No. 1 draft pick Matthew Stafford's contract with the Detroit Lions is an example of how the value of a contract often gets exaggerated when reported by the media. Stafford's contract has been reported as being for six years and $72 million, with $41.7 million guaranteed and an additional $6 million in incentives that could push the total value to $78 million. Those numbers could be correct -- if Stafford plays a certain percentage of the Lions' offensive snaps. However, if Stafford doesn't achieve certain qualifying incentives in his contract, he'll never receive close to that $41.7 million he's supposedly "guaranteed."
The only parts of Stafford's contract that he's fully guaranteed to receive right now are most of his base salaries and the protected value of his option bonus. He did not receive a signing bonus, which isn't unusual for a high draft pick. In 2008, none of the first seven players drafted got a signing bonus. Stafford's base salaries are $3.1 million for 2009, $395,000 for 2010, $1.17 million for 2011, $1.95 million for 2012 and $2.7 million for 2013. In 2010, the Lions will have to decide whether to exercise an option for 2014 by paying Stafford a $17.4 million option bonus. If they exercise the option, the bonus gets prorated from 2010 to 2014, and Stafford gets a base salary of $3.495 million for 2014.
Here are Stafford's salary cap numbers if the Lions exercise the option and Stafford does not achieve any playing-time or performance incentives --
2009 $3.1 million
2010 $3.875 million ($395,000 base salary plus $3.48 million option bonus proration)
2011 $4.65 million ($1.17 million base salary plus $3.48 million option bonus proration)
2012 $5.425 million ($1.945 million base salary plus $3.48 million option bonus proration)
2013 $6.2 million ($2.72 million base salary plus $3.48 million option bonus proration)
2014 $6.975 million ($3.495 million base salary plus $3.48 million option bonus proration)
Those are the basic elements of Stafford's contract, and they illustrate the 25 Percent Rule, which applies to rookies' contracts. The 25 Percent Rule essentially says that certain amounts in a rookie's contract can't increase each year by more than 25 percent of the first-year total of those amounts. Signing bonus prorations and most other amounts treated as signing bonuses aren't included in the calculation of the 25 Percent Rule, but option bonus prorations are included. The only first-year money Stafford gets is his base salary of $3.1 million, 25 percent of which comes to $775,000. So the applicable amounts in his contract -- in his case, those are his base salaries and option bonus prorations -- can't increase by more than $775,000 each year. And not coincidentally, that's exactly how much they increase each year.
The amounts listed in the chart represent the minimum he is scheduled to earn if he's on the Lions' roster through the 2014 season. The total of those amounts is $30.21 million. Not only is that not anywhere close to $41.7 million, Stafford isn't even guaranteed to receive all of that $30.21 million. The actual amount he's absolutely guaranteed to receive under any circumstances is a mere $17.05 million.
Let's take a look at what happens if the Lions decide very early in Stafford's career that they made an egregious mistake, and Stafford is closer to being the next Bobby Garrett than he is to being the next Bobby Layne. Suppose Stafford plays less than 35 percent of the Lions' offensive snaps during the 2009 regular season, and the team decides not to exercise the option in his contract for 2014. Stafford's option bonus is mostly protected, which means that if it's not exercised, a clause in his contract automatically kicks in and assures that he'll get most of the money anyway. If the option isn't exercised, Stafford's base salaries automatically increase to $3.875 million in 2010, $4.65 million in 2011, $5.425 million in 2012 and $6.2 million in 2013, and he becomes a free agent in 2014. You'll notice that those amounts are the same as his cap numbers if the option is exercised, and the total amount is the same. However, there's a catch to that $6.2 million in 2013.
