Bills Signed the Best Deal in Sports Business History; Impact of Deshaun Watson Contract
The inexorable pace of NFL business continues during this predraft time. And the impact of the largest team-player contract in NFL history and the largest team-stadium contract in NFL history will linger. Also, an interesting new trend in wide receiver pay and strategy may be emerging. Settle in …
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Bills sign best deal ever
While Watson took player contracts to a new level, the Bills’ ownership just took stadium contracts to a much higher level. Watson got $230 million; the Bills got several times more than that. Simply, the Bills just made the best deal in the history of the business of sports.
Let this sink in: New York is giving Bills ownership $850 million—$600 million from the state and $250 million from Erie County—to assist funding of a new, $1.4 billion stadium. Bills’ owners Terry and Kim Pegula certainly have the resources to fund most, if not all, of that stadium cost privately. But hey, if they can get the state to do most of the funding, why wouldn’t they?
A few years ago, Nevada forked over $750 million to help build the Raiders a gleaming new stadium, but that was to entice them to move there. This deal—for $100 million more—is simply to keep an existing franchise. New York governor Kathy Hochul has chosen to allocate these resources to NFL owners rather than to schools, libraries, public safety, etc. Why?
One could say that Hochul does not want to forever be known for losing the Bills, but would the Bills really have left had they not received this extraordinary sum? For Austin? St. Louis? Toronto? Really??
Even accepting the fact that New York had to give away public money, I think Hochul needs better negotiators. Couldn’t the state of New York have negotiated say, half a billion rather than $850 million? The Bills will eventually be sold for a price north of $4 billion, and the state of New York’s share of that will be $0.00. NFL owners socialize cost and privatize profit. What a business.
Stadium playbook happening all over
The Bills’ playbook is also in motion in at least four other NFL markets.
In the Washington metropolitan area, Virginia has offered the Commanders $1 billion—plus a cut of sales tax revenue—while Maryland, where they currently play, is offering a similar amount. Tennessee Gov. Bill Lee has allocated $500 million toward a new facility for the Titans. The Bears have a tentative deal with the Chicago suburb of Arlington Heights, offering a better deal than the city of Chicago. The Bengals are making some noise about some public help toward a new practice facility. And at the NFL owners’ meetings, Chiefs president Mark Donovan mentioned being pitched by developers in Kansas (the team currently plays in Missouri).
Even without the previous negotiation stalking horses of Los Angeles and Las Vegas, NFL team owners are still dictating terms to their municipalities, and, well, it’s working. No public official wants to be the one to lose a precious NFL franchise, even to a neighboring area.
Watson contract will reverberate for years
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It didn’t take a genius to correctly predict that the game-changing contract the Browns gave to Deshaun Watson—with a full guarantee of $46 million a year for five years and extreme player protections against losing money due to suspension or further misconduct—would cause reverberations throughout the league. The backlash has begun.
Ravens owner Steve Bisciotti did not hide his disdain for Browns owner Jimmy Haslam and that contract, as Biscotti is now feeling the direct impact. Lamar Jackson has had a better career than Watson, has been healthier despite his style of play and is much closer to free agency than Watson was. Anything less than the Watson deal would be unfair for Jackson in this new market.
Sure, Biscotti and all other owners will try to explain away the Watson mega-contract as an outlier and an aberration, but good luck with that. Not only will this affect teams with elite young quarterbacks—Ravens, Bengals, Chargers, Cardinals—but I have also heard of one or more elite quarterbacks with an existing contract wanting to revisit the terms in light of Watson.
Funding rule comes into focus
Further, there is the bigger issue of the NFL funding rule for future guarantees. In simplest terms, teams must fund future guarantees that go out past the current year, placing the money in escrow. Teams have traditionally hidden behind the funding rule when explaining to agents why they can’t fully guarantee contracts, as they did not (or said they did not) have that cash to put into escrow. That excuse is weakened by what the Browns did.
Here is the problem though: There are several teams that simply do not have the cash resources, as Haslam does, to fund this kind of contract. Two of those teams will be directly in the crosshairs of this deal next year. Joe Burrow and Justin Herbert will be extension eligible a year from now, with every reason to receive an even better contract than Watson. But those teams are not owned by billionaires; they are, in essence, family businesses. The Brown family (Bengals) and Spanos family (Chargers) do not have the $180 million in cash to place in escrow as Haslam is doing for the Watson deal.
And believe me: They know it and are, well, pissed.
The Browns have done what every player and agent have wanted a team to do for decades and, conversely, what every NFL team has fought against for decades.
It is still stunning (and a bit icky) that it was done with this player.
A transforming wide receiver market and, perhaps, strategy
The recent weeks have seen some upheaval in the wide receiver market in a variety of different ways.
Davante Adams and Tyreek Hill have now both moved—with great glee—from Super Bowl-contending teams and receiving passes from future Hall of Fame quarterbacks to lesser teams and lesser quarterbacks. Money was certainly part of it for Hill, but like Adams, something seemed amiss—from both sides of the relationship—between the team and the player. As I always say, even as someone who managed the salary cap for a decade—team management is less about numbers and more about relationships. There is more to these situations than meets the eye.
With the new top tier pay for wide receivers set, the next domino fell as the Bills addressed Stefon Diggs’s existing contract. I’m not sure what to believe with the numbers—the reports are all agent-driven, so it’s hard to know the real numbers—but whatever they are, the Bills “won” these negotiations simply due to the term of contract.
The Bills secured Diggs for an additional four years, beyond the existing two years they already had. Now with Josh Allen also locked up through 2028, the Bills—no matter the money—are in the driver’s seat with these contracts. They have contract control for six and seven seasons while the cap rises and the “out years” of these contracts are nonguaranteed (unlike for Watson).
New wide receiver strategy?
With the receiver market exploding, we may see a change in financial and personnel strategy. The Packers and Chiefs were signing other core players on their teams to extensions; they appeared to make conscious decisions not to prioritize Adams and Hill, and they are already on to the next, with both teams talking about the cap space and draft picks.
We are now at a point where teams are able to leverage rookie-contract wide receiver pay in the way they have leveraged rookie-contract quarterback pay. Teams like the Bengals, Dolphins and Eagles have Ja’Marr Chase, Jaylen Waddle and DeVonta Smith on highly undervalued contracts for at least two more seasons, as the CBA will not allow renegotiations with these players until they have played three seasons. These players will be making roughly $4 million per year, while similarly talented veteran players at their position are making $15 to $25 million per year. Their teams have a built-in advantage.
The CBA rookie-pay system is the gift to NFL front offices that keeps giving.
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