The 5 O'Clock Club: Are 1-year contracts set to become the new normal for NFL ‘stars’?

The 5 o’clock club aims to provide a forum for reader-driven discussion at a time of day when there isn’t much NFL news being published. Feel free to introduce topics that interest you in the comments below.

The Redskins signed a number of free agents to one-year deals this season. Some names of players who are playing on one-year deals, and who will be free agents at the end of the season:

• Junior Gallette
• Kirk Cousins
• Ty Nsekhe
• Vinston Painter
• Terrelle Pryor
• Zach Brown

The first four names on the list were Redskins players last year; however, Pryor and Brown both came to the Redskins from other teams (Browns & Bills) after performing at a high level in 2016. Both signed single-year deals. Presumably, each of them will be looking for a bigger payday next season, whether from the Redskins, or from another team.

Of course, everyone here knows the story of the other healthy starter on that list, Kirk Cousins, who will be looking for a huge payday soon after the calendar flips over to 2018.

All three of these veteran starters have had success in securing high-dollar contracts already. Consider these numbers:

Zach Brown

Terrelle Pryor

Kirk Cousins

Each of these three players has ‘bet on himself’ (or in Cousins’ case, he’s “bet on the system”) and, after a good 2016 season, signed a high-dollar contract. Each of them -- with another good year in 2017 — will likely sign an even bigger deal in 2018.

Many NFL players are looking for and talking about guaranteed contracts, but to accommodate that, the paradigm in the NFL will almost certainly have to change. Teams are not going to give players 4 or 5-year fully guaranteed contracts; it simply doesn’t fit the current team-building practices of the 32 NFL teams. The structure of contracts today is described well by Jason Fitzgerald of OverTheCap:

The major issue at play is the basic lifecycle of the NFL player. For even the best players at most positons the cycle is pretty similar-development year or two on a rookie contract, peak in years 3-5, begin noticeable decline in year 7, keep fighting for a job until no teams want you anymore.

The way current contracts are primarily negotiated is that teams pay a large premium on the frontend of a contract in hopes of receiving a benefit on the backend of the contract if the player breaks out from the cycle mentioned above and is still playing at a really high level in year 8 and 9.

For example look at the Patriots contract with Stephon Gilmore. The Patriots are paying him $32 million in the first two years of his contract and guaranteed him $40 million across three years with the hope to gain a benefit on the backend of salaries of $11 and $12 million at a time when cornerbacks will likely be earning $17-18 million a year. If Gilmore flops terribly the Patriots will have overpaid him by millions but at least be free in years 4 and 5. If he does well they have a great deal.

Once you move to a fully guaranteed structure teams are going to adjust accordingly. Once you remove the benefit of the backend teams aren’t going to pay as much up front because there won’t be a year four or five in the contract. As they absorb more risk they are going to be less likely to inflate the front end of the contract. The contract will only go as far as the current guaranteed deal likely goes (the exception being the QB position).

Are players willing to trade off the ‘security’ of a long-term contract for greater flexibility and a potentially higher payday?

Kirk Cousins, for one, has said that he is comfortable playing on the tag, and has said on more than one occasion that, with the current structure of NFL contracts, most players are effectively on a year-to-year basis anyway. He seems to be ahead of the curve in understanding that he can trade a longer contract for a shorter one, and put more money in the bank.

This strategy may not work for career backups, but for veteran players earning top salaries — and especially for players likely to get ‘tagged’ — it might offer a winning strategy.

Pro Football Talk recently published an article extolling the benefits of this ‘year-to-year approach’.

[H]ere are a few names to watch in the near term: Lions quarterback Matthew Stafford, Raiders pass rusher Khalil Mack, and Rams defensive tackle Aaron Donald.

Consider Stafford’s situation. With a cap number of $22 million in 2017, Stafford would be eligible for a franchise tag of $26.4 million in 2018. By rule, that would move to $31.68 million in 2019 and then to $45.6 million in 2020.

That’s a three-year haul of $103.68 million.

