Money for Nothing and Your Cleats for Free

>> Wednesday, May 21, 2008

By: Scott Rogers
Football Review Daily

Being the worst team in the NFL is bad enough. No one went through last season without poking fun at the Dolphins, especially the ill-fated Ricky Williams comeback. Not only does your fan base become agitated, but your talented players feel like seniors at the freshman dance. So as a reward, you get the first pick in the NFL Draft. Exciting? Yes. Getting a great college player? Yes. Getting a great NFL player? Possibly. Spending some money? Absolutely.

The first pick in the NFL Draft can be a blessing and a curse. For Jake Long, the blessing comes in the form of $30+ million guaranteed. For the Dolphins, a Courtney Brown-esque curse? Time will only tell.

Cade Massey and Richard Thaler highlighted this phenomenon in “The Loser’s Curse”, whose subtitle should have been that players drafted in the first round have as good of a chance as making it to the pro bowl (9%) as they do never starting a single game (8%). This study is a must read for any football junkie. But how can we predict which group our pick will land in?

For one, it is very complicated to analyze with a formula. A player’s impact at a skill position is easy to see. But what about a defensive tackle? A starting guard? It becomes a bit murky. The easiest way to assign a value to each pick is the NFL Draft chart that teams use when trading. We would also need to take into account the average amount of guaranteed money doled out to each spot over the past 4 years. As you can see, with the variables we will be adding, this could get extremely complicated.

The easiest way to look at it is by comparing guaranteed money. Salaries are available for the average fan to see. Looking at only guaranteed money, Long and Matt Ryan are both around $35 million in guaranteed salary. This type of investment is rarely given to the best players. Larry Fitzgerald renegotiated his contract this off-season and got $30 million guaranteed. Alan Faneca got $21 million guaranteed. These two guys have been to multiple pro bowls and Faneca is consistently one of the best lineman in the game. Something has to give.

From a finance standpoint, giving a proven player a lot of money upfront carries a small risk. Giving a rookie, who may not even start right away, a bigger bonus carries exponentially greater risk. But what is a bad team to do? Fans do not want to hear fiscal responsibility and risk reduction in a $6 billion dollar industry. In the end all fans care about is wins, which if the team had any, then they wouldn’t be in this spot in the first place.

Scott Rogers will report on the economic state of the NFL as well as the latest trends in performance training.

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