Monday, March 30, 2009

An Attempt to Force the Hand of Management

Some have asked for my perspective on the soap opera that is Jay Cutler vs. the Broncos, so here's my 2 cents.

Without knowing what's going on behind the scenes, my bet would be that this is an attempt by Bus Cook, Cutler's agent, to force someone whether it's the Broncos or a team that Cutler would be traded to to give him a big-money contract extension.

Cutler played at a very high level last season, so much so that he made it to the Pro Bowl (all be it as an alternate) and is clearly a franchise QB on the rise. It's extremely rare, almost unheard of, for a QB at this young stage of his career and playing at such a high level to potentially be on the trading block. But when Bus Cook & Cutler see Ben Roethlisberger get $33.2M guaranteed on a contract extension or Aaron Rodgers get $20M guaranteed on an extension, they see opportunity for Cutler to get a new deal and more importantly they see guaranteed dollar signs in excess of $20M.

In terms of Bus Cook, he's got plenty of clients, but you can't ignore the fact that his cash cow Brett Favre is no longer collecting checks, so Cutler's gotta carry on in lieu of Favre for Cook as the cash cow QB. So Cook has a significant interest in getting the Broncos to give Cutler a new deal or force a trade where the new team pays Cutler the always lucrative 2nd contract.

Understand that QB is the one position in all of football that is a distinct different maker; if you've got a talented signal caller, it makes up for a lot deficiencies in other areas of the team. Teams year in and year out are willing to spend all kinds of money to find their difference making QB; whether that's $30+ million guaranteed given to a top 5 1st round QB or a roll of dice on a relatively unproven QB like Matt Schaub or David Garrard, or an aging vet like Brett Favre, teams are determined to find a guy. This underscores the uniqueness of a Jay Cutler potentially switching teams. This kid shows all of the signs of being a legitimate franchise QB, and if he were to legitimately be on the market, I really couldn't be mad at a team for going Mike Ditka and trading away the majority of their draft picks in order to acquire Cutler. And so this is the leverage that Cutler and Cook possess; however, the club's leverage is that they don't have to do anything with Cutler, just like Arizona didn't have to do anything with a disgruntled Boldin, as both players are under contract. However, no club wants to have a disgruntled player in the locker room; let alone their starting QB.

I tell people all the time that player contracts and their negotiations are always about the agent, and the player happens to reap the benefits. This is a case where Cook has Cutler in full agreement that this is the way for him to get that next contract; whether or not if it works, we'll see, but it makes for an interesting off-season soap opera. I think Cutler is deserving of a committment from the Broncos of a contract extension, but if the folks in the building don't feel the same, then it's gonna be a test of wills. It'll be interesting to see who caves first.

Sunday, March 22, 2009

When contracts go bad: Dead Money

Now that most of the big money free agent deals have been done, lets take a look at the flipside of these contracts. When an Albert Haynesworth signs a historic free agency contract, or a Terrell Owens signs a big money extension, the club and fanbase are excited by the possibilities of the respective player's future with the team. However, when things don't quite work out as planned there are salary cap consequences with these heralded deals.

Below is a list of the top 10 dead money amounts currently counting on teams' 2009 salary caps. The list is headed by the prototypical WR diva himself, Terrell Owens, who is counting for $9.65M against the Cowboys salary cap on a contract extension that he signed prior to the 2008 season. Following T.O. is Dre' Bly, who in 2007 was traded to Denver and then signed an extension with the Broncos that would've paid him $6.8M/year. After 2 seasons, the Broncos decided to cut the cord, which has resulted in the Broncos carrying a dead money amount of $9.45M. Also, on the list are Oakland's high-priced free agent busts from the 2008 off-season, Gibril Wilson & DeAngelo Hall.

  1. Terrell Owens WR DAL $9,675,000

  2. Dre' Bly CB DEN $9,450,000

  3. Ken Lucas CB CAR $8,330,000

  4. Cory Redding DT DET $7,333,334

  5. Gibril Wilson S OAK $7,000,000

  6. Marvin Harrison WR IND $6,400,000

  7. DeAngelo Hall CB OAK $5,833,334

  8. Derrick Dockery OG BUF $5,400,000

  9. Anthony Weaver DE HST $5,400,000

  10. Brandon Lloyd WR WAS $5,333,334

And yes that's right, Brandon Lloyd is still accounting for $5.3M against the Redskins cap, despite not being on their roster since the 2007 season. This results from the salary cap rule that applied the signing bonus acceleration from a termination to the next year's cap, if that termination occurred after June 1 or was designated as a post-June 1 termination despite occuring prior to that date. For example, if a player had $4M in total signing bonus proration left on the remaining 4 years of a contract (meaning $1M of proration in each year), and that player was released after June 1st, then $1M of proration would remain as dead money in that year and then the remaining $3M would accelerate into the next year.

