83 million; so it would appear that $5.8 million per year is a data point that equates to elite guaranteed money. Some say that Patriots quarterback Tom Brady is underpaid, but given his four-year extension signed in 2005, he did pretty well from a guarantee per year standpoint, with a figure of $6.625 million.

The Three-Year Total, which represents the amount of new money the player will have earned over the first three new years of the contract, of Manning’s contract has not been reported, but if Palmer got $55.5 million in 2005 and Roethlisberger $52.7 million in 2008, then one would imagine that Manning’s Three-Year Total has to be in excess of $55 million. Roethlisberger’s Three-Year Total versus his Total New Money of $88 million gives you 59.9% of Roethlisberger’s new money being paid in the first three new years of the deal. Using that 59.9% figure and applying it to Manning’s $97.5 million contract, gives you $58.4 million of Manning’s new money being paid in the first three years if it’s similar to Roethlisberger. It’ll be interesting to find out what Manning’s actual Three-Year Total turns out to be and how similar or dissimilar it is from his peers.

So what does this contract mean for Chargers quarterback Philip Rivers? Since becoming the Chargers’ starter in 2006, Rivers has been by far the more prolific quarterback of the 2004 quarterback draft class (Manning, Rivers, & Roethlisberger). Since 2006, Rivers ranks fifth in cumulative quarterback rating (93.5), while Roethlisberger (85.7) and Manning (78.9) rank 17th and 28th respectively. Clearly, Roethlisberger’s two Super Bowl rings and Manning’s one set these two quarterbacks apart from Rivers; however, Rivers’ 33-15 record as a starter shows that he’s not just putting up numbers but also leading his team to victories just as his quarterback peers of the 2004 draft class. Given the contracts given to Manning and Roethlisberger and given Rivers’ statistics and win-loss record, it would not be unreasonable for a Rivers contract to approach $40 million guaranteed and $100 million in new money. Sounds a lot like the Haynesworth contract; however, unlike the Haynesworth deal which is seven years in duration (although it’s truly a four-year, $48 million contract before a hefty bonus for the remaining three years), the Rivers deal I would expect to be a six year contract as this seems to be the popular contract term for quarterbacks. Romo, Roethlisberger, Cassel, and Palmer all signed six year extensions.

Being a quarterback in the insatiable media market that is New York City is a tough undertaking; not to mention the pressures that come with being a number one overall pick and being the sibling of arguably the most prolific quarterback of this generation. Thus far, winning a Super Bowl has arguably been Manning’s only saving grace because statistically his numbers don’t exactly equate to elite quarterback status. Yet, the Giants awarded Manning a contract that pays him at an elite level. With this new contract, there’s a certain renewing of the pressure on Manning to live up to lofty expectations; I’m sure the New York media will be watching closely.

Tuesday, July 28, 2009

Is Matt Cassel the Next Tony Romo?


In the valuing of NFL contracts there are standard metrics by which both clubs and agents utilize to determine the comparative value of contracts. The metrics most often publicized are guaranteed money and total contract value. While these metrics are most certainly important, particularly total guaranteed money, these are not the only metrics used.

Another metric is Average Per Year, which in the case of a free agent contract or draft pick contract is simply the total value of the contract divided by the length of the contract. However, when determining Average Per Year in a contract renegotiation or extension, the formula is total value minus the remaining money to be earned on the previous contract divided by the total new years of the contract. In the example of a player with one year left on his contract who signs a five-year contract, there are four new years, thereby making it a four-year extension. The Average Per Year is then representative of the new money per new contract year.

The metric of 3-Year Total is simply how much money will the player have made if the team were to terminate the contract after three years. This metric speaks to whether or not a contract is front or back loaded. For example, two players both sign five-year contracts worth $50 million with the same guarantee. Using the Average Per Year metric, these contracts are equal. However, lets say that in player A’s contract he’s slated to make $40 million in the first three years and then slated to make $10 million over the final two years , while player B is slated to make $20 million in the first three years and the remaining $30 million over the final two years. The 3-Year Total metric makes this distinction and shows that player A’s contract is superior to player B’s, even though the Average Per Year metric shows that they are equal.

