Every now and then, Bent’s Game Analysis likes to branch out and investigate CBA or salary cap issues in depth. In light of the fact that some of the 2011 first rounders have started to receive long-term contract extensions, we’re going to assess what this means for Muhammad Wilkerson.
A couple of days ago, Cardinals cornerback Patrick Peterson became the first of the players selected in the first round of the 2011 draft to receive a contract extension. Under the new CBA rules, it was not permitted to extend these players until after their third season in the league. Peterson was reported to have received a five-year extension worth $70m and with $48m in guarantees. Then, yesterday, came the first signs that the floodgates might open for the elite players from that class, when Cowboys tackle Tyron Smith received an extension that was reported by some sources as a mind-boggling $110m, eight-year deal with $40m in guarantees.
This is obviously going to get people talking about when Wilkerson will get his extension and what it might look like.
Let’s get one important thing out of the way before the jump, though. There is no controversy, no threat of a holdout and no signs that Wilkerson is disgruntled or that anything of that nature on the horizon. No matter how hard the media try to manufacture something that isn’t there, that’s clearly not an issue right now, so this article merely addresses the financial impact of the deals made so far.
After the jump, we reveal how those contracts, as usual, are not quite as big as the initially-reported numbers would lead you to believe and try to assess where this leaves Wilkerson in terms of the timing, size and structure of his pending contract extension.
Before we start, a quick recap of the current landscape for 2011 first round picks. These were the first draftees to have their rookie deals come under the new CBA, which puts significant restrictions on the types of clauses you can include, when you can restructure the deals and how they can be structured. Until the end of the 2013 season, teams were not permitted to restructure or extend any of these deals, but now that we’re past that date, teams are under pressure to extend players like JJ Watt, whose current salary isn’t really commensurate with his production and impact.
Unless someone selected in the first round of that draft has been a disappointment, it was a no-brainer for teams to exercise the team option available to them at the end of that third season. That adds a fifth year to the player’s contract, keeping them under team control through 2015, with an option to franchise them still existing at the end of the deal. The salary in that fifth season is based on an average of the top salaries at each player’s position with top ten picks seeing their salary based on the average of the top 10 but picks 11-32 based on the top 25, excluding the top two.
Media speculation was that in most cases this will mean teams will try and keep the player on their original deal as long as possible, especially in light of the fact these average salaries were potentially going to be lower than previously expected. However, while that might happen in a few cases, it’s more likely that teams just use this as leverage to get an extension inked at the appropriate time. For some teams, that time is now, whereas for others it will be next year. Teams and players were well aware of the fifth team option at the time the rules were introduced and when the first contracts were signed, so those teams that have exercised options likely won’t have surprised anyone and would have limited effect on the contractual expectations of all involved parties.
Reviewing the Peterson deal
As noted, Peterson’s deal was reported as a five-year extenstion, worth $70m and with $48m in potential guarantees. However, PFT got the details and the most important thing to note is that the extension is effectively bolted onto the end of his existing contract, so Peterson remains under contract for seven years, during which time he is due to earn approximately $82m.
So, yes, the extension is worth $14m per year in new money (and he actually got $10,000 per year over that amount so he could claim to be the highest paid), but the effect is that he’ll be earning under $12m a year.
The main reason this distinction has to be made is because the team is using the leverage having him under control for a few more years provides them with to keep the total contract value down. Peterson does receive his signing bonus (just over $15m) now – and $3m counts against the current cap – but otherwise his salaries for the next two years would basically be the same. I assume the salary they’re giving him for 2015 is a rough approximation of what they expect the average of the top ten salaries will be at that point. ($11.6m sounds about right).
You need to be able to differentiate between new money and total contract value to cut through the propaganda where people with agendas can massage the figures to make it look like a good deal for the team and a bad deal for the player or vice versa. As an example, when David Harris signed for $9m per year, people compared that to Patrick Willis, who had signed a $53m deal over seven years. However, Willis had two years and $3m left on his contract when he signed that deal so really it was $10m per year in new money. At the same time, Harris had played his contract right to the end, so he was only really set to earn $7.4m per year over a five year period.
