What if: Fully Guaranteed Contracts in the NFL

[Time to Mo Vaughn]

There's been a lot of discussion in the Steelers thread about Bell, plus other random threads across BBTL every time a young player has a major injury about how the NFL is such a violent game with horrible injuries that all contracts should be guaranteed like the other major sports.

I've been thinking recently about what would the impact be to the league if that were the case. I certainly don't expect that to cause the salary cap to increase, so you still have the same pool of money available to the players, so what would we actually see in the league.

We can draw a little bit from the other major sports, but there's some economic factors that make their situations unique:

• MLB - There's still a major difference in the salaries of pro teams from the top 4 teams all over $194M, the league average at $139M and lowest team at $68M. The salary/tax luxury cap has had an impact here in that the richest teams can't just buy their way out of mistakes by trading players to non-contending teams and covering their entire contracts. We do see teams, like the Red Sox with Hanley and Sandoval, willing to completely cut bait on players that are below replacement value. We've also seen a little bit of the non-guaranteed contract impact with opt out clauses and player/team options in recent years.
• NBA - Very complicated structure with many teams over the cap and the rules that govern signing players. Potentially most interesting is the idea of a max contract and how that has shaped the league over the last few years.
• NHL - I'm a casual hockey follower, but honestly don't know the economics well enough to comment.

I do think we'd see the following if contracts were fully guaranteed in the NFL:

• QBs continuing to get the biggest money. While injuries are common, we don't see a ton of career ending injuries hitting QBs compared to many other positions.
• Lower contract value and shorter years. There's going to be less money to go around if there are players receiving money for guaranteed contracts unable to play (or play about replacement level) already taking up a chunk of the cap space.
• More 1 year deals and player movement
• Worse product on the field, harder for fringe players to break into the league

This is all completely hypothetical, so I think we should forego the argument that the players should just be receiving a larger piece of the owner's pie because I think most of us already agree with that. I'm just not sure I buy that guaranteed contracts would be as massive a benefit for players as many think.

 

[InstaFace]

There's one derivative effect of your second bullet, too: teams would need to preserve some fraction of their cap as replacement-player cap space, to sign new players to minimum deals when others go down. So teams really couldn't tap themselves out.

 

[singaporesoxfan]

I think your second bullet is more better phrased as "lower headline contract value and shorter years". The backend of many long NFL contracts are essentially either phantom dollars that the player will never see, or an option for those cases where the player continues to outproduce, which has value for the team.

Also your second part of the second bullet reads as an implication of the shorter contracts, but I think they are for the most part opposites: there will either "be less money to go around if there are players receiving money for guaranteed contracts unable to play" or - as a logical consequence of owners not being willing pay for that risk - there will be shorter contracts, but the same amount of money is going around.

 

[wade boggs chicken dinner]

I do think we'd see the following if contracts were fully guaranteed in the NFL:

• QBs continuing to get the biggest money. While injuries are common, we don't see a ton of career ending injuries hitting QBs compared to many other positions.
• Lower contract value and shorter years. There's going to be less money to go around if there are players receiving money for guaranteed contracts unable to play (or play about replacement level) already taking up a chunk of the cap space.
• More 1 year deals and player movement
• Worse product on the field, harder for fringe players to break into the league

This is all completely hypothetical, so I think we should forego the argument that the players should just be receiving a larger piece of the owner's pie because I think most of us already agree with that. I'm just not sure I buy that guaranteed contracts would be as massive a benefit for players as many think.

It's an interesting question and I agree that guaranteed contracts probably won't hurt the owners as much as people believe. After all, most players other than late-round picks, undrafted FAs, and guys on the waiver wire already are receiving some form of guaranteed money so I don't know how big of a change it will be. The biggest change will be that the "fake years" that owners add to the contracts to spread out cap hits will be gone so the cap may be, in effect, more of a hard cap - and that could benefit the owners.

So, for example, Gurley got a 4 year extension with a $21M signing bonus and an additional $24M in guaranteed money for a four-year extension to his rookie deal. If contracts were guaranteed, if a deal gets done at all, it's maybe a three-year extension for probably something like $30M-$35M. Probably not a huge change from what he's going to get paid.

Not sure why you are saying the bolded though. I agree with your later assertion that guaranteed contracts aren't going to be a massive benefits to the players. Wouldn't it be correct that guaranteed contracts might actually add to the pie because owners won't have as much "dead money" on the cap?