Another metric that distinguishes contracts from one another is the Guarantee Per Year metric. This metric accounts for the length of the contract as it relates to guaranteed money. Obviously two players who both receive $20 million in guaranteed money are in a great positions; however, if player A’s contract is for seven years while player B’s contract is for four years, then player B has the more favorable deal, all things equal.

As you read the analysis of the Matt Cassel contract below, you’ll see me reference these metrics and who the players are that are most comparable to Cassel in each of these metrics.



QB Matt Cassel
Club: KC
Contract Length: 6 years

Total Guarantee: $27,750,000
Guarantee Per Year: $4,625,333
Total Value of Contract Guaranteed: 44%
Comparable Total Guarantees at Position: OAK QB JaMarcus Russell, $32,000,000; DAL QB Tony Romo, $29,294,118; NE QB Tom Brady, $26,500,000; CIN QB Carson Palmer, $24,000,000

Total Value: $63,000,000
Average Per Year (APY): $10,500,000
Comparable APYs at Position: ATL QB Matt Ryan, $11,000,000; SL QB Marc Bulger, $10,841,667; OAK QB JaMarcus Russell, $10,166,667; NO QB Drew Brees, $10,000,000

3-Year Total: $40,500,000

Analysis:
As you assess Chiefs quarterback Matt Cassel’s contract, you have to compare his contract to his peers, who have also been awarded long-term franchise quarterback contracts with very little track record as an NFL starting quarterback. The most recent examples are Green Bay quarterback Aaron Rodgers and Dallas quarterback Tony Romo. Cleveland quarterback Derek Anderson could be considered in this peer group, but because his deal was only a 3-year contract we’ll exclude him from this analysis.

At the high end of this specific market (from an Average Per Year perspective) is Rodgers, who, relative to this market, was the most inexperienced when he signed his contract. Prior to signing his franchise quarterback contract in November of 2008, Rodgers had only eight career starts (all of them in 2008). Despite this fact, the Packers were so sold on the future of Rodgers that they signed him to a seven-year contract with five new years at an average new money per year of $12,264,000. Rodgers’ guarantee per new year was $4,000,000 (total guarantee was $20,000,000), and his 3-Year Total was $28,000,000. Comparatively, despite a lower Average Per Year, Cassel received a higher total guarantee per year $4,625,333 (as well as a higher total guarantee of $27,750,000). Cassel also surpassed Rodgers’ contract in 3-Year total with $30,500,000 versus $28,000,000 and percentage of the total value guaranteed, 44% versus 33%.

The most lucrative contract of this peer group from a guarantee standpoint is that of Cowboys quarterback Tony Romo; however, Cassel’s contract is fairly similar when you compare the metrics. Prior to signing his franchise quarterback contract, Romo had 17 career starts under his belt. In October of 2007, Romo signed a seven-year contract with six new years. Romo’s average new money per year is $11,250,000, his guarantee per new year is $4,882,353, his Three-Year total is $31,000,000, and the percentage of the total value that was guaranteed was 43 percent. Comparing Cassel in these same metrics, Cassel surpasses Romo in percentage of total value guaranteed, 44 percent versus 43 percent, and Three-Year total, $40,500,000 versus $31,000,000. However, Cassel is slightly lower than Romo in guarantee per year ($4,882,353 versus $4,625,333)and is slightly lower in average per year, $11,250,000 versus $10,500,000. So is Cassel the next Tony Romo? According to his contract, the expectation is for him to be pretty darn close.

The next group of quarterbacks in line for franchise quarterback contracts are New York quarterback Eli Manning and San Diego quarterback Phillip Rivers, but their contracts are going to be in another stratosphere from those signed by Cassel, Rodgers, and Romo, as these two quarterback are significantly more accomplished than the peer group analyzed here (Chicago quarterback Jay Cutler could also be in line for a significant extension if his productivity continues in Chicago as it was in Denver). However, Washington quarterback Jason Campbell and Buffalo quarterback Trent Edwards, if they prove they’re worthy of a long-term deal, could potentially be in the same ball park as Cassel, Romo, and Rodgers.