Due to 2009 being the final capped year, this post June 1 rule is no longer in effect; therefore, when a player is released this year all of their proration in future years accelerates into the current year.

The obvious downside to significant dead money from a salary cap standpoint is that you have players who aren't contributing to your efforts on the field, who are taking up cap space and handcuffing you from acquiring players who can help you. In the instance of say a T.O., you'd rather have that $9M cap figure helping you on the field in the form of a T.O. or some other player instead of just taking up space on your books.

So lets see this time next year who the 2009 Gibril Wilsons & DeAngelo Halls are going to be; that is, of this year's free agent class, which players are going to account for significant dead money next year after a season of not living up to the expectations that they're currently saddled with.

Wednesday, March 4, 2009

Haynesworth Contract Details...Don't Believe Everything You Hear in the Media

OK, so I was able, through my sources around the league, to get my hands on the Haynesworth contract details. Here's what he got:

Guaranteed Money:

- Signing Bonus: $5M

- 2009 guaranteed P5 salary: $6M

- Option Bonus: $21M

- 2010 guaranteed P5 salary: $3.6M

- 2011 guaranteed P5 salary: $5.4M

TOTALING: $41M guaranteed

Non-Guaranteed Money:

- 2012 P5 salary: $6.7M

- 2012 Off-Season Workout Bonus: $500K


Total Over 2009-2012: $48.2M

So you ask, I thought his contract was 7 years (2009-2015) for $100M? Well, here's where the fluff comes in. It goes as follows:

Non-Guaranteed Money:

- 2013 Discretionary Signing Bonus: $20M (OR if teams chooses at their discretion to not pay the Signing Bonus, there then becomes a $35M incentive that can be earned given certain performance)

- 2013 August 31 Roster Bonus: $500K

- 2013 P5 salary: $8.5M

- 2014 August 31 Roster Bonus: $500K

- 2014 P5 salary: $10.3M

- 2015 August 31 Roster Bonus: $500K

- 2015 P5 salary: $11.5M

TOTALING: (assuming the team elects to pay the discretionary signing bonus) $51.8M

Therefore, giving you a GRAND TOTAL of $100M over 7 years ($48.2M + $51.8M).

In essence this is 2 contracts in 1. Basically, the first contract is for $48.2M over 4 years. If he's still playing at a high level come 2013, then the team can, in essence, execute another contract with Haynesworth that would be a 3 year deal worth $51.8M with $20M guaranteed. If he's not playing at a high level come 2013, then they simply cut him; however, they'd then have $9.4M of "dead money" on their books in 2013.

So if you look at this deal as 1 contract, then, yes, it's a $100M deal (and the agent loves that you think of it that way because it makes him look more appealing to the kids he's now recruiting), but the more practical and realistic perspective is that of considering this deal as 2 in 1.

An alarming aspect of this contract is that $21M of his money comes in the form of option bonus. Why is this alarming you ask? Well, as a result of a case involving the contract of Aslie Lelie, teams can no longer collect option bonus money from the player should he do anything to be in default of his contract. Not to say that folks don't change or have bad days, but to have so much guaranteed money unexposed to forfeiture for a player who once stomped a player in a game is a bit of a concern. (UPDATE: as it turns out, the Redskins shrewdly protected themselves from the forfeiture issue by placing language in the contract that allows them to convert Haynesworth's Option Bonus to Signing Bonus when they exercise the option. Signing Bonus money can be recovered from a defaulting player, so if Haynesworth has another bad day, the team is protected.)

Some of you have asked, given that the Skins routinely are up against the cap, how could they afford this contract? The answer is that Haynesworth's 2009 cap number is only $7M; that amount is comprised of a $6M P5 salary (by the way P5 stands for "paragraph 5" of the standard player contract) plus $1M in pro-ration of his $5M signing bonus. By cutting Shawn Springs, the Skins saved themselves $6M in 2009 cap space; so you could say that the Skins just about swapped out 1 for 1 Springs for Haynesworth. Without knowing what the future holds, the Skins are going to have to plan accordingly to afford this contract because Haynesworth's cap numbers beyond 2010 exceed $10M per year; those are significant cap charges. This means the Skins better start getting some cheap labor via the draft to offset this contract's impact on their cap (assuming there is one) in future years.