And what’s the risk for Stafford to go one year at a time? He’ll get $16.5 million this year in salary, pushing his eight-year haul to $125 million. Unlike Cousins and Johnson, Stafford has the money to let it ride; if he suffers a career-ending injury or suddenly loses his ability to play at a high level, he’s already set, multiple lifetimes over.

Consider the record-setting (not really) contract signed by Raiders quarterback Derek Carr. He traded roughly $1 million in salary this year and the franchise tag next year for $25 million in cash flow in 2017, another $22.25 million in 2018 and then, essentially, a year-to-year option held by the team.

Consider what Carr gave up. If he’d been willing to keep his salary at $1 million in 2017, he would have been eligible for $22 million (maybe more) in 2018 under the tag, a 20-percent bump (at least $26 million) in 2019, and a 44-percent increase over that ($38 million, minimum) in 2020.

That’s at least $86 million over three years, estimated conservatively. Under his current deal, Carr will make $86.5 million over the next four years, with no fully-guaranteed money at signing beyond the first $40 million.

It’s hard to call the richest contract ever (not really) a bad deal, but it’s actually kind of a bad deal in light of the alternative. If Carr had gone year to year, he’d have more money over the next four years than he’ll have — and he wouldn’t have been tied to the team for two more years at an average of $19.7 million, which will come at a time when the market for franchise quarterbacks could be well north of $30 million per year.

In effect, the current practice of writing NFL contracts is to provide little or no security to players at or near the bottom of the roster, and to provide an increasing amount of security as teams sign core players and ‘stars’. However, where full guarantees are offered in the NFL, they are typically offered for one to two years; from year three onward, guarantees are typically limited (injury only) or qualified (subject to being on the roster in April).

The practical effect of most of today’s NFL contracts is to have a fully guaranteed contract for a year or two, followed by a series of one-year options, at a known and agreed-upon price, exercisable at the team’s discretion. The net effect of these types of contracts is to maintain competitiveness in a league that relies on both individual and team competition for its appeal, but it offers very limited job security for players, and typically means that veteran players who sign a free agent deal, typically only see the ‘big money’ years in their contracts if they outperform expectations.

One year contracts as the norm wouldn’t necessarily diminish competitiveness, but it might provide players the opportunity to trade off the little job security they currently have for big and immediate paydays. There would probably be great paydays for star players at the top of their games, but might create less predictability and job security for journeymen and backups.

One year contracts as the norm would also likely weaken the ties between players and teams, as players would have more freedom to shop their services from year to year.

This change would likely have an impact on fans as well. In an age where teams are increasingly jumping cities to enhance business opportunities, having higher player turnover generally, and more ‘star’ players jumping teams more frequently in an attempt to maximize earning potential might well run the risk of alienating fans who lack a sense of continuity and connection to the players.

Of course, that might be effectively offset by the increase in parity, competitiveness, and the ability for bad teams to become good teams more quickly and effectively through a free agency system that might increasingly resemble the Wild West rather than the relatively predictable and structured system that exists now. In fact, the very concept of “franchise players” (think Darell Green) might go the way of the dinosaur.

With the late decision in 2015 to back Cousins as the starter, followed by two franchise tag seasons in ‘16 & ‘17, the Redskins and their “franchise quarterback” may, inadvertently, be showing the NFL a new way to think about setting the business relationships between teams and their high profile ‘star’ players.

A lot of free agent veteran players across the NFL opted to sign one-year, ‘prove it’ deals this off-season. In many cases, journalists and fans were surprised at the relatively low value of those deals. In fact, lower paydays for negotiated one-year deals is exactly what players should expect; without the potential upside of outperformance in later, non-guaranteed contract years, there is little motivation for teams to stack piles of money on the table for a single-season commitment. Star players & starting quarterbacks may be able to benefit from a “Dutch auction”, but the players who make up the rank & file of the NFL are more likely to learn that real market value in a 1-year contract is less than the gaudy APY numbers that can be achieved in multi-year deals.

One-year contracts, then, may not have a lot of appeal for the average player, but they may well be the best way for the stars of the game to maximize their career earnings.

If the Derek Carr contract represents the traditional approach of teams & star players to signing new contracts, the Kirk Cousins saga may represent the future.