Thoughts on Micah Parson’s $186 Million Contract Extension

This article was originally published on Over The Cap.

The Micah Parsons numbers are in via Tom Pelissero and this is indeed an eye popping contract for Parsons. The contract has a base value of $186 million over four added contract years with $136 million guaranteed, $112 million of which is a new money guarantee, and $120 million fully guaranteed at signing. These are by far the biggest numbers for a non-QB and will set new standards for superstars to aim for.

The $46.5 million annual value represents a 13.5% jump over TJ Watt’s $41 million per year which was the prior high water mark. When pegged to the salary cap, this contract makes Parsons the second highest paid defensive player of all time, ranking second to only Michael Strahan’s 1999 contract with the Giants which would be worth $47.6 million per year when inflated for salary cap growth since that time. Parson’s contract also only runs for four years which is one year less than just about any other young player, giving him a better chance at another massive payday than any others in his age group. Parson’s contract represents the second massive edge contract signed this year, with Myles Garrett receiving a raise of 17.6% over Nick Bosa a few months ago. Two jumps like this at the position in one season is generally unheard of, but Ill add some context to that in a bit.  

From a cash flow perspective the numbers for Parsons really stand out once we get to the second new year of the contract. Here is how the new money cash breaks down:

While Parsons does not get the mega payday in 2025, he will earn 12.3% more than Garrett through the 1^st new contract year, 15% more than Watt by year 2, 14.6% more than Watt in year 3 and finally 16.3% more than Garrett over four seasons.

Parsons is the only one of the three players to earn more than $100 million in new guaranteed salary though on a yearly basis that will be less than Watt, who signed a three year contract extension with the Steelers.

The Packers opted for a double option structure and I am assuming the addition of two void years to deal with the salary cap numbers of such a massive contract. Assuming that Parsons has the options picked up, which is highly likely, here is what the salary cap breakdown and dead money looks like with the contract.

For the most part the salary cap structure works strongly in Parson’s favor. The dead money in the first four years of the contract is so high that it makes it difficult to release him if he fails to perform up to standards. From a practical standpoint that means he will earn every penny of his $120 million injury guarantee. While the Packers could try to avoid the full salary in 2028 via threatening a post June 1 release (it would be $36M in dead money in 2028 and $44.7M in 2029) that would also require them to carry Parsons at a $64M cap charge that year until June. While the salary cap is increasing that would still be a giant number to handle. So, at the very least, he should earn more than just the guaranteed portion even if not the full amount through 2028.

If he continues to play well the timing also works out great for him. In 2028, Jordan Love carries a $75.8 million cap charge and will be extension eligible. Depending on the timing of the extension Parson’s should be a prime candidate for a restructured deal which will only increase his 2029 salary cap charge and dead money if cut. That immediately should move him into the category of likely extension candidate in 2029.

I know the question many have is why would Green Bay be so eager to get a deal like this done while Dallas couldn’t do it? While there are probably other factors involving Dallas, from the Packers perspective it comes down to the way they likely internally value the contract. While I am valuing this contract as a $46.5 million contract extension, and that is how Parsons certainly views it, the Packers are viewing this as a new five year contract worth $210 million, or $42 million a season.

Teams that trade for players view the old money in a contract as different than existing teams. They see this as an early signing in free agency, basically the same as signing a tagged player to a new contract and giving two first rounders in return. They don’t have an prior investment in the player and view it all as a new beginning. This is a major reason why we see so many players quickly sign new deals post trade, often making them the highest paid player at a position.  From the Packers perspective here is how the Parsons deal lines up against Watt and Garrett.

You can see in this situation how closely the overall numbers for Parsons line up with the new money for Watt and Garrett. Essentially, they see this as how they would have to negotiate with a free agent to get him to sign a top market contract at EDGE. That makes the gigantic raise they gave Parsons from a new money perspective justifiable and an easy decision to make.

This, of course, has zero bearing on Parsons and how he sees the deal. From his perspective he got the massive raise he wanted. The question becomes when the next big EDGE player comes up. Often traded players that sign these kind of contracts block the market in large part because other teams fight back on the valuation of the deal. That will be interesting to see when player’s like that come up for a new contract.

This is an avenue for agents to exploit when representing superstar players, typically under rookie contracts though it can apply to veteran deals as well. The hard part is that the original team holds all of the cards in these situations. The facts were that Parsons was under contract to the Cowboys and there could be heavy fines and salary loss if he refused to play. In addition, Dallas held the rights to tag Parsons for the next two years if they could not come to an agreement. For whatever reason Parsons side was able to manipulate the situation in a way few others have been able to do and put themselves in a spot where they could do a deal with an outside team that was going to be willing to listen to a massive number proposition. Will others do the same?  Only time will tell.