FanPost

The "Rookie Salary Cap" effect on QBs & QB Salaries

The "rookie salary cap" was put in place to protect teams from bad rookie contracts. This is from a 2011 article in the bleacher report:

One of the big issues heading into the CBA talks was a rookie salary cap to get rid of the ridiculously large contracts that paid unproven players more money than valuable veterans as teams were cash strapped with the amount of money they would spend.

Both sides agreed—NFL and NFLPA, on implementing a rookie-salary cap which is now being known as the JaMarcus Russell rule.

In 2007 LSU quarterback JaMarcus Russell was the first overall selection by the Oakland Raiders. As in seasons past most first-round draft picks holdout to try and negotiate the most money possible and more importantly the most money guaranteed.

Russell and his agent held out until the first week of the 2007 season where the Raiders and Russell finally agreed on a six year (max years allowed) $61 million contract with $31 million in guaranteed money. In three seasons from 2007-2009 Russell had 4,083 yards passing, 18 touchdowns and 23 interceptions along with 22 fumbles and a passer rating of 65.2. After the 2009 season Russell was released and cleared waivers after still having three more years left on his contract.

But I think there will be another, perhaps unintended, consequence of the "rookie salary cap. I believe it will change the way GMs build their rosters, and will eventually lead to veteran quarterbacks accepting lower contracts than has become the norm over the past few years.

Although I haven’t seen a lot of interest on the ‘net regarding the "rookie salary cap" or how it will impact on team-building going forward, I’ve been pondering it, especially as it relates to the position of quarterback.

What prompted me to think about the question was the salary cap penalty imposed on the Redskins in 2012 & 2013. With a cap reduction of $18m per year it was hard to imagine how the Redskins had managed to cobble together a competitive team. Then, in this off-season, we saw the new contracts for Flacco & Romo. First was Flacco, who signed 6 years at $120.6m with $52m guaranteed; then Romo at 6 years for $108m with $55m guaranteed.

As a Redskins fan, I already knew the rough details of the RG3 deal: $21.1m over 4 years, including a $13.8m signing bonus. My first thought was to do the raw math: Flacco - $20m per year; Romo - $18m per year; Griffin – $5.3m per year. The Redskins were saving $13m to $15m per year compared to the Ravens & Cowboys. That kind of savings at the QB position just about took care of the salary cap penalty! Mystery solved.

But, of course, when it comes to salary cap, it’s never really that simple. Here are the "cap hits" for the three quarterbacks for 2013:

Griffin $4.8m

Flacco $6.8m

Romo $11.8m

Suddenly it didn’t seem so clear. The cap-hit difference between Flacco, the league’s highest-paid quarterback, and Griffin (perhaps the league’s lowest paid starting QB) is only about $2m in 2013. It turns out that having Griffin at QB instead of – say, Flacco – doesn’t cover the $18m penalty.

But as I said, it was just the start of the process. It got me thinking more about the difference between veterans and rookies in the age of the "rookie salary cap", and especially about rookies & vets at the highest paid position – quarterback.

First, let me see if I can highlight what the "rookie salary cap" (which took effect in 2011) has done to the salaries of quarterbacks taken at the top of the draft. We already know the numbers for RG3, who was the second player selected in 2012. What about some other numbers?

Contract Details

Selection

Number

Player

Length

Contract Value

Average Value per Year

Guaranteed Value

1 (2009)

Matthew Stafford

6

72m

12m

41.7m

1 (2010)

Sam Bradford

6

78m

13m

50.0m

5 (2009)

Mark Sanchez

5

50.5m

10.1m

28.0m

1 (2011)

Cam Newton

4

22.0m

5.4m

22.0m

1 (2012)

Andrew Luck

4

22.1m

5.4m

22.1m

2 (2012)

Robert Griffin III

4

21.1m

5.3m

21.1m

At the time that the players were drafted & signed, no one could know which players would be superstars and which ones would flop, so there’s no reason to even talk about actual performance. What’s immediately clear is that the "rookie salary cap" has dramatically cut the cost of drafting and signing a top-rated quarterback. The three quarterbacks in the 2009 & 2010 draft signed contracts with an average value per year of around $11.7m (guaranteed of around 7.0m). The three quarterbacks in 2011 & 2012 have fully guaranteed contracts, but the average per year is less than half that of the first group. I believe that this will lead to long term changes (and has – in fact – already started leading to changes) in the way a team is built via draft & free agency.

Although the contracts for Flacco and Romo have been constructed to manage the impact on salary cap, all of the dollars actually paid to those players are real, and will someday have to be counted against the cap. Right now, with fully guaranteed 4-year contracts, Cam Newton, Andrew Luck and Robert Griffin III cost the Panthers, Colts and Redskins – at the worst – right around $22m over 4 years.

