Legacy NFL Teams Are At A Disadvantage

A week ago, the hammer came down. Cleveland Browns quarterback Deshaun Watson was suspended 11 games without pay and fined $5 million for violating the NFL’s personal conduct policy.

The Browns were aware that Watson faced 22 active civil suits accusing him of sexual misconduct when they signed him to a five-year, $230 million fully guaranteed contract during the off-season. But the Browns also felt that Baker Mayfield was not the quarterback that could lead the team to the Super Bowl while Watson could. What’s not widely discussed is the Browns’ ability to meet the condition of the league’s collective bargaining agreement that requires teams to put unpaid guaranteed money into an escrow account. That meant the Browns needed to have enough cash flow to sock away $180 million of Watson’s contract for four years. The Browns were able to do that. Some other teams might not be.

Fully guaranteed contracts are rare in the NFL. Watson’s deal was $80 million more than the previous record for fully guaranteed money and it caused some consternation around the league. Baltimore Ravens owner Steve Bisciotti, whose quarterback Lamar Jackson is looking for a new deal, told ESPN, “I don’t know that (Watson) should’ve been the first guy to get a fully guaranteed contract (of that amount). To me, that’s something that is groundbreaking, and it’ll make negotiations harder with others.”

Prior to Watson’s signing, the biggest amounts of guaranteed money went to Green Bay Packers quarterback Aaron Rodgers ($151 million) and Buffalo Bills quarterback Josh Allen ($150 million).

These kinds of contracts could become more frequent—at least for quarterbacks. Last month, Kyler Murray inked a five-year, $230.5 million extension with the Arizona Cardinals that guarantees $160 million. If piles of guaranteed money for franchise quarterbacks become the norm, certain NFL teams will have an edge—and not necessarily those that are the richest. Because of the escrow rule, which effectively takes millions of a team’s dollars out of circulation, legacy franchises (think Chicago Bears, Detroit Lions, Pittsburgh Steelers) that have been passed from generation to generation may be at a disadvantage because they often have many family members that feed off the team’s profits.

For old-guard, family-owned franchises, the team is often the only source of wealth. In contrast, newer ownership groups have many fewer mouths to feed and often derive significant wealth outside the NFL. Teams in this category include the Cleveland Browns, Carolina Panthers, Los Angeles Rams and Denver Broncos. Add to this group the Packers, who are owned by the community and therefore make no distributions to owners.

Given that the league’s humongous national media deals are shared equally among 32 teams, the pecking order of the NFL in terms of team values has long been dictated largely by stadium revenue. That might change soon. Moving forward, the ability to fund guaranteed contracts by keeping multiple millions of dollars in a lockbox for years is also likely to play a role.