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13 Sep 2010

Under The Cap: The Revis Precedent

by J.I. Halsell

On the surface, the new deal for cornerback Darrelle Revis seems to be a win-win for both player and team. Revis got his big payday and the Jets got their shutdown corner back in time for the regular season. But the amount of money the Jets gave to Revis may have set a terrible precedent for the future, with Revis and other players.

On his rookie contract, Revis had 2010-2012 remaining with $20.5 million practically guaranteed. On his new deal, over 2010-2012, Revis will make $40 million with $32.5 million reportedly guaranteed. The important measure for agents and teams trying to determind the value of a contract is the new money for the player versus the additional years for the team. With that in mind, over the 2010-2012 seasons, the Jets are giving Revis an additional $19.5 million. When you add the new year of 2013 and the $6 million Revis will earn then, the Jets will essentially pay Revis $25.5 million of new money to get one additional year under contract.

Whether they started the talks or not, the Jets faced the problem of a player who wanted to hold them hostage despite having three years left on his deal -- not one, not even two, but three. The precedent has been that players get new deals when they have one year left, and occasionally when they have two years left, a la Patrick Willis.

The Titans faced a similar problem with running back Chris Johnson, who, like Revis, is considered the best player at his position in the NFL. To put a Band-Aid on the situation, the Titans moved his $1.25 million year five escalator into this season in the form of a signing bonus, but they didn't give him any new money.

Prior to his extension Revis was due roughly $500,000, $5 million, and $15 million in 2010, 2011, and 2012, respectively. Applying the Johnson solution to Revis' contract, the Jets could have moved the money around so that he received the $15 million in 2010, $5 million or so in 2011 and under a million in 2012, with a wink-nod agreement that a new deal would be consummated prior to the 2012 season.

I am not saying that the Jets didn't think of this solution, or even propose it to Revis, but the team should have called Revis' bluff instead of giving him so much money for so little in return. Revis is clearly a difference maker on the defense, but the Jets could have gone forward with former Pro Bowler Antonio Cromartie, who is in a contract year, and 2010 first-round pick Kyle Wilson. Perhaps Rex Ryan, worrying about the expectations on his team, pressed the issue and pressured the team to get a deal done.

Now Jets players like Mark Sanchez or Shonn Greene could look to redo their deals after 2010, and there's no guarantee that Revis won't want a new contract in 2012. It's almost certain that he'll get a new deal by 2013. If Revis was willing to hold out with three years and $20.5 million remaining on his rookie deal, then he won't think twice about holding out again prior to 2013 when he's due only $6 million. Sure there's the issue of his 2014-2016 years voiding if he doesn't hold out, but if he was willing to hold out with three years remaining on a deal, then he'll surely hold out with four years remaining on a deal, rendering this voidable provision toothless.

So kudos to Neil Schwartz and Darrelle Revis for getting something for nothing, and I'm guessing the Jets front office may be disappointed in the deal. During the Revis saga, we heard about the anomaly that the Nnamdi Asomugha contract is on the cornerback market; going forward, we'll be referring to the Revis extension as an anomaly as well.

Follow J.I. Halsell on Twitter: @SalaryCap101

Posted by: J.I. Halsell on 13 Sep 2010

34 comments, Last at 11 Nov 2010, 4:05am by wholesale sunglasses

Comments

1
by bingo762 :: Mon, 09/13/2010 - 1:56pm

Is this a typo

Revis' contract ran till 2010 with a essentially $20.5 million in guaranteed money. His new deal also runs through 2012,

2
by J.I. Halsell :: Mon, 09/13/2010 - 2:30pm

Apologies, there was a typo; since revised to reflect the terms below:

Old contract had 2010-2012 remaining on it; new deal has 2010-2013, with 2014-2016 voidable.

J.I. Halsell
Salary Cap Analyst | "Under the Cap"
Twitter | @SalaryCap101

3
by Revenge of the NURBS (not verified) :: Mon, 09/13/2010 - 2:56pm

What this article tells me, as much as anything, is that Chris Johnson really should have stuck to his guns a little longer. Both Revis and Johnson had major leverage, in that their teams are built around them, and can't function the same without them. In the game of contract chicken, Johnson blinked, and Revis didn't. And now Revis is getting a fat wad of money.