The biggest effect of guaranteed contracts would be on drafted rookies but I don't think it would be on a money level. I think the owners would require as a condition of guaranteed money that rookie contracts be for two years with two years of team options added on (like the NBA). So drafted rookies would be at approximately the same place but the contractual structure would change.

 

[singaporesoxfan]

I
Not sure why you are saying the bolded though. I agree with your later assertion that guaranteed contracts aren't going to be a massive benefits to the players. Wouldn't it be correct that guaranteed contracts might actually add to the pie because owners won't have as much "dead money" on the cap?

Yup - you either have shorter terms (much more likely) or you have injured/non-performing players in like the 4th or 5th year of their guaranteed contracts taking up cap space, but you won't have both happening, or you'll have that happen only to teams that make bad decisions to give long-term guaranteed contracts, which I don't see as a bad outcome

 

[Time to Mo Vaughn]

Yeah, you guys both have it right. By my own assertion, there can't be less money going around. I think SSF's statement of less headline contracts is closer to what I was thinking, so the best players may get less money overall because of the risk, but the middle tier players may see a bit more. If anything we should see larger contracts for players going more of the year to year route.

 

[pappymojo]

I think the biggest obstacle to fully guaranteed contracts is the high injury rate in the NFL, but it's bullshit that the high injury rate is, in effect, penalizing the players, when they are the ones suffering the injuries.

I would propose that for fully guaranteed contracts, injury salary insurance be implemented for the team's salary cap. If a player under a guaranteed contract suffers a season-ending injury, the player should receive their money, but the team should receive pro-rated one-year salary relief. This would allow them to sign a replacement level player. If a player suffers a career-ending injury, the player receives their full contract, and the team receives both pro-rated, one-year salary relief for that season, plus salary relief for the remainder of the contract at the conclusion of the season.

 

[BaseballJones]

out clauses and player/team options in recent years.

• NBA - Very complicated structure with many teams over the cap and the rules that govern signing players. Potentially most interesting is the idea of a max contract and how that has shaped the league over the last few years.

I hate that the NBA has both a team salary cap and an individual salary cap. Let's say the team cap is $101 million. A team should be able to pay LeBron $78 million if it wants. Sure, they won't be able to field a competitive team, but that's their problem.

 

[Vinho Tinto]

Let's say the team cap is $101 million. A team should be able to pay LeBron $78 million if it wants. Sure, they won't be able to field a competitive team, but that's their problem.

Why would the player’s union sign off on this scenario?

 

[BaseballJones]

Why would the player’s union sign off on this scenario?

Why wouldn't they? It's the same amount of money for the players. Just distributed differently. As a negotiation tool, they could keep the salary cap what it is but raise the minimum salary, which naturally would reduce the max salary any one player would make, but it would still be much more open than it is now. Why shouldn't LeBron make $45 million if a team is willing to pay him that?

 

[Super Nomario]

I think the biggest obstacle to fully guaranteed contracts is the high injury rate in the NFL, but it's bullshit that the high injury rate is, in effect, penalizing the players, when they are the ones suffering the injuries.

I would propose that for fully guaranteed contracts, injury salary insurance be implemented for the team's salary cap. If a player under a guaranteed contract suffers a season-ending injury, the player should receive their money, but the team should receive pro-rated one-year salary relief. This would allow them to sign a replacement level player. If a player suffers a career-ending injury, the player receives their full contract, and the team receives both pro-rated, one-year salary relief for that season, plus salary relief for the remainder of the contract at the conclusion of the season.

The problem is, for the owners, they now are paying extra money in real dollars. That's exactly what the salary cap is supposed to prevent.

Why would the player’s union sign off on this scenario?

It's the owners who don't want this. They want not only to limit their costs, they want to be able to control the players. That's why the max contract exists, why the Larry Bird Exception exists, why the max contracts are higher for a team re-signing its own players, and why the Franchise Tag exists in the NFL.

 

[Cesar Crespo]

Why wouldn't they? It's the same amount of money for the players. Just distributed differently. As a negotiation tool, they could keep the salary cap what it is but raise the minimum salary, which naturally would reduce the max salary any one player would make, but it would still be much more open than it is now. Why shouldn't LeBron make $45 million if a team is willing to pay him that?

