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Adjusting Contracts for Capflation

Discussion in 'Miami Dolphins Forum' started by ckparrothead, Mar 1, 2017.

  1. ckparrothead

    ckparrothead Draft Forum Moderator Luxury Box

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    This is something I posted in Club Level and it was suggested to me that I should post it out in the Mains as I guess there's been some discussion and debate over things that touch on this.

    The salary cap has been growing. It was $123 million in 2013, $133 million in 2014, $143.3 million in 2015, $155.3 million in 2016 and now is set at $167.0 million according to the media.

    This is important. Simply put, a contract that a player signed in 2013 for let's call it $8 million per year would equate roughly to $11 million per year today. That's just the way it is. That's capflation.

    When you're trying to decide what a guy should be paid, it's natural to want to peg him on a list of players at his position and see where he stands on that list, then create a set of comps that will dictate the average annual pay of the contract.

    But if you do that without adjusting these contract values for capflation, the exercise becomes dumb and useless.

    Something else you have to control for is the simple fact that half the damn league are on rookie contracts, which are CAPPED and strictly controlled. They are not free market contracts. Their values are dictated by draft position, and trying to compare them to the contracts signed by vested veterans is apples vs onions.

    So I took all VETERAN contracts and converted them into average annual compensation in 2017 cap dollars, based on what the salary cap was when the player signed the contract versus what the salary cap is expected to be in 2017.

    Now, you will have to forgive me, as I originally used an estimate of $168.0 million for the 2017 salary cap. This was before the news came out today that the final figure is expected to be $167.0 million. It doesn't REALLY change things much, just mentally adjust all of the numbers in the chart downward by about $60k.

    I populated the below charts based on the average annual compensation for the player ranked at the number at the top of the columns, or ranked at the percentile listed at the top of the column.

    View attachment 1707

    One thing I have to warn you against is using these rankings to say OK then so-and-so wants to be paid like he's one of the top 10 players at his position.

    Because I used only the veteran contracts, excluding the rookie contracts, those rankings are not apples-to-apples with what you're thinking (e.g. top 10 veteran contract means one of the top 10 at his total position in the NFL).

    I'll give you an example. Kenny Stills has said he wants to be paid $12 million per year. That would put him about 11th down the list of capflation-adjusted veteran contracts. And thus people will say, Kenny Stills thinks he's a top 10 wide receiver in the NFL.

    That would not be the case. I think it would be understood for example that many players that are still playing on rookie contracts, and/or fellow 2017 UFAs, guys like Amari Cooper, Sammy Watkins, Mike Evans, Odell Beckham, Brandin Cooks, DeAndre Hopkins, Michael Thomas, Jordan Matthews, Allen Robinson, Jarvis Landry, Martavis Bryant, Stefon Diggs, and Alshon Jeffery, they would all be seeking contracts that are above what a Kenny Stills commands....WHEN their time comes for that coveted veteran contract.

    So really, Kenny would be asking to be paid more within the context of him being something like a #22-24 wide receiver in the NFL.

    How does that translate, in other cases? General rule of thumb is wherever the contract in question ranks at the position, double it to account for guys that are still waiting patiently until they can be paid.

    So if your free agent CORNER is asking to $11.4 million per year, you can say that stacks up to top 10 among veteran corner contracts. But it also would roughly translate to being a top 20 corner in the NFL once you account for the guys still stuck on rookie deals.

    The main takeaway from this is something I keep trying to tell people, which is that you just CANNOT keep judging what a player is worth or not worth based on a "feel" for contract values that you developed during years where the salary cap was $123 million or $133 million. Not when the cap is now $167 million. It's just not smart.
     
    Last edited: Mar 1, 2017
  2. invid

    invid Season Ticket Holder Club Member

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    Thanks, CK. I've actually fallen victim to this in the Stills thread. Just a little confusing when reports are saying the FO believe he's good as gone because of his starting bid, which leads me to believe that his initial bid is egregious. Capflation makes it not so egregious, but reports are painting an opposite picture. I guess we'll find out when free agency starts. Where do you stand on whether or not we should resign him?
     
