The Cowboys’ quarterback was willing to take things as close to free agency as possible, and it paid off. But management has the power in most deals you’ll see this week.
Dak Prescott proved my theory regarding player empowerment in team sports: The only way players are going to truly have leverage with teams is to reach, or at least reach the precipice of, free agency. Prescott used the leverage he had over the Cowboys, not as a free agent but as close as one could get to being one, to negotiate a strong contract, especially compared to similarly situated quarterbacks.
Leveraging the Joneses
I wrote back in August 2019 that Prescott’s best option was simply to wait—and wait he did. I found it amusing that when Prescott suffered a season-ending injury last season, many used the worn clichés that he should have taken a deal from the Cowboys, that he lost leverage, that he bet on himself and lost. Please.
Despite the injury, Prescott had three attractive options coming into 2021: 1) another franchise tag, this time worth $38 million, 2) signing a contract to his pleasing with the Cowboys, or 3) being set free into an open market that never sees ascending young quarterbacks. As for the first option, with the salary cap declining from $198 million last year to $182.5 million this year, the Cowboys did not want to apportion 21% of the cap to a single player. Prescott used that to his full advantage. The second option is the one that came to fruition, a new contract with the Cowboys. And what a contract it is.
The contract sets new records for 1) first-year money, an eye-popping $75 million dollars, including a $66 million signing bonus, also a record; 2) three-year money and guarantee, $126 million; and 3) four-year money, $160 million.
And here may be the best part of the deal: It is only for four years, allowing Prescott to either leverage the Cowboys into a player “win” again or hit the free-agent market still in his prime at age 31. Prescott, coming off a serious injury, hit all the marks with this deal, using the leverage of pending free agency, which he will have again in a mere three years.
Speaking of length, the model set by Patrick Mahomes of an exceedingly long contract has certainly not been one that other players want to follow. I wrote about that after Mahomes signed his extension, and the Prescott deal proves my point. I thought that contract was clearly too light on early money and way too long, giving the Chiefs control for the rest of Mahomes’s career. And, of course, quarterbacks such as Deshaun Watson and Prescott, who signed subsequent contracts, had no interest in that kind of length, preferring another shot at a free-agency-induced contract.
Here are some specifics, comparing the Prescott and Mahomes cash flows:
First year money
Mahomes: $10 million
Prescott: $75 million
Three-year money
Mahomes: $63 million
Prescott: $126 million (double)
Four-year money
Mahomes: $104 million
Prescott: $160 million
Yes, Mahomes’s contract escalates to a higher level in its latter half, but who knows where the top of the QB market will be at that time? In contrast, Prescott will find that out, Mahomes will not.
As for Watson, I wondered aloud why he would sign an extension with the Texans in September and want out in January. I received hundreds of responses telling me that he had to take the money because of the injury risk. I present to those responses Exhibit A: Dak Prescott. Watson’s value would only have gone up, and he also would have made himself easier to trade and had a better contract coming from either the Texans or a new team.
We will see the power of free agency this week with players at other positions, at least those who have not received the powerful management weapon of the tag. Player empowerment is possible for those few who are willing to wait and eschew early deals.
Every now and then, a player like Prescott levels the business playing field with management.
Cap myth: Players restructuring contracts are sacrificing
My previous column explaining the NFL salary cap and clearing up misconceptions was very well received; I appreciate all the kind words. I did leave out one myth, which I will address here.
As teams slice and dice to get under the cap by Wednesday’s 4 p.m. ET deadline, we are seeing many players restructure contracts to lower their cap charge (which, again, increases their cap charges later in the contract). As I said two weeks ago, this is not hard: Large salaries or roster bonuses are simply turned into signing bonuses, thus prorated over the remaining years of the contract. But somehow a narrative has developed that players doing this are making some kind of sacrifice. Please.
Players agreeing to cap restructures do not sacrifice any money. In most cases it is paid out exactly as it was before, now simply labeled signing bonus. In some cases, these restructures actually give the player better cash flow. For example, the team may agree that instead of paying the money as it was scheduled—during the season—the player may get some or all of the money immediately. Cap restructures are cash neutral or even cash advantageous. Unless there is a pay cut as part of it—such as with Ben Roethlisberger—there is no “sacrifice” here.
The Saints are so desperate for cap room that they took Taysom Hill’s salary and spread it over three more voidable (fictitious) years while putting a made-up number of $140 million on the deal, all for $7 million of short-term cap relief. And speaking of the Saints, Drew Brees will leave behind a $22 million dead-money charge in retirement. Due to their dire situation, they may hold the Brees retirement until after June 1, splitting the $22 million into $11 million in dead money this year and a similar amount next year. My question, however: Is that kosher?
Brees reduced his salary from $25 million to the minimum in order to allow the Saints to gain all that room under the cap as they scramble. But if they hold his retirement until June, shouldn’t they have to count the $25 million until then? Other players have announced retirements and the team has held the transaction until June, but not with a massive pay cut in the interim. This has caught the eye of teams around the NFL.
The other side of player empowerment
In contrast to the leverage of outliers such as Prescott, this is the time of year when dozens of players are being released with teams having no remaining financial obligation, simply leftover cap accounting. Hundreds of millions of dollars in player “contract” value is being extinguished. Some of these players signed large free-agent contracts as recently as one year ago, contracts portrayed as a lot more valuable back then.
Thus, my annual reminder that what you will see in coming days about contract value is a game played by agents and the media. Agents call media sources and spin the player contract in the most favorable light. The reality of a smaller contract number for one year and “we’ll see” does not grab any headlines. One of those contracts was signed a year ago by Kyle Van Noy with the Dolphins, supposedly a four-year $51 million deal. One year later, Van Noy is an ex-Dolphin and his $12.5 million 2021 salary has vanished. So many other players are on the short end of these deals.
I saw the cold truth of this situation firsthand as an executive with the Packers. We had released a player scheduled to make $8 million. Months after the release, I received a call from a loan officer looking for repayment from the player after being unable to reach him. This banker seemed pretty confident in getting his loan back, telling me: “Well, I see right here he is going to make $8 million this year; we’ll just get a lien on that.” I said as politely as I could: “Sir, that contract was terminated and that money was not guaranteed.” There was silence on the other end of the phone; I felt for this loan officer, whose career was flashing before his eyes.
While we marvel at the few lucky players who score free-agent deals this week, remember that the 2021 free agent signings may well be the 2022 or 2023 releases. Even for the players with leverage this week, NFL contracts—except in rare cases like Prescott—still favor the owners.
The business of sports always wins.