Possible Contract Structure for Mike Vick


With Michael Vick’s conditional reinstatement, the question is now what club will take a chance on him. Clearly, the question marks that revolve around Vick are what type of player is he today, given that he hasn’t played in the NFL since 2006, and then, from a PR standpoint, how is the fan base going to react to a Vick signing. That said, it’s inevitable that a club is going to take a flyer on Vick, the talent of his past is too enticing for a club not to.

The structuring of a Vick contract is an intriguing dilemma. On one hand, you want to guard against Vick being washed up; while at the same time serving your best interest if Vick doesn’t skip a beat and returns to his Pro Bowl form.

Without talking about the dollar amounts, one way a Vick contract could be structured is similar to that of the contract signed by Saints quarterback Drew Brees when he arrived in New Orleans. Remember when Brees came to New Orleans in 2006, he was coming off a shoulder injury suffered in his final game as a Charger in 2005. The injury required surgery and five months of rehab. It was under those circumstances that Brees signed a one year contract with an option for five additional years. The spirit of this structure was for Brees to prove in 2006 that he was fully recovered from the shoulder injury and capable of being the franchise quarterback that they had hoped for, which would in turn lead the Saints to pay Brees’ 2nd year Option Bonus amount. However, if Brees proved to not be the same quarterback he had been, then the Saints simply would not exercise the Option for the additional five years, resulting in Brees becoming a free agent after one season in New Orleans. In terms of how this structure impacted Brees’ compensation, he was paid an $8 million signing bonus, a 2006 salary of $1.9 million, and a $100,000 workout bonus, meaning if the Saints chose to walk away after 2006, Brees would have cost them $10 million. However, if the Saints chose to exercise the option, they would pay Brees a 2nd year Option bonus of $12 million and have him under contract for an additional five years.

In the case of Vick, you have a player, who, due to incarceration and not injury, has been away from the game for two seasons. However, similar to Brees, Vick has to prove he still has the ability to be a starting quarterback in this league. That said, it would not be far-fetched to think that a club would want to structure a “prove it” contract for Vick that allows the team to try the “Mike Vick experiment” for one year, without obligating them contractually or financially for an extended amount of time. If Vick proves that he still has it, then, similar to the Brees deal, Vick’s contract could be structured to include an Option bonus that compensates him as a starting quarterback and contractually binds him to a team for multiple seasons. Regarding that Option bonus, clubs are unable to collect forfeiture on Option bonuses paid to players who default on their contract. Given this dynamic, clubs now insert language into their bonus language that allows the club to convert this option bonus to signing bonus, as clubs can collect forfeiture on signing bonus amounts in the event of default.

In the case of Brees, his bonus money of $20 million was split 40-60, $8 million in signing bonus (40% of bonus money) and $12 million in Option bonus (60% of bonus money). Given the Vick circumstances, maybe his split is 25-75 or even less, but this structure allows a club to keep its options open.

Monday, July 27, 2009

Suggs' Contract Analysis & the Future of the Pass-Rushing Defensive End Market


DE TERRELL SUGGS
Club: BLT
Contract Length: 6 years

Total Guarantee: $40,000,000
Guarantee Per Year: $6,666,666
Comparable Total Guarantees at Position: MIN DE Jared Allen, $31,750,069; IND DE Dwight Freeney, $30,000,000; HST DE Mario Williams, $26,500,000; SL DE Chris Long, $24,990,000

Total Value: $62,500,000
Average Per Year (APY): $10,416,666
Comparable APYs at Position: MIN DE Jared Allen, $12,210,012; IND DE Dwight Freeney, $12,000,000; NO DE Will Smith, $10,133,333; SL DE Chris Long, $9,600,000

3-Year Total: $43,400,001
Comparable 3-Year Totals at Position: MIN DE Jared Allen, $38,380,169; IND DE Dwight Freeney, $37,720,000; SL DE Chris Long, $35,000,000; HST DE Mario Williams, $29,450,000

Analysis:
Defensive end Terrell Suggs’ contract is a market setting contract for the pass-rushing defensive end market. Statistically, Suggs is most certainly deserving of a contract that speaks to his stature as one of the best defensive ends in football. I know that on the roster he’s considered a linebacker because of the Ravens’ 3-4 scheme, but coming out of college he was a defensive end and practically speaking in the Ravens’ system, he’s a defensive end. That said, when you compare him statistically to the other top pass rushers, Suggs measures up. Since entering the league in 2003 as a 20-year old, Suggs ranks tied for eighth in sacks with 53. Of that same group of pass-rushers, Suggs’ 368 total tackles since 2003, ranks him fourth, and his 40.5 tackles for a loss over that time period ranks him first. Not to mention last season, he intercepted two passes and took them both back for touchdowns. Simply put, Suggs is a disruptive force on a disruptive defense, and at 26 years of age, there’s a strong chance that, if he remains healthy, Suggs could play the entirety of this contract and at age 32, be in line for another pay day, although probably not at the same dollar amount as his current deal.