  3. djphinfan

    djphinfan Season Ticket Holder Club Member

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    Makes sense, need to adjust...I think folks get freaked about by the 10,000,000 number.
     
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  4. plc001

    plc001 Season Ticket Holder Club Member

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    CK,

    I see your point if we were talking about a newly established system. However in a mature system such as this, where every year you have 4yr players signing new contacts its invalid. Stills wants to be paid like a top ten receiver who received lucrative contracts perhaps as soon as last year. It's a moving window of data and when signing a player to a contract you have to look at what comparable players signed for recently. Kind of like buying a house, you compare comps. Projecting the contract of Odell beckham and basing stills contract on that figure would cause out of control capflation.
     
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  5. resnor

    resnor Derp Sherpa

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    No...I think the point is, that when considering Stills upcoming contract, you have to realize that in a year or two, he's going to be paid like 22nd-24th in the league, not like in the top 10. It's no different than how people should be looking at Tannehill's contract. You don't just up his amount because you are projecting what other receivers will be making, but, you don't just throw him away because his contract request looks too big compared to contracts given 3 seasons ago.
     
  6. dirtylandry

    dirtylandry Well-Known Member

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    All good posts. I am for Stills, but when your defense sucks the way ours does, and you have the hard cap number this year to spend, it puts things in perspective.

    On the flip side, these players that sign these deals need to stop complaining two years in a deal that they are underpaid. They should take risks then and sign one year deals
     
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  7. ckparrothead

    ckparrothead Draft Forum Moderator Luxury Box

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    I see nothing, absolutely nothing, in any of the assumptions and calculations that I've established that would result in contract inflation that outstrips salary cap inflation. This is mathematically impossible since the contract adjustments are directly tied to the increases in the salary cap.
     
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  8. plc001

    plc001 Season Ticket Holder Club Member

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    Ck, I agree with most everything you write just not this post. But you are an arrogant fella.

    Bottom line... making any type of assumptions regarding a future contract a star receiver will receive to determine the contract of a possible upper middle class receiver today is insane.

    Is stills a top 10 talent I would argue no and in my opinion should not be paid top ten money regardless the spreadsheet you use.

    While that is good data you presented and has other uses such as how well the organization managed their contracts in relation to other players, I don't think any office would use it to determine future contracts. Now if you have proof of that, that may add some validity to your arguement and I would have a lot more questions.
     
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  9. resnor

    resnor Derp Sherpa

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    When considering what Stills is worth, why would it be incorrect to disregard guys like OBJ who are on rookie contracts? If you're truly interested in his worth, you can't judge him based on what guys on rookie contacts are making. In other words if you peg Stills as the 25th best receiver in the league, you can't simply look at the current contracts of the guys above him, cause some are on rookie deals. But, you can't simply pull guys on rookie deals out of the equation, cause then you might have a list where Stills is the 10th best receiver in the league. So, you look at the guys above him, and you absolutely have to take into account what guys on rookie deals are going to be making, and pay Stills accordingly. Otherwise, you'll consistently be having subpar receivers, cause the good ones won't sign with you since you're not paying them what they're worth.
     
    Last edited: Mar 2, 2017
  10. vt_dolfan

    vt_dolfan Season Ticket Holder Club Member

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  11. Finster

    Finster Finsterious Finologist

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    This is a rationalization for over paying Stills, and would be a very poor business plan.

    This is only a 5 year trend, the 3 years previous there was almost no cap movement, so it's entirely possible that the cap in 2018 will be 168 mil, only 1 mil higher than this year, meanwhile if you've signed players based on a 10 mil hike per year you've just jumped into the fire.

    You sign players for what they are CURRENTLY worth because the future has no guarantees, the cap WILL fluctuate in it's growth, there will be spurts and lulls, so you pay in the now.

    You'd have a very difficult time as a salesman trying to sell something on this premise.
     
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  12. Dol-Fan Dupree

    Dol-Fan Dupree Tank? Who is Tank? I am Guy Incognito.

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    Because OBJ's worth would be top 5 if he were a free agent and teams do not have unlimited draft choices.
     