As mentioned in the article, the precedent is now set for a player to hold out at virtually any stage of his contract. Other players may try to emulate this, but the key aspect remains -- this only worked because Revis is indispensible to his team. Logan Mankins, for example, doesn't have that working in his favor.

6
by bingo762 :: Mon, 09/13/2010 - 3:03pm

Unless the players get guaranteed contracts in the next CBA

7
by Revenge of the NURBS (not verified) :: Mon, 09/13/2010 - 3:31pm

I'm not going to hold my breath on that one. And in any case, the players have the ability to negotiate guaranteed contracts now. There's nothing in the CBA that says a player can't have a guaranteed contract. It's just incredibly rare, because apparently most of them would rather have a non-guaranteed $50 million than a guaranteed $25 million.

10
by Boo-urns (not verified) :: Mon, 09/13/2010 - 3:45pm

That's not correct. Players have the ability to negotiate guaranteed money, not guaranteed contracts. I.e., Tom Brady and Robert Kraft could have negotiated a 4 yr, $80 million contract that was not guaranteed, but with $80 million that was guaranteed (but Tom could still be cut after Year 3). That may sound like semantics, but it's actually pretty important, because the owners have a unilateral right to terminate these contracts (i.e., if the Jets don't like Darrelle Revis's 4 year contract, they can simply cut him, whereas Darrelle Revis can't simply end his contract unilaterally (he has to resort to things like holding out)).

It's difficult for us to emphathize, since most of us have at-will employment, rather than term contracts. But basically, imagine that we were all contract employees with multi-year terms (as in, the accounting firm or law office or tech company we worked at essentially had an exclusive monopoly on our services for a period of 3-6 years), except that while we were locked into our contracts, our employer could unilaterally void our contract at any time for any reason. Add on top of that the hypothetical that there were only 32 employers to negotiate with, and that's similar to what NFL players go through. Sure, a handful of the greatest superstars (Brady, Revis, Manning) have some leverage to negotiate more guaranteed money, but to suggest that players have the right to negotiate guaranteed contracts is misleading and similar to suggesting that we all have the right to purchase unicorns-- that right may exist in theory, but it's pretty far afield from reality.

16
by RichC (not verified) :: Mon, 09/13/2010 - 4:32pm

It doesn't matter if the contract term is guaranteed if the money is.

If they want to fire me early, and still pay all my money, sweet.

And as someone else pointed out below, Vinatieri had a fully guaranteed contract with the Pats a couple years back. So yes, players can negotiate contracs where teh money is fully guaranteed.

19
by zlionsfan :: Mon, 09/13/2010 - 5:36pm

While I appreciate the direction of your analogy, I'm not sure it's really that helpful, given that a) it's so different than anything we're ever likely to experience (as you point out yourself) and b) it isn't complete.

We'd be working in an industry that has minimum salaries that increase with both time and experience: the rookie minimum went up $50,000 in the four seasons since the last extension to the CBA was signed. Maximum salaries are approaching 100 times the minimum salary available, and that counts only income provided by our employers. Top performers have an almost limitless opportunity for additional income, and even run-of-the-mill employees have smaller, local options.

We'd also be part of a union that is supposed to be fighting on our behalf to constantly improve these conditions. Many current NFL players had no hand in the 2006 extension, but they'll have a chance to ratify the next CBA, right?

With all that in mind, yeah, it's difficult for me to empathize. Actually, I'd say impossible. It's not all on the players, but the money for which they'll be asking is coming from somewhere, and when more and more owners are coming back to us, hats in hand, begging for handouts because they can just barely make ends meet, there is no reason for me to believe that increased revenue for the players is going to come directly out of owners' profits ... in the end, it's going to come out of the pockets of people like us. Some of it will be voluntary (tickets, merchandise, Sunday Ticket), but some of it won't be.

In the Indianapolis area, we're still paying in multiple ways for a stadium that was blown up years ago, we're paying in multiple ways for the current stadium, and there's every reason to believe we'll be asked to pay even more as time goes on.

