NFL Drafted Players Becoming More Valuable
Looking at the increased value of drafted rookie contracts and what are the negotiating points in those rookie contracts.
The NFL Salary Cap has exploded in recent years. Do you know what hasn’t increased over the same timeline? Drafted rookie contracts. The drafted rookie contract carries more value and potential surplus value than ever. I also touch on some negotiating points for the drafted rookie contracts.
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The most coveted team asset is the drafted rookie contract. This is a four-year, cost-controlled, player contract at a heavy discount compared to positional market value. If you have been a long-time follower/reader of my work you’ll recall my love for draft value in the slot range of pick #20 to pick #75. NFL teams have an opportunity to generate significant surplus value with these contracts.
From the data below, I have pulled rookie contract data from 2014 and 2024 to compare against. The data is courtesy of Overthecap.com
Drafted rookie contract costs are not designed to increase in alignment with the NFL salary cap growth. As you will see below, rookie contracts have a near minimal increase in cost by comparison. One reason for this is during the 2020 league year (COVID season) the league and player’s union agreed to borrow money from future rookie pools to help cover the drop in the league salary cap. Without this borrowing of future pool money, the salary cap during 2020 would have been even lower.
The average increase in rookie contract APY as a percentage of the league salary cap, from the 2014 to the 2024 league year, is…0.04%. Compared to a league salary cap growth of 92%. This is not a true apples-to-apples comparison but I feel it is significant.
Example for Draft Slot 1.01:
2014 APY / % of League Cap: $5,568,250 / 0.042%
2024 APY / % of League Cap: $9,871,515 / 0.039%
The number one overall draft pick in 2014 had a stronger contract compared to the number one overall draft pick in 2024.
Chart of the Drafted Rookie Contract APY as Percentage of League Salary Cap:
Another example of this value and growth is looking at draft pick 1.03 from 2014 and 2024.
In 2014 the highest paid quarterback was Aaron Rodgers at $22 million APY. This represented 16.5% of the league salary cap. It is worth noting that Rodgers signed his extension in 2013.
In the same year, Blake Bortles was the first quarterback drafted at slot 1.03. Bortles’ rookie contract had a $5.16 million APY. This represents a 3.9% cost against the league salary cap.
Fast forward to 2024, the highest-paid quarterbacks are Joe Burrow and Trevor Lawrence at $55 million APY. This APY cost represents a 21.5% cost against the league salary cap.
During the 2024 draft, the first three draft selections were at the quarterback position. The APY cost against the league salary cap will be 3.87%, 3.70%, and 3.59%.
The difference between the potential value surplus is pretty dramatic between 2014 and 2024 at the quarterback position. This marks a 12.5% difference in 2014 followed by a 17.7% difference in 2024.
Extrapolate this thought process across the draft board and position groups and the picture becomes very clear. Yes, it is no surprise that teams who draft well win more games. But I am looking beyond that. Teams that draft well can squeeze out that extra margin of surplus value that could mean making the playoffs or staying home in January.
Effect on the Houston Texans
Time to add a Houston Texans’ spin to this thought process. Houston has 3 more seasons before their salary cap becomes top-heavy when C.J. Stroud, Will Anderson, and Tank Dell are playing under their second contracts. This will place a greater emphasis on the team’s draft selections in the subsequent years. The team may not have as much available salary cap room to cover draft mistakes with veteran signings.
Drafted Rookie Contracts
As of July 11, 2024 the league has signed 97% of the 2024 drafted rookie class.
Consistently I read posts on social media that it shouldn’t take this long for teams to sign their drafted class. Yes, the rookie contracts are essentially locked in via the signing bonus. There are a few negotiating points available to the player’s side of the table, depending on which round the player was drafted in.
Cash flow and timing of the cash payments are critical negotiating points.
1st Round
For the top draft picks, the main sticking point is the payment of the signing bonus. The signing bonus is a locked number, but when the player receives that amount is negotiable. Teams will push for two or three payments over the first 12 months of the contract, while the player agent is working to secure a one-time payment within 15 days of contract execution.
Another area of interest is receiving lump sum roster bonuses during training camp. Back in 2019, only the Top 8 draft picks received this type of cash flow. In 2024 this has expanded out to the Top 26 draft picks. The player will receive a one-time bonus payment, usually on the 3rd or 5th day of training camp, as opposed to being paid during the 36-week payment schedule over the year. Again…timing of the cash paid is the big negotiating point.
2nd Round
Players in the second round are focused on total guarantees and workout bonuses. In 2019 the idea of a 100% guaranteed rookie contract stopped after Pick 1.24. This year, in 2024, the 100% guaranteed rookie contract was extended to Pick 1.32. The first player in the second round, Keon Coleman drafted at 2.33, received a 95.69% total guarantee. It is only a matter of time before 2.33 gets 100%.
3rd Round
This area of drafted rookies will focus on maximum compensation, total guarantee amount, and first-year guarantees. The rookie contract slot value has a minimum amount and maximum amount for each draft slot.
In 2019 the idea of the third-round drafted player receiving 100% of the slot value (maximum value) stopped at 3.06. Fast forward to 2024, the entire class in the third round received 100% of the total compensation value.
Future classes will work towards P5 guarantees in the first year of the contract to push the total guarantee percentage higher. Another area for future draft classes will be to push for a preseason split salary as opposed to a full-season split salary.
Split salary means the player’s base salary is lowered if the player is placed on reserve (injured, PUP, etc.).
4th - 7th Round
Day 3 draft picks, historically, have not gained much ground in contract negotiations. Each player receives the minimum slot value, full season splits in the first two years, and credit season language in the contract.
Future draft classes will be focused on obtaining workout bonuses (a few players received them in 2024), stronger split salary language (preseason only), and money above the minimum slot value in the base salary.
Closing
Training camps are getting almost here! For my Houston Texans, training camp opens on July 18! I will attend as many practices as my work schedule allows as I slowly transition to primarily Houston Texans mode.
Feels great to be back. I am working on a video previewing my thoughts on the Houston Texans training camp and what I will be watching. Should we do that as a live stream? Let me know in the comments.
-TC