The NFL product that you see, is actually two different organizations coming together to produce that product. The binding of that partnership is the collective bargaining agreement. You have the owners and the players, well it’s actually owners vs players, that make up the system that produces the NFL. The NFL is a multibillion dollar annual money printing machine and we are often times reminded by the fact that it’s still a business, an American business, thus capitalism is involved.
As a business man, you want to pay the lowest amount possible for the highest quality of product. A good business man understands how to attack the price of something to show its true value outside of the fluff. Sometimes it’s worth more, many of times it’s worth less. One man, Warren Buffet has made a life on finding companies that are worth more than what people see, he buys a significant piece and helps build the company. The other side of this is the corporate greed, where the dollar is the only thing they care about. They want to buy a company because it’s making money, they only care about how much it will make them, not how much it’s actually worth. Corporate greed almost always leads to bubbles, once a bubble pops the people on the bottom are stuck dealing with it. Since the NFL at its roots is a product and commodity business, they have a marketplace. A marketplace ripe for bubbles.
The marketplace for the NFL consist of two points of entry. The pre-draft marketplace and the post-draft marketplace. Each of these have different levels of value associated with it. In order to buy at the marketplace, you need money, which isn’t endless. In the NFL the salary cap let’s you know how much you can spend without going over budget. Now like I said, this is America and people with money, know how to manipulate money, but often times many people think they’re smarter than what they are. There is a concept of robbing Peter to pay Paul. This is what I consider book fixing, they manipulate the contracts within a single year, to create flexibility by altering that contract to spread the cap hit over other years, often times opening up more money elsewhere. This is where the danger lies. This is the process of correcting an overpriced contract to open up space for more money.
Just as in life, we all have friends who are broke shortly after they get paid. I can speak of two organizations, the Seahawks and the Lions. Both teams and organizations were a mess when I was there, so I saw the dysfunction up close. In Detroit, I saw them concentrate money on three players, which is ok, but it’s the decisions on how they spread the money out elsewhere that was the problem. In Seattle, my first two years, we had a veteran heavy team with a veteran heavy pay load. When Pete got there, I’m sure he looked at the books and said I need to get rid of all these old guys and get young guys.
In both these cases I’ve laid out basics of two teams. I left Seattle before Petes first game but if you look a the the two organizations, Seattle is a head above. Not only did they start after the the Detroit regime, but they performed better than them as a front office and went to the playoffs and Super Bowl almost every year. The Seahawks like Warren Buffett had a successful formula. I remember people laughing at the rate Pete initially overturned the roster. But look at him now. He decided to go the route of cheap talent, trusting that his program is good enough to maximize the players talents. This way you develop superstars, keep them in house, sign them for cheaper and build a dynast. The Patriots, Ravens, Steelers and Packers are four teams that in my opinion embody this. They seem to always have money and talented players with minimal holes.
On the other hand Detroit, picked up and paid good prices for players that other teams were unwilling to pay so much. They had a different system to understand value. They needed to win now, so they didn’t have the time to adequately draft and develop players. They overpaid for high priced vets, relied on their experience to execute the game plans. Relying on superstars like Megatron and Suh to carry a large load while surrounding those players with less than ideal pieces. Instead of developing talent, they paid for older established talent, which cut off their finances and their development. That’s a bad spot to be in. There’s never enough money, because payer never perform the way they’re supposed to. Why? Because even they’re living in a value bubble, when francishises are suffering, look to see if within the past 10 years, have they made poor financial decisions that altered the path of the franchise. The Lions lost out on Suh, they chose to pay Stafford, a deal that the market set, but the actual value wasn’t there. Now without Megatron and Suh, we’ll see how the gamble of locking up a QB that’s not ready will affect the franchise.
With the approach of drafting and developing talent, the new CBA, ushered in a much cheaper way for owners to acquire talent. In 2013, the veteran miminum was less than $900k but more than $750k. As a defensive lineman, if I’m making vet minimum, that means I’m playing about 2 out of every 8 plays and probably a big contributor on special team. Well, if I can get two rookies to do that for the price of a vet, I will. And to save more money, I’d make sure we develop every player thoroughly. Like the Patriots and Packers. There’s one team that stands out to me today. The Broncos.
You have one of the greatest players ever running the team. He’s paying people far more money than he ever made in his career that won’t make nearly as much of an impact as he did on the game. Yes, the value of contracts has changed, but still. You don’t think he’s not thinking, ‘I’m not gonna pay you that are you crazy?’ I think it’s so because he sees beyond the flawed number system that creates the NFL marketplace value.
Let’s look at 4 players Suh Watt Houston and Vernon from Miami who recently signed with NY. The first three players are dominant. Watt and Houston may show up more on the flawed number stat sheet but Suh does too and is often more effective, though numbers don’t show it. Great football minds value it. When these players have great seasons and set the benchmark for both performance and pay, agents think if their player gets close to those numbers they deserve that pay. In most cases the teams pay. Many times I don’t know why. The Giants didn’t need to pay that much for Vernon. He had a good year benefiting from others. Not makin a meaningful impact. Elway would’ve never did that. The Giants are in need, so they overpaid. They don’t have any players that they drafted that are stepping up. So they had to buy already developed talent. This leads teams to a spot that’s hard to get out of. You gain robbing Peter to pay Paul. But not the Broncos.
The Broncos are showing that they’re are willing to go without players to stay with their price integrity. Believing in the system and philosophy. They will pay for their premium players, but only for the right price. Now I fully think Von Miller should be the highest player in the league. He’s like the Joker from Dark Knight, he’s gonna get you when he wants to get you and when he wants to mess things up for you he will. He destroys the best laid plans. Nobody can block Miller when he doesn’t want to be blocked. But the Broncos are smart for going the franchise route and not paying him the $22 million a year he deserves. (Per reports) They’re willing to pay him the franchise tag for the next two years instead of a new contract that’s favorable for him. In two years he might be a different player. The franchise take is the average of the top 5 players at your position. Paying the average is cheaper than the premium price.
The way the Broncos are doing things is how every NFL as a business should do it. To properly asses the value of the skill someone provides and match that with a cost to match. Without the scheme and coaches a player is just an athlete. If I were a GM or President, I’d draw a hardline like John as well. I’d pay premium only for what I determined were premium talents, not players who benefited from the success of a defense or the overall skill of the group. As a player I do believe they should get as much money possible, regardless. It’s not their fault if someone wants to hand them $2om guaranteed. Who would turn that down? Not me. Just as in life, smart financial decisions, properly indetifying needs and wants and looking at the most economical way to get both. These are good life skills, that translate well to the business world.
As players, I would see the NFL as the looming unicorn tech bubble. The more companies that go to IPO and fail, the less and less VC’s are going to be willing to risk to get involved on the action, the more and more overpriced players that don’t pan out, the less and less likely will people be willing to risk money on them. So, to all my brothers in battle, as Too Short says, y’all should be gettin’ it, gettin’ while the gettin’ is good gettin’ while you can you should be gettin’ it.
Milk and Soul 