Is it fair to the players that I think less of their case because the owners seem to be cheap bastards who have no intention of sharing any more of their wealth than they're forced to share? I suppose not, but that's how it is, and nothing either side says to me will change that.

28
by Boo-urns (not verified) :: Tue, 09/14/2010 - 12:04pm

I don't think you understand how markets work. The owners are already trying to maximize revenue streams as much as possible, no matter what the players make. The notion that increased cost inputs (such as higher salaries) translate into higher prices only makes sense if you assume an efficient and competitive market.

The NFL is NOT an efficient or competitive market, but is a monopoly. As such, they are maxing out profits, and are trying to raise prices to the point where it maximizes those profits (if they raise them too much, they lose customers and don't maximize revenues, this is a basic supply and demand chart).

As far as the owners barely making ends meet, puh-leeze. In case you missed it, the Florida Marlins were recently exposed as having made HUGE profits even as they were crying poverty, through a number of hidden revenue streams. Anyone who knows anything about the economics of the NFL would at least have strong suspicions that the NFL is the same. The reason we can't prove it? Because the NFL and its owners have consistently refused to open up their books to the public. The two data points we have: 1) the Green Bay Packers, a public company; and 2) the sale prices of NFL franchises, which reflect the valuation judgments of sophisticated investors who have had a chance to review the financials of the teams they purchase. Based on these two sets of data, Forbes and others have calculated that 6 of the 10 most valuable sports franchises in the world are NFL teams (the other 4 are the Yankees, Manchester United, Arsenal, and Real Madrid), despite the fact that NFL has a far smaller global audience than baseball or soccer.

If NFL owners were barely making ends meet, explain to me how the St. Louis Rams, who play in a depressed economic market with below average ticket prices and have one of the worst teams in the NFL, is reportedly selling for $750 million, in the midst of a big economic slump and low availability of credit, which implies an annual profit of something like $50 million or greater.

And as far as analogies being incomplete or flawed, of course any analogy is going to be. But I'd point out that your additional "facts" are also very incomplete. Yes, rookie scales go up, but no, they don't match what those players would make in an open market (which is why the NFL consistently opposes the simplest solution to the problem: uncapped free agency). Moreover, the typical NFL player has a high risk of a career ending injury, and even if they remain healthy, they have very short careers. So the salaries you talk about really ought to be adjusted over a longer period of time.

The single point my analogy was meant to show was the inherent unfairness of contracts that bind one side but not the other. When you add the NFL's monopoly to the mix, you've basically got a situation in which maybe a handful of players ever have the bargaining leverage to ask for guaranteed money (i.e., to not have those unilateral contracts).

Again, I'll point out that in every other context of contracts, they bind both parties equally. If the NFL and NBC entered into an exclusive 10 year, $10 billion TV contract, do you think that NBC would allow the NFL to be able to cancel the contract at any time, without any penalty?

25
by jebmak :: Tue, 09/14/2010 - 8:40am

as in, the accounting firm or law office or tech company we worked at essentially had an exclusive monopoly on our services

I work in the accounting department of a tech firm!

11
by Boo-urns (not verified) :: Mon, 09/13/2010 - 3:51pm

And honestly, when I read your statement again, it strikes me that it's just fricking ridiculous and totally uninformed. Most players don't get offered $25m guaranteed. The handful that do, from what I read and know, are absolutely making tradeoffs between the amount of guaranteed money and the total value of the contract. The guaranteed money component is by far the most important one for just about every NFL player out there. You make it sound like Brady is deciding between $19m a year in non-guaranteed money vs. $9.5m a year in guaranteed money, when in reality what he's doing is taking $19m a year, most of which is guaranteed (and in fact if he were to take a non-guaranteed contract, I'm sure the Pats would have been happy to offer him a 25 year, $500 million contract or some such).

14
by Revenge of the NURBS (not verified) :: Mon, 09/13/2010 - 4:19pm

My understanding is that Adam Vinatieri once negotiated a fully-guaranteed contract with the Patriots. Someone please correct me if this is wrong and/or fricking ridiculous and totally uninformed.

