Thursday, June 5, 2014

Colin Kaepernick and the Changing Market for Quarterbacks

Quarterbacks seem to be winning with big contract extensions, but so are the teams giving them out.

On Wednesday afternoon, Colin Kaepernick and the San Francisco 49ers agreed to a six-year/$126 million contract. Like most quarterback extensions of late, the raw numbers are huge. $61 million of that is considered guaranteed, which is the largest guaranteed amount ever given out in an NFL contract. Instead of getting into a debate for whether a quarterback with 23 career regular season starts and six more playoff starts is worth that kind of money, let's focus on the details of the contract and the market shift for long-term quarterback extensions.

The Kaepernick Contract

At first glance, the $61 million of guarantees makes it seem like the 49ers put themselves into cap hell throughout the majority of the contract. This isn't a Joe Flacco-type contract, though, where he'd still be $25 million worth of dead money in the fourth year of the deal. Instead, each year of guarantees doesn't kick in until April 1 of the given year. Obviously if Kaepernick plays well each season, the outs in the contract won't matter, but if Kaepernick has been relying on a fairy godmother this whole time and turns into a Josh Freeman-like pumpkin at a random midnight, San Francisco isn't on the hook to pay out all $61 million.

One of the most interesting things about the contract, and the easiest way for the deal to not equal $126 million, is the $2 million worth of de-escalators built into each year from 2015-2020. Kaepernick can keep the $2 million each year by playing 80 percent of San Francisco's offensive snaps AND reaching the Super Bowl or being voted first- or second-team All-Pro. Basically that hinges on the Super Bowl appearance and All-Pro voting, since if either one of those things happen Kaepernick his probably played 80 percent of the snaps during the season. Even though the 49ers have gone the the Super Bowl once and NFC Championship Game twice since Kaepernick took over, consistently repeating that for a five year stretch won't be as easy as its seemed for San Francisco.

Nabbing the All-Pro votes might be even harder. Since 2004, four different quarterbacks have been voted first-team All-Pro, while only one other quarterback was voted second-team All-Pro. Yesterday, on an unrelated topic, Football Outsiders' Scott Kacsmar tweeted out this chart, which becomes relevant for these incentives:

Even as Peyton Manning and Tom Brady get older and closer to retirement, there's still not a lot of room for quarterbacks to grab one of these slots. Rodgers is only 30 years old and the other young improving class of quarterbacks will likely start to flood this list soon as well.

The year-to-year structure of Kaepernick's contract is also team-friendly by staying consistent. The biggest jump in cap hit is $2.6 million from year-three to year-four. The most expensive cap hit of the contract is just $23.4 million in the final season. Joe Flacco is scheduled to be a cap hit of $28.55 million in 2016 and $31.15 million in 2017.

Future of the Quarterback Market

Once the Kaepernick deal was announced, many started to speculate what future contracts for Cam Newton and Russell Wilson would look like. While both of those quarterbacks are going to get paid, the important question will not be how much, but how that money is structured.

While they're not completely similar, the team-friendly outs for San Francisco follows the trend from Chicago's deal with Jay Cutler given earlier this year. I wrote about that deal here in January, with the main take away being the seven-year/$126 million contract is really a guaranteed three-year/$54 million deal with four de facto team options. Unsurprisingly, these two contracts were conceived by Phil Emery and Trent Baalke, two of the smartest general managers in the NFL — Ozzie Newsome would be in that group as well, but it's worth mentioning how much he missed the boat on the Flacco contract.

This trend of teams willing to give out these large deals, as long as the quarterback agrees to bet on himself could impact the disappearing mid-tier of quarterbacks rather than the Wilsons or Newtons of the NFL. That middle tier would include two quarterbacks who will have their contracts expire at the end of this season, Alex Smith and Andy Dalton. I've written initial thoughts on each of those quarterbacks — Dalton here and Smith over on numberFire. It's now likely the only way either one of those quarterbacks get paid like think they should is by taking deals with similar team-friendly structures.

At this point in his career, we know what Smith is at a quarterback. Even at his peak, he's just good enough to lead a good team to victory, but doesn't have too much more upside. It's difficult to justify giving that type of player $18 million a year, unless the contract played almost year-to-year. In Kaepernick's contract, as long as he's released before April 1, the dead money he's owed drops below his cap hit as early as the second season. If Smith was set up with that type of deal, where he'll receive as much money as he earns with his play on the field, that could be a win for all parties. Smith would get paid only if he earns it and once his play starts to decline, the Chiefs could move on.

Dalton will likely earn more than Smith on an upcoming deal, since he still has the potential for a higher upside. Like Flacco in 2012, Dalton's next contract will heavily rely upon the performance in the final year of his current deal. If he goes on a miraculous run leading the Cincinnati Bengals to the Super Bowl, he's going to get more money than otherwise. Still, with the amount of outs built into the two recent big contracts given out to quarterbacks, any general manager not trying to get those into any future deals given out involving a lot of years and a lot of money.

When it comes to quarterback contracts, the possibility of a release could be the new restructure.

Follow Dan on Twitter @DanPizzuta

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