Fully Guaranteed Contracts?

[SteelCityColt]

Given we're into the realm of FA and contract numbers being announced that are not really a true representation of the deal, I figured I'd ask the cap/contract heads on here a question I've been thinking about.

 

If the NFL was to move to fully guaranteed contracts (with some suitable get outs I'm sure), how do we think this would affect the market and the strategy of teams in FA? You'd figure the "overall" value of contracts would probably dip, but only to a value that is in line with what teams are on average actually paying players or slightly below. 

 

Do we think too, we'd seem more players willing to take the Revis approach and back themselves to play through a number of 1/2 year contracts and continually test the market to garner the most money? But then with more players doing this do you see a devaluation of contracts as the supply increases. 

[Valpo2004]

Actually the 1 or 2 year contracts would probably be on the team's part, not on the players.

 

Msot players don't take the Revis approach, not because they don't have his talent but because they want some financial security of some guaranteed money and are willing to sacrifice a total # to get it.

 

I don't think the NFL can do fully guaranteed contracts.  It's just too high of an injury sport.  

[SteelCityColt]

2 hours ago, Valpo2004 said:

I don't think the NFL can do fully guaranteed contracts.  It's just too high of an injury sport.  

 

I think if, as you say, contracts of 1-2 years become more of the norm this is less of a factor. 

 

I do think that we are seeing more "proven" players rolling the dice on 1-2 year deals (Suh springs to mind), but if there were fully guaranteed contracts going for 1-2 years then more go for it. Take Funchess, I think it's what 7 million guaranteed. He might have not got much more than this in guaranteed money over 2 over 2 years (by all accounts what we offered originally). He's backing himself to have a break out season and cash in next year. 

 

What I do think will stop the league from going down this route is parity. If you create a much more fluid market, where players are more free to move teams every 1-2 years, I think you'll see teams more able to stockpile talent. For example, I can take a chance with a team who are going "all in" chasing a ring. If it goes down in flames I know I can walk away and try again somewhere else. 

[Superman]

Let's talk about this.

 

1) There's no rule preventing fully guaranteed contracts in the NFL. This is not a matter for collective bargaining. (Same is true in the NBA and MLB; contract guarantees are almost always a point of negotiation for individual players.)

 

2) One of the lesser known and talked about NFL rules is the fully funded guarantee rule. It's arcane and probably not necessary anymore, but way back when some teams didn't have dependable cash flow, the NFL required any fully guaranteed dollars to be placed in escrow. So if you signed a player for two years, $10m, fully guaranteed, that $10m had to be paid into escrow right then. It made sure the player received the money he was "guaranteed." This rule still exists, and no doubt impacts contract structure, rolling guarantees and the dates those guarantees are effective, etc. 

 

3a) A lot of noise was made about Kirk Cousins' fully guaranteed contract. Three years, $84m, guaranteed at signing. Excellent. But it wasn't a drastic departure from how franchise level NFL QBs usually get paid. Three years ago, Andrew Luck signed a contract that fully guaranteed only $44m at signing, but effectively guaranteed him $75m over three years. The primary difference was the schedule on which money was guaranteed, but in practice, it would have been prohibitively expensive for the Colts to try to terminate that contract within the first three years. Last year, Alex Smith signed a contract that fully guaranteed only $55m at signing, but effectively guaranteed $71m over three years.

 

3b) And that's typical, not just for QBs, but for any franchise level player. (Khalil Mack's contract effectively guarantees $90m over four years.) Even though the full guarantee differs from the effective guarantee, the money is still virtually certain to be paid. So, in practice, Kirk Cousins getting three years fully guaranteed isn't anything out of the ordinary, except for the fact that it was fully guaranteed at signing. 

 

4) More to the point of the initial question, fully guaranteed contracts would likely cause teams to be more frugal in free agency. If you want a fully guaranteed deal, it's going to be a two year deal, three at most. And since the length of the contract is shorter, we don't have those extra two or three years at the end with higher base salaries (that the team views as options) to inflate the yearly average of the deal. So Trenton Brown isn't getting a four year deal at $16.5m/year, he's getting a two year deal at $13m/year (based on the details of his contract). 