And even if it does end up being wrong, I still don't see how that would preclude someone from doing it. As you rightly point out, player contracts involve a compromise between the guaranteed amount and the non-guaranteed total. So... why can't someone say they want 100% of their contract fully guaranteed for skill and injury and being a diva and any other whim of the GM? Because the contract they'd get would be a lot less than the mixed, partially guaranteed contracts they get now. That's all I was trying to say. If my use of numbers as opposed to abstractions was an issue, I apologize. I didn't mean to imply that it was a direct 2-1 tradeoff.

15
by Boo-urns (not verified) :: Mon, 09/13/2010 - 4:26pm

"And in any case, the players have the ability to negotiate guaranteed contracts now. There's nothing in the CBA that says a player can't have a guaranteed contract. It's just incredibly rare, because apparently most of them would rather have a non-guaranteed $50 million than a guaranteed $25 million."

When I read about players and agents, the only thing they care about is the guaranteed money figure. The reason they don't get it isn't because they have a preference for larger non-guaranteed contracts; it's because the owners hold most of the leverage in negotiations, and they hold basically all the leverage when it comes to 95% of the players (those guys who aren't Pro Bowlers or MVP-caliber players).

17
by Revenge of the NURBS (not verified) :: Mon, 09/13/2010 - 4:51pm

Obviously, my original point wasn't clear. I never intended to say that players have a preference for non-guaranteed contracts; they have a preference for LARGER contracts. I thought that was obvious enough to go without saying.

Players can't get guaranteed contracts for the amount of money they want, due to market forces, so they trade higher risk for higher potential reward. That's not the same thing as saying they can't have guaranteed contracts.

4
by Kaz (not verified) :: Mon, 09/13/2010 - 3:01pm

Consider that if Revis played for his old deal, he would have cost 20.5 million + whatever the franchise tag costs at the end of the deal (per http://en.wikipedia.org/wiki/Franchise_tag the franchise tag for a CB in 2009 is ~$10 million, so we could assume in 3 years that number will increase somewhat).

In the end, he gets 32.5 million guaranteed over 4 years in the restructured deal, and the old deal would have paid him 20.5 million + one franchise tender year at ~11-12 million assuming he would sign in and play for it. It seems like a wash in guaranteed money if you ask me.

I fail to see how this deal is/was greatly disadvantageous for the Jets as you describe.

9
by fyo :: Mon, 09/13/2010 - 3:45pm

A wash in guaranteed money, perhaps, but $15 million or so MORE total salary than your franchise tag scenario.

The team doesn't care solely about guaranteed money -- that's only one factor.

5
by Jetspete :: Mon, 09/13/2010 - 3:03pm

how would you factor in the idea that the Jets would be able to franchise him in 2013 (under old deal), and how that old money compares to new contract?

However, the Jets had to know full well the possibility this would happen when they structured his original contract in such a way that he was only getting $1mil this season. They figured, hey, if we struck out on the draft pick we get the fourth year virtually for free then can cut or restructure before the huge bonus (or guarantee) is due in March, 2011. If it turns out they made a good pick, he likely won't blossom til year 4 anyway, then they redo the deal. No one couldve expected Revis would become an all-world player so quickly, and thus the jets dug themselves this hole with the structure of the rookie contract.

8
by Dennis :: Mon, 09/13/2010 - 3:44pm

The major leverage Revis had is the Jets have built a team to win now, and as much as they wouldn't admit it on Hard Knocks, they need Revis badly. If they thought they were just a playoff contender, they could've let him hold out. But they are going to consider anything less than the Super Bowl a disappointment.

12
by Boo-urns (not verified) :: Mon, 09/13/2010 - 3:53pm

The other major leverage Revis had is a very player-friendly coach and a very player-friendly GM. AJ Smith or Bill Belichick or Bill Parcells would have let Revis sit out for 3 more years and built the team regardless.

Players basically have almost no leverage in today's NFL, which is why it's so mind-boggling that the OWNERS are the ones trying to impose radical changes.

