Monday, September 9, 2013

Third-year NFL players and the new rookie contract system

One of the biggest changes of the 2011 NFL lockout and subsequent collective bargaining agreement was the introduction of mandatory slotting for rookie contracts. In addition to slotting, the players association consented to mandatory four year contracts for all draft picks with a mandatory team option for first rounders. The league certainly gave up some things in exchange – minimum cash spending to all players and stronger guarantees for top rookie contracts – but the net effect was a severe restriction in the cash available to rookies.

A lot of analysis has been written about the value of draft picks in this new era. I am guilty of printing a few words on the topic myself. Bill Barnwell’s recent NFL trade value column  highlighted the incredible value of a rookie contract by placing Cam Newton, Colin Kaepernick, Russell Wilson, Andrew Luck and Robert Griffin III among the most valuable assets in the league.

One attribute of the new system, however, is being downplayed in most of the analysis out there: the restriction on renegotiation ends with the final game of a player’s third season. I expect the agents for Newton, Kaepernick, Wilson, Luck and Griffin have the Monday following week 17 this year (Newton and Kaepernick) and next year (Wilson, Luck and Griffin - and Brandon Weeden) circled on their respective calendars.

The calm descended over younger players’ contracts is a lull before the first wave of elite players hits the end of their third season. At that point expect lots of contract extensions with big guaranteed money. Colin Kaepernick is probably aware that Joe Flacco signed an extension with $60 million coming in the first three years while Kaepernick himself is scheduled to earn $740,844 in salary this year (the remainder of his cap hit comes from amortized bonus).

Teams certainly have leverage in the extension negotiations given the additional year plus a fifth year option for first rounders, but NFL teams always have leverage with the franchise tag lurking. Look for bargaining to split between those who take care of their young players quickly – buying off the immediate pain with higher cap hits down the road – and those who drag it out, risking a holdout or very unhappy player to control costs. The scope will be relatively limited as fewer players have leverage the way that draft picks do (what draft pick has ever underperformed before suiting up?). Those who have do have leverage based on their on-field performance will have it on par with the top picks of the old system.

The pending big extensions for Newton and Kaepernick won’t diminish the value they have provided in their first three seasons, and structural features such as the franchise tag will help maintain some surplus value for teams in new deals. These extensions should, however, make it clear that teams that hit the jackpot on their picks got a three year bargain contract rather than five.

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