FootballOutsiders.com Column

Just agreed to start publishing some of my content on a bi-weekly basis on FootballOutsiders.com. You can still read my content here, but definitely check out the content on FO under the column titled "Under The Cap". From a purely semantics perspective on the difference in the name of the column, given the subject matter "Under" is more fitting than "Inside." LOL. Be on the lookout for my first entry on FO early next week.

Want to Learn About the Cap & Contracts??

Check out: www.SalaryCap101.com for information on the Salary Cap seminar I'm teaching this Saturday, 4.25.09, in Alexandria, VA from 10am - 12 noon.

What better way to start your NFL Draft Day than to spend the morning learning about the contracts that these draftees will be signing as rookies.

The Anatomy of a 1st Round Contract: How One Gets $34 Million Guaranteed without a Signing Bonus

As we all know, the 2009 NFL Draft is this weekend, so fittingly, I figured I'd expose the reader to the anatomy of a 1st Round Contract. That said, we all know that Atlanta QB Matt Ryan seemed to prove that he was worthy last season of the $34.75M guarantee that he received as the #3 overall pick in 2008, but how exactly is that amount structured in his contract? You'd be surprised to find out that NONE of it is via Signing Bonus.

Ryan's 6 year contract breaks down as follows:

GUARANTEE ON IT'S FACE (meaning money guaranteed the day he signs the contract; prior to earning any incentive):

- 2008 Roster Bonus (typically earned shortly after contract executed): $2.505M

- 2008 P5 (salary) guarantee: $295,000

- 2009 P5 guarantee: $3.5M

- 2010 P5 guarantee: $4.2M

- 2011 P5 guarantee: $4.9M

- 2012 P5 guarantee: $5.6M

- 2013 P5 guarantee: $6.3M

TOTAL GUARANTEED ON FACE: $27.3M (meaning if, for example, Ryan suffered a catastrophic career ending injury in, say, Training Camp of 2008, then he'd still get $27.3M)

GUARANTEE AFTER THE EARNING OF 1-TIME NOT-LIKELY-TO-BE-EARNED INCENTIVE:

In 1st & 2nd round draft pick contracts, there is almost always money tied to NLTBE (Not-Like-To-Be-Earned) Incentives. These incentives are "backed up" or guaranteed by P5 guarantees. These P5 guarantees typically void upon the earning of the NLTBE incentive (ie, a total of $1M in P5 guarantees voiding when a $1M NLTBE incentive is earned). Unlike Signing Bonus, these NLTBE bonuses don't hit a team's cap until they're earned.

- 1-time NLTBE Incentive (is deemed NLTBE because Ryan had to play 35% of the offensive snaps + the team had improve in 1 of 3 team categories, ie, Total Offense, etc.): $3.8M

- 1-time NLTBE Roster Bonus (Ryan must meet 35% playtime requirement + club improve in team category + player must be on the roster as of, for example, 1st day of the league year after the season he earned the bonus): $2.9M

- 2009 P5 guarantee: $7.5M

- 2010 P5 guarantee: $12.75M

- 2011 P5 guarantee: $2.5M of $12.75M salary

- 2012 P5 guarantee: $2.5M of 13.5M salary

GUARANTEED AFTER 1-TIME:

- 2008 Roster Bonus: $2.505M

- 2008 P5: $295,000

- 2009-2012 P5 guarantees totaling: $25.25M

- 1-Time NLTBE Incentive: $3.8M

- 1-Time NLTBE Roster Bonus: $2.9M

TOTALING: $34.75M Guaranteed

NON-GUARANTEED MONEY AFTER 1-TIME:

- 2011 P5: $10.25M of $12.75M in salary (salary escalates to $12.75M instead of $4.9M because of earning of 1-time NLTBE incentive)

- 2012 P5: $11M of $13.5M in salary (salary escalates to $13.5M instead of $5.6M because of 1-time)

- 2013 P5: $10M (salary escalates to $10M instead of $6.3M because of 1-time)

TOTALING: $31.25M of Non-Guaranteed Money

THEREFORE, the value of Ryan's Contract is:

- Total Guaranteed Money: $34.75M

- Total Non-Guaranteed Money: $31.25M

TOTALING: $66M over 6 years ($11M per year)

The contract also allows for Ryan to earn more money in addition to the $66M via "high-end" or "fluff" incentives. Those incentives breakdown as follows:

- 50% playtime + playoff win(s) (depending upon how far the team advances in the playoffs): up to $500K/year; maximum of $2M over the course of the contract

- Minimum 35% playtime in 2008 or 45% playtime in any year thereafter + club improvement + Top 5 QB Ranking or Pro Bowl selection: max $1M per year; max $4M over course of contract

TOTAL HIGH-END INCENTIVES: max $6M

THEREFORE, the maximum value of Ryan's contract is $72M over 6 years ($12M per year)

Matt Ryan is off to a great start to his career (but so was Vince Young) and to this point, Ryan looks like the real deal, but even before the Axe Hair Products endorsement deal, Ryan's bank account got off to a great start in it's own right the minute he signed this contract. Matthew Stafford and/or Mark Sanchez are potentially going to be similarly compensated to Ryan; hope they live up to the financial expectations.....

