The deadline for teams to sign franchise players to a long term extension spurred a large number of last minute contract negotiations that resulted in some big contracts being signed.
Wide receivers Demaryius Thomas and Dez Bryant both signed five-year contracts for $70 million with over $40 million guaranteed, while Chiefs linebacker Justin Houston signed a six-year contract worth $101 million and came with over $50 million in guarantees. Though not all the particulars of the contracts are known we can see what these contracts mean for the players, their teams and others in the NFL.
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Player Impact
While the wide receivers garnered the most attention in the media, it was Houston who signed the biggest contract. Houston’s $101 million megadeal will make him the second-highest paid defensive player in the NFL. The contract surpasses that of JJ Watt of the Texans in terms of overall value and will be very close on the important three-year payout. Houston received over $50 million in injury guarantees and $32 million in fully guaranteed salary.
Houston’s contract is likely a byproduct of the Chiefs poor cap situation, which, as of this morning, saw them with only $500,000 in cap space with Houston playing on the franchise tag. The Chiefs desperately needed cap relief which likely fueled the contract. Houston was able to convince the Chiefs that he is a transcendent player for his position, similar to Watt. The prior high watermark for an outside linebacker was Clay Matthews at $13.2 million, a number Houston shattered.
Houston’s ability to earn that kind of contract should not be understated. Houston, as a former third-round pick, has a much tougher hill to climb than the others who signed major deals, all of whom were first rounders. Last season, Robert Quinn signed a $14.2 million contract extension with the Rams off a 19-sack season and plays a higher compensated position, yet Houston was able to best that one by over $4 million a year.
Neither receiver was able to convince their team that they deserved the same treatment as Houston. Both had tried to paint a case that they should be compensated above the $16 million per year earned by Calvin Johnson of the Lions, but neither team looked at the contract as completely valid. Despite the fact that both receivers compare with Johnson at the time he signed his deal, Johnson had a great deal of leverage with the salary cap mess that the Lions had created, which he used to negotiate a very strong contract.
Denver and Dallas did not have the cap problems of the Lions or of the Chiefs this year and did not really have incentive to cave on those points. Though both receivers threatened to not play, the fact was their options were limited. They would forego about $750,000 for each game missed and had no ability, per NFL rules, to even negotiate a contract until the regular season was finished. So it was not a surprise that all sides quickly came to the negotiating table to get a deal done since this was best outcome for all parties.
The contracts signed by Bryant and Thomas will now firmly put them as the second highest paid receivers in the NFL. Both received large guarantees and they will earn similar salaries as Johnson over the first three years of the contract in return for more team-friendly charges at the end of the deal. The five year contract length will also give both players, if they continue to play well, the opportunity to be free agents in 2020, which is the final season of the current CBA. Being a free agent before the CBA potentially expires is advantageous due to rules that limit player extensions.
Team Impact
The Chiefs will likely receive about $8 million in much-needed cap relief this year with the new deal for Houston. This will give them the ability to function during the regular season without having to rework the contracts of other players for cap space that can hamper them in the future. The Chiefs had much more cap space on hand in 2016 so they had the room to defer the cap charges until the later dates. The Chiefs should have done this deal last year given the enormity of the contract. They likely cost themselves both cash and cap room, not to mention contract flexibility, by waiting this long and still signing a massive contract.
Dallas will pick up over $6 million in cap space, which they will use to cover the potential cost of Greg Hardy’s contract and maybe allocate towards a contract extension for Tyrone Crawford later this summer. The Cowboys were a middle of the road cap projection for 2016 so they can afford the cap charges moving forward without compromising the team. They won’t be in a position to be very active in free agency, but they would not find a better free agent than Bryant regardless.
The Broncos have no pressing salary cap issues and are now set up for a dominant receiver to pair with a post-Peyton Manning quarterback in the future. The biggest benefit to them, however, is the opening of the franchise tag for use on star linebacker Von Miller who will be a free agent next season and likely command huge money. This contract should either open the door for Miller to negotiate an extension during the season or directly after the season since he now officially knows his path to free agency is effectively blocked.
League Impact
Big contracts often drive the market for others and these should be no different. Though some may argue that Houston is an outlier this now puts four pass rushers (Ndamukong Suh, JJ Watt, and Mario Williams) over $16 million per year and five over $14 million. It would seem clear that the precedent is leaning towards a big season meaning big money. Expect Miller, Aldon Smith and Jason Pierre-Paul all to now see the advantage of the huge impact season in a walk year and try to leverage that next year if they play well.
There should be no arguing outliers at wide receiver since these two contracts are going to define the top of the acceptable market. Both AJ Green and Julio Jones will be looking to build off these contracts. Both can argue they are better players and try to exceed these deals. The Bengals typically do hammer out extensions in the summer so if they are willing to concede a premium contract he would likely be the next to sign. Once four good players are situated at the $14 million range, expect the market to follow.