23
by BigCheese :: Tue, 09/14/2010 - 2:30am

Then they are going to be severely dissapointed.

I can understand the media and fans buying into the hype, but the Jets were there, right? They know they were an 8-8 team at best who doesn't get into the play-offs if the Colts decide to play to win that game, right?

I can beleive they don't quite grasp that the only reason they advanced past to the AFC championship is because they were unbelievably lucky in regards to oponent's FG attempts, but they MUST realize the first part.

I have the Jets third in their division this year (and did before their loss tonight where they looked even worse than I thought) and would be absolutely shocked if they made the play-offs this year.

- Alvaro

24
by tuluse :: Tue, 09/14/2010 - 2:55am

On the other hand they were 9th by DVOA, and were extremely unlucky in close games, and thoroughly dominated the Bengals. So they got lucky in their penultimate game, but this team was clearly deserving to be in the divisional round.

32
by BigCheese :: Wed, 09/15/2010 - 12:48pm

I'm going to go ahead and say that completley dominating the Bengals is not something you necesarly hsould hang your hat on. And the thing is, their good parts were thanks to the D and running game.

I have no faith in their running game being improved, or even as good as last year, and we know the D has a relatively low correlation year to year.

Meanwhile Sanchez is still a very bad QB...

So yeah, I could be WAAAAY off on every single point, but until proven so, I have them firmly entrenched in third place on their division (thanks Bufallo!)

- Alvaro

13
by mikesiewenie (not verified) :: Mon, 09/13/2010 - 4:09pm

Revis rookie contract that he signed

Contract Summary Report
Revis, Darrelle CB New York Jets Veteran Entry: 2007 Draft Round: 1 Accrued: 1
Contract 08/16/2007 New York Jets Ag: Schwartz, Neil S Drafted Rookie
SignBon: $4,700,500.00 OATSB: $2,412,500.00 OptBon: $0.00 2ndOptBon: $0.00
APY: $1,787,750.00 3APY: $2,339,500.00 4APY: $2,025,000.00 5APY: $1,867,200.00 Void Yr: 2011

Year Base Salary Split Salary Prorated Amounts Roster Bonus Reporting Bonus Workout Bonus Total LTBEs Total NLTBEs Other Cap Number
2007 $285,000.00 $0.00 $783,416.00 $333,500.00 $0.00 $0.00 $0.00 $0.00 $0.00 $1,401,916.00
2008 $370,000.00 $0.00 $1,265,916.00 $2,200,000.00 $0.00 $100,000.00 $0.00 $0.00 $0.00 $3,935,916.00
Comment: $2.4125m guaranteed base salary advances ($302.5k from 08, $367k from 09, $431.5k from 2010, $586k from 2011 and $725.5k from 2012)
2009 $460,000.00 $0.00 $1,265,916.00 $5,700,000.00 $0.00 $100,000.00 $0.00 $0.00 $0.00 $1,825,916.00
2010 $550,000.00 $0.00 $1,265,916.00 $7,900,000.00 $0.00 $100,000.00 $0.00 $7,900,000.00 $0.00 $1,915,916.00
Comment: if 2011-12 void achieved and contract not bought back, Club may not Franchise/Transition player if player earned one-time NLTBE rostbon 08-2010; if 11-12 void buy Club does not have right to buyback, then Club may only Franchise player
2011 $650,000.00 $0.00 $1,265,916.00 $0.00 $0.00 $150,000.00 $0.00 $0.00 $0.00 $1,915,916.00
Comment: Voidable; Club may buyback w/ $4.85m guaranteed base salary + $150k w/o
2012 $665,000.00 $0.00 $1,265,920.00 $0.00 $0.00 $150,000.00 $0.00 $0.00 $0.00 $1,930,920.00
Comment: Voidable; Club may buyback w/ base salary guaranteed at $10.85m or $12.85m or $14.85m tied to "points" earned by player/team performance 07-2010; $150k w/o added w/buyback; $2m de-escalator tied to player's p/t

TOTALS
Number of Players Base Salary Split Salary Prorated Amounts Roster Bonus Reporting Bonus Workout Bonus Total LTBEs Total NLTBEs Other
1 $2,980,000.00 $0.00 $7,113,000.00 $16,133,500.00 $0.00 $600,000.00 $0.00 $7,900,000.00 $0.00

18
by mikesiewenie (not verified) :: Mon, 09/13/2010 - 4:55pm

I agree with giving elite players the money they deserve and I think once they get the rookie contracts under control alot more teams will have the money to give to their star players.This next cap will take the control from the players who haven't proved anything to the veterans that have proven it already.

