On Saturday, the Detroit Lions selected former University of Georgia quarterback Matthew Stafford with the first pick at the NFL’s annual college player draft. The Lions and Stafford reached an agreement that guarantees him at least $41.7 million in compensation before he plays a single game. According to Andrew Brandt, a consultant to the Philadelphia Eagles, Stafford will have more money guaranteed to him then any other current NFL player (the Washington Redskins previously guaranteed $41.0 million to Albert Haynesworth, an eighth-year defensive tackle.) Brandt also reported that the $41.7 million figure was derived by adding a 20% premium to the compensation guaranteed to Matt Ryan of the Atlanta Falcons, who was the first quarterback taken in last year’s draft.
It’s a peculiar business model that guarantees eight-figure incomes to new hires who have yet to demonstrate any ability to perform in their positions. It’s even more peculiar when you examine the relationship between draft position and quarterback performance.Of the 32 players who started the majority of the 2008 season at the quarterback position, the mean draft position was 90 and the median 62. (These averages are actually generous, since three starters went un-drafted, so for purposes of this analysis I assigned them one spot below the last player selected.) As for quarterbacks selected in the draft’s first round, the recent evidence suggests at least a 50% failure rate. Taking the 16 quarterbacks selected between 2002 and 2006 – that is, quarterbacks with three full playing seasons since the NFL expanded to 32 teams – only eight are still with the team that selected them, and only seven are considered starters today. (And two of these seven may lose their starting jobs before the season begins.)
Given this history, why were the Detroit Lions so quick to preemptively reward yet another unproven collegiate quarterback? It would be easy to wave a dismissive hand and say, “That’s just the free market at work, and who are you to question what the Lions voluntarily choose to pay an employee?” But that’s not economic analysis. Nor would it even be a completely accurate statement.
All NFL players are bound by the terms of the league’s collective bargaining agreement (CBA) with the government-recognized NFL Players Association. Even potential new hires like Mr. Stafford – who, obviously, could not consent to the union’s “representation” of him – must abide by the CBA’s terms. Among other things, this provides for the annual draft and a number of restrictions on player compensation.
Now, before the libertarian left gets on me about union-bashing, I’ll stipulate that the union isn’t the culprit in this situation. The owners want the draft, player salary caps, and so on. The union would likely be ecstatic if every incoming player was a “free agent” who could auction his services free of the draft’s monopsony constraint. Even veteran players, who tend to dominate union leadership, understand that a true “rookie auction” would likely lower the guaranteed compensation for players like Stafford, which in turn would reduce pressure to cut veterans in order to make room under the overall salary cap.
By voluntarily restricting intra-club bidding for incoming players, owners simply drive up the price they have to pay for top selections like Stafford. In theory, Detroit could have selected Stafford and refused to sign him to a contract, keeping him out of the league entirely. But from a customer-relations standpoint, this would have been intolerable. Fans expect teams to sign top draft choices. Nor could Detroit change its mind and pursue another top-caliber rookie if post-draft negotiations with Stafford failed. The draft produces scarcity where none need exist.
This is not to say that the draft is “collusive” or should be condemned as illegal, as antitrust enthusiasts urge. Government intervention cannot prevent – or overcome – the stupidity of businessmen. But it appears, to me at least, that the draft is at best useless, and at worst a waste of tens of millions of dollars.
Defenders of the status quo might reply that the draft is instrumental in preserving “competitive parity” among NFL clubs, which in turn helps maintain the league’s nationwide popularity. This is dubious on a number of fronts. For one thing, it’s not at all a given that “parity” equals marketplace success, but that is a subject for another day. More directly on point, even if the draft were eliminated tomorrow, a number of mechanisms would remain to prevent one club from simply stockpiling all the top college prospects – among them, roster limits and the salary cap.
The other thing that the high failure rate of recent first-round quarterbacks indicates is that awarding higher selections to bad teams (i.e., Detroit) does not compensate for overall franchise mismanagement. While Detroit has selected near the top of the draft order for most of the past decade, the New England Patriots built a three-time Super Bowl champion with a starting quarterback selected at 199. (And when that quarterback was injured in 2008, New England still had a winning season with a backup selected at 230!)