The final point is in respect of guarantees. The $48m doesn’t constitute full guarantees, at least at the outset. Obviously the $15m signing bonus is fully guaranteed and his 2014 salary was already guaranteed. Beyond that, his 2015, 2016 and 2017 salaries are guaranteed for injury only and will become fully guaranteed as he reaches the beginning of each season. It looks like his workout bonuses have been included in the guarantees as well.
Reviewing the Tyron Smith deal
As noted, Smith was reported to have received an eight-year deal and $110m. However, Jason from OTC has the actual details here. The most important distinction to make here is that the $110m includes the money he was already due to receive over the last two years of his deal. In addition, the eight years are bolted onto the end of these two years. So…he is actually getting $110m but over ten years.
So, in new money, he’s getting $98m over eight years. Even that’s somewhat misleading though, because the last two years have high salaries totalling over $27m and include zero guarantees. So, it’s essentially a much-more-in-line-with-the-current-market $70m extension over six years. Of course, by 2022 (wow!) inflation and rising salary caps generally could make those final two years reasonable, if Smith’s level of play is still considered elite into his thirties. Note: Smith will be 30 in 2020, which is also the year that the current CBA expires.
You don’t often get deals longer than six years these days, because bonus money can only be prorated for six years under the current rules. Therefore, it is probably a good gamble for the Cowboys to tack those extra two years onto the end of the deal where there are no comparables. Dallas is a rare case of a team where the agents will want the deal to look as big as possible, but also the Cowboys owner will relish letting everyone know he’s writing a nine-figure sum in his checkbook without blinking.
That $70m compares favorably with the extension the Jets gave to D’Brickashaw Ferguson which was worth a maximum of $73.6m over six years, but really was worth $60m. However, since this was signed four and a half years ago, that’s just a sign of how the top end of the tackle market has moved. You may recall that the Ferguson deal was bashed by Team Revis (via PFT) because of the lack of “fully guaranteed” money, but the rolling guarantees structure is something adopted commonly these days, including in the Peterson deal above. Again, Ferguson got his extension with two years remaining on his deal but it didn’t kick in until the last year of the deal.
Smith’s deal does have full guarantees in the first two years (which is actually the last year of his existing deal and the first year of the eight-year extension), but when added to his signing bonus, these still only comprise $22m rather than the reported $40m. The difference is attributable, it would seem, to his already-guaranteed 2014 salary, workout bonuses and his 2016 salary which is another rolling guarantee.
The key to these deals and pretty much every big money deal that has been signed recently is that they do allow the teams to use the leverage of the years remaining on the deal to keep the contract value down. As Jets fans, we need to remove ourselves from the mindset of the advisors for Darrelle Revis (and to a lesser extent Leon Washington) whereby those players expected to have their existing deal torn up and a new deal starting from that point.
Such deals are extremely rare at this point, but Revis used the threat of a holdout – something which has been somewhat mitigated by the more stringent anti-holdout measures in the new CBA – to leverage this situation a couple of times. His four-year extension in 2010 came with three years remaining on his deal. So, basically, it was a one-year extension for $25m in new money. On this occasion, his advisors could not afford to portray the contract in that light because Revis had actually painted himself into a corner by telling New York media that he wouldn’t be seeking $20m per year because that was “ridiculous”.
The deal Smith signed is somewhat reminiscent of the deal Revis reportedly turned down in 2010. He was reported by Newsday’s Bob Glauber to have received an offer for 10 years and $122m (obviously including the three years and $21m remaining on his deal). That would have enabled the deal to be described as a $100m extension and $14.4m per year in new money. Revis and his team turned down the deal on the basis that there was no full guarantees, despite the fact the Jets claimed to be flexible on structure. In the modern market, these kind of deals are being made with elite players with Revis merely the exception that proves the rule.
Watt’s on the horizon?
A lot of people are anticipating that the Jets will either (a) want to wait until JJ Watt gets his extension, so that his deal can set the market, or (b) want to rush to get the deal done before Watt gets his extension, so that his deal doesn’t drive prices upwards.