20
by Cid (not verified) :: Mon, 09/13/2010 - 6:17pm

The only problem with that is that some positions have longer careers and/or primes.

For a quarterback, being told "prove it first, then get paid" shouldn't be an enormous problem because elite quarterbacks get paid huge salaries and tend to stick around the league for a very long time (See: Brett Favre, Kurt Warner, etc).

What about tailbacks or punt returners though? Their careers tend to be short and their active primes tend to be even shorter. Even proven, elite backs have virtually no chance of getting a large contract past their mid 20s, because teams know that they're likely to lose their burst and/or become prone to injury. Moreover, players at those positions tend to reveal their value within their first two years in the league. Why should they need to get paid cheaply for 3-4 years when those years represent a significant portion of their prime?

In Revis' case he's primarily motivated by the fact that he has leverage and possibly a fear of injury, but typically, elite corners can stick around for a long time, even switching to safety later in their careers when they lose a step.

21
by Jon Frum (not verified) :: Mon, 09/13/2010 - 10:00pm

The system, as it exists (warts and all) was bargained by owners and players. In deciding not to push for guaranteed contracts, players got something else in return. If you are offended by the lack of guaranteed contracts, explain the logic behind signing 'bonuses.' A singing bonus is not a bonus - as in extra money - it is future earnings, given in advance. Tom Brady wasn't going to play for 5 million this year - he was going to play for 5 million PLUS a pro-rated portion of his signing bonus. Why should a player ever get a penny of money before he earns it? (rhetorical question) Because the union got signing bonuses in lieu of something else of value.

So what if the owners say OK, well give you 'guaranteed' contracts, but in exchange you give up signing bonuses, plus a rookie pay scale that starts at 500K/yr for #1 draft picks, plus no more salary floor? Would guarantees look as good? It's called give and take. You wanna take? You gotta give.

22
by Jerry :: Tue, 09/14/2010 - 12:28am

In the most literal sense, a signing bonus is extra money paid for signing a contract. In NFL reality, it's just a different category of compensation that's paid when the contract's signed. In baseball, where the contracts are guaranteed, we don't see signing bonuses.

The owners can make the proposal you suggest, and the union can make a counter-offer. We can hope that such negotiations conclude in an agreement, but that's up to the parties involved.

26
by tgt2 (not verified) :: Tue, 09/14/2010 - 11:21am

In baseball, we do see signing bonuses, but mostly for draft picks.

What we do see alot of is deferred compensation and accelerated compensation. By see, I mean exist. Those details aren't normally reported due to the guarentees and simpler salary rules (no cap management, no 30% rule, etc...)

my captcha is the mathematic symbols for:
For all lambda in the pair (0,1). How in the world do they expect people to type that?

27
by Revenge of the NURBS (not verified) :: Tue, 09/14/2010 - 11:59am

Yeah, I've starting noticing that I have regenerate my captchas 3 or 4 times to get one that I can both read and type.

29
by tuluse :: Tue, 09/14/2010 - 2:54pm

You only have to write one of the words. You can write literally anything for the other one.

Or you could just register.

30
by Revenge of the NURBS (not verified) :: Tue, 09/14/2010 - 4:20pm

That doesn't appear to work.

31
by tuluse test (not verified) :: Tue, 09/14/2010 - 4:27pm

You have to make sure to pick the right word.

My captcha is "scolests 1961," so I'm going to type "scolests asdf"

33
by wholesale from China (not verified) :: Thu, 09/16/2010 - 8:29am

Sharing wholesale from China, discount shoe, handbags discounts,discount prom dresses and other cheap goods. Always pursuit to save money, live better.