Contract negotiations and reading between the lines

Today will be a momentous occasion for the Denver Broncos organization as far as personnel management goes...or not. MHR has been beside itself the past couple days as the deadline for Demaryius Thomas approaches. I always find these processes fascinating and fun to follow along if you can sort through the huge piles of rumor manure that piles up on all sides.

Let me share with you some insights on how I think about this and hopefully it will help some of you to sit back, relax, and enjoy these events more in the future.

Hype Basics

The first thing to realize is that almost everything you read in the media is probably false. Anything that looks like speculation is probably just that. Most of us are really great at providing opinions on what the team should do...heck, some of us even get our jollies doing that to some extent. But keep in mind that there is only a handful of people who know what is really going on in a player contract negotiation.

The Players

Here are the moving pieces you should always be mindful of: Team management, players, agents, the salary cap, and current contracts for players of the position in question.

Team Management: These are the people representing the team owners in the business negotiations for player contracts. Their interests are in getting the best talent to play for the team for the least amount of money so they can get more talent and stretch their dollars. Their interest is team first and foremost and always have to be accountable to the financial side of things that we fans sometimes don't pay much attention to.

Players: These are the commodities under negotiation. Sure they are people, but this is business. There is a reason that agents usually handle player contract negotiations...because the players play football and aren't normally skilled in business negotiations / don't care to take part in them.

Agents: These guys negotiate on behalf of the players and typically get a percentage of the player's contract as payment for their services. Their motivation is typically money first, player's satisfaction with their services second, and the player's wishes third.

The Salary Cap: Every team has a limit on how much money they can spend on player contracts. This is always an ever-present specter looming over any team management's contract negotiations. Teams limit how much of this pie they spend on offense / defense, different personnel groups, veterans, etc. It becomes a balancing act at times and poor decision making with your cap management can lead to big problems (see any basement dweller team and you'll probably find evidence of this problem).

Current Contracts: Negotiations need a starting point, and this is usually found by looking at player's contracts that play the same position as the player in question. Teams will value a player in comparison to another current player and use that current player's contract as their framework for negotiations.

The Game

At the negotiation table, the two sides will argue over numbers: years, raw money per year, guaranteed money, injury guarantees, value of the player, etc. Deadlines are oftentimes used as a psychological weapon in difficult negotiations such as we see with DT and Dez Bryant.

The problem in both of these cases is that the payers have been franchise tagged. This means they both get an average of the top 5 players at their position for a 1 year. The team can do this again next year with a 20% increase to that calculated rate.

The players options include the following:

• Sign the franchise tag agreement and play the 1 year with worry about injury and no guarantees to their future
• Don't sign until the last minute (which in this case is today) in an effort to get the team to make you a better offer
• Sign the agreement, but hold out as long as possible (this costs them a ton of money in the current year, but they only have to play a handful of games technically speaking)
• Negotiate a compromise with the team on a long term agreement

My Take / What I'm Looking At:

DT appreciates the Broncos. The Broncos appreciate DT. Neither of these facts change the reality of the salary cap and our team's need to be fiscally responsible in the management of their money. Neither of these facts change the reality of the player being one of the elite best in the world at what they do and wishing to be compensated as well as possible while they have this short window of opportunity to make a lot of money.

John Elway plays hardball in these negotiations and he's very good at sticking to his guns about business decisions. Anyone who has researched his history as a businessman would find ample evidence of this. That's not to say he doesn't make mistakes, because he does. But what I mean is that he will use sound reasoning to guide his side of the negotiations and will not get moved off that solid ground.

So far in our time with Elway we've seen a large amount of our home-grown and talented players leave for other teams (Orlando Franklin, Rahim Moore, Eric Decker, Knowshon Moreno, etc). We also see Elway pay talented players good contracts to join us from other teams (Aqib Talib, Demarcus Ware, T.J. Ward, Louis Vasquez, Peyton Manning, etc).

Some say that this shows betrayal to our team and the guys we draft. I think that's hogwash. This is the NFL. We need talent. Elway is not afraid to build this team from any of the pools available to him (draft, free agency, street free agents).

What we'll see today is a glimpse of what Elway and the Broncos think of DT. If they pay him a big contract, they value him a great deal (no matter how little we may want the team to spend big $ on a WR). If they let him go into camp in hold-out mode or play on the tag then you know they were not willing to pay him the big $ his agent was looking for.

Either way, don't just take whatever happens at face value. If we sign DT to a big contract, look at the guarantees (full vs injury). Look at the length. Look at the rest of our salary cap for the next few years. We aren't as cash-strapped as you may think. There's no reason we can't sign both DT and Von. It will cost us some other players we may like, but it can be done.