The NFL imposed a cap on rookie contracts during the labor wrangle of 2011. Instead of over-the-barrel holdout negotiations with the top players in the draft class, there is now a streamlined system of four-year contracts, plus fifth-year team options for first-round picks. The long-term financial ramifications of the rookie cap are still evolving, but in the short term, teams saved themselves millions of dollars, hundreds of manpower hours of haggling and the embarrassment/financial strain of Jamarcus Russell-level crippling draft mistakes.
The new contracts are structured so no rookie can renegotiate his contract in his first three seasons, no matter how Russell Wilson-ish he was. (A built-in escalator system provides a little fourth-year relief for mid-round picks like Wilson who become superstars). At the end of three years, players and teams receive a three-month window to either renegotiate, exercise a fifth-year option (team's discretion, where applicable) or play out the fourth and final year of the original deal. Those first negotiation windows have just opened, ushering in a new era in roster management: an Extend It or Not? game show for teams that have enjoyed three years of moderately priced services from young draftees.
There is no real roadmap for the extension process: Players, teams and agents embark on a Lewis and Clark journey this year, and their decisions will set precedents for future contracts. There will probably be surprises, false starts, hurt feelings, big mistakes and a lot of confusion in the next few months as teams juggle all of the preexisting salary cap compromises with the latest mixed blessing/potential pitfall.
Let's look at some of the most obvious extension candidates from the 2011 draft class. All are worth locking down for a few more seasons, but each team's cap issues are different, and some teams must make some hard choices if they don't want to leap from the frying pan of out-of-control pre-2011 rookie contracts into the fire of Extensions Gone Wild.
Cam Newton, Panthers. A no-brainer. Newton answered all the leadership-maturity questions that dogged him in his first two seasons and is clearly the face of the Panthers franchise for the foreseeable future. An extension allows the Panthers to convert Newton's $7-millionish 2014 salary into a signing bonus and prorate it, creating some wiggle room to sign top-priority unrestricted free agent Greg Hardy and play the market a little bit.
The Panthers could exercise a fifth-year option on Newton's rookie contract, but it would be a whopper (he would earn the average of the top 10 quarterbacks, with no prorated goodness) while doing little to increase the warm-and-fuzzies between Newton and the franchise. Owner Jerry Richardson is more of a cold-and-prickly than a warm-and-fuzzy, but he knows a better long-term solution when he sees one. When it gets done, Newton's deal will be a market establisher, especially when paired with an extension for …
Colin Kaepernick, 49ers. The same situation as Newton, only completely different. Some Kaepernick skeptics emerged during the quarterback's midseason slump, but none of them make business decisions for the 49ers, who know a still-developing quarterback battling a bad receiver situation when they see one. (Also, the skeptics are hard to locate as the NFC Championship looms.) Kaepernick has no fifth-year option, his low base salary in 2014 will not provide a cap massage if turned into a bonus and the 49ers are tighter against the cap than the Panthers.
In short, extending Kaepernick will bring financial pain. The temptation will be great to enjoy one more budget-friendly season, then apply a Joe Flacco/Jay Cutler golden handcuff lockdown just before the 2015 free agent market opens. The 49ers will be wise to resist that temptation.
Speaking of Flacco, Cutler and Matt Ryan, they have set the current market for the quarterback upper middle class with a series of deals that hover around $54-million guaranteed over three years, plus Monopoly money on the back end. Those deals may be the template for the Newton/Kaepernick contracts, but do not be surprised if a new paradigm develops to deal with superstar quarterbacks seeking fourth-year extensions. Andrew Luck, Russell Wilson, the post-Shanahan Robert Griffin and others -- and their agents, of course -- will be watching carefully to see how these negotiations develop.
49ers pass rusher Aldon Smith is also up for renegotiation. With his multiple off-the-field problems, he is a prime example of a player the 49ers could simply wait out for one more year. Even exercising his option may be too expensive a gamble for a team loaded with pricey defenders.
J.J. Watt, Texans: As much a "face of the franchise" player as Newton or Kaepernick, Watt is scheduled to earn about $3.5 million next season. A fifth-year option would be affordable (the average of the third through 25th highest-paid defensive ends in the NFL), especially since Watt would probably become the highest-paid defender in the NFL if he somehow hit the market tomorrow.
The Texans don't want Watt to hit the market at any time, and they don't really want to low-ball their undisputed star with an option pickup, either. But an extension will be an expensive proposition for a team that must start dumping salaries just to sign this year's rookies, let alone retain in-house free agents like Antonio Smith and Ben Tate or play the market a little. With a relatively low base salary, the Watt extension would not provide much proration goodness.
Ambitious cap cutting should make a Watt extension possible. By taking Matt Schaub, Owen Daniels, Danieal Manning, Shane Lechler and a few others off the books, the Texans can cut bait on some recent mistakes, swallow a dead money pill and give Watt a Jared Allen/Haloti Ngata-sized contract, plus get the top pick in the draft signed and make a run at a free agent or two. The accounting will be tricky and the 2014 product a little ugly, but a lot of the dirty work has to be done, anyway.
