Monday Money Matters

The USA Today survey last week of player salaries in the NFL was a technically correct and comprehensive listing of all of the 2008 income of NFL Players, derived from the NFL Players Association and player agents.  While technically correct and informative, the data points out how skewed the numbers are based on the way the NFL compensates its labor force.

 

The mother lode of compensation for NFL players is the bonus – the cash, upfront compensation that seals the deal to consummate most contracts.  In past years, it has always been under the moniker “Signing Bonus” as that term had significant cachet amongst players and agents.  Now, with better Cap management and more judicious planning by teams, there is no pressing need for teams to label the upfront comp “Signing Bonus”. Uses of Roster Bonuses or large, guaranteed Paragraph 5 amounts (salary) – both of which allow for pay-as-you-go Cap management — have become in vogue.

 

The players who received new and extended contracts in 2008 are, of course, at the top of the salary lists due to their bonus compensation.  Although it may not have been all paid in 2008 – and it is unlikely with the magnitude of some of these amounts that it was – it is counted for these purposes as if it was.  Thus, these players sit atop the surveys for now and will be replaced by the group that signs large contracts in 2009 next year.

 

For instance, Ben Roethlisberger is this year’s winner of the study, with 27.7M in compensation this year, most of it in the form of a 25M bonus to ensure his continued participation with the Steelers for the next eight years.  In 2009, with only salary compensation in the 4M range, he will drop precipitously in the rankings.  Of course, his value to the Steelers will not have changed from 2008 to 2009; it is the nature of compensation in the NFL to have these huge disparities from year to year with the first year of the contract being heavily skewed.

 

The others at the top of the rankings all had new or renegotiated contracts this year with double-digit bonus compensation – Jared Allen, Larry Fitzgerald, Michael Turner, Assante Samuel, Randy Moss, Flozell Adams, Tommy Kelly, Terrell Owens, Bernard Berrian, Michael Roos, Terrence Newman, Marion Barber, etc.  This was their year and again, the new contract lottery winners will replace this group in 2009.

 

The one name that stands out that did not receive a new contract in 2008 is JaMarcus Russell, the top pick in the 2007 NFL Draft.  This is due to the way top NFL draft picks are compensated due to limits on Rookie compensation under the Cap.  Since the Cap number of a top pick is very tight, teams have to give most of the bonus money in the form of an option bonus that is guaranteed by future salary and paid at the beginning of the year following the player’s selection.  At the Packers, with the picking of AJ Hawk at 5^th in the 2006 NFL Draft, he became one of our highest cash output players for 2007.   Most of Russell’s 16.8M 2008 compensation is in the form of an option bonus that, in effect, represents Russell’s bonus for being the top pick in the 2007 NFL Draft.  In the 2009 salary rankings, we will likely see players such as Jake Long and Matt Ryan at the top of the list for the same reason.

 

Again, the numbers are instructive to a point, but it is important to note that the players at the top this year will be nowhere near the top next year.  That is the way it works with NFL contracts……

 

Perhaps more instructive in the USA Today rankings are the club cash compensation rankings.  There are two types of accounting in the NFL:  Cap accounting and Cash accounting.  Cap accounting can be deceiving; cash accounting cannot.  The USA Today numbers reflect cash accounting; the actual dollars paid out by teams to players.  The range goes from Oakland at 152.4M down to Kansas City at 83.6M, almost a 70M difference between the high and low.  Although this is a wide swing, it is certainly a far cry from MLB, where the Yankees reside in a neighborhood with over 200M in player payroll while the World Series participating Rays were paying about 44M.

 

The obvious point that screams out about team payroll is that money spent does not translate to on-the-field success.  Like the baseball example above, some of the teams at the top of the NFL team payrolls, in addition to the Raiders, are the Browns, 49ers and Cowboys.  Some of the teams at the lower end of NFL team payrolls in 2008 include the Patriots, Packers (although the study was done prior to their adding 12M to their 2008 payroll with the Rodgers deal) Falcons and Ravens. 

 

This is not a new revelation; it has been proven year after year that the highest-payroll teams do not translate into the winningest teams on the field.  Yet there will be large spending again next year and there will be little correlation between spending and winning once again.