In an NFL contract, base salaries can be guaranteed "for skill" and "for injury" and against cap considerations. A fully guaranteed salary protects a player in all three scenarios. If he can no longer play effectively, suffers a career-ending injury or simply has too high of a cap number, he'll still receive his salary if it's fully guaranteed. And Stafford's base salaries are fully guaranteed through 2012. His 2013 base salary, however, is not fully guaranteed, because of a rule in the Collective Bargaining Agreement that deals with guaranteed salaries. Article XXIV, Section 7, (d)(ii) of the CBA says, "In a Player Contract entered into in a Capped Year, 50% of the Salary fully guaranteed for any League Year beyond three years after the Final Capped Year will be included in Salary and Team Salary during the League Year or Years of the Contract in which the Salary Cap is in effect in a proportion to be determined by the Team." The "Final Capped Year" currently is 2009, which means that half of any salary fully guaranteed beyond 2012 would be charged against the Lions' salary cap in 2009. As a result, Stafford's 2013 base salary (and 2014, if his option is exercised) is not fully guaranteed. It's guaranteed against cap considerations and "for injury," but it's not guaranteed "for skill." So if the Lions decide Stafford simply doesn't have the skill to play for them, they can cut him without paying his salary for 2013. If that happens, and if Stafford never acheives any playing-time or performance incentives, the Lions will have paid him only $17.05 million.
So, why has Stafford's contract been reported as having $41.7 million in guaranteed money? Most likely, it's because Stafford's agent, Tom Condon, wants everyone to think that he got his client that much guaranteed money. In reality, though, that's not the amount that Stafford is guaranteed to receive -- it's the amount that he COULD BE guaranteed to receive, if he achieves certain qualifiers and the Lions exercise his option. If Stafford achieves his qualifiers in 2009, there's a $9.105 million roster bonus in 2010, an additional $7.83 million in fully guaranteed salary for 2011 and an additional $755,000 in fully guaranteed salary for 2012. Along with the $17.4 million option bonus and his standard base salaries for 2009 through 2012, the total comes to $41.7 million, the figure cited by the media. But $24.65 million of that "guaranteed" money is dependent upon Stafford meeting his qualifiers. (The contract also includes built-in ways for Stafford to receive most or all of that money even if it takes him until 2010, 2011 or 2012 to achieve his qualifiers.)
The rest of Stafford's $72 million consists of a potential $7.8 million salary escalator in 2012 and escalated salaries of $11.5 million in 2013 and $11 million in 2014. But again, the only way for him to have those salaries is by reaching his qualifiers in certain seasons. And if those aren't enough, he has additional escalators of up to $1.5 million in certain seasons that could push his total contract value to its maximum of $78 million.
On a related note, I hate to correct ESPN.com's NFC North blogger, Kevin Seifert, considering that he has cited my blog three times. But in his May 8 entry about Stafford's contract, he mistakenly says that the use of the option bonus is "exact strategy" I wrote about in this post that I made on March 21 about a loophole around the 30 Percent Rule (and possibly the 25 Percent Rule for rookies). But it's not the same strategy. Option bonuses aren't a loophole around the rules, because the CBA specifically states that option bonuses count in the calculations for either rule. The loophole involves completion bonuses, which can be guaranteed but do not count in the calculations for the 30 Percent Rule.
Monday, May 11, 2009
Friday, May 1, 2009
A review of the 2009 NFL draft trades
Three weeks ago, I posted a list of almost every trade from 1992 to 2008 that involved NFL draft picks but not active players. Using that list and a mathematical formula, a fan who posts as Mr. Bighead on the KFFL message boards created a draft pick value chart that indicates the historical value of each draft pick. The value of the No. 1 pick was fixed at 3,000 points, the same value it has in the commonly used value chart. Not surprisingly, though, the chart based on actual trades from 1992 to 2008 is much different from the commonly used chart. In general, higher picks are worth more in the historical chart than in the commonly used chart, and the higher the pick, the greater the difference between the charts.
I tested the historical value chart against certain benchmark trades in the list of trades that I posted, and I found that the chart is quite accurate, at least through five rounds or so. Late in the draft, teams are less likely to have picks that will balance out a trade, so they generally just make two-for-one trades out of the picks they have left and don't worry as much about point values.
In this post, I'll take a look at the trades made during the 2009 NFL draft and see whether teams that traded down got more value or less value than expected, based on trades made from 1992 to 2008.