So who’s the next player to set the market for pass rushing defensive ends? Carolina defensive end Julius Peppers is most certainly deserving. Since 2003, Peppers ranks second in sacks with 58.5, only trailing Miami defensive end Jason Taylor, who in spite of his one disappointing season in Washington, has 62.5 sacks since 2003. Dallas defensive end DeMarcus Ware has a strong case, as he has 53.5 sacks in the first four years of his career; ranking him first of pass-rushers since 2005. Moreover, his 299 total tackles since coming into the league rank him first amongst pass-rushers, and his 30 tackles for a loss in that time rank him fourth, one and half tackles behind leaders Suggs and Eagles defensive end Trent Cole.

If Washington defensive tackle Albert Haynesworth gets $41 million guaranteed over seven years ($5,857,143 guaranteed per year) and Suggs gets $40 million guaranteed over six years ($6,666,666 guaranteed per year), then look for Ware or Peppers to get at least $42 million to $49 million guaranteed. Regarding Ware, it is Jerry Jones we’re talking about, so Ware could push that $49 million and possibly $50 million guarantee mark.

Thursday, July 16, 2009

Why do players get cut when draft picks get signed?

I know its been a minute since I've posted an entry here and on FootballOutsiders for that matter. The month of June through mid-July is the league's downtime as folks try to recharge their batteries prior to the opening of training camps and the season. So from a news perspective, it's a slow time in the league (aside from Cassel & Suggs' new deals). Anyway, I just wanted to post something real quick.

I was reading how the Browns recently signed three of their draft picks, and as a result of their signing, the Browns cut three players. In the offseason clubs have an 80-man active roster limit to account for clubs wanting to have as many players as possible to compete for roster spots. When clubs select players in the April draft, not only do they sign a contract tender, but the draft picks go on the "Reserve/Selection List" list. The result is them not counting towards this 80-man roster limit, as they are not considered "Active." However, college players who are not drafted and subsequently sign an undrafted rookie free agent contract with a club count as Active and therefore count against the 80-man limit.

So when a drafted player signs his contract, the tender that he signed after the draft goes away and his newly signed contract takes affect; and from a roster count perspective, he moves from Reserve/Selection List to the Active roster. Therefore if a club is at its 80-man limit, a player must be waived from the Active roster in order to make room for the draft pick.

The decision to figure out who to waive is not always a simple decision because clubs like to go into training camp with a certain number of players at a given position to account for saving the legs & reps of veteran players. For example, some clubs like to have 10 wide receivers at the start of camp so as to not burn out the legs of your valuable wide receivers, but having 10 receivers may mean having one less offensive lineman in camp and, to their chagrin, more reps in practice for your veteran offensive linemen.

So signing a draft pick to your Active roster is simple roster management, but you don't want to waive that one player who turns out to be a solid contributor elsewhere thereafter.

Monday, June 15, 2009

The Structuring of Day Two Draft Pick Contracts

With Mark Sanchez signing a reported maximum value contract of $60 million with $28 million guaranteed, I’m sure readers of this blog are eager to read the analysis of that contract; while I have yet to see the official contract details, know that as soon as I do, I will be posting an entry regarding the deal.

While the Sanchez and Matt Stafford first round pick contracts garner the most attention, keep in mind that other draft picks of the 2009 Draft Class have signed contracts. Of course all of these picks are from rounds three through seven and their dollar amounts aren’t as intriguing as the first round contracts, but what you may find interesting is how their contracts are structured.

In terms of the mechanics of the deal, the first round contracts are the most complex. Second round contracts are not as complex as first rounders; however, second round contracts are structured differently than those of rounds three through seven. Contracts for third through seventh rounders all have pretty much the same structure with the only difference being the duration of the contract.

