I think there are two reasons SM decided not to pick up the 5th year option: the obvious, injury concern; the less obvious, is Sammy going to be the kind of player that fits McDermott's mold?
I saw an interview prior to draft where SM talked about buy-in by your elite players, and he said something to the effect, if you can't get them on board, you can lose the team. If you look at the FAs and draft picks, these all seem to be team first players.
Re Watkins, is he going to be a team-first player? I'm thinking of Sammy complaining about not getting the ball or expressing himself when a ball is poorly thrown. These are legitimate gripes, but I doubt McDermott wants to see these public displays. Hopefully Denison will do what Atlanta does with Julio which will be good for the O and Sammy. If not, and Sammy expresses his disappointment, then they will move on from him.
I see this as a one year contract to look at both issues. If they decide to move on, then they should tag and trade; if they want him, then they'll have to throw a boat load of $ at him, with no guarantee he wants to stay. anything but a pro bowl year, and I'd guess there's very little chance he's here beyond 2018 with the tag.