Here are all of this year's trades that involved only draft picks --
2009 DRAFT
17 = 19, 191
19 = 21, 195
23 = 26, 162
26, 162 = 41, 73, 83
37 = next 1st
40 = 47, 124, 199
43, 111 = next 1st
49 = 68, 105
51 = 75, 110
56 = 61, 165
64, 132 = 79, 84
65 = 76, 115, 228
73 = 232, next 2nd
85 = 91, 164
89 = next 2nd
91 = 137, 213, next 3rd
117 = 120, 229
123, 198 = 137, 141
141 = 156, 210
150 = 158, 221
164 = 222, next 5th
174 = 235, next 5th
202 = 216, next 6th
222 = next 6th
237 = next 7th
Now let's take a look at each trade and the historical values of the picks involved --
17 = 19, 191
The historical value of the 17th pick is 1,419 points. The 19th is worth 1,319, and the 191st is worth 16, for a total of 1,335. Cleveland took 84 points less than the expected value to trade down with Tampa Bay (roughly the value of the 118th or 119th pick).
19 = 21, 195
Again, Cleveland took less than the expected value to trade down, this time with Philadelphia. The 19th pick has a historical value of 1,319 points, the 21st pick is worth 1,229, and the 19th is worth 15, for a total of 1,244 points. Based on those values, Cleveland got 75 fewer points than expected.
23 = 26, 162
This time, it was New England that took less value than expected when it traded down to Baltimore's spot. The 23rd pick's historical value is 1,147 points, compared to a combined 1,068 points for the picks it received (1,037 for the 26th and 31 for the 162nd).
26, 162 = 41, 73, 83
New England traded down again, this time getting higher-than-expected value from Green Bay. For two picks with a combined value of 1,068 points, New England got three picks with a combined value of 1,111 points (646, 263 and 202, respectively).
40 = 47, 124, 199
Oakland traded down with New England, getting a little less value than expected (665 points, compared to 540, 74 and 14 for a total of 628).
49 = 68, 105
This was another trade down for less than expected, with Chicago sending one pick with a historical value of 510 points to Seattle for two picks worth 416 (300 and 116, respectively).
51 = 75, 110
In 2001, Buffalo had the 51st pick and traded down with Denver, dropping seven spots to No. 58 and adding the 110th pick. This year, Dallas had the same original pick (No. 51) but had to drop 24 spots to get the same additional pick (No. 110). Historically, this was 481 points for 352 points (249 plus 103).
56 = 61, 165
Miami traded down with Indianapolis and got less-than-expected value, but not by much. The 56th pick has a historical value of 418 points, compared to 392 for the 61st (363) and 165th (29).
64, 132 = 79, 84
Pittsburgh got slightly better than the expected value for trading down with Denver. Pittsburgh gave up a combined 396 points (335 plus 61) and received 421 (224 plus 197).
65 = 76, 115, 228
Detroit traded the first pick of the draft's second day to the New York Jets for higher-than-expected value. The 65th pick has a historical value of 326 points, compared to a combined 341 for the three picks the Jets sent to Detroit (243, 91 and 7, respectively).
85 = 91, 164
The trade was about as equal as can be, considering that teams usually don't have two picks that add up to the precise value of the one pick for which they want to trade. In this case, Philadelphia traded No. 85, which is valued at 192 points, to the New York Giants for Nos. 91 (165) and 164 (30), which are worth a combined 195 points.
117 = 120, 229
This was another relatively equal trade, with Dallas trading 87 points to Tampa Bay for 88 points (81 plus 7).
123, 198 = 137, 141
Baltimore traded down with New England, getting 15 points more than expected. The 123rd pick is worth 75 and the 198th is worth 14 (89 total), compared to 54 points and 50 points (104 total) for the picks Baltimore received.
141 = 156, 210
Baltimore traded down again, this time getting relatively equal value from Denver. The 141st pick is worth 50 points, compared to a combined 46 points for the 156th (35) and 210th (11) picks.
