Thoughts on Chris Johnson’s new deal

As Andrew mentioned, it’s good to see Chris Johnson and the Titans reached at least a compromise solution, and CJ2K will be in camp when it opens at the end of this month.

The details of the deal are starting to emerge a bit, as Andrew Brandt of NFP wrote this morning about the 2012 incentives CJ has reached based on his performance the first two years.  In that piece, Brandt speculated a potential deal would be based on the $1.25 million CJ has reached, plus a more to bump him over $2 million in total compensation for this year.

Since then, though, PFT has reported that Brandt’s speculation was wrong.  In fact, CJ’s contract bump was merely moving forward the $1.25 million he has already earned from 2012 to this year.  Between that $1.25 million, reportedly paid as a signing bonus, and his $550,000 base salary, CJ will make $1.8 million in total compensation this year.  That’s a far cry from the $30-40 million in guaranteed money he said he was looking for, but still not quite chicken feed.

I’d have to characterize that deal as a win for the Titans, who not only aren’t now paying out a large chunk of that $30-40 million, but also for an un-reported reason why CJ might have been looking for a new deal: the essential illogicality of NFL rookie contracts.

Johnson’s deal followed pretty much the same pattern of most first-round deals.  He signed a five year contract that paid him at or close to the league minimum salary every season.  Because of the rookie salary cap, he received a relatively small (by NFL standards) signing bonus as a rookie, then a much larger option bonus his rookie year.  Ignoring any escalators, here’s what his projected compensation looked like by year when he signed his deal:

2008: $535,000 ($250k signing bonus plus $295k base salary)
2009: $4,249,000 ($3.864 million option bonus plus $385k base salary)
2010: $550,000 (base salary)
2011: $800,000 (base salary)
2012: $960,000 (base salary)

So, as a third year player coming off one of the best years a player at his position has ever had, CJ is looking at (i) making much less money than he did the year before, (ii) barely making more than he did as an unproven rookie, and (iii) not receiving a bonus, when he’d received one the first two years of his career.  Now, to me, this all makes perfect sense, because that’s how every other rookie contract is structured.

Stepping back a minute, though, I’m in absolute accord with CJ and other players: this structure doesn’t make sense.  When veterans sign deals, they often get a relatively large signing bonus up front, get a relatively low base salary that year, and then their base salary often shows good-size increases.  The first year of the contract may be the one they make the most money, but they make more in year 3 than they did in year 2, and year 4 versus year 3, and so on.  Chris Hope’s contract is a reasonable example of this:

2006: $5.585 million ($5 million signing bonus plus $585k base salary)
2007: $6 million ($5 million option bonus plus $1 million salary)
2008: $2 million ($500k roster bonus plus $1.5 million base salary) 
2009: $4 million (base salary)
2010: $6 million ($500k roster bonus plus $5.5 million base salary)
2011: $7 million ($500k roster bonus plus $6.5 million base salary)

Numbers as recorded in my notes, source not specified, likely not exact but should be close.  Hope has the same sort of dip CJ has after receiving his big payment(s), but his total cash compensation recovers and in fact reaches and exceeds his compensation in the bonus years in a way’s CJ’s does not.

So, for a veteran like Hope, his reasonable expectations of future compensation being similar to past compensation are fairly reasonably met.  With rookies like CJ, though, teams are reluctant to commit to large future salaries in the rookie deal because of the large amount of uncertainty in the player’s performance level.

In some sense, the question really is where the bargaining power is when the contract is signed, and where it is in the future.  In the case of a veteran like Hope, he has the right to sign or not to sign, and can get the initial bonus and relatively high base salaries in the future.  Going forward, though, that bargaining power shifts to the team: if the Titans don’t think Hope is playing at a level that merits $6 million this year or $7 million next year, they can ask him to restructure his contract and cut him if he does not.  Contrast this to CJ: because of the draft, he’s stuck signing with the Titans.  The Titans hedge their risk by signing an initial contract with relatively low base salaries for future years.  If CJ believes he’s exceeded those base salaries, then he can ask for his contract to be restructured and not participate if the Titans do not.

What does this little rambling mean, then?  It’s virtually guaranteed that CJ and the Titans will be at a contract impasse again next offseason.  By the time the start of the 2011 season rolls around, though, we may have another labor deal, and that may have even more fun implications for how much money CJ can make.

 

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