Because it hurts the many to benefit the few. Removing the max would hurt guys like Kelly Olynyk, Marcus Smart and other non max players just so LeBron could get paid more.

I hate the max contract, but it's not going anywhere unless every team goes with 3 max players, vet min guys, and guys on rookie deals.

edit: FWIW, he's making $36 mil this year. Not all that far off your $45. In an open market, he'd get 60+

 

[BaseballJones]

Because it hurts the many to benefit the few. Removing the max would hurt guys like Kelly Olynyk, Marcus Smart and other non max players just so LeBron could get paid more.

I hate the max contract, but it's not going anywhere unless every team goes with 3 max players, vet min guys, and guys on rookie deals.

edit: FWIW, he's making $36 mil this year. Not all that far off your $45. In an open market, he'd get 60+

So why don't the NFLPA or MLBPA (not a true salary cap but the luxury tax is a form of a salary cap) argue for a max individual contract on the same principle? Why shouldn't the players union want LeBron to get as much as he can?

 

[Cesar Crespo]

So why don't the NFLPA or MLBPA (not a true salary cap but the luxury tax is a form of a salary cap) argue for a max individual contract on the same principle? Why shouldn't the players union want LeBron to get as much as he can?

Why should the players union want 90% of NBA players to take a pay cut for LeBron James, KD, Steph, Harden etc? The fact is, the max contract already exists and the players aren't going to vote against it any time soon.

 

[reggiecleveland]

So why don't the NFLPA or MLBPA (not a true salary cap but the luxury tax is a form of a salary cap) argue for a max individual contract on the same principle? Why shouldn't the players union want LeBron to get as much as he can?

I would say owners are more likley to pay a few guys lots in the NBA, while shorting the others because:

Star players in basketball make a bigger impact both on the court, but in terms of fan appeal than other sports. For example when Steve Nash played for Canada they scored 15 more points a game and were top 4 in the world, and the games were on TV, when he didn't play top 20 (maybe). Joey Votto would not move Canada to the top in Baseball.

At very least the perception in basketball is one of the top 4 or 5 players is needed to be a contender, where other sports some top 5 at their position guys are needed. The Bruins are a good example of this, as is the Celts willingness to part with assets for Kyrie.

Basketball performance tends to be more predictable. Less likely Lebron or Curry blow out their elbow, or simply slump reducing value.

NCAA provided cheap ready to play players for the NFL, NBA, but more bodies are needed for football, and the only other option (the CFL) does not pay well while the Euro league will pay hoops guys millions. If starters are reduced to vet minimum they would flee to Russia, Spain for more money.

Endorsement money in hoops is spread over fewer guys at the top, so the top tier guys can make back some of which they sacrifice for the good of the union.

 

[BaseballJones]

Why should the players union want 90% of NBA players to take a pay cut for LeBron James, KD, Steph, Harden etc? The fact is, the max contract already exists and the players aren't going to vote against it any time soon.

Yeah I don't think it's going away.

But based on your logic, why not have the max salary be even less, so that even more money goes to the vast majority of guys in the league?

 

[Cesar Crespo]

Yeah I don't think it's going away.

But based on your logic, why not have the max salary be even less, so that even more money goes to the vast majority of guys in the league?

Make it that much less and LeBron goes to Spain. I dunno. They originally made the rule because they were afraid a lot of teams couldn't afford the top players and the players signed off on it because it benefited most of them.

 

[InstaFace]

The Max Contract spreads the wealth around to a lot more players, since most teams spend up to or over the cap. You don't have to be a socialist to see the value in that - diminishing marginal returns, etc.

Keeping the cap but not the max contract would also mean the league's top star players would never be on contending teams, unless they took an absurd discount.

But this thread is about the NFL. The difference between a team having ~6-8 non-minimum deals in the NBA vs ~30 in the NFL is a difference of kind, not just degree.

My proposal, which I've thrown around on this board before, would be to have all contracts guaranteed for the first $X MM. Maybe the first $2-3M. A marginal player gets injured -> they get their salary, which they need a lot more given their short shelf life. A star player gets injured -> they get something, but the team isn't out $20M and maintains flexibility. I think both owners and the union would see value in that middle road.

 

[lexrageorge]

<snip>...
My proposal, which I've thrown around on this board before, would be to have all contracts guaranteed for the first $X MM. Maybe the first $2-3M. A marginal player gets injured -> they get their salary, which they need a lot more given their short shelf life. A star player gets injured -> they get something, but the team isn't out $20M and maintains flexibility. I think both owners and the union would see value in that middle road.

