Fans in Indianapolis have had to deal with unfamiliar surprises in the 2010 off-season. It is rare for Colts players to hold out for contracts, or to not participate in the team’s organized team activities for contractual reasons. Even more rare is for players who are playing under lucrative long-term deals to miss these activities while they try to negotiate pay increases.
So far this season, Colts fans have seen the long-term contract discussions with starting safety Antoine Bethea draw out, along with new contract demands from key players like Robert Mathis and Reggie Wayne. What gives? What drives these formerly unimaginable actions?
Unfortunately, the answer to the question is complicated and likely multi-tiered. It is safe to assume that the uncapped season in 2010 and the pending CBA negotiations have something to do with the change in behavior. What is harder to figure out is which parts of the current rules drive player demands.
Contract Changes Still Limited
The first thing that probably pops in a fans head when the words “uncapped season” are spoken is that there is a chance for players contracts to blow up compared to previous years. Those concerns are somewhat over-stated.
One of the rules that remains in place is the 30% rule, which limits player contract increases to 30% over what they earned the previous year. As a result, Mathis and Wayne, regardless of what they might hope to achieve, know that they will only be able to hope for a 30% increase over their 2009 salaries. Based upon those salaries, the highest request Mathis could make is a $690,000 increase on his $2.31 million salary in 2010, the highest request Wayne could make is for a $1.27 million increase on his $5.5 million salary in 2010.
These potential demands, even if met by the Colts front office, are not so daunting or concerning that fans should get too up in arms if the front office grants them. It is also not something that would place irreparable harm on the Colts future, or put a great deal of pressure on the Colts future ability to retain the best players on the team and remain under the new salary cap in 2011 (assuming the CBA gets worked out prior to March, 2011 and the start of the 2011 season).
These considerations are somewhat assuring but there is something more that could create a concern and could drive these contractual discussions.
Pay Me For What I Have Done, Not What I Will Do
The one thing that this season does, and how it changes the position of players who are pining for more money, is that it flips the contract discussion in a way that previously was easier to avoid. Typically, NFL franchises have always discussed contracts as how much a player will earn in future seasons based upon what the player and the team can project the player is worth for his FUTURE contributions.
Now, with no cap restriction, the team cannot say to a player, “wait, wait, wait, we would love to pay you much more than this amount if we could but you have to understand that the salary cap limits us… if you want to play for a competitive team you will need to accept pay that will allow the team to retain the pieces necessary to keep winning.”
This difference puts players in a position that they previously were not in. They can come back to the front office and say, “well Mr. Irsay, I’ve always been a team player and understood the limitations on you in order to remain competitive in the NFL and within the constraints of the salary cap rules of the CBA… BUT… I think we can agree that I have been an important part of helping this franchise win 12 games a year, go to two Super Bowl games, have been voted to multiple Pro Bowls, and brought home a championship.”
Now the players can tell the owners, “hey, all the money that is in your pockets due to the success of this team is partially due to my performance and without salary cap restrictions in 2010, you have an opportunity to give us our due where in years past you could not.” This means that, particularly for the Colts, Mathis and Wayne could be partially motivated to restructure their current contracts, or sign new ones, to reset the bar set by the 30% rule and get their “payback” for prior performance in 2010 but balance the remainder of the contract for future years as they have previously.
This is even more obvious to Colts veterans with the Peyton Manning contract negotiations ongoing. Anyone would have to assume that the Colts will try to use the changes in the contract rules of 2010 to the team’s advantage, to ultimately pay Manning more than they would have been able to otherwise. Mathis and Wayne likely have this in mind, and will bring that up to Irsay in their discussions. If for him, why not for us?
It is a strange place to be, as anyone negotiating for a contract would typically have to operate in the universe of, I get paid based on what I promise to do for the team in the future. Mathis and Wayne both likely have seen their best years, both have future replacements on the roster, and they would be in poor bargaining positions if the future sets the bar, it would be logical to assume they will point backward and it will be interesting to see how NFL ownership responds to these kinds of demands.
