Within the last week, several NFL players have signed lucrative contract extensions: Deshaun Watson (4 years, $160 million), Jalen Ramsey (5 years, $105 million) Alvin Kamara (5 years, $75 million), Dalvin Cook (5 years, $63 million) and DeAndre Hopkins (2 years, $54.5 million) all agreed to rich new terms with their respective teams. Ramsey joined Patrick Mahomes (10 years, $503 million), Christian McCaffrey (4 years, $64 million), George Kittle (5 years, $75 million), Laremy Tunsil (3 years, $66 million) and Kenny Clark (4 years, $70 million) in a growing group of players who have signed record-setting deals for their position (on a per year average) since the pandemic began in March. Considering the anticipated revenue decline this season (the projected cap number for next year is $175 million, down from $198.2 million this year), one wouldn’t think team owners would have an appetite to hand out massive new contracts. But longtime NFL team president & CEO (Eagles, Browns) Joe Banner and former NFLPA President Eric Winston explained that with today’s high-profile young players having a better understanding of the leverage they hold and ownership confident that significant revenue (and subsequent cap) growth is on the horizon, the flurry of recent big money signings is really not all that surprising.
Our Take: For years, NFL players “underestimated the kind of leverage and the amount of power they held because it was intangible,” Banner said. But as the former front office executive explained, “When it’s a star player or a difference-maker withholding their services, that is huge leverage.” Leigh Steinberg (CEO and chairman of Steinberg Sports & Entertainment, Mahomes’ agent) agreed saying, “the theory of football has a lot to do with irreplaceability. Some teams [believe] that they need seven [star players to win]” and if one elects to hold out (or gets injured) they’re difficult to replace. As a result, “players that teams think are absolutely irreplaceable are garnering more power and more compensation,” he said.
Over the last year or two, the NFL’s most talented players have seemingly come to realize – and take advantage of – the leverage they hold over their clubs (Banner suggested the trend started with Aaron Donald and Khalil Mack in 2018). While difficult to attribute the change in mindset to a single reason or event, Banner believes greater societal changes are playing a role. “There’s a growing understanding that people who aren’t being treated properly don’t have to take it anymore,” Banner said. Winston suggested technology is having an impact. “The mentality [used to be that] players were to keep their mouths shut and play. Now, because of their social media followings and the alternative ways they have to reach fans, [star players] are more influential, more valuable, and teams are taking note.”
The increased understanding of their leverage has led to some of the league’s biggest names to seek out lucrative extensions earlier in their careers than has been customary. Banner explained, “We used to watch a superstar QB sit and wait four or five years to get a new deal. [Moving forward], I can’t imagine any QB who has established himself waiting more than three years before he withholds his services or gets a new contract” (see: Mahomes, Watson). While the expedited timeline won’t prevent a GM in need of a franchise QB from selecting one at the top of the draft, it will “absolutely alter the way teams plan and the way they think about [roster construction],” the former team president and CEO said.
Contrary to the Mahomes precedent, the player empowerment trend is also likely to result in shorter-term deals for NFL players. While it is the elite guys currently seeking out deals just three or four years in length, Banner projected “it will begin to trickle down.” Players will begin to realize as they see their colleagues moving to shorter deals that there is little to be gained from signing a contract longer than its effective guarantee.
The other reason big money deals are getting done now is because NFL owners are “beyond bullish about the league’s future,” Banner said. He explained, “The owners have a pretty good idea of how the [upcoming] TV deals are going to shake out—how much new revenue they’re going to have [coming in]. [They’re thinking], why not sign these deals now before the new TV deals get announced (note: Banner was not suggesting the deals are imminent). Deals that look high now won’t in a year or two [when revenues spike].” Winston was on the same page, saying the size of the deals signed during the pandemic are “simply a function of where revenues and the cap are going. Historically, elite QBs have commanded 15% to 20% of the cap. If in three or four years the cap is $280 million or $300 million, [Mahomes and Watson] won’t be considered overpaid.”
Timing likely contributed to Watson, Ramsey and Hopkins getting deals done within the last week too. Winston explained, “Historically, big extensions get done at the end of training camp. It’s almost like a fictitious deadline [teams and players] put on contract negotiations.”
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