That's not a lot different from what veteran free agents get today: they get a signing bonus, which is guaranteed, and then salary which can go to zero just about anytime.

IMO, the problem in football compared to all other sports is that young players entering the league are most impactful in their first 3 or 4 seasons. Hockey, baseball, and particularly basketball players have several seasons of prime earning years ahead of them by the time they enter free agency. Football players are stuck for 4 or 5 seasons making rookie scale, and due to injury may never see anything after that. Even baseball players can get good coin in arbitration after 3 seasons.

 

[reggiecleveland]

Am I wrong in that the sighing bonus is basically the guaranteed money. Would it be a big change to guaranteed contracts?

 

[mauf]

Iirc, Kirk Cousins’s contract is fully guaranteed. That’s still unusual, but the trend is toward more guaranteed money in veteran contracts.

Here’s a list of NFL contracts, ranked by the largest amounts of “practically guaranteed” money. If you looked at a list from five years ago, I’m almost certain that the guarantees have grown more rapidly than the headline numbers.

https://www.spotrac.com/nfl/rankings/guaranteed/

 

[mauf]

Am I wrong in that the sighing bonus is basically the guaranteed money. Would it be a big change to guaranteed contracts?

Players obviously benefit from the upfront cash, and of course a signing bonus is guaranteed, but these bonuses are used more as a mechanism for gaming the salary cap than as a way to deliver guaranteed money to players.

In addition to whatever signing bonus they receive, most veterans’ contracts also guarantee some portion of their salary for injury, for performance, or both.

 

[NortheasternPJ]

That's not a lot different from what veteran free agents get today: they get a signing bonus, which is guaranteed, and then salary which can go to zero just about anytime.

IMO, the problem in football compared to all other sports is that young players entering the league are most impactful in their first 3 or 4 seasons. Hockey, baseball, and particularly basketball players have several seasons of prime earning years ahead of them by the time they enter free agency. Football players are stuck for 4 or 5 seasons making rookie scale, and due to injury may never see anything after that. Even baseball players can get good coin in arbitration after 3 seasons.

I think baseball players are a bad example. They get a decent signing bonus up front, not a ton like they did before, then get to spend 1-5 years getting paid shit and working through the minors, then if they're in the 10% that make it up, they're on their rookie contract for 3 years.

I'd rather be Sony Michel, a late first round pick, that got $5m guaranteed and if you don't completely suck earn $9.6m over your first 4 years. Compared to baseball where a late first round pick will get about $2.6m and then gets to grind it through the minors. If you are one of the few players to make it in MLB, you do have a really long huge earning power which does make up for a lot of it, but with more players drafted, less room on rosters than NFL it's a lot less likely.

 

[Super Nomario]

Iirc, Kirk Cousins’s contract is fully guaranteed. That’s still unusual, but the trend is toward more guaranteed money in veteran contracts.

Here’s a list of NFL contracts, ranked by the largest amounts of “practically guaranteed” money. If you looked at a list from five years ago, I’m almost certain that the guarantees have grown more rapidly than the headline numbers.

https://www.spotrac.com/nfl/rankings/guaranteed/

That would be an interesting exercise. It strikes me as the sort of thing that fluctuates based on circumstance rather than inexorably moving towards more guarantees.

It's also important to note that while we scoff at the overall figures as funny money, the guaranteed figure can also be funny money. Cousins' contract is fully guaranteed, but in practice there's no difference between being fully guaranteed and, say, 85% guaranteed, because the dead money makes the player in effect uncuttable. Matt Ryan's 2018 - 2020 salaries are fully guaranteed, but what difference does it make? They can't cut him before 2021 anyway because he has nearly $60 MM in prorated bonus money. The puffed up guaranteed money makes headlines, just as the puffed up overall money makes headlines, but the devil is in the details.

Really, Cousins' accomplishment is not in getting fully guaranteed $84 MM over three years, which is not really any different than a number of other deals; it's that he's a FA after three years. I wonder if we'll see more FAs push for shorter contracts, which is where they really get leverage.

Players obviously benefit from the upfront cash, and of course a signing bonus is guaranteed, but these bonuses are used more as a mechanism for gaming the salary cap than as a way to deliver guaranteed money to players.

