The Chiefs and Patrick Mahomes' representatives, Chris Cabott and Leigh Steinberg, have reportedly started negotiations on the 24 year old quarterback's new contract. The Mahomes negotiations are highly anticipated by the NFL community because a deal should shatter existing standards in most, if not, all major contract metrics. Seahawks quarterback Russell Wilson, who signed a four-year contract extension last year, is currently the league's highest-paid player at $35 million per year. Rams quarterback Jared Goff's $110,042,682 are the most overall guarantees in an NFL contract, while Falcons quarterback Matt Ryan leads with $94.5 million fully guaranteed at signing.
Mahomes, who is the youngest player to ever win both NFL MVP and Super Bowl MVP, has an inordinate amount of leverage. He earned MVP honors in 2018 after having one of the league's most prolific seasons for a passer as a first-year starter after essentially being redshirted while a rookie in 2017. He became the only quarterback besides Peyton Manning to ever throw for at least 50 touchdowns and 5,000 or more yards in the same season. If Mahomes is willing to fully exploit his leverage, he could become the first NFL player to sign a $200 million contract.
Quarterback market increases
The expectation is Mahomes will become the NFL's first $40 million per year player with his new contract. In order to do so, Mahomes will have to get the biggest individual percentage increase when becoming the league's highest-paid player since the 2011 lockout ended. It will take a 14.29 percentage increase from Wilson's $35 million per year for Mahomes to reach the $40 million mark. Aaron Rodgers' 11.67 percent increase over Ryan becoming the first ever $30 million NFL player when he received $33.5 million per year from the Packers in 2018 is currently the biggest jump during this span. The market has moved over 10 percent on one other occasion. In 2016, Colts quarterback Andrew Luck's $24.594 million per year was 11.12 percent more than Ravens quarterback Joe Flacco's $22,133,333.
Unprecedented financial movement took place with quarterbacks during 2018 when the salary bar was raised by multiple players (Jimmy Garoppolo-49ers, Kirk Cousins-Vikings, Ryan and Rodgers). The market moved 24.07 percent from Lions quarterback Matthew Stafford signing for $27 million per year in 2017. The next biggest jump from one year to the next wasn't even half as much as in 2018. Luck's 2016 contract was 11.65 percent more than Rodgers' league leading $22 million per year in 2015.
Franchise tag relevance
It probably makes sense for Mahomes' camp to look at the franchise tag dynamic as a guide for a long-term deal although there would have to be some sort of major breakdown in negotiations for Mahomes to be in a position to be franchised in 2022. Nonetheless, the 2022 quarterback exclusive franchise number, which would be the average of the top five 2022 quarterback salaries (usually salary cap numbers) at the end of that year's restricted free agent signing period, currently projects to $39.403 million. This number is subject to change depending on new quarterback deals, contract restructures, pay cuts and/or releases over the next two years. A second franchise tag in 2023 at a collective bargaining agreement-mandated 20 percent increase over Mahomes' projected 2022 franchise number would be $47,283,600. A third franchise tag in 2024 with a 44 percent increase from the 2023 figure would be astronomical at slightly over $68.1 million.
Mahomes could make right around $154.75 million with three franchise tags after playing out the final two years of his rookie contract. The average of franchising Mahomes three straight years would be just over $51.5 million per year.
It might be more appropriate to factor two franchise tags into the equation. A player hasn't been designated three times since the three franchise tag limitation was implemented in the 2006 CBA. Under a two straight designations, Mahomes would make approximately $86.75 million, which is essentially an average of $43,337,500 per year over 2022 and 2023.
Length of high-end quarterback contracts
The length of high end quarterback contracts has been decreasing in recent years. Up until 2018, top quarterback deals were usually for five or six new contract years. There are seven passers with contracts averaging $30 million or more per year. Ryan is the only one whose deal contains more than four new contract years. He signed a five-year extension. The average length for these seven quarterback deals is 3.57 new years. Since all seven deals were extensions (had at least one year remaining on their existing deals when signed), the quarterbacks are under contract for average of five total years. Rodgers' $175 million over six years in 2018 (four year extension at $33.5 million per year) is the biggest NFL contract to date.
Goff and Eagles quarterback Carson Wentz's contract lengths might be particularly relevant since they were first round picks who received extensions after playing three NFL seasons, which is the same stage Mahomes is in his career. Both received four-year extensions, so their contracts are six years long. Goff's extension averages $33.5 million per year while Wentz's is $32 million per year.
