TJ Watt is in position to reset the market for defensive players. Watt is entering the fifth year option of his rookie deal, and is set to earn $10M, all fully guaranteed. Watt’s extension is overdue at this point, causing him to “hold-in” at camp this summer. However, it is far fetched to think that Watt won’t be suiting up for the Steelers for the foreseeable future. Regardless, let’s take a look at what Watt’s extension could look like, and the implications it has on the Steelers cap.
First things first, it is almost certain that Watt is going to look to be the highest paid EDGE defender in the NFL. By doing so, he would have to earn a contract larger than Joey Bosa, the highest paid defensive player in the NFL right now. Watt will argue that deserves this type of money, and is likely to get that type of deal from the Steelers. Bosa has a 5 yr/ $135M contract with the Chargers, which includes $102M in guarantees along with $78M in full guarantees. Watt made a case to be the best defensive player in all of football for the past two seasons, obviously behind Aaron Donald, so it is fair to assume that the only possible way a deal gets done with Pittsburgh is if it makes Watt the highest paid defensive player in the NFL.
Below, I have attached my projected extension for Watt:
This is a simple projection of what TJ Watt’s contract extension could look like. The overall value of the deal is a 5 yr/$144M contract, with $62.1M in full guarantee’s at signing and $90M in total guarantees. While the guarantees are lower for Watt in comparison to Joey Bosa, the overall APY($28.8M) of the deal puts him above Joey Bosa($27M). It is fair to assume that Watt may request more guaranteed money than $90M, however, the projected deal works out quite well for TJ Watt in terms of cash flow. He will have a total of $58.41M in his pocket by 2023(sum of 2021 and 2022 cash flows) and will have $139M in his pocket by the end of the contract.
Watt gets his P5 salary from 2021 thru 2023 guaranteed, with 2023 being fully guaranteed at signing. He receives a $22M signing bonus, which accounts for his Year 1 cash flow along with a fully guaranteed $1.5M base salary. The signing bonus is prorated at $3.66M throughout the duration of his contract. Also available in this contract is a $25M option bonus, which can be exercised in 2022. Since the option is fully guaranteed, the Steelers have one of two choices: They can opt to pick up this option, and prorate $5M each year until the termination of the contract, or they can decline the option and add all $25M to the 2022 cap charge, fully guaranteed. The latter is extremely unlikely, meaning the Steelers will exercise this option, giving Watt extra job security for the duration of the deal. In this projection, Watt has a fully guaranteed $5M roster bonus in 2025, which does affect his dead cap and cap charge. In 2026, he has another roster bonus, this time $4M, which vests into an injury guarantee if Watt is on the team 5 days after the Super Bowl in 2025.
While this deal is quite straightforward for contextual purposes, it is still a team friendly deal for the Steelers . They are making Watt the highest paid defensive player in the NFL, however, once Watt is at the age of 30, the team can move on from him if they would like. They could designate a pre/post June 1 cut/trade and come away with a profitable sum of money. In a worst case scenario, the team can move on from Watt leading up to the 2024 NFL Draft, however at the prime of Watt’s career, this is extremely unlikely. The Steelers are also benefitting by reworking Watt’s deal for this year, which was originally covered by a 5th year option. By the new CBA, Watt is eligible for the 2 time Pro Bowl tender-the value of a franchise tag at his position-for his fifth year option. Since Watt was able to make 2 Pro Bowls in his 4 previously accrued seasons, his fifth year option is of the same value as a franchise tag. The Steelers would be prepared to save around $5M in cap space by handing Watt this contract.
In terms of the guarantees, it is unreasonable to assume that the Steelers would be able to top Bosa’s $102M in total guarantees, or $78M in full guarantees for that matter. The Chargers and Steelers are two teams that have different priorities and are at different levels when it comes to cap space and wiggle room for money. If the Steelers are really pressed to get one of those two numbers over Bosa, they can add some form of partial guarantee on the later years of the contracts, or add another roster bonus before 2025. A signing bonus higher than $22M along with an option bonus higher than $25M could prove troublesome for the team down the line, especially without void years. If it really comes down to $5 or $6M after adding other guarantees the Steelers may look to add escalators or extra incentives to sweeten the deal, however this is something the team tends to stray away from. One realistic idea is to bump up the signing bonus to around $36M and add 3 void years to the end of Watt’s deal. This would result in a contract that technically totals 9 years, and a prorated signing bonus of $4M each year, instead of the proposed $3.66M. This would be a $14M boost to both the total guarantees and the full guarantees, putting Watt’s total guarantee at $104M, a hair above Bosa’s $102M and full guarantee at $76M, just under Bosa’s $78M. Again, adding 3 void years to an already massive extension for the 27 year old could cause issues for the Steelers down the line in terms of cap that would make it tough to work around. However, if it really comes down to the guarantees, that is one relatively team friendly choice for the Steelers to pursue.
Watt’s extension is long overdue, and things could get ugly if the Steelers don’t get this deal done by this Sunday, before Week 1. The front office has been known to be against contract negotiations in the middle of the season. In this case, if the Steelers don’t get the contract done by this Sunday, chances are they will be under big pressure to negotiate as soon as the season ends and get the deal off before March when free agency begins. This 5 yr/$144M deal would ensure that Watt not only becomes the highest paid defensive player in the NFL, but also guarantees that their franchise cornerstone is under contract for the Steelers long term.
Photo Credits: The Wall Street Journal
Front Office Scouting 