150 = 158, 221
In another trade for almost equal values, Washington sent 40 points to Minnesota for a combined 43 points (34 plus 9).
37 = next 1st
43, 111 = next 1st
Based on trades from 1992 to 2008, a first-round pick in the next draft is worth 635 points, on average (equal to the value of the 41st or 42nd pick in the current draft). Seattle gave Denver a pick (No. 37) worth 729 points, and San Francisco gave Carolina two picks worth a combined 709 (608 plus 101). Both times, this year's picks yielded less value than expected.
73 = 232, next 2nd
89 = next 2nd
On average, a second-round pick in the next draft is worth 223 points (approximately the 79th pick). New England made both of these trades, getting less than expected from Jacksonville in the first trade (263 points for 223 plus 7) but more than expected from Tennessee in the second trade (178 for 223).
91 = 137, 213, next 3rd
A third-round pick in the next draft has an average value of 91 points, which is equal to the 115th pick. Philadelphia traded down with Seattle, giving up 165 points and getting back 155 (54 plus 10 plus 91) for a relatively equal trade.
164 = 222, next 5th
174 = 235, next 5th
Both of these were relatively equal trades. A fifth-round pick in the next draft is worth an average of 19 points, which is the value of picks No. 183-185. Philadelphia had the 164th pick (30 points) and traded down with New Orleans, getting 27 points in return (8 plus 19). Detroit traded down from No. 174 (24 points), getting 25 points (6 plus 19) back from Denver.
202 = 216, next 6th
222 = next 6th
Historically, a sixth-round pick in the next draft has had an average value of eight points, which is the value of picks Nos. 222-227. Philadelphia traded No. 222 to Indianapolis in a trade for equal values. Carolina got a little more than expected by trading No. 202 to Oakland, giving up a pick worth 13 points and getting 18 points in return (10 plus eight).
237 = next 7th
This was the first known draft-day trade since at least 1992 that involved a seventh-round pick in the following draft and did not involve an active player. Miami sent Kansas City the fifth-to-last pick that could be traded (compensatory picks can't be traded) in exchange for a seventh-round pick next year. Unless Kansas City surprises almost everyone, Miami at least will get a higher seventh-round pick next year than it gave up this year.
2009 draft trends
Here's a look at all 25 trades, with the historical point values traded by each team. The points traded by the team trading down are on the left side, the points dealt by the team trading up are on the right. A > symbol indicates that the team trading down lost value, a < symbol indicates that the team trading down gained value, a ~ symbol indicates that the trade was relatively equal, and a = symbol indicates a trade that was exactly equal.
1,419 > 1,335
1,319 > 1,244
1,147 > 1,068
1,068 < 1,111
729 > 635
709 > 635
665 > 628
510 > 416
481 > 352
418 > 392 (Trade down from pick No. 56)
396 < 421 (Trade down from pick No. 64)
326 < 341
263 > 230
192 ~ 195
178 < 223 (Trade down from pick No. 89)
165 ~ 155 (Trade down from pick No. 91)
87 ~ 88
89 < 104
50 ~ 46
40 ~ 43
30 ~ 27
24 ~ 25
13 < 18
8 = 8
6 > (next 7th)
From this chart, it's apparent that teams didn't value picks in the first two rounds nearly as much as usual. Nine of the first 10 trades down went for less than the historical value of the pick(s) involved. Through 10 trades, the average value lost was 7.7 percent. Starting with the last pick of the second round, picks started trading for higher or equal value than on average from 1992 to 2008. Of the final 15 trades, the team trading down got higher-than-normal value in return five times and equal or relatively equal value eight times. Only twice did a trade down yield less than would be expected. The average value gained in the final 15 trades, starting with the last pick of the second round, was 5.9 percent. These numbers confirm the reports that many teams believed that the 2009 draft was weak at the top but deep in talent.
I tested the historical value chart against certain benchmark trades in the list of trades that I posted, and I found that the chart is quite accurate, at least through five rounds or so. Late in the draft, teams are less likely to have picks that will balance out a trade, so they generally just make two-for-one trades out of the picks they have left and don't worry as much about point values.
