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Contracts in the Salary Cap Era
1. Contracts in the Salary Cap Era
By David Larkin
DISCLAIMER: This piece was originally written as a recurring column series and not one
comprehensive piece. Putting all of the smaller sections together was done for ease of access,
but the series would not only analyze NFL contracts (as in this piece) but also NBA and NHL
contracts as well in the future.
In the world of major North American professional sports today – outside of Baseball –
most leagues operate under a salary cap system. This means that large market teams have the
same budget constraints as smaller market teams despite the vast differences in total revenues
generated. This ensures a more even playing field so to speak and encourages the spread of
talent throughout the league, rather than clustering in the major cities like New York, Chicago,
Los Angeles and Boston. Analyzing how each team doles out their limited payroll to players
gives keen insight into the philosophies and tendencies of the management side of each
organization; for instance, do you pay the star player who left another team in free agency who
is looking for the largest possible contract with the most guaranteed money, or do you reward
the player whom was drafted by the team and is a positive force on the field, in the locker room
and in the community? These decisions make or break an organization for years at a time.
One example of a very good contract is that of Malcolm Jenkins, Safety, for the
Philadelphia Eagles football franchise. Jenkins came to the Eagles in free-agency from the New
Orleans Saints after their 2010 Super Bowl victory over the Indianapolis Colts. Jenkins has
always been a leader in the locker room dating back to his days at Ohio State, and has always
been a positive force in the community as well. In order to evaluate this signing it must be
approached from both the organization’s and the player’s perspectives.
From the team’s perspective, this contract locks up a player (contractually for 3-5 years);
secures a top 3 safety in the league, Super Bowl XLIV champion with the New Orleans Saints,
defensive captain and emotional leader of a young Eagle defense on the rise. It also shows the
rest of the players that the front office will reward players who earn it (see Lane Johnson,
Vinney Curry, Zach Ertz, and hopefully Fletcher Cox). This in turn garners the Players’ good will
for the new (rookie) head coach Doug Pederson, as well as faith in the new direction of the
organization post-Chip Kelly. Yet the Eagles will somehow save money on their salary cap, 1.5
million according to CBS’s Joel Corry via Twitter.
2. From Jenkins’s own perspective this contract extensions like this almost always means
lots of ‘guaranteed money’. Jenkins’s new extension with the Eagles, according to the NFL
Network’s Ian Rapoport, includes $21 million worth of guarantees over four years with a total
value of $40.5 million over five years. That would make Jenkins the third highest paid safety in
the NFL behind Devin McCourty of the Patriots and Earl Thomas of the Seahawks. According to
Phil Sheridan of ESPN, Jenkins wanted to re-sign with the Eagles and expressed those feelings to
his agent. In the end, Jenkins signed with who he wanted for a lot of money and actually
helped his team’s salary cap situation, which will in turn allow the team to keep players like
Fletcher Cox.
One of the best contract situations in all of professional sports is that of Tom Brady,
Quarterback of the New England Patriots. Tom Brady’s relationship with the New England
Patriots, specifically owner Robert Kraft and head coach Bill Belichick, creates a unique situation
in contract negotiations. Tom Brady is maybe the most secure and successful quarterback in
the history of the NFL. With this knowledge he often restructures his contract in such a way
which creates cap room for the Patriots to sign other players like Randy Moss. Brady knows
that not only will he be financially rewarded in the future by the team (ala Kobe Bryant), but
Brady would go on to break the all-time, single season passing touchdown record, while Moss
broke the all-time single season receiving touchdown record in the same season, with the team
achieving an undefeated 18-0 until their Super Bowl XLII loss to the New York Giants. Just as
importantly as investing in the future is the confidence and comfort that Brady shows in the
Patriots organization by constantly restructuring his contract rather than requesting massive
contracts with lots of guarantees like most players (especially quarterbacks) usually do. Tom
Brady is a perennial top-3 quarterback in the NFL yet is closer to the tenth highest paid
quarterback rather than first.
