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Andrew Brandt

Explaining Aaron Donald’s Contract: How the Rams Do It

The best player in the NFL who does not play quarterback is now being paid like a quarterback. In fact, he is being paid like a very good one. And he is being paid by a team that just paid its own quarterback a $60 million signing bonus.

In an offseason during which a new financial standard was set at positions such as quarterback ($46 million a year for Deshaun Watson) and wide receiver ($25 million a year for Tyreek Hill and A.J. Brown), there is now another new standard, a $33 million a year mark that we can call the Aaron Donald standard. Let’s examine this and the common question I receive all the time: How can the Rams keep doing this?

It’s about the money

Donald appeared on a podcast last week, setting sports talk shows afire when he said that he would be “at peace” if he didn’t play football again. I took brief notice of the comments, but things became clear the moment I heard him say that it wasn’t about the money. To those uninitiated in my Brandtslations, that phrase translates to: “It’s all about the money.”

Donald signed a contract that was top-of-the-market a few years ago, one with an average annual value of $23 million. Since that time, he has watched a couple of defensive linemen pass him by. In 2020, Joey Bosa signed a new deal for $27 million per year, and last year T.J. Watt signed one for $28 million per year. Clearly, Donald and agent Todd France took notice. It was about the money.

The podcast comments, whether intended or not, were a smoke signal to the Rams who, feeling bullish after their Super Bowl win had already upgraded Matthew Stafford’s contract in the face of an escalating quarterback market (more below) and signed free-agent veterans Allen Robinson and Bobby Wagner. Now it was clear that Los Angeles had to show Donald the money.

And they did, putting an end to Donald being “at peace” not playing football again. He is now at better peace—playing football for a lot more money.

Quarterback money

Donald was scheduled to make $55 million over the next three years, with $14 million in compensation in 2022. He will now make $95 million over the next three years, with $31.5 million in compensation this coming season.

In actuality, Donald will make $100 million over the next three years, as he had already received a $5 million roster bonus in March as part of his previous contract. With the previously earned roster bonus added into the mix, Donald will receive a three-year cash average of a cool $33.3 million a year, far eclipsing the previous defensive linemen standard of $28 million a year set last year by Watt.

To put this in perspective, here are couple of recent quarterback deals that Donald has now surpassed: Patrick Mahomes signed in 2020 for a first-three-year cash flow of $63 million, and Josh Allen signed last year for a first-three-year cash flow of $93 million.

Donald is making the same amount as the most recent veteran quarterback to sign an extension. Both Donald and Derek Carr will be making $100 million over the next three years, with Donald making $65 million over the next two years and Carr making $58 million.

With the exception of outlier contracts such as Watson (don’t get me started), Aaron Rodgers (one year, $42 million and then we’ll see) and Dak Prescott (the best contract out there for a young quarterback, with $95 million over the first two years), Donald is right in the mix of the highest-paid players in the league.

Kirby Lee/USA TODAY Sports

The Rams and ‘cash over cap’

There is no team in the NFL for which I receive more questions about their operations under the NFL salary cap than the Rams, with questions all sounding something like, How do they do it?? The answer is a bit complicated, based on a mechanism that is unique to the NFL system and not an issue in the NBA, NHL or Major League Baseball: cash over cap.

Baked into the NFL salary cap is this loophole: For cap purposes, signing bonuses are prorated over the life of the contract. Although treated as cash in the year of negotiation, only the prorated amount is treated as cap each year. Personally, when managing the Packers’ cap for many years, I did not believe in heavy proration, wanting to maintain flexibility in the future and preferring a “pay as you go” strategy, but there are a few teams (like the Rams and Cowboys) that have always been heavy on proration. The mechanism creates short-term cap savings, with low early cap numbers that escalate later. It is a method of doing business that is very short-term oriented, but how L.A. has been operating for years.

The Stafford example

Let’s use the Stafford contract extension as an illustration of this cash over cap principle. Stafford received a four-year, $160 million extension from the Rams this offseason that contained a $60 million signing bonus. That bonus is prorated over the remaining five years of contract, at $12 million a year. His salary this year is paltry, a mere $1.5 million salary (the same number Donald has).

Now here is your quiz for the day.

What is Stafford’s 2022 cash number?

Answer: $61.5 million. The $60 million bonus plus $1.5 million salary.

What is Stafford’s 2022 cap number?

Answer: $13.5 million. A $12 million bonus proration plus $1.5 million salary.

What is Stafford’s 2022 cash over cap number?

Answer: $48 million. That $61.5 million minus the $13.5 million.

Let that sink in. The cash over cap on Stafford, just one of 60 players on the Rams, is $48 million. Of course, were Stafford to separate from L.A. at any time in the next five years, the unamortized proration of $12 million per year would immediately accelerate into what is termed dead money. And the Rams are fully aware of that prospect: They had $21 million of dead money on their cap last year from trading Jared Goff, a figure higher than Stafford’s $20 million salary.

But the Rams, and Rams fans, are clearly not thinking about the future beyond this year.

Of course, this kind of contract-structuring can happen only with an owner who has substantial funds without any kind of cash flow issues. L.A. has such an owner in Stan Kroenke, worth an estimated $12 billion (his brother-in-law, Rob Walton, may soon own the Broncos).

There have been a few times over the years when some owners—small-market ones—have raised the issue of putting a second cap on yearly amounts of cash over cap. But those voices in owners’ meetings have been quickly drowned out by large-market owners—such as Jerry Jones and Kroenke—who rely heavily on proration and cash over cap to minimize early cap charges on large player contracts.

Still more business to come

It is a relief for the Rams that Donald’s deal is now done, but Donald was nowhere near the most underpaid player on the team. Cooper Kupp will never express discontent or hold out of team activities in protest of his compensation level, but the escalation of the wide receiver marketplace has left him making almost $10 million a year less than other top receivers.

The wide receiver market exploded this offseason, moving to a new level of roughly $25 million a year for players such as Christian Kirk, Davante Adams, Tyreek Hill and A.J. Brown.

We can debate how good Kupp is compared to those other receivers, but that is not the point: gap in pay between them and Kupp is conspicuous.

It seems only a matter of time before Kupp is the latest recipient of the Rams’ largess and his contract undergoes a serious upgrade.

Cap balance

Kupp, an unheralded third-round pick from Eastern Washington, illustrates the underappreciated part of the Rams’ success: solid drafting of players in the later rounds. Much is made of the Rams’ lack of high draft picks; they probably spent the first two nights of this year’s draft staring dreamily at Stafford (their first-round pick) and Von Miller (their second- and third-round picks). Indeed, according to general manager Les Snead’s “F--- them picks” T-shirt, they even have disdain for those picks so highly valued by all other NFL teams.

The Rams, however, have hit on the limited picks they have had, and they have absolutely needed to. As much as Snead sneers at the draft, he knows how he needs to hit on those picks to balance the cap on the other side of those elite contracts.

Productive players on rookie contracts are integral to teams’ success, especially for a team like L.A. that heavily rewards star players. Even with the cash over cap mechanism that they use for their stars, it is important for the Rams—and all teams—to have almost half of their players on fixed and reasonable contracts.

The Rams have been “all in” for a few years now; that philosophy continues as much as ever going into 2022. The striking new contract for Donald is another example of the Super Bowl champions’ “win now, worry later” world that they are currently mastering.

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