After a safety negotiates his own rookie deal, the traditional businessmen of the NFL find themselves in serious trouble
Everyone in the class of the 2013 NFL draft has now been signed, with nary a holdout lasting more than a day or two. And all drafted players are under contract without the opportunity to renegotiate until 2016 at the earliest. Not only is the four-year length of these contracts mandated, the amount of money for each pick is also predetermined, which is leading to some uncomfortable conversations about agent fees.
When I left the agent business in 1999—just days after losing Ricky Williams as a client to the clutches of Master P—I was already starting to hear people challenging these fees, especially for rookie contracts. The questions from players, their advisers and their family members have only accelerated since the 2011 CBA.
Prior to the most recent CBA, there was some room with rookie contracts (especially for first-rounders) to add incentives such as player options and voids, guaranteed salary advances and escalator clauses that would act as a “second rookie pool” in a legal circumvention of the rookie cap. These loopholes are now decisively blocked.
Now that we're in year three of the CBA "correction" for rookie contracts, teams, agents and players have all come to a stark realization: the amount of compensation in rookie contracts is predetermined by draft position. As a top union official told me, "A trained monkey could negotiate these contracts."
Thus, "negotiators" for 2013 rookies simply cut and pasted numbers from the corresponding pick in 2012, which had been cut and pasted from the corresponding pick in 2011. Most of these contract negotiations have taken minutes to complete, and the pace of signings for this year's draft class was the quickest ever.
For example, let’s compare the 15th overall pick—the Saints' Kenny Vaccaro out of Texas—to the same draft slot in each of the past two years.
The small difference in the total value has nothing to do with teams drafting, in order, a center (the Dolphins' Mike Pouncey), a defensive end/linebacker (the Seahawks' Bruce Irvin) and a safety—it's due only to annual increases in minimum salary per the CBA. This striking similarity can be seen throughout the draft.
Based on the figures above, if an agent were to charge the maximum allowable fee of 3%, he would stand to make approximately $280,000 over the life of the deal. In contrast, if an agent/attorney were to charge in another fashion, perhaps an hourly fee of, say, $500 an hour (with a conservative estimate of 20 hours to negotiate the deal) that fee would approximate $10,000.
Do players even need agents in today's NFL?
Safety Matt Elam, the last pick in the first round, didn't use one to negotiate with the Ravens. Elam merely signed for “the slot”—$6.767 million over four years, with a $3.3 million bonus to sign—with three years fully guaranteed and a partial guarantee on the fourth-year. (The two picks above him, Travis Frederick of the Cowboys and Alec Ogletree of the Rams, had the same structure in the fourth year of their deals.) Had Elam used an agent to negotiate that same contract, the 3% fee would have cost him over $200,000.
I corresponded with Elam through email and asked him about his nontraditional choice. His response: "I did meet with a lot of agents, but negotiating my contract without one was ultimately the best business decision for me. Once I was drafted it was clear what my contract would be valued at."
As to negotiating with Ravens’ vice president Pat Moriarty, Elam wrote: "It was definitely an educational experience. I had a small team of people that helped me with researching comparable deals and determining the language that I wanted to make sure was in there. I was on the phone with Mr. Moriarty and, honestly, it was a very easy negotiation. I know my contract in and out and I think that makes me a more invested member of the organization."
And as to whether his situation may be a model for other incoming rookie players, he responded: "With the slotting system, the contract negotiation is the easy part. As soon as you become eligible for the draft people are pushing for you to make decisions about your agent, financial adviser, etc. There’s no rush. I benefited from taking my time to determine the best way to form my team. I’m obviously very happy with the results."
Time will tell if the “Elam model” becomes more common in the negotiation of rookie contracts. I know there isn't a lot of sympathy out there for plight of agents, but they do provide real and valuable services.
Despite preset numbers in contract negotiations, agents can provide extra value by wrangling small “wins” to counter the teams’ leveraging its contract structure and stated policy, the offset language (see sidebar), offseason injury protection, workout bonuses, bonus deferrals and cash flow.
Further, there are non-negotiation services that most agents handle for rookies:
• Arranging training and interview preparation for the Combine
• Coordinating Pro Day workouts and interviews
• Managing the player’s family and friends
• Providing a credit line for income prior to signing a contract
• Reviewing lease and other documents presented to the player
• Being a trusted adviser and counselor
Although these services are valuable and facilitate the transition into the NFL, they are managerial and rendered disproportionately during a player’s rookie season. I am now hearing from players in the 2011 or 2012 draft classes who are wondering why they continue to write checks to their agents for cookie-cutter contracts. To them, the agent’s pre-draft services are a distant memory.
And what are those fees exactly? Although agents guard their fees with extreme secrecy, my sense in speaking to several of them is that few, if any, are receiving the maximum 3% for rookies, especially at the top of the draft. This is due to two main reasons: the lack of negotiation required and the competitive nature of the marketplace. After seeing what Elam did, there will be even greater downward pressure on these fees.
The agent business, as I constantly tell hordes of young people wanting to enter it, isn't a Hollywood movie. There are now approximately 800 certified agents for 1,800 NFL players, not counting another 250 aspiring agents sat for the NFLPA entrance exam last week. It is a business that is difficult to enter and even harder to sustain success in. As a former agent, I have seen many burn out quickly. I still marvel at the relentlessness of the few who have achieved prolonged success.