Patrick Mahomes and the $503m deal: A breakdown of the most lucrative contract in sporting history

Image: Colin E Braley/AP/Shutterstock

NFL expert? Hardly.

A fascination in how athletes are remunerated for their services? Without a doubt.

As an athlete representative, the contractual quirks and record amounts detailed in any sport tend to possess a wormhole-like drag.

Thus I’ve found myself deep in the nuts and bolts of the world’s most lucrative sporting contract, providing a contextual appraisal for those not entirely familiar with sport, or the NFL.

Early Tuesday morning, many Australian NFL fans woke up to a whirlwind of financial news. The Kansas City Chiefs franchise star elect, Patrick Mahomes II had signed the most lucrative contract in sporting history – a reported $503m (USD) extension, covering 12 years (2020-2031). At the somewhat tender age of 24, Mahomes was the 2018 NFL Most Valuable Player, 2019 Super Bowl Champion, and 2019 Super Bowl MVP.

For many Aussie’s, some translation is required for the above.

Let’s run this from the top.

Who is Patrick Mahomes?

Mahomes is a quarterback, he leads the Chiefs offense, and as such – QB’s are often ‘franchise players’, built around by organisations for long periods of time.

The length of the deal is, yes, unusual – but we’ll get to that later.

At a base spectator level of understanding – Mahomes may be one of the most talented QB’s in recent memory. A position often tagged as requiring an acclimation period – this was not the case for the explosive Texan.

In Mahomes’ first season as a starter, he ran the Chiefs office like a man possessed, finishing the season as the only player ever to throw for over 5000 yards in both college and the NFL. In similarly impressive fashion, Mahomes joined five-time MVP Peyton Manning (QB) as the only two players to throw for 5000 yards and 50 touchdown passes in a single season.

Yes, Mahomes was viewed as the effective second coming of a divine deity of sorts by the NFL.

A visual representation of this phenomenon is available below – Mahomes dragging his team back from 10 points down with a quarter remaining, to win the Super Bowl.


(4th quarter highlights start at 3:40 – WordPress and the NFL don’t love each other, otherwise it would queue!)

If you would prefer all of Mahomes’ 50 touchdown passes from his 2018 MVP season, look no further.

All-Time Deals: Who is Mahomes topping?

As you may notice, the top-ten is a baseball-strong list, with key players often playing well into their thirties, and the MLB pay structure guaranteeing player pay listed. Boxer Canelo Alvarez pops in to highlight the extremely lucrative “pay per view” market which streaming service DAZN has become embedded in.

If you’re reading this far for the quick comparison – entirely understandable, let me know if any of the deals below fascinate you, and I might review a few in the future.

AthleteTeamSportDuration Total ($USD)P/yearP/fixture
Patrick MahomesKansas City ChiefsNFL12yrs (2020-2031)$503m$41.9m$2.6m
Mike TroutAnaheim AngelsBaseball12yrs (2019-2030)$426.5m$35.5m$219k
Canelo AlvarezDAZNBoxing5yrs (2018-2023)$365m$73m$33.1m
Bryce HarperPhiladelphia PhilliesBaseball13yrs (2019–2031)$330m$25.3m$156k
Giancarlo StantonMiami MarlinsBaseball13yrs (2015–2027)$325m$25m$154k
Gerritt ColeNew York YankeesBaseball9yrs (2020-2028)$324m
$36m$222k
Manny MachadoSan Diego PadresBaseball10yrs (2019-2028)$300m
$30m$185k
Alex RodriguezNew York YankeesBaseball10yrs (2008-2017)$275m$27.5m$169k
Nolan ArenadoColorado RockiesBaseball8yrs (2019-2026)$260m$32.5m$200k
Alex RodriguezTexas RangersBaseball10yrs (2001-2010)$252m$25.2m$155k

Biggest deal per-non-listed sport:

Basketball – All-time rank = 16th

James HardenHouston RocketsBasketball6yrs (2017–2023)$228m$38m$463k

Soccer – All-time rank = 66th

Soccer differs in that transfer fee is often the highest fee of media focus, with wages reported, but less of a focus. The €100m mark was long considered unthinkable, below are the 10 “€100m” players.

Gareth BaleReal Madrid C.F.Soccer6 years (2013–2019)$146.2m$24.3m$406k
  • Neymar: €222m (2017) Barcelona → PSG
  • Mbappe: €135m (2018) AS Monaco → PSG
  • Joao Felix: €126m (2019) Benfica → Atletico Madrid
  • Antoine Griezmann: €120m (2019) Atletico Madrid → Barcelona 
  • Phillipe Coutinho: €120m (2018) Liverpool → Barcelona
  • Ousmane Dembele: €105m (2017) Borussia Dortmund → Barcelona
  • Paul Pogba: €105m (2016) Juventus → Manchester United
  • Eden Hazard: €100m (2019) Chelsea → Real Madrid
  • Cristiano Ronaldo: €100m (2018) Real Madrid → Juventus 
  • Gareth Bale: €100m (2013) Tottenham Hostpur → Real Madrid 

Is it really $503m?

