Nothing in life is guaranteed. At least that's what most of us, including NFL players, have been led to believe. Of course, this isn't entirely true for players in the NBA, where most players' contracts are ironclad agreements with their teams.
Contracts in the NFL are often more like denim-clad arrangements, fashionably ripped up and torn at the discretion of the owners.
Agreements for over $1.4 billion in guaranteed money were made on the first day NBA teams could negotiate with free agents. Deal after deal contained more guaranteed money than any NFL contract ever signed.
All this guaranteed money NBA throwing. Meanwhile the NFL, which generates the most money wont even make the league minimum $1M— Duke Ihenacho (@NachoLyfe) July 1, 2015
It's not hard to see why NFL players would have that kind of reaction. Ben Roethlisberger's recent extension set the league standard with $64 million in guarantees, according to ESPN's Roster Management System. In comparison, that equals the amount forward Tobias Harris will get after agreeing to a four-year, $64 million deal with the Orlando Magic -- fully guaranteed, of course.
Second on the NFL guarantee list is San Francisco 49ers quarterback Colin Kaepernick with $61 million. But in the world of NFL contracts, even guarantees aren't necessarily guaranteed. For example, the details of Kaepernick's six-year, $126 million contract reveal that only $13 million is "fully" guaranteed. He is in line for the full $61 million in the event of injury, but the 49ers would be on the hook for only a fraction of it if they ever cut him because of his performance.
How is this possible? Why do players in the league with the highest revenues in the sports world seem to be getting shortchanged? Much like looking at NFL contracts on face value alone, there's more to the story than simply comparing guaranteed money.
There's nothing in the NBA or NFL collective bargaining agreements that requires or prohibits guaranteed contracts. Each deal is individually negotiated by each player's agent, but NBA owners are far more comfortable guaranteeing money than NFL owners for a variety of reasons.
"The systems are completely different," said Jeffrey Kessler, a prominent labor lawyer who has represented the NFL and NBA players' unions. "The number of players is completely different. The average career span of the players is completely different. All of those things affect how the contracts are done. In the NBA, you're basically dealing with a 13-man roster as opposed to a 53-man roster. It's much easier to have a higher average of money involved for 13 players rather than 53 players. It's just math."
So even though the NFL's total revenue, which is used to calculate the salary cap, is estimated to be more than double that of the NBA, the NBA can dish out bigger slices of its pie. The salary cap for the upcoming NFL season is $143 million per team, which comes out to an average salary of $2.7 million for 53 players. The NBA cap is $70 million, which leaves a $5.4 million average for 13 players, double the NFL figure. Plus, the NBA cap is soft, meaning teams can exceed it through various exemptions. There's no such wiggle room under the NFL's hard cap.
But it goes beyond the numbers, too. It's the nature of the games.
"The other factors are NBA players have fewer injuries and in general have much longer careers," Kessler said. "Because of that, NBA owners have been more willing to do longer-term guaranteed contracts for more players than NFL owners have been willing to do. It's a much greater risk for the NFL owners to do that."
At the moment, about 57 percent of the money in current NFL contracts is guaranteed, according to several agents interviewed for this story, and they are predominantly guaranteed through signing bonuses, which are not as prevalent in sports in which contracts are fully guaranteed.
But it's not just the signing bonus or what's typically labeled as guaranteed money that determines the likely value of an NFL contract.
"I know the NFL gets compared unfavorably to the other leagues, but the reality of it is there is uniqueness to the National Football League in that there is an extraordinary injury rate," said agent Tom Condon of Creative Artists Agency. "That's why we talk about guaranteed money being our most important money and three-year money is the next most important. Predicting whether a player is going to be available after three years is very difficult."
Let's use the six-year, $114 million contract Ndamukong Suh signed with the Miami Dolphins this offseason as an example. Suh's agent, Jimmy Sexton, negotiated $60 million in guaranteed money, which is the most ever for a non-quarterback. That figure represents three years of guaranteed salary and a $25.5 million signing bonus.
The three-year-money benchmark is just a guideline, however. Every NFL contract is structured differently -- with a dizzying array of guarantees, incentives, escalators and de-escalators that make it even more difficult to predict how much of a contract a player is likely to collect.
Most agents count the first-year base salary as guaranteed because there's very little chance the team will cut the player before he completes the first year of a new deal. They will also look at the signing bonus in relation to the length of the contract to figure out the likelihood of a player staying on the roster. Then there can be annual roster bonuses and incentive bonuses that can change the amount of money due to a player as well as the potential salary-cap hit to the team if the player is cut.
