How Accountants Broke the NFL

How Accountants Broke the NFL

It all started 21 years ago in 2004. The reigning NFL MVP waited six whole years for his rookie contract to expire before signing a 7-year extension that was worth the most money ever. And yet, not a single dime of his base salary was guaranteed. Then came 2009. A young gun over in San Diego signed yet another big money extension on his rookie deal that featured two things that rarely if ever had been seen before for a contract of that magnitude. A really big option bonus and rolling guaranteed salaries. And finally, there was 2016. A legendary figure down in the Big Easy was days away from the start of the season and it was the last year of his contract. He wanted a long-term new deal, of course, but the Saints were down to their last 300K in cap space earlier that off season, and they were unsure if they could do that kind of lengthy commitment for an older quarterback with degrading arm strength. However, as the negotiating deadline neared, the Saints front office did have an idea for how to both make that quarterback happy and give themselves much needed flexibility. Enter the contract that changed everything. It’s happy signing day if you’re Drew Brees. Drew Brees and the Saints have reached an agreement on a contract extension. It’ll be announced as a 5-year deal, but Breeze is contractually committed to the Saints for only the next two seasons. The Saints gave Drew Brees a one-year extension to have his contract run through the end of the 2017 season and stuffed not one, not two, but three voidable years on the back of it, effectively making a contract that actually had more fake years on it than real ones. It was genius. Breeze’s cap hit lowered for 2016. He got his guarantees that he wanted for 2017, but most importantly, that deal bought everybody time. After that successful pivot, Saints GM Mickey Lumis ran wild with the concept. Void Years had been around since the early 90s, of course, but no team had ever used them like this before. Nor had they ever embraced a philosophy of riding a knife’s edge year after year and using restructures, extensions, and void years to get out of cap trouble over and over again while holding the roster together. For seven straight seasons after that breeze deal, New Orleans was in the bottom 10 in available cap space at the start of every league year, but they did make the playoffs backto back to backto back in four of those years. The plan was sort of working until, you know, it wasn’t. For a team like the Saints that was operating under a fiscal philosophy that looked like it was conceived by an options trader on bath salts, the pandemic was devastating. The lost revenue for the NFL from the 2020 season resulted in the only time in the last decade and a half where cap space actually went down leaguewide year-over-year. Lumis’ entire cap management strategy relied on the cap continuously going up so he could just kick the proverbial can down the road every single offseason, knowing full well that the following year’s cap growth would give him space to maneuver again. But once the cap went down, Lumis had pretty much no space to quickly replenish a rapidly aging roster and everything pretty much fell apart overnight. The Saints haven’t been back to the playoffs since then. And next year in 2026, not even this year, next year is going to be the first time in about half a decade where the Saints might possibly have a decently healthy cap situation. I guess we’ll see. But suffice to say, the rebuild has been a very slow and painful process. But in that pain, there was a lesson. Not for the Saints, of course, but for all the other GMs around the league that were watching Mickey Lumis ride the Lightning for all those years, who now had to get creative with their own roster management to deal with that temporary dip in cap space from the pandemic. New Orleans in the late 2010s was the test case for everyone. They were the proof of concept that NFL teams could spend money to save money. And from that proof of concept, an even better blueprint was born. If you want to build a dynasty in this league, cash is king. Got something special going on. That was important to me to to take that approach with it. But the way it’s structured, the way it’s paid out, the way the guarantees work, he could have made it harder. into it. He’s going to be underpaid, right? You got to see this again. This kid is special, man. Just think to do that. I don’t mean to rub it in, Giants fans. Wow. But really, that’s the way that skill positions in Philly. We got AJ Brown, Dvonte Smith, Dallas GD. It’s crazy. You have pro bowlers at every every starter on really season. Every starter is a pro bowler. [Music] To me, the offensive line for the Eagles. How about the difference when they would go back and forth and then the Eagles would come back and you’d be like, “Well, they’re just not generating any pressure.” Jaylen’s sitting back there having a hot dog. When you’ve got the lines of scrimmage taken care of to the level the Eagles do, it’s going to be hard to beat you. It’s just the machine is humming right now. You know, [Music] listen here. That ain’t working. That’s the way you do it. I think it goes without saying that a lot has changed from 2004 to 2025. The salary cap has risen a whopping 346% over that time period, while the top of the quarterback market has exploded even more and risen by 408%. What began