Seven clubs (ARZ, BLT, DET, KC, NO, PIT, SL) sign their third through seventh rounders to three year contracts; while the remaining 25 clubs sign their respective picks to four year contracts. When you compare and contrast the three year deal versus the four year deal, obviously, the 3 year deal gets the player to free agency sooner – albeit restricted free agency – while the four year deal gets the player a higher signing bonus than if the same player had signed a three year deal; basically, in exchange for an additional year the team has to give up more coin.

In Year Four of the four year rookie contract there is a salary escalator that, in the majority of instances, allows the player’s salary of $565,000 in 2012 to adjust to the restricted free agency Original Round Tender (in 2012 this amount is $1,308,000) if they achieve certain performances in the first three years of the contract. Additionally, some clubs allow for escalation to other dollar amounts or other RFA levels such as the First Round Tender (in 2012 this amount is $2,846,000). The performance mechanism to induce the escalation is a combination of the player’s playtime percentage and the club’s improvement in one of three negotiated statistical categories.

For example, in order for a player’s 2012 salary of $565,000 to escalate to the Original Round Tender of $1,308,000, the player must, in 2 of the first 3 years of the contract, play in 35% of the offensive snaps (lets say this player is a wide receiver) AND in those SAME two seasons, the team must improve its league rank in any one of the following three statistical categories: Points Scored by Offense, Total Offense (net yards), or Average Net Yards per Passing Play. Additionally, for the player’s salary to escalate to the First Round Tender of $2,846,000, the player must participate in at least 35% of the offensive snaps, AND in the same season the team must improve in one of the three statistical categories, AND the player must be elected on the original ballot to the Pro Bowl (being selected as an Alternate does not count). The player can only achieve one of the two levels, $1,308,000 OR $2,846,000.

So as you can see it’s not exactly a gimme. Some teams will even structure the language such that the player will not receive credit if the statistical improvement still ranks the team in the bottom five of the league, meaning the team went from 32nd in the league to 29th in the league in the given category. Some teams only require the statistical improvement in one of the two playtime years; so some team’s escalator language is easier than others, but again, none of it is a gimme.

Essentially, a player can be a significant contributor to a team from a playtime percentage standpoint, but if the team doesn’t improve in one of those categories then it all goes for not, in terms of escalating their year four salary. So like most things related to contract negotiations, it’s a matter of risk by both parties to the negotiation. From the player’s perspective, they can take, for example $40,000 for a late seventh rounder to sign a four year contract, in lieu of $30,000 to sign a three year contract; however, if they turn out to be a Pro Bowler, then in year four they’re playing under the First Round Tender of $2,846,000 or even worse the Original Round Tender of $1,308,000; when if they would have done a three year deal they would’ve been playing under the First & Third Round tender of $3,616,000 potentially. From the team’s perspective, they’re gambling on giving the player a little more money on the front end to save a bunch of money on the back-end, but if the player sucks, then they spent additional money unnecessarily. However, one could make the argument that if you have four draft picks who receive four year contracts and one of them turns out to be a contributor such that he earns his escalator and the other three picks are out of the league by year two, then the savings on the player who made it pays for the additional signing bonus expenses of the three players who didn’t.

In short, the team is, on the front end, buying even more control of the player’s fourth year. Also, keep in mind that it’s not actually a decision for a player and his agent to make in terms of three years versus four years; teams take the position that this is how we do business, this is non-negotiable. So in the case of a four year rookie contract team, you can either sign a four year contract or not sign one at all; after all, is a sixth round pick really going to hold out of training camp because he doesn’t like the duration of his contract? So the real negotiation lies on the terms of the escalator language; ie, Bottom 5 language, Original Round tender vs. First Round tender, and the three statistical categories.

Given that it sounds like this four year contract structure is tilted favorably towards the clubs, why don’t all clubs sign their picks to four year contracts? Well, I’d say that cash is a small part of the issue; lets face it, some owners are trying to save as much money as possible, particularly on players who have yet to prove themselves. However, I think the bigger issue is that the three year clubs believe that if a player turns out to be a stud, then the player probably is not even going to play under that year four salary anyway because either prior to year four or during year four the team and player are going to agree to an even more lucrative contract extension. Moreover, if there is still uncertainty as to if the player is deserving of a lucrative extension, then the club will tender the player accordingly and if they lose him via restricted free agency then at least they get a draft pick in return.

