There are three separate costs associated with Will Smiths contract.

His base didnt explode until 2011.

Then there is the 2m roster bonus every year.

His dead money hit hasn't been below 7M since 2009 which is the year he had 13 sacks.

So by the time he was not preforming to his contract value it was too expensive to cut him due to Dead Money..

So in reality it has been cheaper to keep him and swallow the cap hit than to suffer the dead money escalation.

Reference
Will Smith Contracts, Salaries, Cap Hits, & Transactions

It was bad from the start but no one knew he wouldn't live up to expectations until it was too late.