  13. resnor

    resnor Derp Sherpa

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    But that's the point. OBJ IS top 5, but he's on a rookie contract. EVERYONE knows he's getting a massive contract in a year or two. So, when thinking about what Stills is worth, it's not about right now, this season. It's about what is he worth 3 years down the road, you know, when OBJ and others, get big contracts. Let's say you wait to pay Stills until 2020, or, let's say you string him along on one year deals. In 2020, Stills would probably command more than 10 million a year. So, by looking ahead to what contracts will be, you can actually save yourself money down the road by "overpaying" this year. Rearly, though, you aren't overpaying.
     
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  14. Dol-Fan Dupree

    Dol-Fan Dupree Tank? Who is Tank? I am Guy Incognito.

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    reading what you wrote, it makes it seem like we wouldn't be overpaying Stills this year.

    So, I do not understand what you are trying to say. OBJ is worth more than his rookie contract. Just because he isn't getting paid that, he would be getting paid nearly $17 million a year if he was a free agent. Unless the salary cap goes down, then he would most like still be worth around $17 million a year as a minimum in 2019 or 2020.

    CK is not saying that you need to look at the salary cap in the future. You need to look at it what it is now and not compare it to contracts that are 3 years old when the salary cap was much lower.

    Also, You are not stringing Stills with yearly contracts.
     
  15. vt_dolfan

    vt_dolfan Season Ticket Holder Club Member

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  16. vt_dolfan

    vt_dolfan Season Ticket Holder Club Member

    Im not sure you are basing your Salary Cap projection correctly. Here are projections through 2020.



    Here are our projected salary cap amounts for the 2016–20 seasons:

    2016: $152.81 million

    2017: $160.98 million

    2018: $170.85 million

    2019: $179.90 million

    2020: $189.04 million




    This is a great breakdown of what goes into creating the overall cap number.

    All Revenues

    The salary cap is based on the projected “All Revenues” (AR) of the upcoming League Year during which the salary cap will be effective. AR includes almost all revenues generated by the NFL and its clubs with limited exceptions.

    There are three main “buckets” of AR.

    Media — Revenue the NFL earns by selling the rights to broadcast games on television and radio. Currently the NFL has television broadcast agreements with NBC, CBS, FOX, and ESPN. The right to operate Sunday Ticket, which allows subscribers to watch out-of-market games, is held by Direct TV. Radio rights are held by Westwood Media and SiriusXM. The NFL also receives nominal payments from the Copyright Royalty Board (CRB) for the re-transmission of certain games.

    NFL Ventures, L.P. — Income generated via the NFL corporate entity NFL Ventures, L.P. This entity is responsible for all NFL revenue generated at the national level, excluding TV and radio broadcasting revenue. This bucket includes revenue generated by the NFL Network, sponsorship, licensing, NFL productions, and miscellaneous smaller revenue sources.

    Local — Local revenue generated by individual teams via gate receipts, luxury box sales, concessions, parking, local sponsorship and advertising, and any other team-generated revenue.

    Projecting All Revenues

    As the NFL and its 32 teams (with the exception of the Green Bay Packers, more on them later) are private enterprises projecting the amount of money they earn takes a bit of detective work. Furthermore, as with any company, forward-looking projections are by their nature built on conjecture and don’t have the benefit of knowing future unforeseen business changes. Nevertheless, utilizing the financial information available and sports industry trends, one can develop a respectable projection of future NFL revenues and league-wide salary caps for the duration of the CBA.


    http://salarycapcrunch.com/projecting-nfl-salary-cap-2016-20-seasons/




    There is no real logical reason to suggest these projections wont play out, given the amount of information available to base these numbers off of. The media contracts run through the '21 season...so you wont see the NFL lose any revenue there.

    It would be silly for the Miami Dolphins not project what a contract will look like 2,3,4 years down the road. Teams do this all the time, its how you stay competitive cap wise. Can you imagine if the Phins signed a player not making projections like this...or rather, didnt? You would rapidly become uncompetitive because every other team is.
     
    Last edited: Mar 2, 2017
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  17. resnor

    resnor Derp Sherpa

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    1. Yes, OBJ is worth more. You don't look at old contracts to determine current contracts. You should, though, think about what Stills would be worth in 3 years.