To see my perspective on "cheap labor" team building see below. Otherwise, hope you enjoyed the Haynesworth breakdown. You're now dismissed.....
(UPDATE: if you have any questions, leave a comment with your question, and I'll reply in the comment section. So check out the comments section for further analysis based upon the questions you guys submit....thanks!!!)

Monday, March 2, 2009

The Return of the Real Redskins

For those of you who don't know and in the interest of full disclosure, I spent the past 2 seasons working as the Salary Cap Analyst for the Redskins. So naturally, some of you have been, for lack of a better word, "clamoring" for my perspective on the deals executed by the Redskins last week.

In short, my opinion is that history and statistical data has proven time & time again that you cannot build a championship team via free agency. The fact of the matter is that the salary cap plays such a pivotal role in team building that the most prudent way to build a team is thru the acquistion of cheap labor, which occurs via the draft. Instead of buying a Haynesworth or a D. Hall, find the next Haynesworth or D. Hall in the draft; they'll cost you significantly less than what they're gonna cost on the free agent market. However, when you operate in a manner that diminishes the value of draft picks, such that you trade them away (ie, the knee jerk reaction to trade a 2nd for a 35-year old Jason Taylor who ultimately only played 1 season for you at a low level), you then become handcuffed from building your team in the most efficient manner possible. Look at the rosters of Indy and Pittsburgh and look at how many of those players are "home grown;" similarly, look at how those teams rarely, if at all, participate in free agency and have shown a willingness to let players leave (ie, any number of LBs who have had success in PIT, or a Cato June, Marcus Washington in Indy) in lieu of paying them significant money to stay with the team. This willingness to let players walk is because they know that they've got an inexpensive young player who can step in and fulfill the role of the player who they're letting go. It's simple economics.

The New England Patriots take a different approach to team building; they clearly draft well (ie, flipping a 7th round, obscure QB out of USC named Matt Cassel into a 2009 2nd round pick), but it's how they acquire multiple draft picks and then leverage those picks to acquire even more picks is what is interesting. They clearly value draft picks and have down to a science how to flip those picks to their advantage. In addition to their draft pick management strategy, they approach free agency not looking to land the biggest fish in the free agency pond, but instead to find the best value and more importantly the best fit for their system. You look at their acquisition of a Fred Taylor. He's an established vet, who's gonna be good in the locker room, can still be productive as a tag-team partner with a Laurence Maroney or BenJarvis Green-Ellis. More importantly, he's gonna serve as a great mentor to those 2 young RBs; one thing that alot of fans don't see about the NFL is that coaches don't do alot of technique coaching, they're busy installing the game plan on a week-to-week basis; which then leaves the technique coaching to veteran players. So the coaches scheme, the vets mentor, and the young, inexpensive players develop; together, its proven to be a winning formula.

As far as the Redskins, from a pure salary cap standpoint, if you would've told me that they'd be able to sign D. Hall (without getting a discount from him) and sign Albert Haynesworth, I wouldn't have believed it, and I really wouldn't have believed it if you told me that they were going to keep Jason Taylor at his 8.5M cap amount. The Redskins are a team that is constantly up against the cap; so to be able have Hall, Haynesworth, and Taylor, was unbelievable. Folks around the league knew that Shawn Springs' fate was tied to whether or not a deal with D. Hall got done; so it didn't come as a surprise to me that once the Haynesworth & Hall deals got done, Springs was shown the door, because the $6M savings realized from his release was going to help free up space for the signings. Between the release of Springs, Marcus Washington, and ultimately Jason Taylor, the Skins saved themselves $19M in cap space; not to mention the $10M or so in savings they realized by restructuring the contracts of Randle El, Andre Carter, and Cornelius Griffin. So my old boss, Eric Schaffer, (who by the way doesn't get enough credit for the work that he does under the circumstances; and I'm not just saying that because he's my old boss) definitely has earned his paycheck this off-season in positioning the Skins to be able to make these moves.

But the question then becomes, are these the right moves? When you have glaring needs on offense, I can't agree with spending tons of money to add players to a defense that finished ranked in the Top 5. So last week in my opinion, marked the return of the free-spending Redskins; just when you thought that they were "getting it" last season by remaining on the sidelines during free agency, they come out and sign players who could end up becoming the 2.0 versions of Dana Stubblefield and Deion Sanders.