Breaking Down K2's Deal

Kellen Winslow made no bones about his desire to receive a new contract while he was in Cleveland. He subsequently got his wish after being traded to the Bucs. The Bucs made Winslow the 2nd highest paid TE in the league; only Indy's Dallas Clark (who by the way will be paid over 3 years as much as Randy Moss, $27M) has a more lucrative contract.

Winslow's new deal was a renegotiation of a contract that had 2 years ('09 & '10) remaining on it; the new contract extends this contract for 4 new years ('11 - '14). The renegotiation breaks down as follows:

TOTAL PACKAGE BREAKDOWN:

- Old Money (meaning money Winslow was due to earn under his old contract over '09 & '10): $9.55M

- New Money Earned Over Old Years ('09 & '10): $2.34M

- New Money Earned Over New Years ('11 - '14): $24.21M

- TOTAL NEW MONEY: $26.55M over 4 new years ($6.64M/year)

- Total Package (Old + New Money): $9.55M + $26.55 = $36.1M over 6 years ($6.02M/year)

CONTRACT COMPONENTS:

Guaranteed Money:

- 2009 full salary (P5) guarantee (for skill, injury, & cap): $5.71M

- 2010 full P5 guarantee (skill, injury, cap): $6.721M

- 2011 full P5 guarantee (injury only): $8.259M

Total Guaranteed for SKILL & CAP(what I would call truly guaranteed): 12.431M

Total Guaranteed for SKILL, INJURY, & CAP: $20.15M (remember $8.259M of this is not payable if they cut him for lack of skill)

Non-Guaranteed Money:

- 2012 P5: $3.3M

- 2013 P5: $4.5M

- 2014 P5: $5.5M

- 2012 Off-Season Workout Bonus: $500K

- 2013 Off-Season Workout Bonus: $500K

- 2014 Off-Season Workout Bonus: $500K

- 2012 45-man per game Roster Bonus (meaning for every game player is on the 45-man game day roster, they will earn 1/17th of bonus): totaling $550K

- 2013 45-man per game Roster Bonus: $600K

Total Non-Guaranteed Money: $15.95M

Incentives:

- 2011 Incentive (if player makes '09-'11 Pro Bowl AND has 90+ Receptions in each of '09-'11): $4.45M (if achieved, '12 - '14 P5's decrease by a total of 1.449M AND '12 - '14 Pro Bowl & Receptions Incentives go away)

- 2012 Pro Bowl Incentive (voids if 2011 Incentive earned): 200K

- 2013 Pro Bowl Incentive (voids if 2011 Incentive earned): 200K

- 2014 Pro Bowl Incentive (voids if 2011 Incentive earned): 200K

- 2012 Receptions Incentive (voids if 2011 Incentive earned): 800K

- 2013 Receptions Incentive (voids if 2011 Incentive earned): 800K

- 2014 Receptions Incentive (voids if 2011 Incentive earned): 800K

Maximum Amount of Incentives That Can Be Earned in '12 - '14: $3M

THEREFORE, if Winslow earns 2011 Incentive he makes an additional $1,000 because if he were to not earn the $4.45M incentive, he'd instead possibly earn $4.449M ($1.449M in P5's + $3M in incentives).

MAXIMUM TOTAL PACKAGE:

- Guaranteed Money: $20.15M

- Non-Guaranteed Money: $15.95M

- Max Incentives: $3M

- SUBTRACT $9.552M in Old Money

TOTALING: $29.55M over 4 new years (7.39M/year)

In valuing this contract, one would assume that Winslow is not going to max out his incentives; therefore, one would be inclined to value this contract as $26.55M over 4 new years ($6.64M/year). With that in mind, Winslow is 2nd behind Dallas Clark's $6.96M/year and is ahead of Tony Gonzalez's $6.25M/year.

In comparing the top tier TE's by how much they'll make over the first 2 new years of their deals, Winslow again falls in between Clark ($23.2M) and Gonzalez ($18.25M with $20.55M.

In terms of Guaranteed Money, if you include the amount guaranteed solely for Injury, Winslow has the largest Guarantee of any TE at $20.15M, followed by Clark's $20M and Gonzalez's $17.75M. However, Winslow falls in between Chris Cooley ($14M) and Jason Witten ($12M) with a guarantee of $12.431M if you don't include the amount only guaranteed for injury. $12.431M is actually a smaller guarantee than his rookie contract as the 6th pick of the '04 draft.

