"There's something wrong about the system," Goodell said Friday. "The money should go to people who perform."
Goodell referred to Michigan tackle Jake Long's five-year, $57.75 million contract - with $30 million guaranteed. Long was the first overall draft pick by the Miami Dolphins in April.
"He doesn't have to play a down in the NFL and he already has his money," Goodell said during a question-and-answer period at the end of a weeklong sports symposium at the Chautauqua Institution. "Now, with the economics where they are, the consequences if you don't evaluate that player, you can lose a significant amount of money.
This is probably just one in what will be a long line of public statements made by both sides of the collective bargaining process in the NFL, statements crafted to get the public on one's side. Still, is Goodell on the money with his comments or not?
On the face of it, Goodell seemingly implies that player's should receive their pay after their play has been observed. I doubt that's what he's saying here, but that what he's saying, taken at face value.
More to the point, according to basic economic theory, if an employer only values profits, the value of an employee is what he contributes to the the firm's revenue. In the NFL, since each player's contract is signed before the player's productivity is known, his expected contribution is key in determining whether he is overpaid.
Long was an effective left tackle in his last two years at Michigan (he apparently is skillful at holding and not getting caught). The left tackle is any team's most important insurance policy since he protects the right-handed quarterback's blind side. Because of this insurance value, left tackles are one of the most valuable, and hence highly-paid, players on the football field*.
Based upon the salary numbers given, the Dolphins feel that Long will be worth about $57.75 million in present value over 5 years and they are willing to guarantee $30 million, or $6 million per year. I take this as his expected contribution. Doing the math, this tells us that there is about a 51.9% chance that he will reach that level of productivity and a 48.1% chance that he'll generate nothing.
If the Dolphins did overpay, there are two places where they made mistakes: they either overestimated his future value or they overestimated the probability that he would reach his future value. Is there any reason to believe that the Dolphins made at least one of those mistakes?
Let me focus on his future value. According to Chris Isidore:
For example, the top two paid NFL players in the league last year were quarterbacks: the Falcons' Michael Vick and the Seahawks' Matt Hasselbeck received $23.1 million and $19 million respectively. But the next two highest-paid players were left tackles: the Rams' Orlando Pace, at $18 million, and the Seahawks' Walter Jones, at $17.7 million.
That was in 2005. And according to Michael Lewis,
By the 2004 N.F.L. season, the average N.F.L. left tackle’s salary was $5.5 million a year, and the left tackle had become the second-highest-paid position on the team, after the quarterback. In Super Bowl XL, played on Feb. 5, 2006, the highest-paid player on the field was the Seattle Seahawks’ quarterback, Matt Hasselbeck — who was just finishing the first season of a new six-year deal worth $8.2 million a year. The second-highest-paid player on the field was the man who protected Hasselbeck’s blind side, the left tackle Walter Jones, who made $7.5 million a year.
I'm not sure what explains the $10.2 million nominal jump for Jones between '04 and '05, but why is a guaranteed $6 million in present value over 5 years, starting in 2008, overpaying compared to these numbers? In fact, a guaranteed $6 million per is awfully close to the average left tackle salary from 4 years ago.
If the Dolphins are willing and able to risk $30 million on Long, my belief is that they should be allowed to do so. More generally, players should be allowed to be paid what they and their teams think they are worth regardless of seniority stature. Bargaining for contract language that forces anything less is just rent-seeking on the part of teams, and if the players' union agrees to it, I hope they get something of value in return.
*If you haven't read Michael Lewis' The Blind Side
What reasonable economic argument can Goodell and owners really proffer here? If it is so inefficient to put resources towards these unproven rookies, can't any team gain a competitive advantage by simply not signing so many rookies, and put that money towards signing more veteran players on the free agent market?
Clearly, there is a premium paid to top draft picks, based on the potential that they will blossom into super stars. Owners in pro-sport labor disputes always basically argue that they are too irrational to let market forces operate.
Posted by: j | July 01, 2008 at 06:42 PM