In this post, I'll take a look at the trades made during the 2009 NFL draft and see whether teams that traded down got more value or less value than expected, based on trades made from 1992 to 2008.
Here are all of this year's trades that involved only draft picks --
2009 DRAFT
17 = 19, 191
19 = 21, 195
23 = 26, 162
26, 162 = 41, 73, 83
37 = next 1st
40 = 47, 124, 199
43, 111 = next 1st
49 = 68, 105
51 = 75, 110
56 = 61, 165
64, 132 = 79, 84
65 = 76, 115, 228
73 = 232, next 2nd
85 = 91, 164
89 = next 2nd
91 = 137, 213, next 3rd
117 = 120, 229
123, 198 = 137, 141
141 = 156, 210
150 = 158, 221
164 = 222, next 5th
174 = 235, next 5th
202 = 216, next 6th
222 = next 6th
237 = next 7th
Now let's take a look at each trade and the historical values of the picks involved --
17 = 19, 191
The historical value of the 17th pick is 1,419 points. The 19th is worth 1,319, and the 191st is worth 16, for a total of 1,335. Cleveland took 84 points less than the expected value to trade down with Tampa Bay (roughly the value of the 118th or 119th pick).
19 = 21, 195
Again, Cleveland took less than the expected value to trade down, this time with Philadelphia. The 19th pick has a historical value of 1,319 points, the 21st pick is worth 1,229, and the 19th is worth 15, for a total of 1,244 points. Based on those values, Cleveland got 75 fewer points than expected.
23 = 26, 162
This time, it was New England that took less value than expected when it traded down to Baltimore's spot. The 23rd pick's historical value is 1,147 points, compared to a combined 1,068 points for the picks it received (1,037 for the 26th and 31 for the 162nd).
26, 162 = 41, 73, 83
New England traded down again, this time getting higher-than-expected value from Green Bay. For two picks with a combined value of 1,068 points, New England got three picks with a combined value of 1,111 points (646, 263 and 202, respectively).
40 = 47, 124, 199
Oakland traded down with New England, getting a little less value than expected (665 points, compared to 540, 74 and 14 for a total of 628).
49 = 68, 105
This was another trade down for less than expected, with Chicago sending one pick with a historical value of 510 points to Seattle for two picks worth 416 (300 and 116, respectively).
51 = 75, 110
In 2001, Buffalo had the 51st pick and traded down with Denver, dropping seven spots to No. 58 and adding the 110th pick. This year, Dallas had the same original pick (No. 51) but had to drop 24 spots to get the same additional pick (No. 110). Historically, this was 481 points for 352 points (249 plus 103).
56 = 61, 165
Miami traded down with Indianapolis and got less-than-expected value, but not by much. The 56th pick has a historical value of 418 points, compared to 392 for the 61st (363) and 165th (29).
64, 132 = 79, 84
Pittsburgh got slightly better than the expected value for trading down with Denver. Pittsburgh gave up a combined 396 points (335 plus 61) and received 421 (224 plus 197).
65 = 76, 115, 228
Detroit traded the first pick of the draft's second day to the New York Jets for higher-than-expected value. The 65th pick has a historical value of 326 points, compared to a combined 341 for the three picks the Jets sent to Detroit (243, 91 and 7, respectively).
85 = 91, 164
The trade was about as equal as can be, considering that teams usually don't have two picks that add up to the precise value of the one pick for which they want to trade. In this case, Philadelphia traded No. 85, which is valued at 192 points, to the New York Giants for Nos. 91 (165) and 164 (30), which are worth a combined 195 points.
117 = 120, 229
This was another relatively equal trade, with Dallas trading 87 points to Tampa Bay for 88 points (81 plus 7).
123, 198 = 137, 141
Baltimore traded down with New England, getting 15 points more than expected. The 123rd pick is worth 75 and the 198th is worth 14 (89 total), compared to 54 points and 50 points (104 total) for the picks Baltimore received.
