Over the next couple of weeks, I want to take you inside the negotiations of these rookie contracts in a few stages. A common misperception about rookie contract negotiations is that with the rookie salary cap setting basic levels of contract values the only substantive negotiation is the number inserted for the signing bonus. In some contracts, that might be the case, but the reality is a bit more complicated. Its the infrastructure of the contract that often becomes more debated than the dollars and cents. Today, lets look at the signing bonus.

The Signing Bonus
Depending on when the contract is negotiated, there may be precious little to negotiate with regard to the bonus. In the seventh round, the haggling may be over tens of dollars. In the sixth round, it may come down to a hundred dollars. In the fifth, the debating may be over a few hundred dollars and so on.

For those teams that wait until the week of training camp which some teams do the bonus amounts will have likely filled in around the pick, and its simple to fill in a fair number for both sides. As mentioned, some teams will look around the rounds of their picks in the week of training camp, call the agents and fill in the numbers. Thats a relatively stress-free way of doing the contracts; my nature would not allow me to do that because Id be worried if we hadnt signed most of our rookies by early to mid-July. For those like myself who tried to lock in contracts early in the development of the round, filling in a number becomes a task based on the previous, rather than the current, year.

Thus, in negotiating among the first deals in a couple of the rounds, the markers used this year were from the 2008 draft, examining the increase in bonus from 2007 to 2008 in various data points:
the exact slot of the selection;
the overall selection in the draft;
the area three picks above and below the slot;
the quadrant of the round;
the half of the round;
the full round.

In the lower rounds, the increases in bonus amounts are typically in the 3-4 percent range. In the second round, the range is broader and higher, anywhere from 6-8.5 percent.

In round numbers, the following are current signing bonus amounts for a mid-round selection in the lower rounds, assuming four-year deals, which most teams are now routinely using:
Seventh: $50,000
Sixth: $100,000
Fifth: $180,000
Fourth: $470,000
Third: $735,000
Second: $1.8 million (signing bonus plus guaranteed salary)

On a four-year contract, the salaries for each player are locked in at the following for contracts this year:
2009: $310,000
2010: $395,000
2011: $480,000
2012: $565,000

So before any bonus discussion, the player is assured of a contract worth $1.75M in total value, although not guaranteed.

Thus, the negotiation about hard numbers becomes a negotiation about the signing bonus, except for the second round, which, due to the operation of the rookie pool, necessitates teams shielding part of the guaranteed amount in a one-time incentive using the easiest-earned categories allowable for the player to make the money to keep it out of the pool number. Second-round picks receive signing bonuses and incentives backed by future guarantees in later salaries in the contract.

The rookie cap went up five percent from 2008 to 2009. Interestingly, the minimum salary for year one went from $295,000 in 2008 to $310,000 2009, a 5.1-percent increase in itself. Thus, teams can realistically argue that there should be no increase in bonus this year as the cap number for each player is already up five percent due to the minimum increase. That argument has and continues to be made, although without much success in the agent community.

For most agents, the negotiation is all about the bonus, and I cant blame them. The sobering fact is that the majority of these players will not last the contract and should probably grab every penny of guaranteed money they can. Every agent should bet on his player to protect the upside but be realistic about the downside.

Speaking of the upside, next in this series: the escalator.