 

5) It would also make it more difficult for bad teams with inflated contracts to get good. It would lead to underperforming players on big contracts getting paid more than is justified, and prevent other players from getting contracts that would be justified. Timofey Mozgov is still making $16m/year; Albert Pujols is averaging $29m/year over the next three seasons. How much of that money should go to players who can actually help their teams win games?

 

6) If players really want to maximize earning, and not just win the reporting cycle in free agency, they would negotiate a four year deal with mutual options after Years 2 and 3. The team already has an option to kill the contract in most cases; a player option gives the player the opportunity to get another bite at the apple if he's outplaying the deal. This is essentially what Nick Foles did. Instead, they'd rather sign a longer term deal that includes money they most likely will never see, in the name of "security."

 

I think this conversation has become "a thing" because media and fans have started to understand that a player's seven year, $100m contract is really two years, $30m, "and then we'll see," and they feel like NFL contracts are somehow dishonest or deceiving. There's a good article about this on The Ringer today, and it dials into how agents played a big part in the way contract details have been reported over the years. It also highlights how infrequently a player actually plays out his entire multi-year contract. 

 

I've said it before, and I fully believe it so I'll say it again: fully guaranteed contracts are bad for the NBA and MLB (see: Mozgov and Pujols), and because of the violent nature of football and the larger roster size, they would be worse for the NFL. The freedom that NFL teams and players have with contracts as they are now makes it possible for teams to retool their rosters on the fly. It's up to players and their agents to take greater control of the process and the narrative -- similar to Cousins -- to maximize their earnings and work the cap rules to their advantage.

[SteelCityColt]

@Superman, even by your standards I'm astounded, so much nuance I hadn't even begun to consider. 

 

I was aware of the escrow rule (mainly because you've brought it up before!). I do think we under appreciate how much accounting technicalities will play into how teams do things. They are businesses after all, and things like cash flow do have to be thought about. I always find it funny too that we put everything on the GM when in the reality they can't afford to get bogged down in every minute detail. That's why you have capologists etc. Obviously they have the final sign off but still. 

 

Thanks for the Ringer article, I will digest it properly as it seems quite thorough. You're right about the root of the conversation, personally it was Gregg Roesenthal at nfl.com for me. He's been on a bit of a drum beating crusade every FA for the least few years how the numbers are almost just vanity/promotion for the agent and player. 

 

I agree that contracts would get more frugal and shorter, but I guess the knock on effect of the players not having the optional back loaded years is that they are free to test FA. They wouldn't surely have realised those options unless there play demanded it, and if you're playing well you'd hope you could get that sort of value on the market. I guess the flip side is that it might kill the "sign your own" philosophy for teams.  

[Valpo2004]

Rumor is that the Raiders traded Mack away because Mark Davis didn't have enough cash on hand to put in to an escrow for what he would want in guaranteed money.  Don't know how true that is though.

[Superman]

15 minutes ago, SteelCityColt said:

I agree that contracts would get more frugal and shorter, but I guess the knock on effect of the players not having the optional back loaded years is that they are free to test FA. They wouldn't surely have realised those options unless there play demanded it, and if you're playing well you'd hope you could get that sort of value on the market. I guess the flip side is that it might kill the "sign your own" philosophy for teams.  

 

If the player is playing well, he most likely feels like he could do better on the market than he's doing with the contract he signed two years ago. Not to mention new guarantees (see: Antonio Brown, basically every year for the last five years).

 

By the way, this is the reason teams don't do it, in most cases. Brian Billick said 'the first three years are for the player, the last three years are for the team.' Translation: You're getting a frontloaded deal that favors you initially, but it favors the team on the back end, so don't ask for an early extension if you outplay your deal. The team has an option to terminate the contract early, but the player who could command more money doesn't. 