So why does the draft and its inflated pricing scheme endure? The flaw probably lies with the structure of the league itself. There’s a great deal of bureaucratic inertia supporting the draft system. And in recent years, the NFL and its television partners have marketed the two-day draft as a standalone event, which only further discourages league insiders from assessing the drawbacks of the system.
As I’ve written previously, sports leagues made a fundamental mistake when they began appointing “commissioners” in place of CEOs. A commissioner is a bureaucrat, not a businessman. It’s particularly egregious to give commissioners virtually unrestricted authority over league management when he is not himself an equity shareholder in the business. As the two most recent NFL commissioners have demonstrated, in my view, they seem to judge success by how much they can expand their own bureaucratic command and control, not whether they are making the league and its member clubs more profitable or even financially stable. It’s unlikely any commissioner would give up the draft and cede such valuable “turf” back to the judgment of the individual owners.
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One could say the same thing about other rules in football. Why can’t the quarterback throw the ball after passing the line of scrimmage? Why do we have sidelines? Elimination of these rules and artificial constructs would help teams more efficiently reach the end zone.
It’s entertainment, and searching for economic purity and efficiency will always lead to a perceived failures.
Many fans, this one included, like the idea of a draft in a competitive sports. Routs are not fun. Close games are.
“The Lions and Stafford reached an agreement that guarantees him at least $41.7 million in compensation before he plays a single game.”
!!! – 8(
If you look over the past few years, Bill Belichick has often traded away his first round picks for second rounders or experienced veterans. This year he had 12 picks in the six later rounds, 0 in the first. He’s also regarded as the best coach in the game.
A lot of owners want flashy first rounders like Michael Vick to fill the seats, not wait 3 or 4 years for a smart coach to load up on 5th rounders.
There does seem to be some method to the madness. Like 8, I think college heros are like rock stars and a lot of people tune in to tv games and buy tickets to see them. Winning games doesn’t seem to be the most important thing to come owners. Take Jones and Dallas. He appears to want rock stars on his team even if the team loses. They generate a lot of press and interest in the games.
Maybe owners like Jones are thinking on the margins. The dedicated fans are going to buy tickets regardless. But maybe the marginal fans show up to watch the superstars even if the team loses.
I think Stafford sold himself too cheaply. The Lions have to overpay to get anyone to play there.
I would have come up with riduculous demands just to keep the Detroit Lions from drafting me.
That’s a good point, Horst. Most rookie QB’s don’t do well in the NFL, but I wonder how much that has to do with the fact that they get drafted into really bad teams like the Lions. A QB can’t carry a team all by himself. Like the Kansas City Chiefs (who play like Chefs), you can’t pass well when you’re the most sacked QB in the league. A great QB starts with a good line.
Nathan: “Many fans, this one included, like the idea of a draft in a competitive sports. Routs are not fun. Close games are.”
As the article indicated, the draft does not necessarily help games to be more competitive.
Forget the draft, make all rookie’s free agents. Solves the problem of having to overpay rookies because now those rookies are in the same pool as veteran free agents. And, teams looking to sign rookies are going to pay rookie free agents based on their own salary cap situation and also take into account what their own signed veteran salaries are making for the same position.
As “8″ pointed out, some teams trade their picks for proven players or other compensation. This allows smart people to work the system to their advantage. The New England Patriots prove that is a successful strategy.
I remember reading about a major league baseball team (whose name escapes me) that meticulously kept stats on all teams second tier players. They looked for high quality players who were under appreciated and then got them in trade or as free agents. They built a really great team of no-names who performed consistently. Probably some of you know what team I am talking about, but I am not a sports fan.
So while it is true that the draft system is a mess, success on the field still comes to the best even if the financial rewards are skewed. And if you ask most of the players, I think they are glad to be on the team at any price because there is more to happiness than money. You can’t buy a championship ring or a record in the book
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As someone who grew up in Detroit, following the incessant flailings of the Lions over the past couple decades, I can say with some certainty that trying to apply economic logic to the Lions is akin to studying the aerodynamic properties of pigs in flight.
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