Writers of Pro Football Prospectus 2008

28 Aug 2010

Under The Cap: Top 10 Draft Picks

by J.I. Halsell

The top ten picks of the 2010 draft class enter the NFL in a very unique environment for contracts. From a structuring perspective, the prospect of a lockout in 2011, which would eliminate pay for players, was a consideration emphasized by the union. As Liz Mullen of the Sports Business Journal pointed out earlier this week, the NFLPA instructed its agents to get as much in first-year (2010) money as possible. Usually, more than half of the guaranteed money in first-round deals is paid in year two and beyond.

From a contract value perspective, this draft class will likely be the final group to receive exorbitant guaranteed compensation, as the new CBA is expected to include a rookie wage scale.

In viewing the analysis above, there are some terms and assumptions that you need to understand.

The tables you'll find below assume that in 2010 the player earns his "qualifier," where qualifier is defined as a player participating in 35 percent of his unit's plays and the club improving in one of three agreed upon team statistical categories (i.e., club improves its year-over-year league ranking in points scored), or the player achieving a CBA-defined individual performance threshold (i.e., leading the club in any offensive category). By achieving this qualifier, the player can earn a one-time guaranteed roster bonus or incentive and a one-time non-guaranteed or guaranteed escalation of future salaries.

2010 Top 10 draft picks (in millions of dollars)
Club Player Guarantee First-year payment Base package Average per year Percentage of base
paid in three years
STL Sam Bradford 6 3.2 78 13 53.8
DET Ndamukong Suh 5 3.1 60 12 62.2
TB Gerald McCoy 5 18.1 55 11 65.6
WAS Trent Williams 6 5.4 60 10 55.3
KC Eric Berry 6 4.4 50 8.3 57.0
SEA Russell Okung 6 4.0 48.5 8.1 56.2
CLE Joe Haden 5 12.4 40.1 8.0 65.0
OAK Rolando McClain 5 2.3 30.0 6.0 65.6
BUF C.J. Spiller 5 3.8 24.3 4.9 85.4
JAX Tyson Alualu 5 3.4 21.4 4.3 80.9


2010 Top 10 draft picks (in millions of dollars)
Club Player Guarantee at signing Second-year
bonus/advance
Post-option
advance/guarantee
Percentage of
guaranteed risk
STL Sam Bradford 24.0 18.0 31.2 37.6
DET Ndamukong Suh 23.3 17.4 30.2 24.4
TB Gerald McCoy 20.8 10.0 35.0 0.0
WAS Trent Williams 26.4 0.0 26.4 28.2
KC Eric Berry 25.7 14.2 25.7 24.4
SEA Russell Okung 24.3 10.0 24.3 17.1
CLE Joe Haden 14.9 0.4 15.8 38.3
OAK Rolando McClain 17.0 12.1 22.0 3.5
BUF C.J. Spiller 15.4 9.2 19.5 2.7
JAX Tyson Alualu 14.1 6.2 17.5 0.0


2010 Top 10 draft picks (in millions of dollars)
Club Player Guaranted
one-time bonus
One-time percentage as
lump sum
Post one-time
guarantee
Guarantee per year
STL Sam Bradford 25.2 33.4 50.0 8.3
DET Ndamukong Suh 18.0 40.1 40.0 8.0
TB Gerald McCoy 16.8 72.5 35.0 7.0
WAS Trent Williams 20.6 36.5 36.8 6.1
KC Eric Berry 12.2 40.3 34.0 5.7
SEA Russell Okung 10.9 46.0 29.3 4.9
CLE Joe Haden 11.9 37.8 25.6 5.1
OAK Rolando McClain 3.5 100.0 22.8 4.6
BUF C.J. Spiller 6.0 100.0 20.0 4.0
JAX Tyson Alualu 5.3 100.0 15.5 3.1


You'll notice that there is often a difference between the guarantee after a club exercises its option and the guarantee after the player earns the one-time money. When a club exercises its option and pays the player an option bonus, more often than not, the provisions of the contract preserve any future-year salary guarantees to ensure that the player receives his guaranteed money total even if he never achieves the qualifier. For example, in Sam Bradford's contract, after the Rams pay his $18 million option bonus, his 2012-2015 salaries are fully guaranteed, totaling $9.6 million. However, if Bradford achieves his qualifier in 2010, then he's entitled to $25.2 million in one-time guaranteed compensation and his fifth- and six-year guarantees void. Ideally, an agent would want those future year salary guarantees ($9.6 million) to equal or exceed the one-time guaranteed amount ($25.2 million), but due to 25-percent rule math, this is not the case in the contracts of the top seven picks in 2010.

In the case of Bradford, he could lose out on $15.6 million ($25.2 million minus $9.6 million) that was supposed to be "guaranteed" if he does not achieve the qualifier. This $15.6 million is 37.6 percent of his guaranteed money total that is not protected. I have labeled it above as "Percentage of Guarantee at Risk.”

There are two deals that stand out from a cash-flow perspective for the player.

