- NFL contract extensions come down to leverage and timing. Our business of football expert explains why that works against a new deal for Aaron Rodgers.
I have some personal as well as professional interest in the most closely watched contract negotiation going on the NFL right now. Having negotiated contracts for the Packers for nine years, and knowing Aaron Rodgers as a former colleague and friend (we even discussed my representing him for a brief time years ago), I am keenly interested in where his latest negotiation with the Packers goes.
When Aaron signed his first NFL contract (sitting next to me, as shown below), he was slotted to be a backup to Brett Favre for the foreseeable future—and maybe longer. Fast forward until now, when Aaron is rightfully poised to secure the largest contract in the history of the sport and one that could be a measuring stick for all future elite quarterbacks. Aaron’s agent and the Packers have reportedly been in negotiations for some time, and the usual crescendo point for these deals comes at the start of training camp, which would point to completion next week.
However, in thinking about all parts of this negotiation…I don’t think they’ll reach a deal. Let’s examine.
The Easy Part: The Numbers
In the event the Packers and Rodgers do reach a long-term deal, Rodgers will become the highest paid NFL player in terms of total value and average per year. Of all the negotiation obstacles, this is the easiest to overcome. But even that calculation may be skewed by “total money” compared to “new money.”
The new standard bearer for player compensation from a contract extension is Matt Ryan, who was able to negotiate an eye-popping $94.5 million over the next three years. However, upon closer inspection, Ryan had one season remaining on his deal, at $19 million, so his “true” total over the next three years is more like $75 million—more like a $25 million per year average than a $31 million per year average. Jimmy Garoppolo netted a five-year, $137.5 million deal with the 49ers, an apparent $27.5 million average. However, he would have otherwise made a franchise tag number of $23 million, making his “new money” $113.5 million over five years, or a $22.7 million average. Kirk Cousins is the one contract that “starts from scratch,” without an existing year as an unrestricted free agent, and he signed for $28 million per year.
As explained below—and the primary reason I believe a deal will not happen now—Rodgers’ situation is more complicated with more time on his contract at the time of negotiation than any of the players previously mentioned. Assuming Rodgers surpasses Ryan’s $31 million “new year” average, his contract will still be skewed due to the remaining years on his current deal.
If the negotiations were just about whether the new years would average $31, $32 or $33 million a year, the contract would have been completed long ago. The devil, of course, is in the details about (1) out-of-the-box thinking and, more importantly, (2) those pesky two remaining years.
The Out-Of-The-Box Part: Adjustability
Knowing Rodgers’ talent and the expected magnitude of the contract, there is speculation—some of it uninformed—about potential “adjustability” in a groundbreaking contract. Theories abound about a precedent setting contract that would adjust to (1) a changing elite quarterback contract marketplace and/or (2) a negotiated percentage of a steadily increasing NFL salary cap. As a friend of Aaron and an advocate for breakthroughs on the player side on the business of the NFL, I don’t have much optimism that these clauses can be forged. Let’s examine.
Adjustable to the market
As to the theory of a contract adjusting midstream: It sounds nice, but even if that was possible, how would it happen? It could not magically update as if in a Madden game. It would have to be renegotiated, with signatures from Rodgers and the Packers. And what would be the criteria for adjustment? Salary? Bonus? Guaranteed money? First-year cash? First-three-year cash? Total contract? Cap number? Would workout bonuses, roster bonuses and performance incentives be factored in? What about the language of the contract? Every team uses different contract language, and the Packers have been using the same language in all their deals for many years. There are many obstacles.
Further, can you imagine the reaction around NFL ownership were the Packers to give an “adjustable” deal, even to Aaron Rodgers? Every owner would eventually deal with that request from one or more of their star players. Think about Julio Jones’ present discontent in Atlanta due to the top-of-market deal he signed two years ago being passed by lesser players like Sammy Watkins and Allen Robinson. Imagine if Jones had an adjustable deal? This is another reason that, as much as Aaron may deserve an adjustable deal, it’s highly unlikely at best.
And perhaps the biggest obstacle to an adjustable deal is a precedent which I tried to insert in a contract with a player named—you guessed it—Aaron Rodgers. When negotiating his rookie contract, our sticking point in the negotiations was how to reward him suitably with contract incentives and escalators when Brett Favre retired, a timeframe for which no one (including Brett) knew. I wanted to structure the contract language such as “at such time when Brett Favre retires from the NFL” or even “when the current starting quarterback has retired.” The NFL Management Council shut down those ideas quickly. I was told, in no uncertain terms, that there would be no approval for any contract that tied compensation to any action, retirement, or compensation of another player. Thus, perhaps the biggest obstacle to Rodgers receiving an adjustable contract may be based on precedent from negotiations regarding… Aaron Rodgers.