with a reigning MVP not getting a single dime of guaranteed salary has evolved into Brock Perie signing a contract that not only when adjusting for inflation has a higher percentage of the cap than Payton’s first blockbuster deal, but it also has a whopping 69% of the total contract being guaranteed. Year after year, we see quarterbacks shatter the market with jaw-dropping numbers that far exceed anything that past generations received, even when adjusting for the growth of the cap. Monster guarantees, monster signing bonuses, and of course, monster cap hits. How did we even get here? Why has the quarterback position outscaled the entire rest of the sport? And perhaps even more importantly, how the hell are teams even making this work anymore? I mean, logically speaking, every single team that signs a deal like this should be crippled, right? Well, not exactly. But before we get into the not the inflated average annual value numbers that get posted by the media every single time a contract gets announced, uh, by the way, fun fact, those numbers are pretty much Uh, but if you don’t factor in AAV and you’re just looking at cap hits and you’re looking at cap percentages every single year on these new money quarterback deals, they’re actually a lot more team friendly than they might seem. Take Trevor Lawrence’s deal as an example. When he signed his 5-year, $275 million contract extension that valued him at $55 million in AAV last offseason with 200 million guaranteed. By the way, a lot of people got pretty big sticker shock on that. I mean, after all, what has Trevor Lawrence done to deserve being at the top of the market in AAV? And that $55 million average represented a whopping 21.5% of the salary cap at the time of signing, which far exceeded Manning’s blockbuster 2004 rookie extension that was valued at 17.6% of the cap at signing. Manning was the reigning MVP at the time, while Lawrence was uh, let’s be honest, far from that. So, bogging down the rest of the roster by spending over 20% of the cap on a good but not elite quarterback seemed insane on paper. Except if you actually look at how the Lawrence deal is structured, he never even gets close to taking up that much of the Jags salary cap over the next four seasons. In fact, from this coming year in 2025 all the way until 2028, he never even gets to 13% of the cap. The Jags have plenty of space to maneuver around and build the team any way that they want to. And the reason for that again is the structure of the deal. Those details are what matters. The reported value of it on the surface, that $55 million number, it’s basically fake. Honestly, it’s a vanity number. It’s almost meaningless. Just think of modern quarterback contracts and really all modern high dollar NFL contracts for any position as you would a volume of water with the water itself representing the total amount of money to be paid on the deal. The vertical axis here can represent a cap hit while the horizontal axis represents the surface area of years that a contract lasts for. Again, on paper, not all the time in real life. If you put two cups of water, or in this case, two cups of money in a narrow container, it’s not very wide and therefore not that many years of surface area. So that water is going to be deeper. That depth represents the size of the average cap hit. But in a wider container, that same two cup volume of water will be much more shallow because it has more room to spread out. That represents smaller cap hits over a longer period of time. And this entire visual is why void years are so powerful. Lawrence has two void years or dummy years on the back end of his deal, which basically gave the Jaguars a 9-year surface area to work with to spread the cap hits out from 2024, which is when the deal was originally signed, through the fifth year option year, which is right now in 2025, to the extra 5 years of the extension on top of that. And then finally, the two void years on the back end that are not real contract years. They’re just there for accounting purposes. Trevor’s signing bonus was relatively low, at least by modern standards, at only $37.5 million, which was barely over Payton’s signing bonus from two decades ago. And that was purposeful because signing bonuses can be prrated over 5 years. So from 2024 to 2028, that upfront real cash flow that has already hit Lawrence’s personal bank account, that’s only going to cost the Jags 7.5 million against the cap per year over the next 5 years. Additionally, Lawrence’s salaries are extremely low through 2028 as well. So, those don’t even add a lot to his cap hit either. Now, at this point, you might be wondering, “Okay, well then, if Lawrence has a low signing bonus and low salaries, how the hell is he making $55 million a year?” Well, again, he’s not. He’s actually making $43 million a year in terms of overall averages across the entire surface of the deal. And starting this year in 2025, he has four straight seasons of rolling option bonuses that are $35 million each. And here’s the kicker. Those do not count as $35 million cap hits immediately. Remember, option bonuses, just like signing bonuses, can also be prrated over a 5-year period. And they can stack on top of each other. So, the 2025 option bonus is again $35 million in real life going into Lawrence’s actual bank account upfront, but it only counts as an additional 7 million against the cap for the next 5 years. And then you add on the