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Thread: Explain to me NFL trade economics

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    Al B. Sure!
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    Explain to me NFL trade economics

    This is something that's been bothering me for years but maybe someone can explain it to me. It seems that for some bizarre reason, the entire league way overvalues draft picks and undervalues established (even pro bowl) players.

    Now, logically to me, if a team trades a player for a 3rd round pick, the idea would be that the team that gives up the player believes they can acquire a player of the same talent or greater, regardless of position, in the 3rd round. Otherwise, you're losing value. Considering how many drafted players (even first rounders) never amount to anything, this doesn't seem reasonable and their chances of replacing the talent of an average player, let alone a pro bowler, with one drafted in the 3rd round seem very slim.

    This past offseason gave a unique chance to really get into the minds of GM's because three good WR's were traded by teams primarily because of personality issues:

    Santonio Holmes (and the inability to use him for 4 weeks) for a 5th round pick
    Anquan Boldin and 5th rounder for 3rd and 4th round picks
    Brandon Marshall for two 2nd round picks

    Now, the relative values of these players to each other is reasonable and the Marshall trade makes sense... here, you have a 2-time pro bowler in exchange for two 2nd rounders. Makes sense. Considering that Marshall was drafted in the 4th round, his value has grown considerably as it should. Makes sense.

    The others don't and for a variety of reasons.

    Aside from the unlikely chance that either the Steelers or the Cardinals could replace that amount of lost talent in those rounds, they don't make sense from any player value standpoint.

    Anquan Boldin was a 2nd round pick of Arizona in 2003. 7500+ yards, 44 touchdowns, and 3 pro bowls later... and it takes him AND a 5th rounder to equal a 3rd and a 4th? Shouldn't Boldin's value have gone up? Shouldn't he be MORE valuable now than he was as an unknown 2nd round WR prospect in 2003?

    Consider, Taylor Jacobs and Bethel Johnson were drafted ahead of him in the 2nd round (not to mention Charles Rogers and Bryant Johnson in the first). Tyrone Calico went a few picks later. In case anyone doesn't recognize the names, those three taken in the 2nd round (Jacobs, Bethel Johnson, and Calico) have COMBINED career totals of 1491 yards and 10 TDs. Boldin has put up numbers close to that in a single season! That was the talent level of the guys drafted around him; in other words, his expected value as a 2nd round pick in 2003 at WR was lower than Taylor Jacobs' and Bethel Johnson's.

    I'd say Boldin has considerably exceeded his 2003 value yet why is the 2003 unknown Boldin who was considered less valuable than Bethel Johnson and Taylor Jacobs now more valuable than the 2010 Boldin?

    Now, Santonio Holmes has the issue of being suspended the first four games of the season so arguably that depreciated his value but what's four games to a 26 year old who can provide several seasons worth of value?

    The thing is, Santonio Holmes was a 1st rounder as recently as 2006. In 4 years, has Santonio Holmes' value really dropped from a 1st round pick as an unknown prospect to a 5th round pick as a known capable #2 receiver? Now, Holmes was the only 1st round WR taken that year but the next two WRs taken in the 2nd round were (drum roll please) Chad Jackson and Sinorice Moss (I really want to establish how much of a crapshoot drafting is). (compare, Reggie Brown was traded to Tampa for a 6th round pick after only 5 starts the last two miserable years; is the difference between Holmes and Brown no greater than that between a 5th round pick and a 6th?)

    Let's consider another player drafted in 2006 in the 2nd round who was also traded: TE Tony Scheffler. It was a three-way trade but basically amounted to Scheffler AND a 7th round pick for a 5th round pick (or Ernie Sims, basically Ernie Sims the 9th overall pick in 2006 is now equivalent to a 5th rounder). Scheffler wasn't as accomplished as some of the other players I've mentioned but he has proven himself to be a solid pass-catching TE who's good for 500 yards a season. How can it be that the unproven Scheffler was worth a 2nd rounder but the proven Scheffler now needs a 7th round pick to muster a 5th rounder in exchange?

    Can anyone explain the trade logic to me?

