Leverage: Von Miller & Denver Broncos Contract Dilemma

The Denver Broncos and Von Miller are at an impasse over the contract negotiations for arguably the most dominant defensive player in the NFL. The team and the player are worlds apart on the terms of the contract with Miller stating today that he will not play under the terms of the one year franchise tag tender contract.

The situation went from bad to worse when the Philadelphia Eagles signed their star defensive lineman, Fletcher Cox, to a long term contract earlier this week that pays out significantly more money than the Broncos had previously offered Miller. The argument could be made in a very credible manner that Miller is a better player than Cox, and that the Broncos obviously are now put in a very bad spot in their negotiations with Von Miller.

The Broncos are trying to spin this story to make Miller look greedy and uncooperative. The team is basically implying that they made a good faith offer to Von Miller of a multi-year contract that indicates a payout of over $100 million dollars.

However, contracts for players in the NFL are different than any other pro sport and the only thing that counts is the guaranteed money because that $100 million or $120 million total figure is extremely subjective and is tied to all sorts of incentives. A closer look inside the contract offer from the Broncos demonstrates that the guaranteed money is nowhere near the Fletcher Cox deal, and the contract offer is structured in a way that the Broncos can void the deal after two years.

These are the real issues behind why Miller is not happy and not going to sign that offer. He has played at a top level and would like some job security and financial stability which this offer on the table provides neither of those elements. The counterpoint to that situation is that the Broncos are looking at it from the perspective that if the player gets injured, and they invest significant dollars into Miller over a long term deal, then that becomes “dead money” against the salary cap. This will hamper the front office from being able to improve the team in subsequent years.

The balance has to come in NFL contracts where the player feels they are gaining some stability for playing the most violent of the major professional sports, and the team has to have some assurance that it is not going to get stuck in a bad contract that will limit their capabilities in making future personnel decisions.

The remedy at this point available to bridge that divide is the use of the signing bonus which can be issued in a variety of ways to compensate the player and provide the team with greater financial flexibility. There has not been much talk of a significant change to the bonus structure of the contract for Von Miller, and that will most probably change in order to create a compromise on money that both sides can agree on terms.

The honest reality is that these contract negotiations can get contentious and messy (see Ryan Fitzpatrick and the New York Jets) and that has certainly been the case here between Von Miller and Denver. This situation can get a lot worse before it gets better. The Miller camp is pointing to the outstanding stats that he has delivered on the field and then directing the conversation towards the Suh contract with the Miami Dolphins and now the Cox deal as examples of contracts for defensive linemen who have performed at a different metric than Miller and been compensated with dramatically higher salaries.

The Broncos and other teams have a history of doing this with potential free agents and contracts. It really is like nickel and diming guys, and the NFL as well as some media markets try to paint the players as being greedy and rapacious. The reality is that the teams make a ton of money themselves in the NFL.

In other sports in the “Big Four” it is a different scenario: there are struggling NBA franchises, NHL franchises, and MLB franchises. The NFL has so much revenue being generated through their TV and media rights deals that gets cut up among the teams that the whole scenario is much different. The teams in the smaller markets have revenue streams to make free agent contracts work to improve their team, provided that they have the salary cap space.

The teams have to realize that without the players, there is no NFL product. The players are what draws the fans to the stadiums and the TVs. The salary cap and revenue sharing are the mechanisms employed to maintain balance and parity in the league so that the NFL did not have their larger market teams outspending the other teams.

In this situation between Miller and the Broncos the franchise tender offer is involved. The fact that the franchise tag contract usually pays out a huge amount of money for one year usually leverages both sides into action. The player will usually report and play knowing that he is getting very well compensated for one season of football. However, the risk is that it is a one year agreement and if the player is injured that diminishes his leverage on the next contract he signs.

The team is motivated by the franchise tag because it does not want to pay a player, in this case, Miller that much money out of their salary cap for the season, so the preference is to agree to terms with the player on a long term deal that smooths out the cost curves.

In this situation, it is tough to tell from my perspective how it will turn out. I believe Von Miller when he said he will not play under the franchise tag tender offer, that he will rather sit out the season. Miller has to realize if he does sit out the year, it will actually weaken his position because other interested teams will negotiate with him based on the fact that they do not know if his skills are still at a premier level, and he will be a year older.

I believe the Broncos have a number in their head on both the overall cost of the contract and the term length as well as the guaranteed money and that they will not go above those figures regardless of whether Miller walks away from the team.

In any negotiation, they will either meet in the middle somewhere, or part ways with each other. The Broncos will realize that their defense without Miller and some other key personnel that left will be a shell of the team that won a Super Bowl. Miller will realize that the business side of the NFL is a minefield, and he better be ready to navigate it.

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