Originally Posted by jksmith269
For example, Player X is currently in the third year of a four-year deal (1999–2002) that paid him a $1 million signing bonus. In 2001, Player X renegotiates his deal extending his contract to the 2004 season while getting a $2 million signing bonus. The original $1 million signing bonus is allocated at $250,000 per year over 2001 and 2002 just as it would be if there were no renegotiations. However, the new $2 million signing bonus is allocated at $500,000 per year over the remaining two years of the original contract (2001–2002) and the extended two years (2003–2004).
Not quite. The bonus shifts. Here's why.
Year 1 - $2.0 Mil + $500K bonus
Year 2 - $2.0 Mil + $500K bonus
Year 3 - $2.0 Mil + $500K bonus
Year 4 - $2.0 Mil + $500K bonus
Year 5 - $2.0 Mil + $500K bonus
Total - $10.0 Mil + $2.5 Mil bonus = $12.5 Mil
If said player has to renegotiate after year one, there's $2 million in bonus left. If the new bonus is equivalent or higher than the remaning bonus, then the base salary would drop. We'll demonstrate to a two year agreement.
Year 2 - $1.0 Mil + $1.0 Mil bonus = $2.0 Mil/Year
Year 3 - $1.0 Mil + $1.0 Mil bonus = $2.0 Mil/Year
Total - $2.0 Mil + $2.0 Mil bonus = $4.0 Mil
You save money in terms of base salary (which gives major cap relief) because the bonus is paid at the end of the year instead of during the year. The unpaid $2 million is still being payed, but shifted to the bonus to ease the cap. It's more managable because the bonus to base salary ratio will pan out if the player was released. You save $1 million now instead of paying $1.5 million the next season.
Now, if the bonus is equivalent or lower than the original bonus, here's how it will pan out. The same two year agreement but with the changes:
Year 2 - $3.0 Mil + $350K bonus = $3.35 Mil/Year
Year 3 - $3.0 Mil + $350K bonus = $3.35 Mil/Year
Total - $6.0 Mil + $700K bonus = $6.7 Mil
You fork up more money in base salary but the bonus is significantly lower. The unpaid bonus went into the base salary because it still has to be paid. A smaller total bonus now with a more hefty base salary in the long run will open up the gate should the player be cut. They pay the $700K bonus now but save a substantial amount in the long run.
Dallas seemingly overpaid because Dallas is thinking about now instead of thinking on down the road. Which will inevitably land us in cap trouble.