The speculation about the possible size of his deal is widespread, ranging from OTC’s projection that he gets a short term $14.5m per year extension to Spotrac’s suggestion that his true value is $23m per year and Joel Corry’s suggestion that even this is undervalued.
Ultimately, I’ve got a sneaking suspicion that Watt might have shot himself in the foot with his recent comments about how dedicated he is to being the best player he can be and the Texans might just insist on him playing out his deal and then franchise him and let some other team do the negotiation for them, pocketing two first round picks if they decide not to match. Either way, I don’t think the Jets should let the Watt situation dictate their thinking in respect of Wilkerson.
One more thing to take into account with regard to Watt and Wilkerson is that they were not top ten picks, so their option year salary is going to be less than for Smith and Peterson, thereby giving the Jets and Texans a little extra leverage.
While these recent deals might have had some eye-popping numbers to make us wonder what Wilkerson might be worth, digger deeper there’s some good news. While Wilkerson’s eventual deal will almost certainly produce some shocking baseline numbers, these deals suggest that at least teams are structuring these deals to take into account the remaining years on the deal.
Both Peterson and Smith are interesting cases who cannot really claim to be the best at their position, but are in the upper echelon and still young enough to continue to improve. Wilkerson is at least that good and arguably better – although the fact he is yet to make a pro bowl and has the lower salary in year five hurts his bargaining position a little. He’s also difficult to find a comparison for because he plays both as a tackle and defensive end.
These new deals are right at the top end for their respective positions, but at least they are not driving those prices upwards, which is another good sign. In fact, Jason wrote today how Smith’s deal doesn’t really make him the highest paid.
In a lot of these cases, the additional cap room required upfront has been extremely low. The Jets have the luxury of plenty of cap space remaining in the current year, so may opt to increase salaries in 2014 or 2015 rather than pay a big signing bonus (or, better still, pay it as a roster bonus so Wilkerson doesn’t have to wait for his game checks to reap the rewards). However, I wonder if the team will be reluctant to do this given how they were burned by Revis claiming he was underpaid twice based on his current year salary/cap number without accounting for his frontloaded deal. As you can roll money forwards with no limits, it might be better for the Jets to make a deal with a similar structure to these recent ones and draw on their current surplus cap room over the next few years as Wilkerson’s cap charges rise, eating into their current year surpluses.
As noted, it’s difficult to pin a value on Wilkerson, but I’ve been suggesting 75% of whatever Watt might get as a reasonable ballpark figure. On the basis of the OTC and Spotrac projections, this would put him on a deal of somewhere between $10.5m and $17m per year. If we split the difference and call it a five year, $13.75m deal that would work out as just under $11m per year over the next seven years, assuming they take into account the existing two years on his deal.
Looking around the league, that seems reasonable based on the values of some other top contracts. Calais Campbell got a five-year extension for $11m per year, as did Gerald McCoy. Haloti Ngata and Ndamukong Suh both had deals with an average value of over $12m but less than $13m. Remember, these are the values of their extensions and don’t account for the years remaining on their existing deal when signed. The only defensive linemen in the league with average contract values over $13m are Mario Williams (who clearly seems to be established as an outlier) and Greg Hardy (who was franchised).
On the basis of these deals, it would be very difficult to push the value of Wilkerson’s deal above $13m and even if it was at that level, less than $11m per year over the next seven years is affordable, especially with the cap surplus they already have. Taking into account Wilkerson’s reputation, production and attitude, I’d say he can make a convincing argument that he deserves the same kind of money as Campbell and McCoy, perhaps with a small inflationary bump, but likely not more than that. Maybe a deal like that given to Chris Long (just over $12m per year) is a realistic target.
With other deals happening that are being structured in a way that would seem to suit the Jets, a deal could in theory be completed any time. Now the challenge is for the two sides to come to some kind of agreement that works for both sides. Let’s hope that happens behind the scenes.
Previously: Salary Cap Update: If a storm is brewing, will Mo be high and dry? [TJB