Thursday, October 6, 2022

Agent’s Take: The type of contract that isn’t fully guaranteed Lamar Jackson should consider from Ravens

Time is running out for quarterback Lamar Jackson and the Ravens to get a deal done. Jackson, who doesn’t have an agent, has set a deadline of the start of the regular season for an agreement on a new deal to be reached or he’s going to play out his rookie contract for his fully guaranteed $23.016 million fifth-year option. Baltimore’s first game is on Sept. 11 against the Jets.

NFL Insider Jay Glazer painted a bleak picture on Sunday prior to the Fox Sports preseason game between the Ravens and Cardinals. He characterized it as an uphill battle for Jackson to get a new deal soon. Glazer reported that the Ravens have offered Jackson more than quarterback Kyler Murray recently received from the Cardinals. The 2019 first overall pick signed a five-year, $230.5 million contract extension worth up to $238 million through salary escalators. At $46.1 million per year, the deal has made Murray the NFL’s second-highest-paid player.

The amount of $160 million was guaranteed for injury at signing and can become fully guaranteed at various dates during the contract. Out of the $160 million, $103.3 million was fully guaranteed at signing — the second-most ever fully guaranteed amount in an NFL contract. An additional $29.5 million in latter years of Murray’s contract, which isn’t guaranteed for injury at signing, can also become completely secure to bring the total amount that can be guaranteed to $189.5 million.

Glazer also suggested that the fully guaranteed five-year, $230 million contract the Browns gave quarterback Deshaun Watson in connection with his March trade from the Texans is a sticking point in the negotiations. Jackson wants his deal fully guaranteed, which is a rarity in the NFL, while the Ravens aren’t interested in helping to normalize those kind of contracts, according to Glazer.

Jackson has every right to insist on a fully guaranteed contract comparable to Watson’s. He is the more accomplished player. Jackson established a new single season quarterback rushing record with 1,206 yards on the ground and led the NFL with 36 touchdown passes in 2019 when he was league MVP. He was also the first player to have at least 3,000 passing yards and 1,000 rushing yards in the same season.

Watson has never been a First Team All-Pro, let alone NFL MVP. There also aren’t any concerns about Jackson’s off-the-field behavior. Watson is suspended for the first 11 games of the regular season for violating the NFL’s personal conduct policy. 

Giving up on a fully guaranteed contract would be a major concession by Jackson. It would likely close the door on other veterans getting fully guaranteed contracts for the foreseeable future.

History would be repeating itself. Kirk Cousins set the stage for other quarterbacks by breaking new ground in signing the NFL’s first lucrative fully guaranteed veteran contract with the Vikings as an unrestricted free agent in 2018. His three-year, $84 million deal, which made him the league’s highest-paid player at $28 million per year, was worth up to $90 million with incentives. Any momentum there could have been for additional fully guaranteed contracts stopped after Matt Ryan and Aaron Rodgers signed conventional contract extensions with the Falcons and Packers respectively in the following months.

The only way Jackson should seriously consider making such a monumental concession is if the Ravens meet his demands in nearly every other important aspect of the contract. Otherwise, going the franchise tag route probably makes the most sense. The exclusive franchise designation would be most likely in 2023. Four of the five times quarterbacks have been designated as franchise players during the last 10 offseasons, the exclusive tag has been used. Jackson would be prohibited from soliciting an offer sheet from other teams with the exclusive version.

The 2023 exclusive quarterback franchise number will be the average of the top five 2023 quarterback salaries (salary cap numbers with some minor adjustments) at the end of next year’s restricted free agent signing period on April 21. It currently projects to $45.248 million. This number is subject to change depending on new quarterback deals, contract restructures, pay cuts and/or releases between now and then.

A second franchise tag in 2024 at a NFL collective bargaining agreement mandated 20% increase over Jackson’s projected 2023 exclusive number would be $54,297,600. Baltimore designating Jackson as a franchise player in 2025 for a third consecutive year would be cost prohibitive. A third and final franchise tag with a 44% increase over the 2024 figure projects to $78,188,544. Jackson would be positioned to test the open market in 2025 after making a little less than $100 million on two franchise tags.

Becoming the NFL’s highest-paid player should be a requirement for Jackson to abandon a quest to get a fully guaranteed contract. That distinction belongs to Rodgers. Once Rodgers, who was entering a contract year, decided he wanted to remain with the Packers rather than try to force a trade, he became the NFL’s first $50 million-per-year player in March. His contract is widely considered to be $150.815 million over three years although there are two additional years well below market value in the deal. Rodgers’ $50,271,667 average yearly salary is almost $500,000 more per year than the projected average of two franchise tags. Jackson would practically be at $50 million per year with the franchise tags without giving up the additional years required in a long-term deal.

The Ravens have previously put a quarterback at the top of the NFL pay scale with less than a 1% market increase on two different occasions. The franchise tag game was avoided with Joe Flacco in 2013 when his contract was expiring. Flacco was able to parlay an amazing 2012 playoffs in which the Ravens won Super Bowl XLVII and he was the game’s MVP into a six-year, $120.6 million deal averaging $20.1 million per year that briefly made him the league’s highest-paid player ahead of Saints quarterback Drew Brees’ $20 million per year. In 2016, Flacco surpassed Rodgers’ $22 million per year with a three-year extension averaging $22,133,333 per year. 

