I would like to dive a little bit deeper into contract structure. Frequently people talk about the type of contract they would be willing to give a free agent. They start discussing the number of years. They might say something like, "I would give him a three year contract but nothing more. As we talked about in the contract structure post, though, years do not necessarily mean anything. A team might sign a player for ten years, but if there is no dead money from cutting him after two, that is not such a big deal.
Why do teams sign players to long contracts knowing that they will never make it to the end? Part of it has to do with flexibility. A long deal with minimal dead money essentially means the team can keep a player as long as he is productive and cut him once he isn't. That isn't a bad thing for a team.
Part of the reason also has to do with the cap. Go back to our dead money post. Remember how signing bonuses are part of each player's cap hit? They are divided evenly over the life of a contract.
Let's say hypothetically the Jets signed Ryan Fitzpatrick to a contract with an $8 million signing bonus. If it was a two year deal, the cap hit would look like this for signing bonuses.
|1st year||4 million|
|2nd year||4 million|
Remember, the cap hit for the signing bonus gets divided equally over the life of the contract. If he got a four year contract with the same $8 million signing bonus, here is what the cap hit for that bonus would look like over the life of the contract.
|1st year||2 million|
|2nd year||2 million|
|3rd year||2 million|
|4th year||2 million|
So sometimes teams will give out a longer contract because it spreads out this cap hit, offering more short-term relief if the team is cap strapped. It doesn't necessarily impact the long-term much either.
This is just another thing to keep in mind as we approach the offseason. A long-term contract might just be a mechanism to work the cap. The structure of the deal is more important.