Sando: Newton, Wilson and the new cost of NFL QB contracts

Newton, Wilson and the new cost of NFL QB contracts

Mike Sando

http://espn.go.com/nfl/insider/story/_/id/12954288/cam-newton-russell-wilson-new-cost-qb-contracts-nfl

Six months after Miami Dolphins coach Joe Philbin wavered on Ryan Tannehill as his starting quarterback, the organization gave Tannehill a four-year extension averaging $19.25 million per season. That is the NFL’s sixth-highest average.

Tannehill’s new contract carries $21.5 million guaranteed in full and another $23.5 million guaranteed against injury. What sounds excessive for a player with modest credentials is very much in line with the NFL market for quarterbacks. “I think both sides won on this deal,” a contract negotiator for another team said, echoing what others in the industry are saying.

Is the NFL out of its mind when it comes to quarterback valuation? The Dolphins’ deal with Tannehill provides an opportunity to re-examine the pricing of the position. What is an average (or slightly above-average) quarterback worth? Is the fear of not having a viable quarterback driving the market out of control? Insights from agents and team contract negotiators provide a deeper level of understanding while setting expectations for the next wave of quarterback signings.

Six things to know about QB contracts

1. Luck, Newton and Wilson represent the next frontier.

Agents and negotiators expect Andrew Luck to command up to $25 million per year on his new deal, and without much drama. They are more curious to see what happens with Cam Newton and Russell Wilson. Both should wind up earning at least $20 million a year, these insiders thought.

“Historically, the difference-making contract at quarterback has been franchise-tender driven,” a team executive said. “Drew Brees and Peyton Manning come to mind. The fifth-year tender is interesting for someone such as Newton. It’s a fixed number, but not guaranteed. That contract will be the most interesting one. I would not consider him a top-10 QB, but he is going to get paid like one. And if I were Carolina, I’d pay him in the top 10. You are not going to not have him.”

Tom Brady’s average falls next at $9 million thanks to some creative accounting. No other veteran starters are earning more than $5.25 million per season, which is where Matt Cassel and Brian Hoyer check in. There really is no veteran’s middle class at the position, in other words. (Luck, Newton and Wilson head the group of low-priced starters still on team-friendly rookie deals, but as I wrote above, that won’t be the case for much longer.)

“You either have a guy or you do not, and you would overpay for the security of having an OK guy,” a team executive said. “That is not because you are a bad deal-maker. It’s just that you cannot invent the resources to replace that guy.”

The question becomes whether paying more to keep Tannehill (or someone similar) is worth the expense when players such as Ryan Fitzpatrick, Cassel, Hoyer and Josh McCown are the lower-cost alternatives. Teams have so far answered resoundingly that the additional cost is preferable.

3. There is more than one way to evaluate a deal.

The experts look at average per year over the life of the deal, and in the first three years. They want to know guarantee structure, specifically how much is truly guaranteed versus guaranteed for injury only. They want to see the cash flow by year. They want to know how much “new” money an extension carries. They want to know if a deal features outlier traits that could affect future deals.

Tannehill’s deal ranks 10th in APY from 2014 forward, sixth in APY and three-year APY over its newly added years, 14th in true guarantee and 13th in total guarantee (counting injury-only guarantees).

“If you look at it as a four-year extension at $19 million a year, he is the sixth-highest-paid quarterback,” a team negotiator said. “Is that more than Jay Cutler is getting with all the guarantees? No, it is not as good.”

While Colin Kaepernick’s deal with San Francisco made waves for details such as the 49ers’ ability to wait until April before triggering guarantees, a different team negotiator described the Tannehill deal as unremarkable. This manager ranked deals for Aaron Rodgers, Ben Roethlisberger, Matt Ryan, Drew Breesand Joe Flacco one through five, respectively, from a player perspective. He put deals for Tony Romo and Cutler next, followed by those for Tannehill, Kaepernick, Matthew Stafford, Philip Rivers, Alex Smith, Eli Manning, Carson Palmer and Andy Dalton. This manager set aside the deals for Tom Brady and Peyton Manning, who adjusted their contracts downward after maxing out previous contracts.

Others agreed with the rankings through the top seven or so, differing thereafter based on a range of criteria. Structure can be critical. The Bears’ deal with Cutler comes to mind. His contract carries more than $15 million fully guaranteed in 2015, plus another $10 million in 2016. Those guarantees all but forced the Bears’ new leadership to keep Cutler after a disastrous 2014 season. But that situation was an outlier (see below).

4. Guarantee structure can be critical … and overrated.

One negotiator said he thought guarantees, while important, command too much attention, overshadowing the realities of the position. While a pay-as-you-go structure clears the way for Miami, Cincinnati or San Francisco to break from their quarterbacks after a couple of seasons, these are unrealistic scenarios. What are the 49ers going to do? Go with Blaine Gabbert?

Cleveland Browns might have paid for Smith, Dalton, Kaepernick or Tannehill if one of them had been a free agent this offseason. Instead, they settled for McCown.

5. Teams are in the insurance business. (QBs are, too.)

The Dolphins had a couple of choices with Tannehill after picking up his $16.2 million option for the 2016 season. They could have let him play out that deal, or they could have worked out an extension. They chose the extension as a hedge against paying an even higher price if Tannehill continues to improve. The team is paying a premium over the next two seasons for the right to lock in a set price thereafter.

“Tannehill gets more in the next two years and if he does really well, he is still doing great,” a salary-cap manager said. “The reality is, teams must be wary of the Flacco situation.”

Flacco’s magnificent run to a Super Bowl title following the 2012 season put Baltimore in a bind after the team let him reach the final year of his deal.

Tannehill had already earned more than $10 million over his three-year career, so he was negotiating from a position of relative strength. His new deal gives him another $21.5 million fully guaranteed at signing, meaning he should be set for life, and then some. However, because subsequent guarantees are for injury only, the Dolphins are not locked in for the long term.

6. The franchise tag can be the elephant in the negotiating room.

Ripping the Bears’ former regime over the Cutler deal is perhaps justified, but with Cutler fast approaching free agency in 2014, the franchise tag was hanging over negotiations.

“The system of compensating quarterbacks is so different and the biggest reason has become the gigantic franchise number that you have to live with if you cannot get a deal done,” a negotiator said.

No one is faulting the Green Bay Packers for paying Rodgers $54 million fully guaranteed and $22 million per season. Most would agree that the very best quarterbacks are worth every cent. But those top-tier quarterback deals also help set the value for the franchise tags teams can apply to guard against losing their most important players in free agency. The tag was set at $18.5 million in 2015.