Adjustable to the cap
I have heard the idea of a contract with a fixed cap percentage many times over the past 20 years, even from agents proposing it to me while with the Packers. I’m not saying it is a nonstarter, but this is an uphill climb. The aforementioned Management Council—which approves all contracts that teams submit—is not going to approve a contract without an actual number attached to each individual year. Further, even if the numbers are, again, “adjustable,” those adjustments would require renegotiations between Rodgers and the Packers when the new cap is set each year. And then, as with the marketplace adjustability, the devil is in the details. Would it be for salary only? Would it include bonus proration, roster bonuses, workout bonuses, earned (or unearned) performance incentives? Beyond the fact that the Packers would be very reluctant (at best) to do anything like this, the hurdles with the Management Council would be substantial.
Interestingly, a theory that I would give more credence to—if only Rodgers didn’t play for the only publicly owned franchise in the league—is the possibility of granting Rodgers an ownership stake. I was surprised to learn that when Peyton Manning was a prized free agent in 2012, and rumors swirled about the Titans offering him an ownership stake, the Management Council had no prohibition against it. The problem, of course, would be valuation against the cap. Were it even a possibility with Rodgers (assuming the Packers were privately owned), were he given, say, a 1% stake in the team with a current valuation of $2 billion, his cap charge would be assessed at $20 million (in addition to other cap charges he had based on salary and bonuses). With the valuation going up each year, the cap charge allocation to Rodgers would do the same. Again, this will not happen because we are talking about the Packers. But, in theory, this could be done with another team.
I love the out-of-the-box thinking that may be coming from Aaron’s side. I don’t love the obstacles he faces, however.
But all of the above does not even address the biggest obstacle for Rodgers that cannot be overcome for several months: the existence of two remaining years on his contract
The Real Problem: the Existing Contract
This is the unavoidable rub, if you will, of this negotiation from Aaron’s side. It’s the one that has me thinking that common ground ultimately won’t be reached in this negotiation, at least not this year.
As I know firsthand from my history negotiating contracts there, the Packers are as proactive as any team in the league in securing contract extensions with core players. They were typically proactive with Rodgers with his previous extension, and are attempting to be so again. Completing early extensions gives players like Rodgers emotional and financial security, but ultimately they are better for the team in providing their own stability and, more importantly, leverage in future negotiations. And now the Packers are able to discuss an extension knowing Rodgers is under contract for two seasons (or more) whether they do a deal or not. Thus, while the best player—and one of the best people—in the sport has some leverage due to his extraordinary value, it is the Packers—not Rodgers—who ultimately hold the cards with two years remaining on the existing contract. (Plus the potential of a franchise tag after that.)
As for the comparables discussed above, both Ryan (one year left) and Garoppolo (tag year) were able to see the free agency finish line. And Cousins—after living with the tag for two years—had actually made it to the promised land of free agency. Rodgers, however, is a year behind Ryan, potentially two years behind Garoppolo and two or more years (depending on the tag) behind Cousins. While Rodgers has a clear talent advantage over those players, the contract length cannot be overstated here. It is the single biggest hurdle in this negotiation to Rodgers getting what he wants.
For the reasons above and primarily this reason, I truly wonder if it makes sense for Rodgers to do a deal in 2018. I can certainly see why the Packers want to, even at an average per year north of $30-32 million for the extension years. That is a no-brainer and a contract that will serve the Packers well for ages. From Rodgers’ perspective, though (again, I admit to bias as a friend and former teammate), I’m not sure I see the value in signing now. Whatever deal he signs now will be, in my mind, inferior to what he would sign at this time next year, and vastly inferior to the one he would sign two years from now, franchise tag or not.
Contract negotiations are based on two things: leverage and timing. Rodgers’ leverage, emanating from his extraordinary abilities, is considerable, but it is tempered by the Packers advantage from a timing perspective. A contract with two years remaining, from a contract negotiation perspective, represents a massive advantage for the team.
Thus, for this contract for which I know the parties so well, if we are playing “Deal or No Deal,” I’d have to say…no deal.