Number-One Picks

News item: The Detroit Lions have offered up $41.7 million guaranteed for Matthew Stafford to come be their quarterback as the number-one pick in the 2009 NFL Draft. Stafford Draft

These dollars are for a player who has never played one game, not even one down, of National Football League competition. There are NFL players who are multiyear veterans who do not earn close to some of the millions of dollars that are spent on these #1 draft picks yet have contributed and will continue to contribute much more to their respective teams than most of these highly touted ,and sometimes, highly misrepresented college players. This factor looms critical especially when considered that most of these coveted #1 picks turn out to be failures as often as they turn out to be successes and only a few are actually team shaping and have a history changing effect on a franchise’s future drive to a possible Super Bowl victory.

There have been some startling and close to earth shaking mega signings through the history of professional football. One of the most daring of these events has to have been when the New York Jets took Joe Willie Namath and signed him to the unheard of amount of $400,000, in a daring gamble to take the Jets from football destitution to football respectability. The effect that Namath had upon the Jets history, and more important on the history of the NFL, is well documented and was an effect that modified the landscape of the game financially as well as competitively to this very day. But for a fortuitous chance of being the quarterback of a decent but not great Jets team who played in Super Bowl III against a Baltimore Colts team, that for whatever reason didn’t come with all its cylinders running at peak performance, and quarterbacked the Jets team to the upset that shook the football world to its very foundations Namath would probably not even be a footnote in the history of pro football. In fact Namath probably would not even be in the same conversation of being a top QB in the history of the game forget about being in Canton, Ohio enshrined with the past greats of professional football.

Dallas owner Jerry Jones, who once jumped to sign Russell Maryland, and set the precedent for pre-draft negotiations with an overall first pick in doing so, once said, “In our entire society—in any business—the paying of that huge money to unproven players is the most imprudent use of financial resources I know of.”

Granted for some of these neophyte pro players this may be the one and only time they will have to jump at and grab the chance to garner riches that, until the point of their being picked by a NFL team as the number one pick, were unavailable. In addition, unlike many deals in other sports, in the NFL contracts, once negotiated and signed, are not necessarily done deals. NFL contracts are not guaranteed. If an NFL team decides it no longer wants the services of a signed player then they can release that player and be done with any further financial entanglements regarding the terms of the remaining years of the player’s contract.

Players therefore often are protected by their agents negotiating upfront bonus money and certain guaranteed amounts to be paid to the player even if they are released in the future. These bonuses usually in the millions of dollars count against the NFL’s salary cap in yearly amounts over the life of the contract. Most teams rarely release a player in an early contract year because of the overwhelming impact a bonus would have on the team’s salary cap. For this reason most rookies entering the NFL have agents who creatively negotiate a large bonus with a multiyear contract that allows lowball front ends of multiyear annual salaries and backloads the remaining years of a player’s remaining annual salaries.Stafford Leinart

Two professors, Cade Massey of Duke University’s Fuqua School of Business and Richard H. Thaler of the University of Chicago’s Graduate School of Business, have poured over every selection, every trade, and every player in every NFL draft since 1988. What they discovered was published in 2001 “The Loser’s Curse: Overconfidence vs. Market Efficiency in the National Football League Draft.”

The professors centered their study on the high cost of players chosen early in the draft. The NFL’s salary cap ordains that for every dollar spent on a draft pick is a dollar that cannot be spent on making the existing team better through other sources, e.g. free agents. One of the professors’ specific hypotheses is that a player taken as the number one pick will usually cost four times the cost of the later first round picks. They therefore assume that the first pick is actually of less worth dollar wise to his team then a late first round pick. The study measures a players true worth not by who is best but by who is best for the cost of their contract. If, it can be assumed that this hypothesis is valid then by that measurement every selection in the next round will be better than the selection in the previous round. The professors make that conclusion up to a point because in any talent pool, the talent eventually will become qualitatively less valuable than previous picks. The question to be answered is when does that happen? What the study revealed is that the point is about the 43rd pick in a given draft or about the 11th pick in the second round. (There is a study for all number crunchers: Compare the 11th pick in every second round to every overall number one pick in the last twenty drafts and see who has given most bang value for the bucks for their respective teams.)

In the 2000 draft, that 43rd pick was made by the Dallas Cowboys, who choose running back Julius Jones. Jones ran for 819 yards and scored seven touchdowns in just eight games and cost Dallas only $4.37 million on a six-year contract. After Jones, the study revealed that a slow but steady fall off in talent and worth begins to occur, except for one slight aberration: Tom Brady who was the 199th overall pick in that 2000 draft. Therefore, after the 43rd pick the majority of higher picks are a better value than the lower picks but not by the differential that the higher pick usually receives in the mega million, multiyear deals they often receive.

According to the professors teams often over value the high draft picks and often over pay to sign these picks. The professors’ suggestions when first published were more or less a fresh look regarding an often-asked question, i.e., are first round picks actually worth the money. The professors results suggest decidedly they are not. Back in the 1980s the Washington Redskins’ GM Bobby Beathard employed the strategy the study was indicating. He believed that first round picks just were not worth the cash outlay and routinely traded away picks from the first round in return for multiple picks in the second and sometimes the third round. Beathard for seven straight years traded away his first round picks in the 80s and the results were that the Redskins won three Super Bowls using that method to build the nucleus for their future.