Given Winslow's propensity for injury over his first 5 seasons, one could question why TB felt compelled to give additional money to a player who was under contract for the next 2 seasons. One could argue that TB could've seen for at least the 2009 season what they have in Winslow from a injury, personality, and schematic point before deciding to make him the 2nd highest paid TE in football. Now that he's gotten his payday, it'll be interesting to see how the often-combustible Winslow behaves in his new locker room with a head coach who he mistook as a player when he first met him. The fact that he's already mouthing off about his former teammates in Cleveland is a bit of an ominous development, but there's no doubting that he's probably the most gifted & skilled receiving TE in the NFL when he's healthy & has his head on straight.

Cutler's Worth

Before I get into how much I think Cutler can get on a new contract, let me say that for the sake of all future young Head Coaches and young Salary Cap guys-turned-GM, I hope this gamble pays off for Josh McDaniels and Brian Xanders. Like I said, it's rare for a young franchise QB to get dealt, particularly when everyone is trying to find their franchise QB, so I hope this pays off for the young duo in Denver; otherwise, they'll be the poster children for why not to hire young, in-over-their-head coaches & GMs.

Moving along to Cutler, the young QBs who have gotten contract extensions in recent years include, Tony Romo, Ben Roethlisberger, Aaron Rodgers, David Garrard, Carson Palmer, & Drew Brees. Their contracts had the following characteristics:

Player Guarantee 3 Year Total Guar/3 Year

Roethlisberger $33,200,000 $43,500,000 76.32%

Palmer $24,000,000 $41,750,000 57.49%

Romo $29,294,118 $31,000,000 94.50%

Brees $20,000,000 $30,000,000 66.67%

Rodgers $20,000,000 $28,000,000 71.43%

Garrard $18,000,000 $25,500,000 70.59%

The "3 year total" is the amount of money the player would cost the team if they were to cut him after 3 years. This is a common barometer used by agents and clubs to value contracts. The "guar/3 year" tells you what percentage of the 3 year total is made up of guaranteed money; this indicates the level of commitment on the part of the team. Meaning the more guaranteed, the higher the level of committment and risk for that matter on the part of the club.

Cutler has 37 starts under his belt; here's how this group compare to one another over the first 37 starts of their career:

Player W-L Comp% Pass Yrds Pass TDs INTs Rating

Cutler 17-20 62.5 9024 54 37 87.1

Roethlis. 27-10 62.8 7782 47 38 88.9

Romo 27-10 64.4 9865 76 40 97.3

Palmer 21-16 63.9 8611 62 36 90.0

Brees 17-20 60.7 7472 47 34 80.9

The stats above show that if you're a winner, meaning you've shown a ability to lead your team to victory, whether it's by throwing for 250+ yards & 2 TDs per game as Romo did, or only throwing for limited yards & TDs as Roethlisberger did, teams will pay a premium for you. So it isn't coincidental that Romo, Roethlisberger & Palmer, whose combined win-loss records after 37 starts were a combined 75-36, are the highest paid QBs of this group from a 3 year & guaranteed perspective. Comparatively, Cutler is 17-20 over his first 37 starts, so he can't be considered an elite QB yet, as he has yet to prove himself to be a winner in this league.

One could make the argument that Drew Brees' departure from San Diego is decently similar to Cutler's departure from Denver. Granted, one left via free agency and the other left via trade, but similarly, they both were the same young age when they transitioned teams (Brees 27 & Cutler 26). When Brees left San Diego, there were questions as to whether or not he was a legitimate franchise QB, Cutler faces this same question. In the case of Brees, he's been outstanding in New Orleans; nearly breaking Marino's single season passing yardage record in 2008 and entrenching himself as the leader of that club and a leader in the community. Needless to say, Chicago hopes Cutler develops in the same manner as Brees.

The stats below show Brees' final season in SD versus Cutler's final season in DEN:

Player W-L Comp% Pass Yrds TDs INTs Rating

Cutler 8-8 62.3 4526 25 18 86.0

Brees 9-7 64.6 3576 24 15 89.2

All of that said, it's my opinion that Cutler can expect an guar/3 year percentage somewhere between 60% - 72%, where Brees serves as the example of the low end and Rodgers (a QB with less of a proven track record than Cutler prior to signing his deal, but who had a better statistical 2008 than Cutler) serves as the example of the high end. In terms of guaranteed money, I would expect Cutler to get anywhere between $20M - $25M; while getting anywhere between $30M - $35M over 3 years.

As I said in a previous entry, you can't deny the importance to Bus Cook, Cutler's agent, to get Cutler a new deal as a means for Cook to make up for the loss of income from the retirement of Brett Favre. It'll be interesting to see what type of deal Cook ends up negotiating for Cutler. We shall see.....