    2. Obviously you aren't going to string Stills along on one year deals. I was using that as an hypothetical example, to try to show what I'm getting at.

    The idea is that if the 24th best receiver will be getting say, $13 million in a year or two, die to the inflation that comes from guys like OBJ coming off of rookie deals, then signing Stills $10 million a year now isn't outrageous, even if that makes him seem like he's being paid like a top 10 receiver in the short term.
     
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  18. Dol-Fan Dupree

    Dol-Fan Dupree Tank? Who is Tank? I am Guy Incognito.

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    Seems like you are agreeing with him.
     
  19. resnor

    resnor Derp Sherpa

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    With CK?

    I think I am. LOL
     
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  20. ckparrothead

    ckparrothead Draft Forum Moderator Luxury Box

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    Right back at you for being arrogant. And wrong.

    The point I made about players on rookie contracts was fairly simple. If you're sitting there and thinking about whether a player is "top 10" then in YOUR mind you're doing a top 10 based on the entire NFL. That's a problem, because in this analysis all players on rookie contracts regardless of how good they are have been STRIPPED OUT OF THE POOL.

    So you're not doing a top 10 among the entire NFL anymore. You're doing a top 10 among players on veteran contracts. It's like the difference between talking about being a top 10 team in the NFL versus being a top 10 team in the AFC.

    Next time I suggest disagreeing without adding in the ad hominem attacks. And I'll do the same.
     
  21. phins18

    phins18 Active Member

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    Stills is not worth it. He is our 3rd WR, and with the holes we have on defense given what he have invested in the draft the last few years with Carroo and Grant, you dont dare pay Stills that much money. Makes 0 sense. The patriots are the patriots and the best teams are the best teams because what they do best is get value for their money.

    The reason Stills was so great last year was because he was being paid less than a million to do it. Make that 10 million and that is notgood enough. It is just such a regressive move to sign him to that kind of deal when we are going to lock up Landry, have Parker on his rookie deal, and just took 2 rookies relatively early in the draft last year. It is just a horrific use of limited assets to pay your 3rd WR that much money.
     
  22. resnor

    resnor Derp Sherpa

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    At this point, Stills is not our 3. He's at worst our 2, and the argument could be made he's our 1. Parker had not shown that he's able to consistently play as our 1 or 2.
     
  23. phins18

    phins18 Active Member

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    Stills is not our 1, first of all. Second, investing the way you just referred to is an example of why the patriots are consistently much more well run then us. We are not paying for what Stills was this past year. We would be paying for his next 3-4 years. We have invested a high first rounder in Parker, a 2nd rounder in Landry, a 3rd rounder in Carroo (maybe 4th i dont remember) and then another pick in Grant. You dont invest 10 million in a guy who is clearly not a number 1 receiver in this league when you hae already invested so heavily into the position and when your defense has as many holes as ours does.
     
  24. djphinfan

    djphinfan Season Ticket Holder Club Member

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  25. jdang307

    jdang307 Season Ticket Holder Club Member

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    Did you all catch the part where Gase is almost in tears at the thought of losing Stills?

    Yeah I'ma go with the guy who is doing the cooking on what ingredients he thinks is essential. Let the cap guys handle it.

     
  26. brandon27

    brandon27 Season Ticket Holder Club Member

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    I think you should stop being so hung up on #1,#2 or #3 WR titles and instead think of them as a unit, working together, then think of how you can use them together. Rather than labelling them on a depth chart. What stills brings to this offense is far more than devante Parker at this point. And I assume since you are advocating letting stills go because of Parker and Landry you likely think he's the #3 behind both of them.

    Think outside the depth chart and look at the value and talent they bring and where we line them up and how we use them together, and separately. I think then you should see why people would think Stills is our "1" or "2" and why he is worth the money to this offense.

    Sent from my Samsung Galaxy S5 using Tapatalk... ignore the typos!
     