From Brady’s perspective, when all is said and done, he will be paid more every year
than every other quarterback save maybe Peyton Manning or Drew Brees; Brady’s ‘skill’ and
injury guarantees in his contract along with signing, roster, and other bonuses more than
compensate Brady for the lack of guaranteed money and salary cap worth. Once all of that is
tabulated you must also consider his endorsement contracts with companies like Ugg and
Under Armour among others which raises Brady’s net yearly earnings substantially. When it
comes to the playing of actual football, the Patriots led by Tom Brady and Bill Belichick are
virtual certainties to win their division and earn a playoff berth which usually leads to a deep
playoff run. With the bonus-heavy contract Brady has he is handsomely paid for all of these
mile-stones which again evens out the lack of common guaranteed salary.
3. On the other hand one of the worst contract signings in recent memory has been Mike
Wallace, wide receiver with the Miami Dolphins. From the organization’s standpoint at the
time, it was said that Mike Wallace would fit so well into that offensive scheme that overpaying
by so much was worth it. Those fruits would never ripen, just before the third year of Wallace’s
contract with Miami he was traded to the Minnesota Vikings. Wallace’s initial free agent value
stems from his time with the Pittsburgh Steelers, almost any wide receiver who plays with
quarterback ‘Big Ben’ Roethlisberger will look good. While he did have success and production
with the Steelers, the huge caveat to any possible Wallace suiters in free agency was whether
he could match his previous numbers with another team with another quarterback in another
system. To this day the overwhelming answer to that question is a resounding ‘No’. Both in
Miami with Ryan Tannehill and in Minnesota with Christian Ponder and Teddy Bridgewater he
has never lived up to neither his potential nor his salary. Even worse is that Wallace’s contracts
and production have become a commonly used example around the NFL of a bad contract as
Kevin Patra of the NFL Network wrote in his 2015 article. While Miami traded Wallace to
Minnesota, they will still be responsible for almost $7 million of his salary while he plays for the
Vikings in 2016; in short, the Dolphins are paying Wallace to play against them.
When Mike Wallace hit free agency after success with the Steelers, he was banking on
the fact that he could maintain that success with another team, or that leaving would force the
Steelers to increase whatever contract offer they had initially put forward. This gamble can
work out very well in some cases, i.e. Joe Flacco of the Baltimore Ravens, who won the Super
Bowl the year after declining a contract extension with the Ravens and subsequently forcing
them to pay top dollar to retain their quarterback. It is possible that the Steelers called
Wallace’s bluff and he was then forced to seek out another team or it could have been the case
that Wallace was going to go to whoever offered him the most money. Either way this was
clearly not a smart strategy and clearly backfired on both Wallace and the Miami Dolphins.
While Wallace is still making an inflated amount of money despite his lack of production, his
brand, image and value have forever been tarnished in the National Football League.
While not a massive disappointment like Wallace, Dwayne Bowe signing with the
Cleveland Browns after leaving the Kansas City Chiefs was an odd signing. Dwayne Bowe failed
to record one reception in the 2015 season with the browns where he played fewer than 50
snaps the entire season. This, one year removed from being the #1 receiver in a receiving corps
that did not catch a single touchdown the entire season (fourth team in NFL history do to so).
That being said, there is no way Bowe should have had any guaranteed money when he signed,
but a contract based around performance and playing time bonuses; the Cleveland Browns
thought otherwise and ended the season with only three wins and the second overall pick in
the 2016 draft. Bowe’s contract with the Browns was for two years with a $1.75 million signing
bonus and $100,000 “workout bonus” for 2015 and 2016 according to spotrac.com. While
4. these are not huge numbers by any NFL standard, the contract would count nearly $4.5 million
against the Browns’ salary cap for a non-factor and wasted roster spot.
From his own perspective Bowe essentially bet on himself with a back-loaded contract
that would rely upon his own production on the field. Unfortunately Dwayne barely saw the
field and did not take advantage of the few opportunities that did come his way. While the
Cleveland Browns had a dreadful season without Bowe, it is hard to imagine any one player
could have reversed that. While Bowe almost certainly added a veteran presence to the
meeting rooms and helped rookies develop, his ultimate lack of production led to the
termination of his contract after the 2015 season.
How professional sports teams manage their salary cap can tell you a lot about how
they choose to run their organization, their overarching philosophies and decision making
processes. Does a team choose to gamble and pay lots of guaranteed money to the big name
star players, or do they invest in their own prospects who might not have the big name but help
the team on the field, in the locker room and in the community. What does your favorite team
value, how do they choose to approach contracts and how does that impact their community
and their fan base?