Other Changes in 2010 Motivating Players To Ask for More
NFL franchises are relieved in 2010 of some of the financial demands of players benefits that were required in CBA controlled capped seasons. DeMaurice Smith, Executive Director of the NFL Player’s Association, explains, “The union agreed that in the Final League Year, clubs would be relieved of their obligation to fund numerous benefit programs for current players. Examples include second career savings (401K), player annuity, severance pay and performance-based pay. The total league-wide contributions to such plans in 2009 were in excess of $325 million or more than $10 million per club.”
It is possible then, for each team to save $10 million dollars in revenue from previous seasons due to these savings. As a result, veteran players may see these potential savings as a reason and potential opportunity to demand a larger piece of the team pie.
Additionally, one of the proposed changes in 2011 that seems likely to get through is a reduction in rookie salaries. This money will go somewhere else, starting in 2011, assuming the CBA negotiations are successful. For veteran players like Wayne or Mathis, it could make sense to argue with Irsay and the front office that they should be the beneficiaries of those savings. It is also rather likely that the salary cap will increase, meaning the portion or percentage of the team’s overall cap will reduce for previously signed players.
It all comes down to changes in demands on team finances, future changes in the CBA, and how those changes and salary cap increases ultimately affect current NFL veterans playing out long-term lucrative contracts in ways they would not have been able to foresee when they originally signed. Now that “the writing is on the wall,” or at least closer to being there, the players see a reason to negotiate for their share now.
Limiting A New Contract
Finally, could Mathis and Wayne be attempting to sign new contracts that go into affect in 2010? If they do attempt to negotiate a new contract and are successful, what limits the terms of that contract?
The answer to this question also limits the work that is being done in Peyton Manning’s contract negotiations.
Even a contract that is signed in 2010 is limited by future CBA agreements in that a 2010 salary that is more than 50% higher than the 2011 contract will spread out the difference of that contract as a signing bonus pro-rated over the remainder of the contract. This means that if the Colts sign Peyton Manning to a $110 million contract, including $40 million in an up-front bonus and try to pay him $40 million in 2010, while the league is uncapped, and a $7.25 million salary in 2011, a $32.75 million pro-rated bonus would spread out over the remainder of the contract.
If the contract is balanced, not front or back-loaded, in a 5-year contract Manning would earn a salary of $7.25 million a year over the final four years and an additional cap hit of $8.19 million that results from the pro-rated bonus due to the 50% rule that is still in place. A $15.44 million cap hit per year for each of his final four years, resulting in a larger cap hit every season than Manning had over the entire duration of his 2004 contract, other than his 2010 hit ($15.8 million). Is this a real savings to the team? Is this really beneficial and taking advantage of the uncapped year? No, and it limits what the team can do.
For players like Mathis and Wayne, however, it could be more legitimate. Wayne is due $11.4 million in the final two seasons of his contract and Mathis is due $4.7 million over his final two seasons. Mathis is set to receive $2.3 million and $2.4 million respectively. Wayne is set to receive $5.5 million and $6 million respectively. Accordingly, the Colts could sign the players to new contracts that increase the value of each individual contract by $2.2 million and $5.4 million respectively and not fall under the 50% rule, assuming that the new contracts do not extend the number of years and alter each player’s salary totals over those years.
What Does This Mean?
While this is a lot of information and hard to follow, the point is that even in an uncapped year the 50% rule limits what players signing new long-term contacts, like Peyton Manning, can do in negotiations with the team. Manning may sign another back-loaded contract with a higher bonus in order to mirror what happened in 2004, the bonuses reward Manning immediately but back-loading protects the team from future injury by requiring Manning to play to the entire contract out to earn the “big bucks” he is promised in the contract. Manning is also protected by the guaranteed earning of the bonus money regardless of his health.
For players who have current lucrative contracts but may not desire a long-term extension, there is more leverage to increase immediate 2010 salaries significantly enough to cause a fuss, and still not hurt the team long-term when the CBA goes into affect and cap limitations again become a concern.
Which way all of this will go is hard to figure, but having an understanding of some of the salary cap and CBA components at play, which could affect some of the players’ actions heading into the new season, should clear up things a bit.
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