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New York Jets Offseason: Why Contract Structure Matters

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Timothy T. Ludwig-USA TODAY Sports

Last night we discussed the concept a dead money a bit. This leads into another topic, the structure of contracts.

Whenever a player signs a new contract, you frequently hear people say, "We need to see how the contract is structured." That is true. Sometimes a contract is not what it seems on the surface.

Let me give you an example.

Imagine tomorrow you hear that Ryan Fitzpatrick has signed a 4 year, $100 million contract. Twitter would explode. Jets fans would be furious. Even those who see the wisdom in keeping Fitzpatrick as a stopgap are going to be upset with making him the highest paid player in the league. Such a contract will cost the team Damon Harrison and Muhammad Wilkerson.

It all depends on how the contract is structured, though. Imagine a contract where Fitzpatrick did not get a signing bonus. As you might remember from our post last night, that means the Jets can cut him at any point and have no dead money on the books. That is to say, Fitzpatrick would count for zero against the salary cap if he was cut before a season.

Still a base salary of $25 million per year would be too high. There is no rule a player's salary has to be the same for every year of the contract. For example, it might be structured like this.

Year Base Salary Signing Bonus Cap Hit Dead Money if Cut Cap Savings if Cut
2016 1 million N/A 1 million 0 1 million
2017 1 million N/A 1 million 0 1 million
2018 1 million N/A 1 million 0 1 million
2019 97 million N/A 97 million 0 97 million

This would be a tremendous deal for the Jets. They would get Fitzpatrick for less money than they paid him in 2016. Yes, technically it would be a $100 million contract. Technically Fitzpatrick would have an average salary of $25 million per year, making him "the highest paid quarterback in the league." In reality, he would be cut before his salary rises to $97 million in 2019. He would cost the Jets zero for 2019 after he was cut.

I know this is a ridiculous example. It just makes the point easier to get across.

Now let's say Fitzpatrick got the same 4 year, $100 million contract. This time instead of no signing bonus, he got a $96 million signing bonus. This would be a catastrophic deal for the Jets.

Year Base Salary Signing Bonus Cap Hit Dead Money if Cut Cap Savings if Cut
2016 1 million 24 million 25 million 96 million negative 71 million
2017 1 million 24 million 25 million 72 million negative 47 million
2018 1 million 24 million 25 million 48 million negative 23 million
2019 1 million 24 million 25 million 24 million 1 million

It is reported the same way in the press, but the structure of the contract makes all of the difference in the world.

In the first example, the Jets got a steal with a 4 year, $100 million contract. In this case, the Jets have destroyed their franchise with a 4 year, $100 million contract to the exact same player.

This is something to keep in mind as we head to free agency. Dollar amounts and years matter, but the structure of a deal is just as important.