Richard Sherman, Seahawks: Over the next two seasons, the Seahawks will either establish a blueprint for how to prioritize and cope with fourth-year extensions and options, or a cautionary tale about what happens when a team drafts too well but does not budget wisely enough.
As you probably know, the Seahawks benefit from more cheap talent than any other quality team, thanks in part to outstanding mid-round drafting in 2011 and 2012. Sherman and K.J. Wright are two important defenders in the extension zone who are currently scheduled to earn less than $1.5 million combined next year, and the 2015 extension candidates include Russell Wilson, Bruce Irvin and Bobby Wagner. Important young contributors from before the 2011 rookie cap kicked in, like Earl Thomas, are also approaching free agency.
What to do? Some decisions seem simple: Extend Sherman this year and Wilson next, let 2011 first-rounder James Carpenter play out his fourth year and walk, play hardball with the linebackers, who are easier to replace, and keep treating the third day of the draft like a honey hole. But if you watched Wagner in the Saints game, you know not all linebackers are replaceable parts, and playing Moneyball is not easy when the money rules have suddenly changed.
Complicating matters is a 2014 cap situation constricted by some pricey pre-2011 contracts (left tackle Russell Okung eats up $11 million) and one massive trade boo-boo (Percy Harvin). The sheer quantity of young players coming through the extension pipeline also makes the Seahawks unique. Juggling all of these balls is going to take some front-office acrobatics, but having a championship-caliber team full of guys under affordable short-term contracts is a happy problem to have to tackle.
It all starts with extending the best cornerback in the NFL, probably by throwing some Revis-like numbers at him. After that, the Seahawks front office must prove that it is as creative about sustaining success as it is about achieving it.
Muhammad Wilkerson, Jets. The Jets are not nearly as successful as the Seahawks, but they are another team in need of financial signposts as they prepare to deal with marquee defenders seeking extensions. Wilkerson is one of the best 3-4 defensive linemen in the NFL, and he will be followed through the Jets accounting pipeline by Quinton Coples (who improved substantially in his second season), then Sheldon Richardson (already a star) and Dee Milliner (has the talent and mentality to pull a Coples).
Unlike most of the Seahawks stars, all of the Jets extension targets on the horizon are first-round picks. That means general manager John Idzik will have fifth-year options in his toolbox. Those options may be ideal solutions for Wilkerson and the others: The pay rates will not be extreme (only Milliner was a top-10 pick, so all option salaries are computed using the lower average), and the extra year provides insulation for players along the defensive front seven, who notoriously fall victim to injury/weight/motivation issues at a higher rate than those at other positions.
The Jets could also lock Wilkerson into a long-term deal fairly easily once they clear some crazy dead-weight contracts off the books. The question is whether Idzik will want to. The Jets general manager has a reputation as a salary cap brawler with a mind for the importance (and danger) of setting precedent. He went to the wall with Milliner to make sure his rookie contract included offset language, and he may pop the fifth-year options on his moderately priced first-round defenders just to show that there is no three-years-to-payday formula for the Jets, and to make sure future Jets teams are not paying for past mistakes the way the current Jets are.
A.J. Green, Bengals, and Julio Jones, Falcons. A cynic would suggest that Green took money out of Andy Dalton's pocket when he dropped that fourth-down bomb against the Chargers in the playoffs. A catch may have turned the tides of both the game and public opinions of Dalton. But quarterbacks are blamed for losses, not wide receivers, so Dalton was essentially erased from the extension equation, moving Green to the top of the Bengals list of important young building blocks.
Front offices do not really think or work that way, of course. Dalton's season-long scouting tape likely sealed his fate as a quarterback who will spend next year justifying his Bengals existence. Drops aside, Green is one of the most dynamic all-purpose receivers in the NFL, and the Bengals have the cap maneuverability to lock him in place while they decide the fate of the guy throwing to him.
While Green made himself richer, Julio Jones' midseason injury probably took him off the extension priority list. The Falcons are working to extend fellow receiver Roddy White in the early offseason. They can pop Jones' fifth-year option to buy time, make sure Jones' foot has healed, then start talking extension once the team has negotiated some other rebuilding minefields.
Cameron Jordan, Saints. The Saints are in a terrible cap situation, with tons of money locked up by their veteran superstars and tight end Jimmy Graham ready to demand wide receiver money from anyone willing to offer it (and likely to balk at a franchise designation). Jordan enjoyed a breakout 2013 campaign, with 12.5 regular season sacks and an eye-opening performance in the playoffs ("Hi, my name is Cameron, I weigh 285 pounds and I can outrun Russell Wilson"). Jordan's situation is similar to J.J. Watt's. He must hope his team cuts some expensive veterans to clear cap space, and may have to settle for a fifth-year option while the accountants wade through a spreadsheet bayou.
The Jordan-Saints problem is new, but not unique: It is repeating itself around the NFL this year, and will keep repeating itself until a new salary reality emerges. For now, there are many great young players looking to get rich(er). The next few weeks will tell who gets to be first in line, and what he will get once his name is called.