The Puzzling Arguments in Favor of Guaranteed NFL Contracts

One argument you see out there is NFL players are somehow getting screwed by not having their contracts fully guaranteed. I mentioned on Twitter that I struggle with this argument.

My fundamental problem is that the NFL has a fairly rigid salary cap-not necessarily in terms of the cap in a single year, but over a multi-year period, a team can’t spend more than the total amount permitted under the salary cap. Thus, we should expect the total amount of compensation paid to players under an alternative NFL world with fully guaranteed contracts to be pretty much the same as it is right now.

One argument might be that this isn’t necessarily the case. Take, for instance, the NHL. Under their CBA, a player even with a fully-guaranteed contract only counts against a team’s salary cap number if he’s on the NHL roster. A number of players making fully-guaranteed money are playing in the minor leagues or overseas. For the NHL, with its imbalances in local revenue, this presents a real competitive balance issue, as high local revenue teams are able to effectively eat large salaries in a way that smaller local revenue teams are not.

It’s not clear to me, though, that the NFL would necessarily work the same way. The ability to bury contracts is a product of the NHL’s CBA. The NFL could simply adopt a different bargaining position, namely that all guaranteed contracts count against the salary cap and burying a player simply wouldn’t be allowed.

Assuming away that threshold issue, I’m still not sure we’re in the same world. Given the league-level sourcing of much NFL revenue, the competitive balance issues presented with burying players aren’t present the same way. There are still some real disparities created by local revenue, but they’re not nearly as big. I’m not sure which way this cuts.

If burying players is permitted and becomes relatively common practice, one thing you might see happen is the NFL negotiates essentially two salary caps-one for the active roster and another for total compensation to players, whether on the active roster or not. I’m not sure how effectively this would work, and especially how these numbers would compare to the current NFL salary cap.

Beyond that argument, which I haven’t actually seen made, at least not in that fashion, I’m not sure what exactly the arguments in favor of guaranteed contracts are. Thinking about this was spurred by this Mike Freeman column on Matt Forte’s contract arguments with the Chicago Bears. I’m in complete agreement with Freeman that the Bears’ actions are a good example of why players like Forte don’t and shouldn’t trust teams, and the situation clearly is already a little messy with the potential to become pretty ugly.

Freeman’s related argument that this is a good example of why NFL players need guaranteed contracts strikes me as an almost complete non sequitir, though. The fundamental problem between Forte and the Bears arises from the fact that he has no contract in place right now, and the two sides can’t agree on the amount Forte should be paid. Had Freeman’s point instead been that the Forte case is a good example of why the continued existence of the franchise tag was bad for players, he would have had a point. I would have still disagreed with him, because the franchise tag was part of the CBA negotiations and to get rid of it, the players would very likely have had to give up something they have to get rid of it, but his argument would have made sense.

Returning to the broader point, I’ve been trying to think of how a world with fully guaranteed contracts would benefit players and come up with a couple ideas.

First, assuming we’re still in a draft world, teams would have more incentive to spend resources in developing their middle- and late-round players, because they’re stuck with their contracts for four years. I’m not sure I’ve seen this argument made, but the basic problem remains. When teams cut these players, they’re replaced by other players, namely veterans and undrafted free agents. Making all contracts, including draft pick contracts, fully guaranteed likely means fewer undrafted free agents will make NFL teams. You might also see fewer veterans getting signed to contracts, even assuming we’re retaining the preferential salary cap treatment for veterans with little guaranteed money.

Second, one effect of fully-guaranteed contracts would likely be that teams are less willing to give out multi-year contracts to veteran players. Thus, the only veterans most likely to receive multi-year deals, and thus be most likely to be overpaid in the decline phase of their careers, are the veterans who were also most likely to have been underpaid as rookies. Fully-guaranteed contracts would therefore for some players draw lifetime compensation closer to their lifetime total value.

