Agents and Contracts (Inside the NFL)
Most players coming out of college are unfamiliar with the way rookie and veteran NFL Contracts are actually negotiated. They are, however usually recruited heavily by agents who principal purpose is to convince their players to retain their services. All of these agents will claim that they are the best at what they do, and some may even be convincing. Once they have developed a relatively large clientele, they will try to impress professional prospects with the names of players represented by them and the lucrative contracts that they have negotiated. Unfortunately, most players coming out of college are unaware that those contracts are probably a by-product of the NFL system of slotting players by draft position. We believe it is very important for prospective professional football players to become familiar with the basics of the NFL system under which contracts are negotiated. It is our experience that many collegians do not have sufficient information about the role agents really play, and the NFL system under which they will soon be competing. The information that follows should be helpful in not only selecting the agent, but also in understanding how contracts should be structured. Slotting is basically the current system used by almost all agents and all NFL teams in determining the contract value for a player selected in the NFL Draft. Simply put, the first player selected in the draft supposedly gets the best and largest contract, followed by the next player picked, then the next and so on. The first pick’s contract is in large part impacted by the prior year’s contract for the first pick. For example, if a player is selected at the 18th pick in the 1st round, his agent will generally wait until the first 16 or 17 players in the round are singed and then try to get his client a little bit less that the player selected ahead of him. Sometimes agents even wait (often by holding their players our of training camp) until one or more players selected after them are signed. The purpose is to try to get a little bit more of an advantage in negotiating the contract by basically letting the system dictate what the player gets, thus avoiding really doing much of anything. This is one of the reasons that many agents will negotiate contracts for a lesser percentage or fee than allowed by the NFL Players Association. Since the contract can almost be pre-determined if the agent allows his client to be slotted as preferred by NFL teams, such an agent is not necessarily spending a lot of time negotiating the rookie contract. Like almost anything else in the business world, you get what you pay for. Unfortunately, some agents don’t even properly slot the players they represent in the draft because they do not know how each NFL team determines slot values. Therefore, it is important to initially ascertain, before actually commencing negotiations, what percentage of the team’s overall rookie pool money (the total amount of money each team is allowed by the NFL to spend on all of its draft selections for the year) is allocated to a particular draft choice by the team. Obviously, doing so would give the representative the basic parameters for negotiating the contract and an advantage over most other agents representing players in the NFL Draft. The NFL determines draft slots by contract value; agents often determine slots solely by numeric position in the draft, and not necessarily the underlying contract value for the particular position in the draft. NEGOTIATING BEYOND SLOTTING: Since slotting is a form on wage scale that controls overall player salaries and caps them at a general, almost pre-determined level, it follows that if you can avoid slotting or minimize it effects, a player’s contract value can be dramatically enhanced. Some agents would probably take the position that there is very little that can be done to enhance a player’s contract other than the player being drafted in a very high position (in which case he would be slotted nonetheless) or holding a player out from training camp hoping that the team given in and increases the player’s compensation significantly. In fact, many agents who recruit prospective professional players actually negotiate contracts simply by waiting a team out and then claiming that they are superior negotiators based on a contract that the team gives a player. Teams usually arrive at a pretty definitive number some time right before or shortly after the beginning of training camp, and they usually won’t vary much from that number because of the slotting system. But, what teams will do after a long hold-out is “back-end" the contracts so they look bigger and the agent can show his client that he achieved a superior result. In almost all instances, the player will never really receive the larger back-end money because of the NFL salary cap system (the average yearly salary and any unguaranteed back-end bonuses would be too high to fit under a team’s salary cap), and back-loading the contract might actually hurt the player because he could be released if he in umproductive for any reason, including injury. This is why a large number of original first rounds picks have been released in the last couple of years. Also, by holding out,players become much more susceptible to serious injury because they have not had the benefit of the conditioning and preparation they would have received in training camp. Secondly, missing training camp usually affects a player’s initial season performance which could potentially affect his career; and thirdly, hold-outs usually cause ill will with coaches and management. Contrary to what many people associated with the NFL believe, slotting can be avoided in order to significantly enhance a player contract, and a player’s salary and bonuses are not dependent solely on his position in the NFL Draft. There are at least three ways to overcome slotting under the current system: 1. The first is to simply sign a short-term contract if the player is drafted lower than expected. When the Contract expires in February, the player is obviously no longer constrained by the rookie salary cap; rather, he is free to negotiate a new contract using all the available money under the team’s overall salary cap. Also it is important to keep in mind that, in general, the more money and bonus payments he receives. On the other hand, it is not uncommon for agents to push for longer deals because once the player signs his contract, the agent will receive his fee for every year of the contract, even if the player later switches agents for any reason, or if someone else negotiates his player contract. 2. The second method of avoiding slotting is for a player to sign first in his draft round if possible, or at least ahead of the first few players selected ahead of him. By doing so, the player won’t be tied into what the players drafted before him signed for, and there will be much more money available under the total team rookie pool that the agent can get for his client if he imaginatively and effectively negotiates his contact. 3. The third way to avoid slotting is to essentially tie-in the player’s contract, as much as possible to the overall growth in the team’s salary cap for future years. In many situations, when an agent negotiates a player contract, the contract may reflect fair market value in the year the agreement is reached, but not be reflective of the effect of the increasing NFL salary cap on the contract in later years. For example, if an agreement is reached that a player gets $2 million per year and the team and agent agree on a 4 year contract, they may simply multiply $2 million times 4 for an overall all 4 year $8 million contract. The NFL salary cap increases every year, the contract will in future years become inferior and appear less and less attractive to the player, who was probably initially very happy.