This transition to the majority of clubs utilizing four year contracts has occurred over the past few seasons; in 2007, my first season in Washington, we made the switch. With cap guy Kevin Demoff now in St. Louis (as a side, the NFL refers to the Rams as “SL”; “STL” the NFL considers as the St. Louis Football Cardinals), historically a three year contract team, coming from Tampa, a four year contract team, it’ll be interesting to see if they make the switch this year to four year contracts.

All of this said, when you see that your local team just signed their seventh round pick to a four year contract with a $50,000 signing bonus, understand that there’s a lot more to that contract than just how much the guarantee is.

Webinar: It’s that time of the month again, I’m conducting a Salary Cap 101 Webinar, where you’ll have the opportunity to learn about the components of player contracts and how those contracts are accounted for under the rules of the salary cap; for more information and to register, visit www.SalaryCap101.com .

Wednesday, June 3, 2009

How Santana Moss Assisted in the Departure of Jon Jansen


Many were surprised last week when the Redskins terminated the contract of veteran RT Jon Jansen. The move was surprising because, in spite of his diminishing skill, many around the league felt that the team would not be willing to live with the increased cap number associated with terminating Jansen, $6.1 million, versus keeping him possibly as a reserve at $4.5 million. Jansen’s termination signaled that the Redskins were indeed willing to live with a dead money cap charge of $6.1 million; however, in looking at their recent contract activity it would appear that the recent renegotiation of WR Santana Moss played a direct role in the release of Jansen.

Santana Moss celebrated his 30th birthday over the weekend, and he had 6.2 million reasons to celebrate, as in the $6.2 million signing bonus paid to Moss from his mid-May contract renegotiation. If the Eagles’ are known for signing players to early extensions, the Redskins are known for guaranteeing unguaranteed money in order to create short-term cap space, and that’s what the Redskins did with Moss.

New Contract

2009

2010

2011

P5

$745,000

$968,500

Void

SB

$6,286,500

$1,257,300

$1,257,300

$3,771,900

Prior Contract Proration

$3,053,000

$2,453,000

$1,711,000

Cap #

$5,055,300

$4,678,800

$5,482,900

Old Contract

2009

2010

2011

P5

$3,700,000

$4,300,000

Void

Prior Contract Proration

$3,053,000

$2,453,000

$1,711,000

Cap #

$6,753,000

$6,753,000

$1,711,000



Per NFLPA records, the above tables show that under his old contract, Moss was suppose to make $8 million in unguaranteed P5 (salary) over 2009 and 2010. By renegotiating his contract, the Redskins have guaranteed $6,286,500 of that P5 via Signing Bonus, thereby reducing his P5 amounts to $745,000 and $968,500 respectively in 2009 and 2010. The effect of this maneuver are cap savings of $1,697,700 in 2009 and $2,074,200 in 2010. In 2011, one will notice that in both tables his P5’s say “Void,” this is to illustrate that Moss’ contract voids after the 2010 season in both his old deal and his new deal. Under his old deal, in 2011 the Redskins would have been saddled with Bonus Acceleration of $1,711,000. Under his new deal, the team will be saddled with $5,482,900 of Bonus Acceleration; this would be considered Dead Money as Moss would no longer be a member of the team.

In essence, the Redskins chose to use Moss’ $1.7 million in cap savings on Jansen’s additional $1.6 million cap charge. In 2011, just as the Redskins are currently saddled with a $6.1 million dead money charge for Jansen, they will be saddled with a $5.5 million dead money charge for Moss, so it’ll be interesting (assuming there is a cap) to see who the Redskins push money out with in 2011 in order to live under the cap with this dead money amount. Other players who could potentially count for significant dead money in the future are Clinton Portis, Andre Carter, and Antwaan Randle El, as these players have been recipients of the Redskins’ money-pushing technique.

