I mostly abhor the compulsion to announce winners and losers in professional sports contract negotiations. Who cares whether Player A makes more than Player B, with the likely exceptions of A, B and their agents?
My interest lies in whatever consequence, ramification and/or domino effect a deal can have. And that's what drew me to the six-year contract extension San Francisco 49ers quarterback Colin Kaepernick signed last week. To me, the deal -- which could be worth as little as $12.974 million and as much as $126 million -- carried two big takeaways:
It reinforced a trend we discussed earlier this offseason. Teams are implementing a powerful hedge against the 2014 salary cap spike, and the CBA-mandated spending floor, by "guaranteeing" money that can be taken back by a predetermined deadline.
It carries with it the uncomfortable prospect, at least for Kaepernick, of being locked into below-market salaries for the prime of his career.
Let's consider these issues one at a time.
As we noted in March, this offseason teams have frequently tagged some guarantees in major deals as "injury only." A player will be paid his total guarantee if he suffers an injury that prevents him from playing. Otherwise, the team can terminate the contract for "skill" reasons -- if the player doesn't perform well enough in the team's estimation -- and not owe the remaining guarantees. This maneuver allows teams to commit big cash totals to meet requirements in the collective bargaining agreement, but allows them to take it back and apply it to someone else in future years.
One of the most noteworthy cases was free-agent cornerback Aqib Talib, whose deal with the Denver Broncos technically has $26 million in guarantees. But $14 million of it is guaranteed for injury only beginning in 2015, making the Broncos' true commitment a one-year, $12 million deal.
The only money the 49ers are obligated to pay Kaepernick is his signing bonus ($12.329 million) and his 2014 base salary ($645,000). The rest of his $48 million in guarantees is tied up in a complicated matrix of injury-only designations and de-escalator clauses that could all be wiped out if the 49ers release him prior to April 1, 2015. In turn, the 49ers could eliminate $36 million of the guarantees if he plays the 2014 and 2015 seasons and is then released between April 2, 2015, and April 1, 2016.
In reality, Kaepernick's deal is seven one-year contracts that the 49ers can roll over or terminate at their pleasure. (ESPN's John Clayton analyzed the terms in his Sunday mailbag.) This structure compares with other major contracts this offseason, but it has now penetrated the previously insulated world of quarterback deals -- which brings us to our second point.
If Kaepernick develops into an elite quarterback, as the 49ers hope, this contract gives them full capacity to pay him below market value for the prime of his career. The deal calls for him to earn between $12.8 million and $17.4 million annually between 2015 and 2018 at a position where the best players currently are averaging more than $20 million.
Early projections for Indianapolis Colts quarterback Andrew Luck and the Seattle Seahawks' Russell Wilson, who will be due new contracts next offseason, suggest a jump to $25 million annually. As early as 2015, then, Kaepernick's deal could be paying him half of what Luck and Wilson might be receiving.
The Colts and Seahawks could qualify the guarantees for Luck and Wilson, respectively, but it seems less likely they would agree to similar average salaries. At that point, a presumably elite Kaepernick would be in a position that has routinely caused strife in NFL contract history.
How would Kaepernick react if he is deeply underpaid less than halfway through his contract? NFL teams rarely renegotiate long-term deals even at the midway point, unless it leads to more favorable terms for them.
ESPN's Jim Trotter reported that Kaepernick was fully aware of the consequences of this structure and hoped it would leave enough cash and cap space for other 49ers veterans to re-sign. Indeed, Kaepernick has shown nothing if not a fierce independent streak during his NFL career.
On the other hand, we have also witnessed the destruction that a one-sided multiyear contract can wreak. In 2003, the Minnesota Vikings signed quarterback Daunte Culpepper to a 10-year contract worth up to $102 million. The deal was really worth about $15 million over three years, and Culpepper's MVP-like season in 2003 immediately dated it.
Culpepper began pushing for a new deal after the 2004 season, going so far as to stage a one-day holdout from training camp in the summer of 2005. He won a modest concession but was never able to convince the Vikings to rework the contract in a substantive way before they traded him in March 2006.
The contract was great from the Vikings' perspective, giving them full leverage over their franchise quarterback for the meat of his career. It was so one-sided, however, that it hastened the end of his tenure. (A major knee injury in 2005 also contributed.) The Vikings won that fight but lost the match. Almost 10 years later, they are still seeking his replacement.
Kaepernick might prove to be the rare employee who disregards his salary relative to peers. That's what it will take for this work.