141 = 156, 210
Baltimore traded down again, this time getting relatively equal value from Denver. The 141st pick is worth 50 points, compared to a combined 46 points for the 156th (35) and 210th (11) picks.
150 = 158, 221
In another trade for almost equal values, Washington sent 40 points to Minnesota for a combined 43 points (34 plus 9).
37 = next 1st
43, 111 = next 1st
Based on trades from 1992 to 2008, a first-round pick in the next draft is worth 635 points, on average (equal to the value of the 41st or 42nd pick in the current draft). Seattle gave Denver a pick (No. 37) worth 729 points, and San Francisco gave Carolina two picks worth a combined 709 (608 plus 101). Both times, this year's picks yielded less value than expected.
73 = 232, next 2nd
89 = next 2nd
On average, a second-round pick in the next draft is worth 223 points (approximately the 79th pick). New England made both of these trades, getting less than expected from Jacksonville in the first trade (263 points for 223 plus 7) but more than expected from Tennessee in the second trade (178 for 223).
91 = 137, 213, next 3rd
A third-round pick in the next draft has an average value of 91 points, which is equal to the 115th pick. Philadelphia traded down with Seattle, giving up 165 points and getting back 155 (54 plus 10 plus 91) for a relatively equal trade.
164 = 222, next 5th
174 = 235, next 5th
Both of these were relatively equal trades. A fifth-round pick in the next draft is worth an average of 19 points, which is the value of picks No. 183-185. Philadelphia had the 164th pick (30 points) and traded down with New Orleans, getting 27 points in return (8 plus 19). Detroit traded down from No. 174 (24 points), getting 25 points (6 plus 19) back from Denver.
202 = 216, next 6th
222 = next 6th
Historically, a sixth-round pick in the next draft has had an average value of eight points, which is the value of picks Nos. 222-227. Philadelphia traded No. 222 to Indianapolis in a trade for equal values. Carolina got a little more than expected by trading No. 202 to Oakland, giving up a pick worth 13 points and getting 18 points in return (10 plus eight).
237 = next 7th
This was the first known draft-day trade since at least 1992 that involved a seventh-round pick in the following draft and did not involve an active player. Miami sent Kansas City the fifth-to-last pick that could be traded (compensatory picks can't be traded) in exchange for a seventh-round pick next year. Unless Kansas City surprises almost everyone, Miami at least will get a higher seventh-round pick next year than it gave up this year.
2009 draft trends
Here's a look at all 25 trades, with the historical point values traded by each team. The points traded by the team trading down are on the left side, the points dealt by the team trading up are on the right. A > symbol indicates that the team trading down lost value, a < symbol indicates that the team trading down gained value, a ~ symbol indicates that the trade was relatively equal, and a = symbol indicates a trade that was exactly equal.
1,419 > 1,335
1,319 > 1,244
1,147 > 1,068
1,068 < 1,111
729 > 635
709 > 635
665 > 628
510 > 416
481 > 352
418 > 392 (Trade down from pick No. 56)
396 < 421 (Trade down from pick No. 64)
326 < 341
263 > 230
192 ~ 195
178 < 223 (Trade down from pick No. 89)
165 ~ 155 (Trade down from pick No. 91)
87 ~ 88
89 < 104
50 ~ 46
40 ~ 43
30 ~ 27
24 ~ 25
13 < 18
8 = 8
6 > (next 7th)
From this chart, it's apparent that teams didn't value picks in the first two rounds nearly as much as usual. Nine of the first 10 trades down went for less than the historical value of the pick(s) involved. Through 10 trades, the average value lost was 7.7 percent. Starting with the last pick of the second round, picks started trading for higher or equal value than on average from 1992 to 2008. Of the final 15 trades, the team trading down got higher-than-normal value in return five times and equal or relatively equal value eight times. Only twice did a trade down yield less than would be expected. The average value gained in the final 15 trades, starting with the last pick of the second round, was 5.9 percent. These numbers confirm the reports that many teams believed that the 2009 draft was weak at the top but deep in talent.
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