same option bonus again next year to the stack. That’s another 7 million to make it 14. And then another the year after that to make it 21. And then the year after that to make it 28 in 2028. And here’s where the use of void years is key. Because when that last 2028 option bonus hits, those two void years stretch the available surface area to five years out from the time that bonus hits. So you can use those two dummy years as just extra fake surface area to spread the money out. This structure for the cash flow gives these stacked bonuses room to come down gracefully and therefore keep the total cap hits low, or at least relatively low. Add in those lower salaries, a low signing bonus, and the standard 500k workout bonuses, and you have real cash flows in Lawrence’s bank account every single year in the high30s to low 40 millions. But his cap hits don’t even get over 50 million until 2029. And by then, he’s probably going to get extended anyway, just to lower those hits all over again by doing the exact same type of structure. So many quarterbacks that have been extended since 2020 have similar kinds of deals in place to keep their hits low. Jordan Love got three Voy years to spread the pain, except he had a bigger signing bonus but less option bonuses. It effectively did the same thing though. His cap hits never even get over 42 million for another four years on a deal that’s technically worth 55 a year in compensation. Except again, it’s not. Tua also has two void years on his deal and Miami can get out of that one in only two years from now if they want to. It really doesn’t hurt them at all. Kurt Cousins got three void years in Atlanta last year. Burrow got three void years. Lamar has two void years. Jaylen Herz has four void years and literally six straight seasons of just him getting paid in bonuses. He got a $255 million deal. And I’m not even joking. Only 3% of it is salary. It’s ridiculous at this point. But it works. Like, I’ll I’ll hand it to him. It works. And of course, when talking about all the quarterback deals signed since 2020, we’d be remiss if we didn’t talk about the elephant in the room. Arguably the catalyst for all the borderline moneyaundering we’ve seen in the quarterback market over the last 5 years. And I think you know who I’m talking about. With breaking news, NFL Network’s Michael Silver is reporting that the Kansas City Chiefs and the Super Bowl champion quarterback Patrick Mahomes have come to an agreement on a 10-year contract extension that could keep the Super Bowl MVP in KC through the 2031 season. You have to understand at the time of the Patrick Mahomes deal, Russell Wilson was the highest paid player in the NFL at 35 million AAV. Technically, we’ve established that number doesn’t really mean anything, but again, let’s just use it for argument sake. 35 million AAV, highest paid player. Mahomes got 45 for 10 years. Mickey Lumis walked so that Brett V could set the land speed record apparently. And naturally, the reason why the deal was for 45 million a year for a decade was a as a form of futureproofing because Mahomes quickly established himself as arguably at the time the best quarterback in the league and the Chiefs didn’t want to just have to keep redoing his deal over and over again as other guys got paid. So, they just set the bar extremely high right out the gate. And B, again, they wanted a very large surface area full of rolling guaranteed roster bonuses and high salaries that could be converted into signing bonuses that get prrated. And they needed room on the back end of the deal to do all of that and keep the cap hits manageable. Nearly 20 years ago, the Falcons tried to do a similar thing with Michael Vic when he signed a 10-year deal, which then got cut short for obvious reasons, but the principle was the same. Really, the only major difference between the philosophies of both Casey and Atlanta for how they handled the Mahomes and Vic extensions and the philosophy of the Eagles for how they handled the Herz extension is that Casey and Atlanta spread the pain out by just doing 10-year contracts of real years, while Philly spread the pain out by doing a normal contract and then just tacking a shitload of void years on the back end. They both created large surface areas. They just did it a different way. though. Uh I guess if we’re being honest, uh the Eagles are very different than the rest of the league for a particular reason. And that particular reason is a rabbit hole that I didn’t expect this episode to go down when I started writing it, but we also kind of have to go down that rabbit hole together in order for you to understand everything else I’m about to talk about. Uh so forgive me. Uh the short version of this, the Eagles are insane. And the long version is the Eagles are still insane. And also, here’s a six-minute explanation for how. Somewhere along the line here, Jeffrey Lurie and Howie Roseman fully bought into the shenanigans that the Saints pioneered, and they started doing this voidarheavy style of contract for everybody, not just Jaylen Herz. Like, if you look at all of the Eagles top contracts, they all have three or even four void years on the back end. They don’t just do it for quarterbacks. So basically, none of their top players ever have cap hits that reflect the top of the market, even though all of their real cash flows into their bank accounts are at the top of the market. And conveniently, most of their cap