Media hyperbole is a fickle beast, with the “$503m” line touted globally without context. Mahomes management agency, Steinberg Sports outlines the deal more specifically as “He gets $477M in guarantee mechanisms and ability to have outs if guarantee mechanisms aren’t exercised. No trade clause.”

Thus we, as the spectacting simpletons must assume that the remaining $26m are bonus clause associated.

The most common question I’ve noticed regards the total amount, and how Mahomes may or may not receive such an amount. 

Disclaimer: Things get a touch specific below, if you are curious as to the cultural and racial significance of Mahomes deal, scroll to the section at the bottom of the article.

Does Mahomes genuinely receive $503m?

The NFL differs from some sporting leagues, in that contractual pay is separated into a number of relatively complex categories, and not all pay is “guaranteed”. Should you desire a detailed primer for NFL contracts, I’d encourage a reading of Connor Christerphson’s Sports Illustrated guide.

There are four main categories for our translation piece today:

  • Base Salary: An amount paid to a player in 17 installments across a season for being on the team roster  
  • Guaranteed for injury: An amount paid to a player if they are released from the team due to being unable to complete football activities, or pass a physical examination to play. If a player is released, this amount is paid to a player regardless. Mahomes injury guarantee amount has been reported as $140m.
  • Skill Guarantees: Protects a player from being released from the team due to not possessing a skill deemed as ‘required’ by the team.
  • Cap Guarantees: Protects a player from being released if the team is attempting to remain under the salary cap, or sign a new player (removal from the metaphorical financial chopping block during roster management). 

The three listed types of guarantees combine to form a “full” guarantee – which the player is entitled to upon signing.

Furthermore, a “signing bonus” is common, and is usually received within the first listed year of the contract, unless the amount is deferred for salary cap or ‘prorated’ bonus (spread across five years at most in smaller amounts). Players do this for a number of reasons, one of which is income tax.

When assessing such a large number, one might wonder – how does a team arrive at that figure

Much of this process is determined by the oddly communist-themed theory that exists amongst US sports, the salary cap. This number is applied to all teams within a competition, and determines how much a team may spend each season to hire a set number of players. The number is set in attempt to provide competitive parity, in that each team has the same financial amount to work with, and may plan strategically for future season. The number is determined each year by the NFL, in line with predicted revenue, the salary cap for 2020 for each team is $198.2m.

How these funds are specifically applied to players is set out in the collective bargaining agreement, negotiated between the NFL Players Association and the NFL.

The what now?

Colloquially referred to as the “CBA” – this incredibly dense 456 page document is a labor agreement, detailing in extreme specifics – the distribution of league revenue, health and safety standards, benefits and even pensions. It is available in full here

The CBA assists the playing group in outlining what share of the NFL’s revenue will be redistributed to players, in the most recent negotiations, 48 percent of the NFL’s annual revenue will be paid out to contracted players.

Who negotiates this seemingly astronomical fee?

Whilst I’m sure many an NFL player would love to wander into the front office and suggest a salary rate, negotiations are often performed by player agents. These individuals act as representatives of the player’s best interests, and tend to have extremely specific understandings of player market value, arrangement of all aspects of a contract, and the nerve to negotiate with relative calm.

Patrick Mahomes, a client of Steinberg Sports, was represented by Leigh Steinberg (the literal inspiration for the film ‘Jerry Maguire’.. Yes, that guy!), and Chris Cabott. Steinberg has represented an NFL record 8 No.1 draft picks, and 64 first round draft picks, negotiation over $3 billion in player contracts. A right-hand man of sorts, Cabot is the COO of Steinberg Sports, and is best known for arranging the financial specifics of the contractual process ($500m+in negotiated contracts).

The NFL caps agent commission rates to protect players from overzealous individuals, with a maximum rate of 3% – paid across the life of the contract. Steinberg Sports would thus stand to make roughly $15m at most, across the life of the contract.

The spread of Mahomes contract is yet to be confirmed, but best sources suggest the below payment structure.

MahomesBreakdownapparent

This image immediately highlights that Mahomes has two years remaining on his rookie deal. Thus whilst an immediate signing bons of just over $10m comes as a healthy account topper, Mahomes’ deal is ‘backloaded’ – encouraging the young superstar to remain with the Chiefs long-term. The deal will reportedly peak in 2027 when Mahomes is 32, at $59.9m before tax.

Considering “worth” – and why this deal likely doesn’t last

Whilst I’m a fan of summary whilst unpacking an incredibly complex topic – for a more extensive assessment of the league worth of Mahomes deal, I’d implore you to read ESPN contract expert Bill Barnwell’s assessment. 

A few notable dot points from Barnwell summarised:

  • Based on career production rates (remaining talented and healthy for a long period of time) – Mahomes is unlikely to play all 12 years of this deal without renegotiation.
  • Barnwell notes the deal would most likely be reassessed in 2025, shaping the deal as more of a six-year $183.4m package.
  • Comparison of this deal to Anaheim Angels Mike Trout (Baseball) is a waste of time – as baseball contracts are fully guaranteed – thus Trout will be paid $425.6m (12yr deal) in full.
  • Across the next 4 years, Mahomes will represent 15.4% of the Chiefs salary cap – the most of historically noteworthy QB contracts by 1-2%
  • Where Mahomes deal is unique, and rather odd in NFL terms, is that his base salary amounts are guaranteed or ‘vested’ 1-2 years in advance across the contract – thus upon signing, Mahomes is guaranteed his 2020-22 salaries. 
    • This tactic is employed to make it more difficult for the Chiefs to cut him.
  • This cunning contractual structure similarly means if Mahomes was hypothetically cut prior to the start of the 2027 season, $44.8m for 2028 would be guaranteed even if Mahomes wasn’t on the roster.

