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TheOak 06-06-2013 11:25 AM

The NFL Contract Process
 
Rookies first contracts are excluded from this discussion.

There are large numbers of NFL fans that do not understand the process of an NFL contract between the player and the team. I will define three terms that anyone should keep in mind when reading headlines about NFL contracts. While I understand that everyone understands these definition, it seems that the below first three key phrases are what all contracting is about in terms of signature date, dollar amount, and terms and conditions. I am in no way being condescending, I am just trying to help some preserve their sanity... Because I care :D

Value - (noun) The regard that something is held to deserve; the importance or preciousness of something: "your support is of great value".
Note: "value" is extremely subjective.

Liability -(noun) A thing for which someone is responsible, esp. a debt or financial obligation.

Mitigation - (noun) The action of reducing the severity, seriousness, or painfulness of something.

Perception - (noun) The neurological processes by which such recognition and interpretation are effected.

When you go to Burger King you pay $3 and get a burger, there is no haggling, its a very low dollar amount and it is a "set rate". However, when you go to buy a car or a home, do you just pay the asking price immediately? Do you not have inspections to mitigate future liability and make that part of the purchasing agreement "contract"? If the person you are buying from floored the entire home in expensive carpet in a butt ugly color do you see that as added value and pay a premium? I don't.

Contract Negotiations from a players perspective -
Reasons a player wants an early contract:
1. He has out played his rookie contract value.
2. He knows there is chance he could get hurt on Sunday and never get another shot at a larger contract.
3. With a large enough contract he can all but guarantee he will be on that team for a while.

Reasons a player does not want an early contract:
1. He is waiting for another player that has similar stats to set the market price so he has negotiating leverage.
2. He just came off of a season where he was injured or didn't preform as he expected which would lower his value.

Contract negotiations from a teams perspective -
Reasons a team does not want to re-sign a player early:
1. Liability
2. Liability
3. Liability
4. Who wants to pay next years prices this year? How many of you intentionally renew any contracts.. insurance, electricity, etc.. KNOWING it will be more expensive?

Reasons a team would want to re-sign a player early -
1. They want to mitigate a player on another teams contract from increasing the market value of their player.
2. There is no other reason. Its business folks.. Pure and simple.


The negotiation -

This is a game of chicken, who flinches or panics first and gives in. If the player gives in too early he leaves money on the table, if the team gives in too early they pay too much.

When a price is agreed upon that is a mutual happy. However, when the total value is agreed upon it is not the end of the negotiation, it is just the start. Then they start negotiating proration, guaranteed portion, bonuses, upfront money, terms and conditions EG Romo had a clause preventing him from being Franchise tagged... etc... Any of those one items can bog down the process... is it wise for the player to just give in? Is it wise for the team to just give in? No in both cases.

Contract Value -

I know there are a lot of people that say no man is worth millions.. That's to you. The subjective part.

Now pretend to be a billionaire, you own the Saints, and you will spend 123M in one season on salary for the team. You have one player a top QB, and with him you stand a 75% chance of making the Super Bowl, with out him you have a 50% chance of making the Super Bowl. His salary is going to cost you $20m for that year... Sounds absurd doesn't it? Now put on your business hat, winning a SB this year will being in an extra $100M in revenue this year and there will be carry over in future seasons with increased ticket, jersey, advertising sales. Who in their right mind would not spend $20M to get 100m+?

Rugby Saint II 06-06-2013 01:40 PM

Re: The NFL Contract Process
 
Way to break it down Oak. Thank you sir.


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