Sunday, March 2, 2014

What is Dead Money?

I wrote about this topic back in December (click HERE to read), but am reproducing it here for the sake of clarity due to some questions that I've received recently regarding this topic. Enjoy reading below and feel free to tweet me asking me further questions of you have them...


What is Dead Money? Let me use a food analogy to keep things in layman's terms, as people can often relate to things better with their stomachs, especially if they're allergic to financial speak and jargon. Before I explain, first kindly keep this formula in mind as I go through the analogy below:


Let's say you're a poor starving college student living in a dorm. You're hungry, & you love pizza. Guess what? There's a box with leftover slices that your roommate liberated from a party he attended the previous night 
& brought back for you. 

You're starving, & you help yourself to the cold pizza in the box when you wake up. Problem is this: you can't save all the pizza. Only half the pie is left (4 slices), but one slice is no good, & is stuck to the bottom of the cardboard pizza box, with lots of cheese missing on top to boot.

That slice is analogous to DEAD MONEY. You saved the 3 other slices (CAP SAVINGS), but weren't able to save that poor slice stuck to the box.

Apply this now to Will Beatty's contract in the 2015 season:

CAP NUMBER ($8,050,000) - CAP SAVINGS ($550,000) = DEAD MONEY ($7,500,000)

Let's also apply this logic back to the pizza box. The pizza box originally had 8 slices in it---our CAP NUMBER. You subtracted the savings from it (4 slices), & were left with one bad slice that you couldn't put to use, a.k.a. DEAD MONEY. In the case of the pizza box, you had DEAD MONEY amounting to one slice. In Beatty's case, should the Giants decide to cut him in 2015, you'd be left with $7.5 Million in DEAD MONEY.

In summary, what's DEAD MONEY? It's the amount of a given player's CAP NUMBER that is left over after you cut him 
& count CAP SAVINGS. It's the part of the player's contract that remains on the accounting books after cutting him loose. The catch with DEAD MONEY is that it still counts towards a team's salary cap even after the player in question is off of the team.

When Free Agents walk, they have no Dead Money---unless they have Voidable Year deals like Brandon Myers & Corey Webster did, but they're exceptions to the rule. Dead Money is what you're stuck with still counting against your cap AFTER you get rid of the player---kind of like that disgusting slice of pizza.

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