 

You don't have to change the rules to address this inequity. Just negotiate better, with full understanding that there's no benefit for the player to sign a six year contract for $60m when you could sign a four year deal for $40m. If you get hurt or your play falls off, you're not getting that extra $20m; if you're still playing well, you can still get that $20m when you hit free agency again, and maybe more.

 

As for how it would impact 'sign your own' teams, I don't know. Look at Ballard. Will he ever do more than a three year deal? He hasn't yet, not even for his own guys. We'll see what he does when it's time to re-sign Kelly, and others. He probably overpaid for Funchess to give a one year deal. I think players asking for shorter contracts would be music to Ballard's ears. Every GM has their own contract philosophy, but teams already look at contracts as year to year deals, especially once the guaranteed money is paid.

 

Nick Foles' contract with the Eagles is an exercise in player control. The Eagles had an option for Year 2, which they exercised, but Foles had an option to buy out Year 2 by paying back his $2m signing bonus. That's nothing when he's signing a new deal with $50m guaranteed (as reported so far). The Eagles could have tagged him at $23-25m, and again, he would have come out ahead, money-wise. 

 

So instead of a one year "prove it" deal (and by the way, every one year deal isn't a "prove it" deal; I don't see $10m for Funchess as a "prove it" deal), do a three year deal with a mutual option after the first year. If Funchess blows up in 2019, wouldn't he pay back $2m to effectively buy his free agency, or force the Colts to tag him?

 

Just saying, rather than focusing on yearly average and reported guarantees, shift some focus to contract length and player flexibility. Especially if you want to maximize earnings.

[Superman]

4 minutes ago, Valpo2004 said:

Rumor is that the Raiders traded Mack away because Mark Davis didn't have enough cash on hand to put in to an escrow for what he would want in guaranteed money.  Don't know how true that is though.

 

That cash flow rumor came up again this year. It's possible. He was already cash poor (in NFL terms, of course), then they have to pay for their Vegas move, it sounds like the new Oakland lease is going to cost more money, they have to pay a relocation fee, etc. 

[Finball]

2 hours ago, Superman said:

 

 

3a) A lot of noise was made about Kirk Cousins' fully guaranteed contract. Three years, $84m, guaranteed at signing. Excellent. But it wasn't a drastic departure from how franchise level NFL QBs usually get paid. Three years ago, Andrew Luck signed a contract that fully guaranteed only $44m at signing, but effectively guaranteed him $75m over three years. The primary difference was the schedule on which money was guaranteed, but in practice, it would have been prohibitively expensive for the Colts to try to terminate that contract within the first three years. Last year, Alex Smith signed a contract that fully guaranteed only $55m at signing, but effectively guaranteed $71m over three years.

 

3b) And that's typical, not just for QBs, but for any franchise level player. (Khalil Mack's contract effectively guarantees $90m over four years.) Even though the full guarantee differs from the effective guarantee, the money is still virtually certain to be paid. So, in practice, Kirk Cousins getting three years fully guaranteed isn't anything out of the ordinary, except for the fact that it was fully guaranteed at signing. 

 

Great post and Cousins contract wasn't drastic departure in terms of guarantees but the length was drastic (no team friendly years). He can hit the market again in 3 years (2 right now) and maximize his earnings. He also had no transition tag clause and no trade clause. Most player friendly deal ever. The benefits of being starting QB in FA. 

 

 

OP brought up Revis and Revis singed all kinds of deals to maximize his earnings. 1 year deal with a team option for another (Pats). Long, guaranteed rookie deal which he held out and which are possible no longer (Jets). Long-term deal which was essentially 1 year deal (Bucs). Then the traditional long-term deal with couple of years guaranteed and few more non-guaranteed (Jets again).

[NFLfan]

1 hour ago, Finball said:

He can hit the market again in 3 years (2 right now)

 

I am pleased about that. Cousins is not a winning player. We should never have signed him to over $22 million/year. The best thing about his contract is that it is short. I wonder if Miami or another team would trade for him. (Yes, I know that he has a no trade clause. .)