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  27. Electric Boogaloo

    Electric Boogaloo Inventor of the question mark

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    Interesting analysis, CK. Thanks for bringing it to the free boards

    Agree with the cap related inflation adjustments to the seasoned contracts. Not sure I buy the top 22-24th Wr case. Yes, Stills would be paid as a top ten vet, and that is indeed different than a top 10 at his position. However, it is the presence of the "have nots", i.e rookie contracts, that subsidizes the "haves" (vets) in a salary cap world. IOW, in a league with finite salary resources via the cap, if suddenly all WRs were able to sign for market value, Stills contract size would fall far below $12mm. It's simple supply/demand in a limited resource market. So, to say $12mm is going rate for a top 22-24 wr in the entire NFL just doesn't seem accurate or even determinable. In my example, there wouldn't be 21 guys making more than $12mm. Add to that, that when the OBJs of the world get paid, some of those current top 10 guys get cut. Their vet subsidy gets reallocated elsewhere. Other than capflation, for every winner, there is a corresponding loser.

    I think you correctly framed it that Stills is getting going rate for a top 10 vet and there is no way to know the total wr pay ranking in a league with subsidies.
     
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  28. plc001

    plc001 Season Ticket Holder Club Member

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    Holy crap... I can't believe this is even a discussion.

    I've never heard of a contract mimicking a possible future contract, but I hear every yr that player x is looking for player y type money. when comp-ing players you look to the recent past not a possible future.

    Unless you own a time machine then maybe you can take this into account, Ck do you own a time machine?? It's the only way your arguement even starts to make sense.

    Ad-hominem...Lol
     
  29. Dol-Fan Dupree

    Dol-Fan Dupree Tank? Who is Tank? I am Guy Incognito.

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    So basically what you are saying is you haven't been paying attention to contracts in the last 5 years.
     
  30. jdang307

    jdang307 Season Ticket Holder Club Member

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    And you still haven't. CK isn't making that argument. There are players right now, playing on their rookie contract, that are better than Stills. You don't think Odell is gonna get paid hard? You don't Amari Cooper is going to get paid hard? Allen Robinson, Jarvis Landry, Brandin Cooks, Michael Thomas, Mike Evans, etc.

    These are all players who if were not restricted by the rules, would be paid higher than Stills would get. Once they do get paid, Stills contract would be in the 20th range of WRs and that's not crazy.
     
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  31. dolphin25

    dolphin25 Well-Known Member

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    A lot of financing was done like this back before the bubble burst and the housing market crashed. "Oh, you can afford this house at this payment BECAUSE in the FUTURE you will making more money then you are now. "

    Meanwhile in the real world Lamp is killing it at the combine :)
     
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  32. Alex13

    Alex13 Tua Time !!! Club Member

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    /discussion
     
  33. ckparrothead

    ckparrothead Draft Forum Moderator Luxury Box

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    I think you've got your arms around what I was trying to demonstrate. You're right though, in a league with subsidies it's not a perfect methodology to think of a top 10 veteran contract coming out more or less around top 20 when you account for guys still on rookie deals. It's not perfect. I called it a rule of thumb. And that's exactly what it is.

    People that haven't done the work I have in terms of compiling the data, tracking break points, etc...are not going to know how to describe or contextualize the difference between the subset of veteran contracts and the full league including rookie contracts. So I gave them an imperfect rule of thumb, that I derived based on a lot of work mapping out the position-by-position break points. And trust me when I say that this rule of thumb is able to be detected WITHIN the data. The NFL itself seems to operate around these norms.

    What I was warning against, was what I knew would happen, which is people saying "He wants to be paid like he's a top 10 wide receiver??? NO WAY!!!" This is because they're going to think of top 10 in terms of what it means to be top 10 in the full league of 32 teams, etc. This is a far more dangerously inaccurate way of thinking about it than the rule of thumb I gave.
     
  34. danmarino

    danmarino Tua is H1M! Club Member

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    Yeah, it seems quite a few don't understand what you've written lol
     
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  35. rafael

    rafael Well-Known Member

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    Agreed. IMO Stills is the one element of our offense that would be most difficult to replace. And it's obvious to anyone that listened to his PC that Gase feels the same way. Stills at anywhere between $8 mill and $10 mill is a must sign.
     
  36. GridIronKing34

    GridIronKing34 Silently Judging You

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    We also "invested" a third round pick in Stills if you want to talk about draft picks... he's only 24 years old right now.


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