I would agree that for those players, fully-guaranteed contracts are a good deal. It seems to be those players who are generally the focus of arguments in favor of fully-guaranteed contracts as well. In a cap world, though, dollars paid to one player don’t arise out of thin air. Rather, they come from other players. Implicitly, people who make this type of argument in favor of fully-guaranteed contracts are making a distributional claim, that we want to privilege a certain type of player. Maybe they do, but I’m not sure the arguments I don’t address the trade-off involved. Further, I’m not sure why I as a fan or why the group of players as a whole, relatively few of whom would actually fall into this category, should see this as a good argument in favor of fully-guaranteed contracts.

I did some searching, and found this post on the Washington Post‘s The League blog, which makes a distributional argument with respect to rookies. That prior to the current CBA the top eight to ten picks in the draft were all overpaid was a good barrel-fishing subject, but we see from the fix in the current CBA there’s no necessary correlation between high rookie salaries and guaranteed contracts. The question is now, without that barrel-fishing, do you still condone the likely distributional effects of fully-guaranteed contracts?

I also found this interesting post by Leigh Steinberg (Google cache link) from August 2011, which notes that there’s been an increasing amount of guaranteed money in NFL contracts. It’s basically orthogonal to the argument that NFL contracts are fully-guaranteed, but he does note that NFL players tend to be hyper-competitive, which makes it unlikely they’ll loaf if they do receive guaranteed contracts. Even granting that point, I’m not sure how affects the fundamental argument at all.

Beyond those, one argument I mentioned on Twitter is that fully-guaranteed contracts might lengthen the career of veteran players and reduce total player turnover. As I’ve thought more about that point, I’m less sure that might be the case. Rather, as noted above, the more likely effect in my mind would be that NFL teams would be more selective in handing out multi-year contracts to veterans. This might lead to the development of a sort of “gods and clods” model for veterans, with the top-level ones making more or less what they do now and the majority of them making closer to the league-minimum on a series of one-year deals. Once again, I’m not sure why this world would be considered superior to the present one.

One topic that’s normally brought up in connect with guaranteed contracts is injury protection, namely that players unfairly bear the risk in their career is cut short by injury. The free-market enthusiast in me says this shouldn’t be the NFL’s problem, that players can contract around this by buying insurance. Such policies would almost certainly be expensive, in part because of the moral hazard involved, potentially prohibitively so. The free-market enthusiast in me says that that’s exactly as it should be, and the players are trying to impose this cost on the owners. There are a couple reasons why the owners might be better than an outside insurer to take on this risk-carrying an NFL roster permits better risk distribution than an outside insurer who might have only a fairly small number of players, plus the owner is in much better position to monitor players who sign, both ex ante to avoid signing lemons and ex post in terms of player rehabilitation.

Shunting the free-market enthusiast in me aside, there are a couple of points related to injuries and guaranteed contracts. The argument is generally phrased as a matter of justice. We’re back in a distributional argument here, namely that injured players are somehow more deserving of being protected than healthy players. This is a complicated argument, similar to though not the same as the societally-optimal amount of governmental welfare (different in part because the same government crowding out private welfare doesn’t exist here). We might be fine with this, because healthy players can continue to play in the NFL and earn more income, while injured players generally see their expected future NFL earnings decrease. The problem I keep harping on, namely that NFL teams will likely contract around this, being less likely to sign injury-prone players to mutli-year deals, still stands.

The one group who might be benefited by this the most is young players who get injured on their rookie deal. I actually sympathize with this argument, because a number of rookies make less than they would if they’d been able to negotiate market-value contracts, and these injured players are the ones who see their likely market value decreased the most. I haven’t seen the argument phrased in quite this fashion, though, and the general timbre of arguments in favor of fully-guaranteed contracts does not point to drafted players on their rookie deals as a group that needs additional protection.

Beyond what I’ve outlined here, I’m still struggling, trying to find reasoned arguments for why players would be better off in a world of fully-guaranteed contracts, and not having much success. If you have know of one I haven’t touched on in this post, please let me know, because I really do want to hear it.


One thought on “The Puzzling Arguments in Favor of Guaranteed NFL Contracts

  1. Because owners are making ridiculous profits that exceed what the players are being payed. Because every professional sport BUT pro football has guaranteed contracts. Because the NFL is the ninth most popular sport in the world and easily the most popular sport in the US.

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