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Fox: Mahomes Making It Rain

7/17/2020

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​Ryan L. Fox

​​When you think of giant, long-term contracts in sports your mind tends to go into the world of baseball. That’s where you normally would see giant contracts in the hundreds of millions of dollars over long term deal, including multiple players just this past offseason getting 10-year deals worth over $300+ million. But this past Tuesday, the sports world stopped and did a double take at the news coming out of Kansas City, Missouri.
​
On that day, it was announced that the Kansas City Chiefs and their star QB Patrick Mahomes came to terms with a new contract extension. It would be for 10 years and for a whooping $450 million with incentives that could push the total amount to over $500 million. 
Currently Mahomes is still on his 2017 rookie deal (4 year, $16,425,786). The team also had his 5th-year option back on April 29, which was worth $24.8 million. He is also coming a 2019 season where the Kansas City Chiefs won the Super Bowl where Mahomes was named MVP of. That season followed a 2018 season where he was named MVP and lead the team to the AFC Championship. Combined with the fact that he is becoming the face of the NFL (not to mention being on the cover of Madden 2020), it is no surprise that the Chiefs wanted to lock him up for the long term.

I know that there are some people out there that are shocked to hear that the length of the contract is 10 years.

Normally you see contracts/extensions go for 4-6 years depending on the player. This is due to the fact that football players, especially those entering their prime, do not want to be tied into long term deals that will restrict them from going out and try to maximize their value in the free agent market.

There is also the fact that this has not been the first time an NFL quarterback signed 10-year deal extension with their team during the NFL offseason. Both Brett Favre and Drew Bledsoe signed 10-year extensions with their teams back in 2001 (10-year/$100 million for Favre (31) with the Green Bay Packers and 10-year/$103 million for Bledsoe (29) with the New England Patriots), Donovan McNabb (25) signed a 12-year/$115-million extension with the Eagles back in 2002, Daunte Culpepper (26) signed a 10-year/$102 million extension with the Minnesota Vikings in 2003, and Michael Vick (24) signed a 10-year/$130 million with the Atlanta Falcons in 2004.

Now the contract itself is pretty overwhelming when you first glance at it. The amount of $450 million is nothing to sneeze at but in a way you can.

The base salary for the first half of the extension is not exactly what you will call a bank breaker. Heck, in year one of the extension the base salary is $1.5 million. After a steep raise to $5.5 million in year two, it levels out at $2.5 million over the next three years. It is only in the second half where the base salary starts to shoot up. In year six, it starts off at $10 million in year six before steeply climbing year to year to where it will then be $38 million in the final year. During the entire time, Mahomes will be paid a $500k workout bonus as well as have the potential to make an extra $2.5 million per year from incentives ($1.25 million for winning NFL MVP & $1.25 for winning AFC Championship Game).

Still with me? Good.

Okay, the actual meat and potatoes of the contract value does not come from the signing bonus ($2 million from year one until year three of the extension). Rather, it comes from the roster bonus. That is where Mahomes is going to get the big bucks from.

In year one, Mahomes will receive a roster bonus of $27.4 million from the Chiefs. Following that in year two, it will increase to $34.4 million and climb to $34.9 million in year three before leveling off at $38.9 million in years four and five. After that, the amount will peak at $49.4 million in year six before then turning downward ($30.9 million in year seven, $23.9 million in year eight, $22.9 million in year nine, and $13.9 in the final year).

So, one would think that the Chiefs are going to be on the hook for a lot of dough to just one player. Well actually that is not really the case.

First off, football contracts are different than the other contracts in the 4 other major league sports. Even though some players might get bigtime contracts, the contracts are not fully guaranteed. The only fully guaranteed part of football contracts is the amount that is set aside as guaranteed. at

The guaranteed money in the Mahomes extension was actually $63 million out of the $450 million he is theoretically about to get. That is just 14% of the total value of the extension, which Mahomes got at after signing the deal. More likely than not, this guaranteed money be spread out over the course of the contract, so the Chiefs salary cap will not be burdened.

Then there’s the ‘guarantee mechanisms’ of the contract itself.

In the contract itself, it states that Mahomes’ salary, roster bonus, and workout bonus for the upcoming season become fully guarantee if the Chiefs sign him on the 3rd day of the new league year. For example, when the Chiefs sign Mahomes on the 3rd day of the 2026, his salary, roster bonus, and workout bonus essentially become fully guaranteed for that year. If he is not signed by the 3rd day of the new league year, then he becomes a free agent.

In laments terms, the Chiefs gave Mahomes a contract extension full of team options that they can decline should something happen to their star quarterback (i.e. multiple down seasons, injuries, off field issues).

So, if you had to pick a winner in this extension, hands down it is the Kansas City Chiefs. Although it looks like Mahomes got a huge payday, the Chiefs essentially control his destiny. They got him locked up for as long as they want him for, and they have the ability can get out from underneath it without incurring too much dead cap space.
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Nevertheless, over the next few years the road to the Super Bowl in the AFC will not go through Foxborough as it did so in years past. Rather, it will be through Kansas City as teams will have to try and overthrow one of the NFL’s top players. And he is not going away anytime soon.  

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