Paying the franchise quarterback: how much is enough?

I think that part of the reason a split has arisen between fans in discussions about Kirk’s contract is that the salary cap has had two very different “periods” in recent NFL history.

The “fixed” salary cap period

During the period from 2009 – 2013, the salary cap didn’t vary much. In fact, it went down at one point.

2009 $123m

2010 uncapped (in theory) due to cancellation of old CBA

2011 $120m

2012 $120.6m

2013 $123m

By the end of 2013, fans and media analysts could look at contracts in the NFL and fairly easily establish player "value" by looking at his position and his abilities relative to other players (eg. "elite" cornerback, "average" cornerback). Player value wasn’t much of a moving target.

The “rising” salary cap period

In the 4 subsequent years, we have seen a fairly rapid escalation of the salary cap:

2014 $133m (8%)

2015 $143.28m (7.7%)

2016 $155.27m (8.3%)

2017 $167m (estimated) (7.5%)

The 2017 salary cap is going to be roughly 36% higher than the "fixed period" of 2009-13.

Given that there is a salary "floor" that requires teams to spend most of the salary cap, player salaries have to rise. New contracts have to be higher than old contracts. Fans & media analysts who were able to have a very good idea of player value in 2013 (not so long ago), now have to adjust to a moving target.

And that moving target doesn’t just mean understanding past increases — it means factoring in expected future increases in the salary cap.

With each new season, new player contracts are going to set new high water marks for the value of each position. The numbers can be breathtaking when they are announced, but each contract is soon eclipsed by the next player who “gets paid”.

The salary cap in 2022

The salary cap seems likely to continue its rise into the future. During the "rising" cap period from 2014-17, the typical annual increase in the cap has been around 8% from the previous year.

A quick calculation on my Android phone tells me that if we extrapolate that 8% rate, compounded annually, five years from now (2022) the expected salary cap would be around $245m.

Salaries are escalating, and are likely to continue escalating for the life of current player contracts. Unlike normal businesses, where the owner benefits financially by paying the lowest salaries he can negotiate, NFL owners are contractually obligated to spend the salary cap money on players.

The only real question relates to how much to give to each player. The team has to pay 53 guys + injured reserve players. Out of those 53, I estimate (based on no research whatsoever) that most teams will have about 30-40% on rookie contracts, which are pretty much fixed by the CBA.

That leaves a lot of money to go to a relatively small group of players. Out of the 30 or so players on veteran contracts, the bulk of the money a team spends on player salaries is going to go to just a handful of high performers, team leaders and ‘stars’.

It’s no secret that starting quarterback is the best paid position on a typical NFL team. Overthecap.com did an interesting analysis a couple of years ago, where they looked at the percentage of cap space Superbowl winning teams spent on the starting quarterback.

• The highest percentage number is Steve Young at 13.1%.
• The long-term average is 6.4%
• The numbers for veteran signal callers from 2006-2012 ranged from 6.6% – 11.7% of the team’s salary cap.

In general, it seems that a decent rule-of-thumb for the right percentage of salary cap resources to devote to the franchise veteran QB these days might be around 10%.

Based on that rule-of-thumb, I’d say that a reasonable range for estimating how much a team can pay its veteran franchise quarterback might be to say that it could be between 8 and 12 percent of the salary cap.

The calculation

When I add together the expected salary caps from 2017 to 2022, I get:

167 + 180.36 + 194.78 + 210.37 + 227.2 + 245.37 = 1,225m

That’s an average salary cap of $204.18m per year.

Projecting the APY of the franchise quarterback

• At 8% of salary cap, the starting quarterback contract should get $16.33m APY
• At 10% of salary cap, the starting quarterback contract should get $20.4m APY
• At 12% of salary cap, the starting quarterback contract should get $24.5m APY

In a vacuum, I think that the $20.4m APY would be a good target for the Redskins & Kirk to settle on; however, the two sides won’t be operating in a vacuum.

Supply and demand (in my view) favor Kirk, so I would expect a long-term deal signed in the next 5 months to have an APY of around $24.5m.

In this type of longer-term analysis, the numbers stay basically the same for every franchise. The large commitment to a quarterback salary limits the ability of the front office to put together the rest of the team. It’s important that the team pay the quarterback the right amount.

The question becomes, how much is the right amount?

Good GMs get it right.