A look at rookie contracts

First, a note on the “stop-you-in-your-tracks” news of Steve McNair’s death this past weekend in Nashville: I didn’t know McNair but felt like I did in my nine years dealing with Bus Cook, his agent and the agent for Brett Favre. It seemed like every time I spoke with Bus about Brett, I would inevitably hear about McNair (pronounced MAC-nair by Cook) since their careers as the faces of two successful franchises seemed to coincide. Indeed, whenever we worked on a deal for Brett, we always discussed similar negotiations going on with McNair.

When the Titans locked out McNair from working at their facility prior to his trade to the Ravens, I had to hold the phone away from my ear as Bus railed on about the treatment given to the signature player of that franchise (I would later hear the same about another client of his). Throughout that ordeal, however, Bus maintained that McNair would never take shots at the organization and would handle himself with professionalism and class throughout. He appeared to be that type of person and was full of natural leadership traits that served him well in his wonderful career in football.

Bus truly cherished and adored Steve. Rest in peace, Steve MAC-nair….

Second, as a tennis fan and very unsuccessful former competitive player, I think we are truly in a time to count our blessings as fans of the sport. The Roger Federer-Andy Roddick Wimbledon final was a joy to watch, as, it seems, are all of Federer’s matches. His mastery of the game is breathtaking. He also genuinely seems like a good guy, someone who takes his game much more seriously than he takes himself. As I’ve said many times about this era of tennis with Federer, Rafael Nadal, Roddick and sisters Venus and Serena Williams – who seem to be able to win any tournament they grace with their presence – we are truly smack dab in the middle of a golden age of the sport….

The July 4 holiday has passed, and NFL teams now will step up their efforts to bring the rookie class of 2009 into the fold contractually. Of course, the fact that very few high picks have signed is meaningless at this point, as every player has participated in offseason activities and mini-camps, all secured by injury protection forms signed prior to their first team activity in May.

Over the next couple of weeks, I want to take you inside the negotiations of these rookie contracts in a few stages. A common misperception about rookie contract negotiations is that – with the rookie salary cap setting basic levels of contract values – the only substantive negotiation is the number inserted for the signing bonus. In some contracts, that might be the case, but the reality is a bit more complicated. It’s the infrastructure of the contract that often becomes more debated than the dollars and cents. Today, let’s look at the signing bonus.

The Signing Bonus

Depending on when the contract is negotiated, there may be precious little to negotiate with regard to the bonus. In the seventh round, the haggling may be over tens of dollars. In the sixth round, it may come down to a hundred dollars. In the fifth, the debating may be over a few hundred dollars and so on.

For those teams that wait until the week of training camp – which some teams do – the bonus amounts will have likely filled in around the pick, and it’s simple to fill in a fair number for both sides. As mentioned, some teams will look around the rounds of their picks in the week of training camp, call the agents and fill in the numbers. That’s a relatively stress-free way of doing the contracts; my nature would not allow me to do that because I’d be worried if we hadn’t signed most of our rookies by early to mid-July. For those like myself who tried to lock in contracts early in the development of the round, filling in a number becomes a task based on the previous, rather than the current, year.

Thus, in negotiating among the first deals in a couple of the rounds, the markers used this year were from the 2008 draft, examining the increase in bonus from 2007 to 2008 in various data points:

• the exact slot of the selection;
• the overall selection in the draft;
• the area three picks above and below the slot;
• the quadrant of the round;
• the half of the round;
• the full round.

In the lower rounds, the increases in bonus amounts are typically in the 3-4 percent range. In the second round, the range is broader and higher, anywhere from 6-8.5 percent.

In round numbers, the following are current signing bonus amounts for a mid-round selection in the lower rounds, assuming four-year deals, which most teams are now routinely using:

Seventh: $50,000
Sixth: $100,000
Fifth: $180,000
Fourth: $470,000
Third: $735,000
Second: $1.8 million (signing bonus plus guaranteed salary)

On a four-year contract, the salaries for each player are locked in at the following for contracts this year:

2009: $310,000
2010: $395,000
2011: $480,000
2012: $565,000

So before any bonus discussion, the player is assured of a contract worth $1.75M in total value, although not guaranteed.

Thus, the negotiation about hard numbers becomes a negotiation about the signing bonus, except for the second round, which, due to the operation of the rookie pool, necessitates teams shielding part of the guaranteed amount in a one-time incentive – using the easiest-earned categories allowable for the player to make the money – to keep it out of the pool number. Second-round picks receive signing bonuses and incentives backed by future guarantees in later salaries in the contract.

The rookie cap went up five percent from 2008 to 2009. Interestingly, the minimum salary for year one went from $295,000 in 2008 to $310,000 2009, a 5.1-percent increase in itself. Thus, teams can realistically argue that there should be no increase in bonus this year as the cap number for each player is already up five percent due to the minimum increase. That argument has and continues to be made, although without much success in the agent community.

For most agents, the negotiation is all about the bonus, and I can’t blame them. The sobering fact is that the majority of these players will not last the contract and should probably grab every penny of guaranteed money they can. Every agent should bet on his player to protect the upside but be realistic about the downside.

Speaking of the upside, next in this series: the escalator.

This week’s “Master of the Obvious” headlines:

“New league UFL to consider signing Vick”

An upstart league with no players of name value is considering signing one of the most well-known athletes in the sport. Ya think?

“Favre Doc Says Favre wants to join Vikes”

Dr. Andrews, who was consulted by Favre to advise on his stated desire to play for the Vikings, says what we have known for a year. Ya think?

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