By: Steve Picciano (Twitter: @RandomGrenades)
The second component of contracts – Length:
In part one, we talked about the importance of developing a valuation system that fits your outlook based on price paid for expected performance. Equally important to the contract equation is length. Now, if your league assigns equal length to all contracts, you don’t have any option. However, if the decision is left up to the owner, it should not be overlooked. Together, these two components make up the Total Contract Value (TCV). This is what you’ll pay the player over the course of their current contract.
Natural instinct might be to offer the longest possible contract to all of your players, but this has potential negative impacts. First, if you’re signing multiple contracts, they’ll all expire simultaneously. That could cause major roster turnover if your league limits the number of players you can retain each year. Second, if your league implements Salary Cap Hits or Guaranteed Pay, it could leave you on the hook for a portion of the player’s salary should you drop or trade them prior to their contract expiring or being renegotiated. We’ve all signed players that either didn’t work out, got hurt or left the NFL before their contract was complete, so it’s best to try and mitigate some of the risk involved with offering large, long-term contracts to everyone. In fact, a quick glance at most NFL roster shows that they employ a mix of contract lengths, which averages out to about 3 years.
A simple tool that I might recommend is to chart-out your entire roster on a simple spreadsheet with the columns marked for the next 5+ years. Even though you can probably see what your current roster looks like on your team’s site, you can’t see what your roster will look like next year, or the years after that. Player names go in the rows and the fields are filled in with their current and future salaries. It doesn’t sound like much, but it can really provide a complete view of your fiscal landscape. If you wanted to go above and beyond, use color-codes to indicate which players you intend to extend or Tag. If possible, factor in the salaries of your upcoming Rookie players. It will give you insight on who you might need to trade or cut in order to make room for the incoming draft class.
How complicated can this get?
In a word, very. Every league is going to be set up differently, so the level of complexity is completely up to your Commissioner and the site’s platform. For example, I’m an owner in a 16-team dynasty league on the MyFantasyLeague.com platform, and the tools available on their site have allowed our Commissioner to create what we define as an NFL Simulation League, which essentially means that we’re using the actual NFL Collective Bargaining Agreement (CBA) as our rules, and that includes most of the contractual nightmares that go along with it. I’ll touch on all of them since some readers might be dealing with the same type of set-up either on MFL, or a different platform altogether.
Salary Cap Hit (i.e. Cap Hit): Money still owed to the player if released or traded.
Guaranteed Pay: Portion of a player’s contract to be paid if the player is released.
Tags, Options: Methods used to retain players (may or may not be exclusive).
Restructure: Extension of the length of an existing contract.
Holdout: A player that refuses to play without receiving a new contract
There might be differing opinions here to one of the biggest questions; what to offer unproven players? On one hand, there will be some owners willing to offer the Moon for an early round, highly touted Rookie. However, I would caution against such exuberance. Just about everyone has heard that 50% of the players taken in the 1st round of the NFL draft are busts, and honestly it can be worse in fantasy because rarely are there enough skill players taken in the 1st round of the NFL draft to coincide with the number of owners in your league. That means owners with late 1st round picks will be choosing from player who were actually drafted in the 2nd, 3rd and possibly 4th rounds, and those players are far from sure things.
There’s a reason why the NFL owners pushed to get structured Rookie contracts, so they weren’t spending $100 million on a player who hadn’t proven a damn thing yet. I’m fortunate enough to be in a league that mirrors the NFL Rookie contract rules, but not everyone is. If you’re not, you may need to develop a separate value system for Rookies since you have limited information on which to base the expected performance portion of your calculation.
You may also want to use a separate scale for staggering Rookie contract lengths. We all know the thrill of being able to lock up an incredible talent like OBJ for the maximum length of an inexpensive Rookie deal, but we also know the pain of having to pay a Cap Hit to get rid of Brandon LaFell only two years into his contract because he’s not developing into what we hoped. Such a stagger might assign longer contract lengths to players draft in rounds 1 & 2 of the NFL draft, and shorter lengths for players drafted later. It won’t save you from every Johnny Manziel disaster, but you generally know it’s a safer bet that teams will give round 1 & 2 players every opportunity to be a starter, whereas players drafted later might be kept around as role-players or special teams personnel.
If your league allows them, contract renegotiations (aka extensions, restructures) can be tricky. They usually trigger a multi-year contract for the player and, if there’s no limit to the number of players you can renegotiate with, it could lead to having multiple players having simultaneously expiring contracts in the future. A more common problem is that you’ll eventually end up extending a player well beyond their productive life and possibly have to pay a higher Cap Hit to release them from their contract.
When considering to use a restructure, it’s important to weigh several factors. First, is the player worth it, or are you just afraid another owner is going to get “your guy”? Second, if the player was productive last year, do you expect them to be productive 3, 4 or 5 years from now? What’s the player’s age and what position do they play? A 33 year old QB might be able to play at a high level for most of a new 5-year contract, but what about a 33 year old RB? Again, the use of a simple spreadsheet can help you chart how a restructured contract will increase over its life and help you to plan accordingly.
Tags & Options:
Basically, these are ways to retain a player for one additional year, and usually at a higher salary. Our Tags operate very similarly to how they work in the NFL, which is that they are priced to the average of the highest salaries of any given position. In addition, they generally provide some protection to the original owner by way of a draft pick, either from the League or from a competing owner’s allotment. Without going into extreme detail, I’ll say that our league uses three different levels of Tags, each with its own pros & cons.
Currently, the only Option we use is to replicate the 5th-Year option that is part of every 1st-round Rookie contract and must be declared by the owner. Just like the NFL, the salary of the Option is dependent on where the player had been drafted (top 5 vs. rest of the 1st-round).
As you can see, these are realistic wrinkles which add a great challenge to the owner’s yearly roster build. The instinct is to try and hold on to your players and not let them even be available for other owners to make bids. However, what price are you willing to pay above their previous contract to do so? Three, four, five times their previous salary? The dangers of quickly escalating your team’s salary with these 1-year contracts is very real. Before pulling the trigger, it’s important to figure out if the player is truly worth such a salary.
If you’re an owner in a next-level league, you might be dealing with Holdouts. Simply defined, this is when a player has finished in the top “X” for their position (we use the top 10), but their salary is below a certain level. At that point, the player refuses to play for you unless they’re given a new contract, at a much higher salary.
If your league is replicating Holdouts, there really should be options available to the owner to deal with the situation since no one should be forced to meet the demands for a more expensive contract.
Holdouts can occur at any position at any time, and they should be reviewed on a case-by-case basis. I think we would all prefer a Rookie UDFA we pick up for $1 to explode on the scene and well outperform his expected production, such as Stefon Diggs did in my league. I think most of us would be ok meeting that player’s holdout demands and signing him to a long-term contract. But what about a Veteran player? I bet most people were shocked when Gary Barnidge put up huge number two seasons ago. Should we really be trusting a soon-to-be 30 year old TE who had never caught more than 13 receptions with a shiny new mega-deal that could tie him to your roster for up to 5 years? Given the fact that TEs are rarely productive past the age of 30, and there’s no track record to speak of for Barnidge, probably not.
In the third and final part, we’ll discuss fighting human behavior and how to identify when it’s ok to stray from your value discipline.