Another part of the equation that occurs in why teams are reluctant to trade away top picks is for the simple reason most management people are just plainly over confident in their ability to spot the next great franchise player. They peruse hour upon hour of game films, pages and pages of reports and analysis and then they “sagely’ opt for the next Peyton Manning or Jerry Rice. And when they do finally make these educated guesses on the next great landscape changing player they then tend to grossly over pay to obtain the player’s services. Part of the rationale is ego. Now that they have made a choice, how would it look to walk away with nothing at all if they could not get the player to agree to terms?Matt Ryan

John Czarnecki has covered the NFL for thirty years and has been an editorial consultant with FOX NFL since 1994 upon its inception. Recently he expressed on line the opinion why Roger Goodell is pushing for a rookie salary cap. In 2011 Goodell and the Players Association new executive director, DeMaurice Smith will begin talks on a new basic agreement between NFL management and the Players Association. A major point likely for discussion according to Czarnecki will be a rookie wage scale. Czarnecki sees Goodell as positioning management to broach the topic with the assumption that Smith will be more inclined to create advantageous bargaining power for his present rank and file, the veteran players, and their agents, than the premier players take in through the yearly draft. Czarnecki writes, “At the recent NFL meetings, Goodell said that he felt even stronger about implementing a rookie wage scale. He broached the subject publicly at last year’s draft and even supported Tennessee center Kevin Mawae, a 15-year veteran and union activist, when he questioned the record $34.5 million in guaranteed money given quarterback Matt Ryan, Atlanta’s first-round pick last year. Ryan received more than the two players taken ahead of him, OT Jake Long of Miami and DE Chris Long of St. Louis.” Czarnecki goes on to say that he was a fly on the wall when he heard some management personnel and some agents complaining about how this situation effected the overall “so-called slotting scale” in the first round because a player received the “quarterback premium”. If Ryan becomes a future star then Atlanta will have arguably spent their money wisely but the reality is that because of Atlanta’s cash outlay for the third player drafted last year, that this year’s team picking third, the Kansas City Chiefs, will now have to deal with the financial repercussions of that deal.

This year Georgia quarterback Matthew Stafford is being projected to collect even more than the deal the Falcons negotiated with Ryan. Stafford is being projected as the Detroit Lions pick in the number one spot in this year’s draft. According to Czarnecki, talk is that $36 million in guaranteed money is not out of the question for Stafford and Czarnecki asks the rhetorical question: why is this important. Because he says “36 million is what Pittsburgh gave QB Ben Roethlisberger last year on a contract extension – and Big Ben has won two super Bowls.”

Goodell says, “The money should go to the players that have produced at the NFL level. You want to make sure the system rewards the players that perform and I think that’s what we have to figure out in the next collective bargaining agreement. How do we pay the players fairly?”

Czarnecki in his article goes on to point out in 1989 Troy Aikman was the first player taken and negotiated a contract worth $11 million over six years. In 1998 Peyton Manning was the first pick in the draft and he and his agent negotiated a deal that paid him an $11.6 million signing bonus or the value of the total deal that Aikman received from the Cowboys.Troy Aikman

Czarnecki says, “This year the NFL salary cap is at $127 million per club. It was at $102 million just four seasons ago. The NFL is a $7.5 billion industry, but management has been slashing employees while also hiring young head coaches for $2.5 million when so many of their veteran peers are in the $5 million range. Two of the game’s highest-paid coaches of all-time, Mike Holmgren and Mike Shanahan, are unemployed, although Shanny is being paid not to work this season.

The bottom line is that owners want to cut back in their financial benefits to all players. Reducing salaries sounds like a deal breaker for Smith and the union. However, maybe veteran players will consider a rookie scale to be a better formula in order to maintain or increase veteran minimums, etc. It sounds like a long shot, but Goodell has to start somewhere.”

  • JaMarcus Russell signed a contract for six years at $60 million dollars, of which $31 million is guaranteed, which is more than many proven starters.
  • Alex Smith signed a 6-year deal with $24 million guaranteed and has been replaced as the starting QB for his team.

Is paying all these dollars to these two examples above the smart or the right thing to do? Not in Czarnecki’s opinion, and not in many others opinions either, including my own. The reality is that it is rather insipid, inane, and insane, besides the fact, that it is just plain insulting to the previously mentioned proven veteran players. This matter that surrounds the money that unproven picks, especially overall number one picks, receive from franchises is a problem that exists and is steadily increasing in its outrageousness. It needs to be addressed in the form of creating a “restrictive rookie cap” and the problem that faces the NFL is that Goodell needs to show that this cap is the right thing to do for all football and not just management. Czarnecki ends his article by saying, “There’s no question that this is completely ridiculous, and is a growing problem in the NFL. With the passing of Gene Upshaw, perhaps the NFL can convince the players that a more restrictive rookie cap would be good for ALL of football. It would distribute more money to the proven vets, where it belongs, and it would help avoid situations like Smith, where a team is forced to pay a player tons of money with no certainty of any positive results. Of course, every player in the NFL is a risk. Injuries, age, and other circumstances can happen to affect a career. But rookies are the biggest crapshoot of all.”

 

I am of the opinion that easily over 50% of the #1 picks in professional sports turn out to be more or less barely worth the many millions of dollars that they receive for their services.

Submitted 4/4/2009
(This is a special Throwback Thursday article reprint from 2009)

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