The fact of the matter is that a club can continue to push money out for as long as they can, but at some point you have to “pay the piper” when a player’s skill has diminished or they’re simply no longer needed. In managing the cap, it’s a matter of taking your dead money medicine now or later, but taking your medicine is an inevitability. This money-pushing technique has allowed the high-spending Redskins to survive without having to blow up the team, so you can’t exactly knock the technique, but at the same time as our economy has proven, there’s something to be said for financial conservation and prudence versus high-spending quick fixes.
Speaking of cap management, check out my entry that'll be posted on www.FootballOutsiders.com/Under-Cap tomorrow (6/4/09) regarding those teams got the most bang for their buck in 2008.

Friday, May 29, 2009

The Skins Add Another Player to the Top 10 Dead Money List



For some the Redskins termination of veteran RT Jon Jansen came as a surprise; yours truly would be part of that group that was surprised. However, some would make the argument that Jansen's skills had diminished significantly; while others would say that he's been a rock on that offensive line for 10 years. Similarly, some would say he was a leader on the team, while others would argue otherwise. The fact of the matter is that whether you loved him or not, the Skins are now sattled with Jansen taking up $6.1M on their '09 cap; whereas if they were to have kept him, he'd only count $4.5M.

When you add Jansen's dead money amount with Brandon Lloyd's amount ($5.3M) counting this year, you have $11.4M of cap space being taken up by players no longer on the team. Add Shawn Springs ($2.5M) and Marcus Washington ($2M) to that amount, and you then have nearly $16M in dead money on the Skins' books this year.

At a minimum, people (including Jansen himself probably) figured that Jansen would at least have the opportunity to compete for a starting position in training camp; however, given his recent history of being injury-prone, I'm guessing the club didn't want to risk Jansen suffering a Phillip Daniels-like training camp injury which would then essentially guarantee his salary in 2009.

Reports indicate that Jansen wasn't unemployed for long, with his signing with his home state Detroit Lions; kudos to Dan Snyder for feeling compelled to fly Jansen to Redskins Park to tell him face-to-face of the team's decision to let him go.

Tuesday, May 19, 2009

Salary Cap 101 Webinar on 05.30.09

On Saturday, May 30th, from 10am - 12 noon, I'll be conducting a live Salary Cap 101 webinar via GoToMeeting.com. The seminar will be completely interactive and will provide for Voice-Over-IP (VOIP), which will allow the registrants to not only hear my voice as I take you through the salary cap powerpoint presentation, but also communicate with me via audio to ask questions. Topics that will be discussed include: the components of a player contract, how contracts are accounted for within the parameters of the salary cap, and how clubs & agents measure the value of a contract. It should definitely be an interesting and informative presentation via the marvel that is the internet. For more information and to register for the webinar, visit: www.SalaryCap101.com

Saturday, May 16, 2009

The Early Extension of Young Players' Contracts

As we all know Sheldon Brown of the Philadelphia Eagles is currently disgruntled with his contract and has openly voiced his opinion in this regard. The Eagles have a long history of giving extensions to young players who may only be 2 to 3 years into their rookie contracts. In the case of Brown, in the middle of his 3rd season, he accepted & signed a contract for 9-years, $7.5M guaranteed, and an average per year over those 9 years of $2.82M/year. At the time of signing the contract, Brown was 25 years old; therefore, he agreed to be contractually bound to the Eagles until age 34. Now at age 30, Brown plays in the defensive backfield with a fellow corner in Asante Samuel, who inked a Free Agent contract for 6 years, $23.6M guaranteed, averages $9.5M per year, and binds Samuel to the Eagles until he’s 33.

Had Sheldon Brown decided to pass on Philly’s offer of an extension in 2004, he would have become an Unrestricted Free Agent after the 2005 season (unless Philly chose to Franchise him at $5.89M guaranteed for 1 year). In the off-season leading up to the 2006 season, free agent corners Brian Williams and Will Allen inked UFA contracts respectively with JAX and MIA. Williams’ UFA contract with JAX was for 6 years, $10M guaranteed, and $5.33M per year; while Allen’s UFA contract with MIA was for 4 years, $4.5M guaranteed, and $3.25M per year. So when you look at Brown compared to the corners who he would’ve hit the market with, he not only is under contract until a later stage of his career, but on a per year basis he’s making less in total contract value and less, in the all important, guarantee money. Simply put, in retrospect, it would have probably been in the best interest of Brown to be patient for another season and a half and then contemplate either an extension with the Eagles at that point or explore the free agency market, as one would think he would’ve gotten a better deal than the one he’s currently saddled with.