maneuvering all happens to be suns setting at around the exact same time. And again, that is for a very particular reason. Jaylen’s last real year is 2028 before all these void years slam home with a combined 97.5 million deadcap hit in 2029. And remember, just because a cap hit is thrown into a group of void years, that doesn’t mean that the hit doesn’t exist. It just means that all of the spread out hits slam home together at once as soon as that first void year triggers. So that’s why the 2029 cap hit is so high. But it’s not just Herz that hits in that year. Landon Dickerson also in 2029 has a $35 million deadcap hit from all of his void years slamming home. Lane Johnson that same year has a $30 million deadcap hit also from his void years. Jordan Milada same thing 2029 $35.7 million deadcap hit. Devont Smith 2029 $35.8 million deadcap hit. Seaquan again, 2029, $32.5 million deadcap hit. Even Jake Elliot, the kicker, $8.6 million deadcap hit in, you guessed it, 2029. At least Zack Bond’s different. He has a $24.8 million deadcap hit by 2028 when all of his void years slam home. And then finally, both AJ Brown and Cam Jurgens have a $53 million deadcap hit and a $28.7 million deadcap hit, respectively, in 2030. All told, it’s around $381.6 million in Voyear slamming home all between 2028 and 2030. Even the Eagles could not eat that much dead cap in such a short time period. Like, it’s not even remotely possible. But here’s the twist. They’re not going to. If all goes to plan, most of these deals are likely going to be extended again with short-term real years that have a ton of void years on the back end, just like that famous 2016 Drew Brees deal. And that’s going to be done to ease the pain and give the franchise’s cap situation a soft landing into 2030 and beyond. I cannot possibly emphasize this enough, but that year is everything. Like, not just for the Eagles, but for everybody. The Eagles entire cap management strategy today and I would argue a lot of other teams entire cap management strategy today is built around all of their plans for 2030. And that is not an accident because you know what happens after the 2029 season? The NFL gets to exercise their opt- out clause for the media rights distribution deal. Meaning CBS, Fox, NBC, all those deals go away. Everybody has to go back to the table and renegotiate for 2030 and beyond. And you know, kind of side tangent here because Neielson recently adjusted how they calculate their ratings across the board. I’m talking across the entire industry, every genre of TV ratings are up 5 to 40%. Not because more people are watching, but more so because more people are getting accurately counted by Neielson. So everybody’s ratings have skyrocketed, including the NFL. So, we’re pretty sure this new deal that gets negotiated for 2030 is going to be worth, as one uh esteemed economist put it recently, a metric fuckload. Over the last three media rights distribution deals, the average firstear jump in cap space in the New Deal is 13.6%. And the largest cap growth we ever saw was a 19.3% year-over-year growth. The cap right now is 279.2 2 million, but the 2030 cap could possibly be between $430 and $450 million. And the Eagles know this. Their owner, Jeffrey Lurie, comes from a film and television production background. He is well aware, more than most, of what is coming down the pipe in these rights negotiations. So, as far as what the cap hits are projected to be and what the dead money hits are projected to be based on when all these void years are slamming home, I don’t really think the Eagles care. Like, I honestly don’t think they care at all. Lori sold an 8% stake in the team just last year to raise $660 million in liquid capital to fund all of these contracts. Most owners cannot do this. Like, they can’t even dream of it. Even Luri himself couldn’t dream of it before he sold a stake in the team cuz he needed all of that liquidity. And as far as his net worth and you know his equity in the team and if he you know lost money doing this because he’s giving all of his money to the players, here’s a fun little dirty secret from the world of the ultra wealthy. Every dime that Lurie has spent building the Super Team, he’s already made back. The Eagles today after winning the Super Bowl are more valuable than they were a year ago. to the point where 92% of the Eagles right now is worth more than a 100% of the Eagles right before he sold his stake. So, his net worth has actually gone up. He basically just got a whole bunch of free money to build a Super Team and win a Super Bowl, and he’s still just as rich, if not richer. Like, this whole scheme is brilliant cuz on paper, there’s kind of not really a downside. Spend money, win games, make even more money, and then just do it all over again. And when you look around the NFL, every single team has paid attention to what Philly has done here. A lot of them are going to try to replicate it. Some of them might try to get it banned if they don’t have the liquidity to do it, and they also don’t want to sell a stake in their team. And I think there’s a couple franchises that qualify uh for that description. But I don’t know what the league is going to do. Like maybe they’ll let teams keep doing it. Maybe they’ll ban it. I I have no idea. All I really know is this. For now, in the modern NFL, the salary cap is only as real as you allow it to be.

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