To see what the Ravens & Cowboys are facing, let’s look at the cap hit for each of these five players in future years:

2014 Cam Newton 7.0m (dead money = 7.0m)

2015 Andrew Luck 7.03m (dead money = 7.03m)

2015 Robert Griffin III 6.7m (dead money = 6.7m)

2015 Tony Romo 25.27m (dead money = 19.9m)

2016 Joe Flacco 28.55m (dead money = 25.85)

The numbers paint a starkly contrasting picture of what these five teams have ahead of them in the next few years. Three teams can look forward to being led by exceptional young quarterbacks at a cap cost of around $7m per year. The other two teams can look forward to being led by aging QBs (Romo will be 35 in 2015, Flacco will be 31 in 2016) with a cap hit of over $25m per year.

It seems clear that, as we get to the 2015 to 2018 seasons, teams will start to face cap decisions that are tougher than the ones being faced at the moment, and today’s young stud quarterbacks may find it tougher to sign the kind of big-money career-contracts that Flacco and Romo have just signed.

Prior to the "rookie salary cap" a team who had a Flacco or a Romo at quarterback had to compare the talent and experience of that quarterback against draft pick like Stafford or Bradford who would cost in the range of 12m to 13m per year.

But now, in the era of the "rookie salary cap," that same team will be looking at a cost of around 7m per year for the same quarterback taken in the draft.

Salary-cap-enomics may start to come into play in the next few years.

For example, Eli Manning – an elite quarterback – is currently set to become a free agent following the 2015 season. In 2016 he will be 35 years old. His base salary in the final year of his contract is $17m, and his cap hit in the final 3 years of his contract hovers around $20m. Should the Giants sign him to a $25m+ per year contract to keep him in the organization when they could draft and play a young quarterback for only around $7m per year?

You might argue that Manning is a bit too old to be good example. How about Matt Ryan of the Atlanta Falcons, who is arguably a quarterback just coming into his own? He is currently carrying a salary cap hit of around 12 or 13m per year, and is set to be a free agent after next season. Right now he’s a great value for the Falcons, and at age 29 in 2014, it should be his turn for a Flacco-esque 6-year contract valued at over $120m.

But Thomas Dimitroff, the GM of the Falcons, is going to have to get out his calculator and put on his thinking cap. It’s likely that Ryan will cost the franchise around $18m per year more than a drafted rookie. That’s 18 million reasons to think hard about who you want taking snaps for your offense.

Eighteen million dollars a year can buy a lot of talent in the free agency market. For some teams that might buy an entire offensive line or a defensive secondary. General Managers, if they haven’t started to do it already, are going to have to see what the "rookie salary cap" is doing to the value proposition of high first-round quarterbacks.

It’s no longer a fluke; we’ve seen plenty of rookies starters recently, along with some real second year success stories. Cam Newton, Andrew Luck, RG3, Russell Wilson and Colin Kaepernick are making the case that playing a quarterback just out of college can bring a team immediate success. Even if the team has to "adapt" the offensive scheme to the player, that may be an effective strategy if it frees up salary-cap room to acquire better players at other positions.

The front office starts to face a decision – do I want to put the success of the team on a quarterback who takes up 1/6th of the salary cap, or do I want to take a chance on a younger guy surrounded by more talent (that the team can afford because of the extra $18m per year it has available to spend)? More and more, I think the answer will lie with youth. I believe we’ll see two corollary outcomes in next few seasons.

First, more and more GMs will see young quarterbacks drafted out of college as a realistic option for building a successful team. The "rookie salary cap" will change the economic model that has ruled the NFL for more than a decade.

The second, related, outcome will be that it will be increasingly difficult for veteran quarterbacks to sign Romo-like and Flacco-like deals. A quarterback taken at the top of the draft today costs less than half of what his counterpart did just three years ago. It will increasingly become a buyer’s market, and with more and more GMs opting to start younger quarterbacks as a legitimate salary-cap management strategy, there will simply be fewer teams that will be willing to pay for the huge quarterback contracts that are considered normal today. The teams that do pay those big contracts will be at a competitive disadvantage when it comes to paying for talent in other positions – especially via free agency.

I see the league splitting into two types of salary-cap teams in the 2015 – 2018 years. One type will have the high-priced, veteran quarterback leading a team by carrying it on his back. Think of the Dallas Cowboys with Tony Romo and you’ll probably have the right idea.

The other type of team will be led by a young, enthusiastic quarterback surrounded by offensive and defensive talent that will help carry him while he develops his skills. Think of the 49ers or the Seahawks and you’ll probably have the right idea.

As always, the pendulum will seek equilibrium. As we approach 2020, I believe that the salaries for veteran quarterbacks are likely to get adjusted back by the market to a point where the veteran QBs will earn money that rewards them for their experience and talent, without creating the kind of price inequity that will drive GMs to favor the younger, cheaper option.

Of course, by that time, the rules will have changed again…

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