Mahomes is thus effectively ‘guaranteed’ a figure of $63m upon signing, per Albert Breer.

Then why is Mahomes signing for so long?

The deal is considered unusual as players of Mahomes’ ability tend to sign short terms deals and re-up their salary every 1-2 years at the salary cap rises with increased NFL revenue, much like LeBron James enjoys doing in the NBA. This is of course, unless the team can guarantee large portions of his contract, which it appears they have done so through roster bonuses, vested in advanced portions which trigger on the third day of each calendar year.

The Mahomes friendly structure of the guarantees ensures the deal would be very difficult for the Chiefs to extricate themselves from, unless Mahomes wanted to alter the deal for more money in the future. The historically lucrative sections of this deal don’t begin in earnest until 2026-27, by which, these amounts may not be so insane, if the cap were to increase steadily as new TV deals are signed.

Notable NFL Extensions:

  • Donovan McNabb, 12 years with Eagles, 2002 – played 8 years , then traded to Washington
  • Brett Favre, “lifetime” contract with Packers, 2001 – played 7 years,  traded to the New York Jets
  • Drew Bledsoe, 10 years with Patriots, 2001 – Traded to Buffalo after signing an extension
  • Michael Vick, 10 years with the Falcons, 2004 – Released 5 years after signing his extension (suspended by the NFL for 2yrs, illegal dog-fighting)

Rest assured this amount is commensurate with a talent of Mahomes’ calibre – considering the deal in an economic context, the Kansas City Chiefs are worth an estimated $4.5 billion. Revenue rose in 2019 to $400m, with $60m alone in gate receipts.

Ensuring someone of Mahomes’ draw remains employed for your team has a flow-on effect, further enhancing state and national sponsorship opportunities – whilst increasing the likelihood of an extended season and associated financial perks of a playoffs appearance.

Tax

The taxation system of the United States has a few quirks, taking into account the usual 37% federal top bracket, plus the 5.4% upper cap of state tax in Missouri – Mahomes will see a fair chunk of change depart in taxation. A peculiar aspect of North American sporting teams is the ‘jock tax’ – in that players have a state tax applied for each different state in which a game is played, or states in which they practice (think preseason camps or teams who cross state lines to training venues). This measure makes compiling a tax return a theatre of nightmares for the wiliest of CPA’s.

Racial and Cultural Significance

The stereotyping of black or mixed race QB’s has plagued the NFL for decades, with historical levels of misrepresentation in the offensive lead position – when compared to league-wide representation across all positions. A 2017 assessment noted that whilst 67% of NFL players were black, only 17% of QB’s were black.

Mahomes’ place atop the global contractual leader board may work toward changing an old, yet pervasive narrative.

Why did such a stereotype ever exist? 

The QB position is often considered the most difficult position to play, deemed to require a raft of both physical and mental skills, that do not always exist in tandem. An example of this scenario may involve a QB with the mental skills required to make decisions at the highest level, whilst lacking the leadership skills to invigorate a championship offence and ultimately be regarded as a ‘great’ QB. A 2007 empirical study from the Howard Journal of Communications assessed the use of language in draft stock analysis in Sports Illustrated and Sporting News from 1990-2007.
The study found a substantial difference in the characterisation of black and white QB’s, when separating positive and negative assessments of ‘athleticism’, ‘arm strength’, ‘accuracy’, ‘intelligence/decision making’, and ‘leadership’. Black QB’s were more commonly regarded as ‘physical’ beings, with a comparative disparity to white QB’s in “mental” categories. This style of biased analysis has had substantial effects on the draft stock of numerous QB’s, with the tired stereotype of  QB being a ‘thinking’ position requiring intangible “intelligence” over immediately visible physical attributes has led to many talented QB’s being encouraged to swap positions.

The literal questioning of a black QB’s proficiency or positional change has been evident in the cases of James Harris (the first black QB to win a playoff game), Doug Williams (the first black QB to win a Super Bowl) and Lamar Jackson (the third black QB to win MVP). 

The current group of statistically dominant black or mixed-race QB’s is an incredibly exciting prospect for the NFL in societal terms, including Russell Wilson (Seattle), Patrick Mahomes (Kansas City), Kyler Murray (Arizona), Lamar Jackson (Baltimore), Deshaun Watson (Houston), and Cam Newton (New England) to name a few. The most revered position in the NFL may gradually be on its way to a more diverse future, encouraging younger players to pursue the positions they enjoy most regardless of aged coaching stereotypes. For further commentary on a topic with a complex history, I’d recommend Elena Bergeron’s recent New York Times piece.      

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