The bonuses appeal to each side for different reasons; obviously if they only worked for one side, they would happen a lot less.

In addition to whatever signing bonus they receive, most veterans’ contracts also guarantee some portion of their salary for injury, for performance, or both.

I would say most significant, long-term contracts do this. Of course there are a number of veteran contracts that are vet minimum deals or modest one- or two- year signings that contain little or none of this (though veterans get guarantees if they're on the opening day roster).

 

[lexrageorge]

I think baseball players are a bad example. They get a decent signing bonus up front, not a ton like they did before, then get to spend 1-5 years getting paid shit and working through the minors, then if they're in the 10% that make it up, they're on their rookie contract for 3 years.

I'd rather be Sony Michel, a late first round pick, that got $5m guaranteed and if you don't completely suck earn $9.6m over your first 4 years. Compared to baseball where a late first round pick will get about $2.6m and then gets to grind it through the minors. If you are one of the few players to make it in MLB, you do have a really long huge earning power which does make up for a lot of it, but with more players drafted, less room on rosters than NFL it's a lot less likely.

One difference is that Michel is 23 years old and played 4 years of college where he basically wasn't paid (wink, wink...). Many of those drafted baseball players are only 18 or 19. An MLB player at 23 is probably still a couple of years away from arbitration, but if he has made it to the majors by then and is a regular fixture on the roster, he can still expect something in arb.

 

[NortheasternPJ]

One difference is that Michel is 23 years old and played 4 years of college where he basically wasn't paid (wink, wink...). Many of those drafted baseball players are only 18 or 19. An MLB player at 23 is probably still a couple of years away from arbitration, but if he has made it to the majors by then and is a regular fixture on the roster, he can still expect something in arb.

I looked at this this morning before I posted and was very surprised how many of those drafted in the first couple rounds were not HS kids, but are 20-22 year olds.

https://www.mlb.com/draft/tracker

I didn't add them all up but half or so of the first two rounds are in their twenties. Sony was probably a bad example since he's a really old rookie.

 

[singaporesoxfan]

It's also important to note that while we scoff at the overall figures as funny money, the
guaranteed figure can also be funny money. Cousins' contract is fully guaranteed, but in practice there's no difference between being fully guaranteed and, say, 85% guaranteed, because the dead money makes the player in effect uncuttable. Matt Ryan's 2018 - 2020 salaries are fully guaranteed, but what difference does it make? They can't cut him before 2021 anyway because he has nearly $60 MM in prorated bonus money. The puffed up guaranteed money makes headlines, just as the puffed up overall money makes headlines, but the devil is in the details.

When we scoff at overall figures as "funny money", that's because a lot of times the player gets cut and never sees a penny of the non-guaranteed figure, so it exists largely as a way for agents to puff up how much they got or to puff up players' egos. That the non-guaranteed money turns out to be real money for some players, especially QBs, doesn't imply the inverse that the guaranteed money is funny money, or that the guaranteed number like Cousins' is puffed up in any way. All it means is that it is harder to do apples-to-apples comparisons of contracts.

 

[Super Nomario]

When we scoff at overall figures as "funny money", that's because a lot of times the player gets cut and never sees a penny of the non-guaranteed figure, so it exists largely as a way for agents to puff up how much they got or to puff up players' egos. That the non-guaranteed money turns out to be real money for some players, especially QBs, doesn't imply the inverse that the guaranteed money is funny money, or that the guaranteed number like Cousins' is puffed up in any way.

"Funny money" was a poor choice of words on my part, but "puffed up" is pretty accurate. On a lot of these big deals, the guy is not getting cut in the first two/three years anyway, because of his role / importance and also because the dead hit from his signing bonus makes him uncuttable. So the "fully guaranteed" salary makes the overall guaranteed figure look big and impressive, but it is not really materially different than if a much smaller amount was guaranteed.

Ultimately it's about structure. The overall money matters, the guaranteed money matters, but the real key is whether the structure of the deal makes it likely for the player to earn closer to the max or closer to the the guaranteed floor, and who has leverage at various points of the deal.

All it means is that it is harder to do apples-to-apples comparisons of contracts.

Bryce Johnston has done the most serious work in this space in which I'm aware; he calculated an "Expected Contract Value" for each contract based on its structure. He used to write for Over The Cap but now works for the Eagles.