The thing about locking yourself into a deal for so long is that, while you’re “stuck” at $2.82M/year in the case of Brown versus the corner market, the market for corners, and all positions for that matter, continues to escalate. The increase in the corner market is illustrated in the increase of the Franchise tender from $5.89M in 2006 to $9.96M in 2009, that’s a 69% increase in 3 seasons.

When you consider, from the player’s perspective, the pros & cons to signing an early extension, there are not too many pros to signing an extension with the length of Sheldon Brown’s extension. Surely receiving $7.5M in guaranteed money is hard to pass up, when the total value of your rookie contract isn’t even worth $7.5M; so you’re presented with the opportunity to receive an amount of money that is truly tantalizing. However, when put into perspective, is this $7.5M today worth the under-compensation over the course of the contract in the long run? Definitely not, but it illustrates how a club can use the emphasis of guaranteed money on the part of players and agents against them. The biggest issue with Brown’s contract is the duration of the deal. The fact that he sacrificed his ability to hit the market until age 34 is an egregious mistake on Brown’s part and his agent.

From the club’s perspective, the pro to doing these types of extensions is obvious, in that you’re getting players, who you anticipate to be a significant part of your team, at a compensation rate below market. So as the cap increases and as the players’ respective position markets increase, you’ve locked in your labor at below market compensation, thereby allowing you freedom in your cap management to pursue the Asante Samuels of the world in free agency. Conversely, the con to doing these deals is that you run the risk of giving a player a significant amount of guaranteed money after they’ve only shown their ability for 2 years and the player could in the long run end up not living up to your expectations. An even bigger concern is that you eventually end up with players like Lito Sheppard and Sheldon Brown, who eventually realize that they’re being paid below market and become disgruntled as a result. So if players were simply assets without emotions, then this early extension concept would be perfect; however, since we’re talking about athletes who are sensitive about their income status, this concept leads to acrimony in the locker room which doesn’t exactly lend itself to the perceived harmonious team concept of winning teams. To their credit, Philly is doing something right, they’ve been a consistent winner for the past decade (all be it without a Super Bowl ring). Having a legitimate franchise quarterback in McNabb helps (he may not be Peyton Manning but he’s no Bobby Hoying), after all if you look around the league, those teams with solid & consistent quarterback play are the teams that succeed. The quarterback in Philly, by the way, also signed an early extension in his career and has since played under a contract that has paid him $5.75M per year; while quarterbacks like Marc Bulger, Matt Schaub, and David Garrard make in excess of $8M/year, not to mention Matt Stafford’s $12M/year. So to his credit, McNabb has done a good job of biting his tongue for the most part and being a good company guy.

This concept of early extensions isn’t unique to the Eagles; the Eagles have simply employed it more frequently than other teams. In Arizona, Anquan Boldin’s grief is as a result of an early extension that now under pays him; it doesn’t help that every time he lines up, he sees on the other side of him a WR in Larry Fitzgerald who’s making $10M/year, while he’s making $3.92M/year and other top tier receivers are making $9M/year. Kevin Williams in Minnesota may be a happy camper today, but when Albert Haynesworth is getting $41M guaranteed and $14.29M/year; he could easily have an Anquan Boldin type attitude in a few seasons.

The moral of the story is that no one put a gun to the heads of these players who have signed these early extensions; therefore if you and your agent allow yourselves to be “bamboozled” by the early extension offering of a club (particularly one that defers your free agency until age 34), then you have no one to blame but yourself and you should honor your contract. Instead of signing a 9 year contract, go the route of Bart Scott, who played out his rookie contract, signed a 3 year extension contract that guaranteed him $6.5M, but more importantly positioned him, due to the fact that it was only 3 years in duration, to receive another big pay day this year at age 29 that pays him a guarantee of $13.5M.

Switching subjects, yours truly will be conducting a Salary Cap 101 webinar on Saturday, May 30th, 2009 from 10am – 12 noon. For more information and to register, visit http://www.salarycap101.com/ .