Jaylon Smith believes he’s still a Top 10 pick despite his serious injury. If he falls past the first round, the former Notre Dame linebacker may be silently rooting to drop all the way to the middle of the third round.
What is seemingly a perverse incentive – to diminish your draft stature – may actually be a sound financial decision for Smith, according to NFL draft expert Jason Fitzgerald.
Because NFL rookie contracts are fixed according to the league’s 2011 collective bargaining agreement with its players’ association, an accurate projection can be made about what each pick stands to earn.
There are three ways at looking at this.
Fitzgerald, founder of OverTheCap.com, projects the final pick of the first round – currently held by the Denver Broncos – will be paid $8,235,538 over the life of the four year contract.
Smith purchased a “loss of value” insurance policy before suffering an ACL/LCL injury in the Jan. 1 Fiesta Bowl. It will reportedly pay out $700,000 if he is not among the first round picks. It will also pay $100,000 for each subsequent pick in which he is not selected, up to a maximum of $5 million. Darren Rovell, ESPN’s business reporter, said the policy pay out is tax free.
Smith’s policy maxes out at the 75th pick, a middle-of-third-round selection currently owned by the Raiders. That pick will be paid $3,126,100 over the four year contract, Fitzgerald says. Therefore, the linebacker would make $8,216,100 including the insurance payout.
If Smith is selected with the first pick in the second round or up to the 10th pick in the third round, he’ll paid be paid between $7.29 million and $8.05 million.
Conclusion: If Jaylon Smith isn’t selected in the first round, he should hope to go in the mid-third round to maximize his money.
Fitzgerald says, in general, guarantees are as follows:
- The first 23 or so picks: Entire contract is guaranteed.
- The remaining first round picks: Full signing bonus, plus three years of salaries guaranteed
- Second round: Full signing bonus plus first two years’ salaries guaranteed**
- All other rounds: Full signing bonus guaranteed.
The insurance policy, I’ll assume based on reporting, is guaranteed money.
The final pick of the first round is paid $8.24 million, of which $6,662,509 is guaranteed money. Then Smith’s insurance policy kicks in, creating a roller coaster where some picks are more valuable than others.
They are, in order of most valuable to least valuable to Smith:
- Round 2, Pick 5
- Round 2, Pick 32 (last pick of the round)
- Round 2, Pick 6
- Round 2, Pick 3
- Round 2, Pick 7
- Round 2, Pick 8
- Round 2, Pick 9
- Round 2, Pick 4
- Round 2, Pick 2
- Round 2, Pick 10
- Round 2, Pick 12
- Round 2, Pick 11
- Round 2, Pick 31
- Round 2, Pick 1
- Round 2, Pick 13
…and so on.
Conclusion: If Smith doesn’t go in the first round, he’ll want the team who holds the fifth pick in the second round – currently the Jaguars – to select him to maximize his guaranteed money.
** Fitzgerald says: “The second round is actually a little less than the first two years as it gets later and it fluctuates team to team. But that’s a safe estimate to use.”
AFTER FEES & TAXES
Fitzgerald made a great point.
“If this policy is truly tax free, then to do a full analysis you would probably need to pull the tax money and agent fees out of the contract numbers too. With that in mind you may be able to make a case that being picked 76 is better than being picked say, 23,” he wrote.
Agents earn up to 3 percent on money actually received, and a draft pick will have to pay Uncle Sam next April for any earnings made this year. I’m not a tax professional, but I have a rudimentary understanding of how tax brackets work. Using Bankrate.com as a reference, I’ve determined:
The 28th pick in the draft will earn $9,269,432 over the life of a four-year contract, of which up to $226,662 would go to his agent (over a four-year period) and $1,277,056 would go to the federal government for 2016 earnings. (I can’t calculate taxes beyond 2017 because we may have a different tax system by then. I also didn’t attempt to calculate state taxes, since those vary.) That leaves him with approximately $6.05 million.
If Smith falls below that pick, by my analysis, the best way to maximize his take-home pay would be to be selected with the final pick of the second round. In that instance, he would collect $3.8 million from the insurance policy (remember, it’s reportedly tax free) and an additional $2.13 million from his contract (minus fees & taxes). Smith’s take home pay would be $5.93 million.
Conclusion: If Smith falls below pick #28 – currently held by the Chiefs – he should hope to be picked at the end of the second round (in a pick currently held by the Broncos).
OTHER VARIABLES TO CONSIDER
If Smith has to take a “redshirt” year to fully recover from his injury, but then subsequently plays a lot for his team, it could be a blessing to fall to the third round. Rookie contracts include a “Proven Performance Escalator” which rewards players selected in rounds 3 through 7 for exemplary play.
Smith would receive a increase to his fourth-year salary by either 1) participating in at least 35% of his team’s defensive plays for either two of his first three seasons, or at least 35% over the course of his first three years.
“If you were certain on playtime, he would also stand to earn an extra $900,000 to $1 million in the fourth year of his contract as a third rounder,” said Fitzgerald. “That would definitely bump it into a better position than a late first rounder.”
The contract expert said the other side should be examined as well.
“Generally, players picked in the first and second rounds have an easier time securing a second contract even if the play is average,” Fitzgerald said. “You generally need to work harder to get on the field as a third rounder than a higher pick.”
IT JUST TAKES ONE TEAM
Smith, according to several media reports, failed his physical examination with multiple teams and at least 3 clubs say they won’t consider drafting him before a re-check of his knee in April. NFL Media’s Kimberly Jones said Sunday “that the first round now seems unlikely for Smith based on what she’s hearing from NFL decision makers.”
But it’s important to remember: Smith doesn’t need to convince every team to draft him; he just needs one.
Sports Illustrated’s Peter King reported Monday that at least one G.M. is still high on Smith.
“No way he won’t play at some point, and play well,” the G.M. said.
Les Snead, Los Angeles Rams’ general manager, may have said it best: “Like I’d tell Jaylon, whether you got hurt or not, it really doesn’t matter where you get drafted. It matters, whether we’re talking about Jaylon or any other player who has been injured in four, five, six, seven, eight to 10 years.”