Flacco had been a slightly above average quarterback at best in the seasons prior to his stellar postseason, which is easily the best four-game stretch of his career. He has never been selected to the Pro Bowl or earned All-Pro honors.

The MVP award is evidence that Jackson can perform at the highest level over a more extended period of time, but the Ravens have only won one playoff game with him. Baltimore’s treatment of Flacco suggests a deal averaging $50.5 million per year, which would be 0.45% more than Rodgers’ average yearly salary.

The most common contract length for high-end quarterback contracts before the Chiefs signed Patrick Mahomes to a 10-year extension in 2020 when he had two years remaining on his rookie contract was four new years. Mahomes became the NFL’s first $40 million-per-year player with his $45 million per year extension. Besides Rodgers’ four-year extension with the Packers in 2018, Jared Goff, Carson Wentz and Russell Wilson signed extensions of the same length respectively with the Rams, Eagles and Seahawks in 2019.

The first big quarterback deal after Mahomes was Watson’s four-year extension averaging $39 million per year with the Texans as the start of the 2020 regular season was approaching. Dak Prescott continued the trend when he became the league’s second $40 million-per-year player the following March after playing under a $31.409 million franchise tag in 2020 by signing a four-year contract worth $160 million.

A four-year extension would seem to be appropriate under the circumstances. Adding a fifth new year like in Murray’s deal would only be a consideration with a fully guaranteed contract.

A contract that isn’t fully guaranteed would need to have an extremely player-friendly structure. The four-year contract extension for quarterbacks that has the best cash flow belongs to Wilson. In his $35 million per year extension which made him the league’s highest-paid player when signed, 50.71% of the $140 million in new money is earned by the end of the first new contract year. There’s 64.29% and 81.43% of new money through the second and third new contract years. By comparison, the average with lucrative four-year extensions for quarterbacks ($30 million per year or more) is right around 43.5%, 61% and 80.25% of the new money through the first, second and third new contract years.

It isn’t unprecedented for the Ravens to have the most player-friendly contract extension at a position. The cash flow percentages in the four-year extension averaging $14 million per year Mark Andrews signed right before the start of the 2021 regular season is far superior to the cash flow percentages of the other highest-paid tight ends with deals of that length. It sticks out like a sore thumb. Andrews’ extension made him the NFL’s third-highest-paid tight end upon signing.

The first two years of Jackson’s contract, 2022 and 2023, would need to be fully guaranteed at signing. The third contract year or 2024 and a substantial portion of 2025 would have to be guaranteed for injury at signing and become fully guaranteed next March during the first few days of the 2023 league year. There would be flexibility for the 2025 guarantee to be completely secure in March 2024 instead with a record-setting signing bonus. The largest signing bonus in NFL history is Prescott’s $66 million.

Another important component of the deal would be a clause preventing the Ravens from using a franchise or transition tag when the contract expired after the 2026 season. This type of clause is rare in NFL contracts. Prescott is the only quarterback among the 10 highest-paid players in the NFL with one.

An inability to prevent Jackson from hitting the open market in 2027 would ensure him maximum leverage in any subsequent contract talks. There would be pressure for the Ravens to reach an agreement when Jackson is entering the final year of his deal in 2026 if keeping him was the objective.

A no-trade clause would also need to be a part of the contract. Most of the quarterback contracts averaging $35 million per year or more contain one.

The following provides a sense of what Jackson’s extension might look like after factoring these contractual elements into the equation: 

Length: 4-year Extension

Average Yearly Salary: $50.5 Million

New Money Total: $202 Million ($225.016 Million over 5 Years)

Overall Contract Guarantees: $170 Million

Fully Guaranteed At Signing: $126.016 Million

First New Year: $103 Million (50.99%)

First Two New Years: $131 Million (64.85%)

First Three New Years: $165 Million (81.68%)

Jackson should hold firm in becoming the NFL’s highest-paid player and getting an extremely player-friendly contract structure with strong guarantees, especially since the Ravens wouldn’t be establishing new precedents, if he’s open to a contract that isn’t fully guaranteed. Without the Ravens accommodating Jackson in these areas, playing the franchise tag game should be an appealing option.

It really shouldn’t matter to Jackson which specific contract structure the Ravens used as long as his demands are met. Baltimore’s most lucrative multi-year contracts (Andrews, Marlon Humphrey, Ronnie Stanley and Marcus Williams) have utilized a signing/option bonus structure.

An option bonus is essentially an additional signing bonus that’s usually paid in the second or third year of a contract to exercise a later year (or years) in a deal. Because an option bonus is given the same treatment on the salary cap as signing bonus, it is also prorated or evenly spread out over the life of a contract for a maximum of five years. A dummy or voiding 2027 contract year could be added so the proration could be maximized since Jackson’s option bonus would be prorated over four years (2023 through 2026).

A benefit of this structure is the cap numbers in the initial years are more manageable with the option bonus being prorated. The drawback is the cap numbers will eventually have a big spike, thanks to the extra bonus proration due to the option bonus.

All of this assumes Jackson is willing to take a deal that isn’t fully guaranteed. If a fully guaranteed contract is a true deal-breaker for Jackson, then starting to head down the same path as Cousins might be inevitable. By embracing franchise tags, Jackson could set himself up for the fully guaranteed contract that would have had been eluding him in 2025 free agency.

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