Go back to Kaepernick's deal. He has to be on the 49ers' roster on April 1 of each year for the full guarantee on that season's salary to go into effect. If the 49ers cut him before that date, any remaining guarantees are wiped off their books. If they decided to move on from him after this season, it would mean that his contract had yielded only $25.9 million over two seasons.
All those contract variables don't affect just what a player gets paid, they impact the amount of "dead money" it will cost a team against the cap to cut that player. The higher that number is, the more job security it gives a player, even if he's not performing to the level of his annual salary. This might be why the Chicago Bears stuck with quarterback Jay Cutler after a season in which he was benched. Not only is his 2015 salary of $15.5 million fully guaranteed, but had the Bears cut him, it could have cost them a cap hit of as much as $29.5 million in dead money.
NFL owners will argue that players will be paid no matter what; it's just a matter of which players get the money. Do you want it going to the 32-year-old running back who no longer deserves to be the highest-paid player on the team or to the 24-year-old upstart who is getting the bulk of the carries?
Even without guaranteed contracts, players who can still play are going to get paid, even if they're cut loose mid-contract. The Dallas Cowboys, for example, released DeMarcus Ware, their all-time sacks leader, last year when he refused to take a pay cut. One day later, he signed a three-year, $30 million deal with the Denver Broncos with a $20 million signing bonus.
While all players would much rather have the life of the contract guaranteed, having large signing bonuses does give NFL players the chance to invest a larger amount more quickly than NBA players.
"In an NFL deal, you're literally paid within 30 or 60 days of when you sign that contract, and you receive substantial compensation," said Doug Raetz, managing director at True Capital Management, which serves pro athletes and other high-net-worth clientele. "There's value there to be able to get the bulk of your money on the front end.
"For NFL players, we advise them to put the bonus money away as their long-term savings and to live off their salary money, which is the small dollar amount. Your bonus money is what's going to take care of you in retirement; your salary money is your lifestyle money. But you get your investments going right away off the signing bonus money."
Not only have NFL owners historically opposed guaranteed contracts, they've been a nonstarter in labor negotiations. In fact, the league has a rule in place that essentially discourages owners from handing out large amounts of guaranteed money.
"The league has insisted on retaining the fully funded rule under the CBA," said DeMaurice Smith, executive director of the NFL Players Association, "and many of the teams cite that rule in their unwillingness to put that full amount into escrow."
The rule requires teams to deposit future fully guaranteed payments into escrow. Although more than half of the NFL's teams are owned by billionaires, who would be unlikely to suffer cash flow problems, the owners have used this rule as an excuse for limiting guarantees during negotiations.
"Eventually someone is going to break, and the owners are clearly in a power position. ... It's like the JV team going against the varsity team." Marc Isenberg, managing director at GSG Capital Advisors
"Now, these owners can afford to put that money in an escrow account, so I think a lot of it is us leveraging that and saying, 'I know what I'm worth,'" Winston said. "Either that, or the signing bonuses have to get a lot larger to encompass more of the total money being paid out."
The union has unsuccessfully tried to get rid of the collectively bargained funding rule, which was put in place long before most of the league's teams were owned by billionaires. But convincing a room full of Forbes-wealthy people to do something they've never done before and are against ever doing has been almost impossible.
"At some point you have to recognize who your opponent is, and as much as I would like the NFLPA to really push, where are they going to go with it?" asked Marc Isenberg, the managing director at GSG Capital Advisors and the author of several sports business publications. "Eventually someone is going to break, and the owners are clearly in a power position. ... It's like the JV team going against the varsity team."
While NFL owners are against giving players guaranteed contracts, the league might be on the verge of breaking its unwritten rule if a couple of young franchise quarterbacks demand nothing less.
"It may take highly leveraged players, perhaps Russell Wilson or Andrew Luck, to be truly aggressive in their negotiations for full guarantees," said Andrew Brandt, an NFL business analyst at ESPN who spent nine years as the vice president of the Green Bay Packers. "If they are willing to do that, perhaps they can break the seal on the full guarantees and it can slowly trickle downward."
Wilson's drawn-out contract negotiations with the Seattle Seahawks have largely centered on guaranteed money. Paul Allen is the wealthiest owner in the NFL with a reported net worth of $17.5 billion, but the Microsoft co-founder has shown no inclination to become the first owner to fully guarantee an NFL contract.
"The league has been very standoffish about it," Winston said of guaranteed contracts. "It's not something they want to talk about, but I think it's coming to a head at the same time. I think our players are definitely noticing that there are guaranteed salaries in other leagues and they want to be treated the same way."