Browns cornerback Joe Haden and Bucs defensive tackle Gerald McCoy are the poster children for getting as much money as possible in the first year. Haden will make $12.4 million this calendar year, by far the most of any player in his class. While a lot has been made of Bradford's $50 million guarantee, Haden's deal is still very strong. Moreover, of the seven top 10 picks whose guarantee-to-base package ratio is roughly 66 percent, Haden's cash income through the first three years of 65 percent ranks second to McCoy's 65.6 percent.

However, the downside to the Haden deal is that it is probably the most risky deal amongst the top ten in terms of its dependency on the player achieving his one-time qualifier. As a result of Haden accepting a $12 million signing bonus, the math behind the 25-percent rule results in low future-year salaries that are significantly short in attempting to match Haden's guaranteed one-time compensation. Haden's percentage of guarantee at risk is 38.3 percent, which is slightly ahead of Bradford's 37.6 percent.

In the case of Haden, his agent had to choose between the risk of a lockout or the risk that his client won't achieve his qualifier, and it appears they chose to mitigate their lockout risk and took the money today as opposed to waiting on money in an uncertain future.

The McCoy deal is the most favorable deal this year for a player taken in the top ten. While McCoy will not make as much money as Haden by the end of the calendar year, he very well could make more than Haden by the end of the 2010 league year. While most players' one-time guaranteed lump-sum bonus comes in the form of a second-year roster bonus, McCoy's one-time guaranteed lump-sum comes in the form of a 2010 one-time incentive that could be paid out by the end of the league year. Therefore, assuming McCoy achieves his qualifier in 2010, his vested cash income by the end of February 2011 will be $18.1 million.

Another player friendly cash flow aspect of the McCoy deal is the fact that 72.5 percent of his one-time guaranteed compensation comes in the form of a lump-sum incentive as opposed to coming in the form of guaranteed salary escalation that is paid over the course of the season. In terms of cash flow over the first three years of the deal, McCoy's 65.6 percent of base package earned is, as mentioned earlier, the highest among players taken in the top seven.

Top picks from last year's draft, such as Rams tackle Jason Smith, Chiefs defensive tackle Tyson Jackson, and Raiders wide receiver Darrius Heyward-Bey prove that achieving your qualifier as a top pick is no guarantee. If McCoy does not achieve his qualifier in 2010, then his deal remains a very strong deal, just not to nearly the same level. Under the scenario of McCoy not achieving his qualifier, McCoy's year one cash income would be $5.9 million, which is still higher than any pick in the top ten besides Haden. Also, under this scenario, McCoy's percentage of guarantee at risk is only 25.8 percent, which is on par with Ndamukong Suh, who also signed a five-year deal.

With Haden and McCoy positioned to make significantly more 2010 cash than their peers, they are now well prepared to weather any type of labor stoppage that could occur in 2011.

Follow J.I. Halsell on Twitter: @SalaryCap101

Posted by: J.I. Halsell on 28 Aug 2010

4 comments, Last at 01 Sep 2010, 10:43am by IanWhetstone

Comments

1
by evenchunkiermonkey (not verified) :: Sun, 08/29/2010 - 5:37am

"In the case of Haden, his agent had to choose between the risk of a lockout or the risk that his client won't achieve his qualifier"

I wonder if the 'percentage of guarantee of risk' might indicate a draft picks confidence level, especially at a position where sub-par play is extremely visible, such as at LT or CB.

I think contract qualifier clauses serve not only to assuage owner's anxieties, in the sense that qualifiers ensure the club recoups on players suffering major injury or who JaRyan-Leafells after signing top dollar deals, but they also provide a more effective form of motivation, almost like making every year a contract year.

The Union may want to offer a lower-ceilinged rookie wage scale tied in with some sort of qualifier guaranteed in all rookie contracts. In America (or anywhere for that matter) people should be paid according to his merit and mandating a bonus for any player who starts games and makes an impact for his team regardless of draft position can be sold to both sides of the Union/Ownership dynamic

It can be construed as both more equitable to a wider number of future union members than the current system and would still keep some of the top down salary distribution in the form of the wage scale.

It also works to the benefit of ownership in the sense they would in a position to quite literally pay for they got. Instead of paying huge sums to unproven talent they get a lower ceiling on the wage scale with universal qualifiers that reward those who have a positive effect on the franchise.

The owners don't want to pay huge bonuses to busts and they also don't want to deal with holdouts and contract re-negotiations. Not to mention what kind of effect an uncapped year would have on players expectations. Instead of fighting the idea of a wage scale I think owners ought to be looking at it as way they could reduce risk while rewarding excellence

2
by Sisyphus :: Sun, 08/29/2010 - 4:47pm

You have to wonder the extent the agents or the teams (let alone the players) are weighting the time value of money in their calculations. McCoy's deal allows him to be further ahead considering that he will be able to also directly benefit from investment earnings on the "surplus" dollars he has collected. (Additionally he benefits from not being subject to probable increased tax rates that are likely on his income level next year.) Both McCoy and Haden have very good deals at their relative positions in my view.

3
by Independent George :: Mon, 08/30/2010 - 9:44am

Rookie contracts are looking more and more like executive compensation packages every day.

4
by IanWhetstone :: Wed, 09/01/2010 - 10:43am

Great stuff. The game as a whole certainly may benefit from a hard rookie salary slotting system in the next CBA, but the deals will probably become a lot less interesting.