Putting a $200 million contract into context
Mahomes is under contract through the 2021 season for a total of $27,631,905. He is scheduled make $2,794,905 this year and $24.837 million on a fifth year option in 2021. $1,969,905 of Mahomes' salary for this year is a fifth day of training camp roster bonus. Getting a deal done before this bonus is due would give the Chiefs the most salary cap flexibility. The roster bonus could be converted to nearly $9.845 million of signing bonus and prorated for five years without affecting Mahomes' $5,316,443 2020 salary cap number. After the fifth day of training camp passes, proration of the roster bonus is no longer a possibility. Assuming there aren't any delays to training camp opening because of COVID-19, the fifth day would be right around August 1.
Mahomes would need to sign a four-year extension averaging approximately $43.1 million per year to be the first NFL player to sign a $200 million contract. This type of extension is in line with Mahomes being franchised two consecutive years after playing out his rookie contract. It is also consistent with the biggest year-to-year increase for quarterbacks in the last decade. The 24.07 percent increase in 2018 applied to Wilson's $35 million per year is just over $43.425 million per year.
Goff, Rodgers, Wentz and Wilson's four-year extensions could provide a roadmap for Mahomes' cash flow and guarantees. The range for new money through the first and second new contract years is 43 percent to slightly under 51 percent, and just over 60 percent to approximately 64.25 percent respectively. To put this in better perspective, Mahomes would have a little less than $112.5 million of new money through 2023 (his second new contract year) at $43.5 million per year if his cash flow percentage is comparable to high end of the range with these four-year extensions.
Mahomes' total dollars in his first four contract years (2020 through 2023) would be approximately $140 million because the $27,631,905 in the remainder of his rookie deal is added to the almost $112.5 million of new money in the same time frame. Essentially having 70 percent of the 201,631,905 six-year total is consistent with the structure of Goff and Wentz's deals, which are in the 68 percent neighborhood. In Goff's case, his guarantees run through his first four contract years. Doing the same for Mahomes with this model would put his overall guarantees practically at $140 million.
I would imagine that Cabott and Steinberg would insist on the Chiefs fully guaranteeing first three years of the contract, if not the first four years, at signing. This would likely make $110 million the lower end of the amount fully guaranteed at signing under these parameters.
One challenge may be structuring Mahomes' contract to account for the potential impact the COVID-19 pandemic could have on the 2021 salary cap if league revenues decrease because games are played in empty stadiums or in front of limited fans. The Chiefs aren't a proponent of the signing bonus/option bonus contract model but utilizing an option bonus in 2021 could be a way to make Mahomes' 2021 cap figure more manageable in case of a flat or lower salary cap next year.
My preference would be to sacrifice the potential of the $200 million contract for a three-year extension. Mahomes would be better positioned to a take advantage of the anticipated financial growth in the salary cap because of the addition of a 17th regular season game and new media rights deals with a shorter term. Most of the current TV deals expire after the 2022 season and the 17th game most likely will be implemented at some point before the 2023 season.
Salary cap percentage concept
There has been plenty of speculation that Mahomes may be able to use his immense leverage to tie his salary in the later years of the contract to the growth in the salary cap. This was something Rodgers unsuccessfully attempted to get with his 2018 extension. Rodgers would have been in a better position to take strong stand about his contract in 2013 as a 29 year old entering the prime of his career. Wilson never really got anywhere last year in trying to get a salary cap percentage based contract.
My experience as an agent was extreme pushback when trying to establish new contractual precedents. The idea of a new precedent was considered a deal breaker in most instances. Teams routinely cited their concern about the precedent being used against them in future negotiations with other players. It always seemed a little disingenuous because teams should be able to distinguish the circumstances of different negotiations.
The high end four-year extensions signed over the last couple of years have salary escalators and/or incentives. Rodgers, Wilson, Wentz and Goff's contracts have $4 million, $6 million, $12 million and $14 million in performance bonuses respectively. Goff's deal has the highest potential value at $148 million.
Performance bonuses would seem to be a necessity for Mahomes given these contracts. Instead of tying his money to a percentage of the salary cap, Mahomes' camp could explore a different kind of mechanism, which has been used before, that would keep his contract from becoming outdated.
When I was first getting started in the agent business, I worked on a deal for six-time Pro Bowl cornerback Eric Allen. He was one of the clients of the firm that employed me. After a lengthy preseason holdout in 1992, Allen signed a three-year contract with the Eagles where his 1994 salary would be adjusted so that his pact would equal the average of the three highest paid NFL defensive backs deals if he was no longer being paid in that stratosphere provided he earned Pro Bowl or All-Pro honors in the previous two seasons. A mechanism for Mahomes could be the greater of a specific dollar value like a traditional performance bonus or an adjustment that would ensure he remained the league's highest paid player with extraordinary individual achievement and/or team success.