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    If the buyer has more need than the seller, they pay more.
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    Quote Originally Posted by SlowwHand View Post
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    If the buyer has more need than the seller, they pay more.
    So if we were to assume that Holmes and Boldin were valued at what they were drafted at...

    Steelers gave up a 1st round player for a 5th round pick to the Jets. The Steelers had that much more need than the Jets?

    Cardinals gave up a 2nd round player and a 5th for a 3rd and a 4th to the Ravens. The Cards had that much more need than the Ravens?

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    I didn't get invited to the pre-trade meetings, so I really couldn't tell you.
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    Since teams have a salary cap, teams have to consider the salaries of the players relative to the players worth. In an extreme example if you have the best QB ever but he eats up 75% of your cap then it makes since to trade or cut him. What I'm trying to get at is that teams have to consider the ratio of player's value to team/player's salary. Boldin does or is going to make a lot of money. Boldin was also in the last year of his K and all indications were that he was not staying in Arizona, if IIRC, so that probably lowered Arizona's selling price.

    Edit: was reading some more about the subject and found this interesting analysis.. Basically it says it is better for teams to get RBs, WRs, TE, CBs from the draft instead of signing free agents or resigning older players because you can get the same value RB, WR, etc for a lower price.

    RB, WR, TE, and CB top the list. But what does that actually mean? It's not as clear as draft point value. The point value from the conventional draft chart represents the draft "capital" spent to select a player. But the M-T surplus value represents the typical performance of the pick above his contract cost. The value of the pick's performance is based on the cost of a free agent with equivalent performance.

    So what the table above actually shows is how each draft position overperforms compared to free agents at the same position. So the positions at the top of the list are the positions at which free agents are the most overpaid relative to draft picks.

    Take RB for example, the position at the very top of the list. The data basically says that teams are probably better served by employing drafted RBs rather than free agent RBs. One example that comes to mind is the recent experience of the Colts. Marshall Faulk was an excellent player throughout his initial draft contract but the Colts did not resign him. They drafted Egderrin James who performed practically at the same level, and for half the price. When James' contract came up, the Colts allowed him to leave and replaced him with another draft pick--Joseph Addai, who was more than talented enough to help the team win a championship.

    The same might be said for WRs, CBs, and TEs.
    http://www.advancednflstats.com/2007...ee-agents.html.
    Last edited by flash9286; July 24, 2010 at 11:16.
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    Al B. Sure!
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    Flash:

    the point about salary cap space is reasonable.

    As for the rest, I think the issue is that there is no 'premium' in the NFL for a known commodity; apparently, NFL teams don't have appropriate risk aversion if they prefer unknowns to veterans. That Massey-Thaler study is very long. I can't get into it right now but even if it were accurate and you can get more value out of rookies than veterans, that doesn't change the fact that there is a definite advantage to signing a known commodity and the value of a veteran player with respect to draft picks should be represented.

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    The exception is the #1 pick. How many #1 picks every return the value their initial salary provides them?
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    Quote Originally Posted by rah View Post
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    The exception is the #1 pick. How many #1 picks every return the value their initial salary provides them?
    According to the crude measures used in the Massey-Thaler study they do on average make less than what their performance dictates they should.

    Last edited by flash9286; July 28, 2010 at 14:42.
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    Bullcrap.

    Let's look at #1 picks from 1990-2007; With a #1 overall pick, you expect a star; not a mediocre player:
    2007: Jamarcus Russel: Garbage
    2006: Mario Williams: Good (pro bowl)
    2005: Alex Smith: Would have been garbage; after last year, mediocre player.
    2004: Eli Manning: Good (pro bowl)
    2003: Carson Palmer: Good (had some very good seasons; pro bowl)
    2002: David Carr: Bad
    2001: Mike Vick: Good (pro bowl)
    2000: Courtney Brown: Mediocre/Bad
    1999: Tim Couch: Bad
    1998: Peyton Manning: Elite
    1997: Orlando Pace: Elite
    1996: Keyshawn Johnson: Good (pro bowl)
    1995: Ki-Jana Carter: Garbage
    1994: Dan Wilkinson: Mediocre
    1993: Drew Bledsoe: Good (pro bowl)
    1992: Steve Emtman: Bad
    1991: Russel Maryland: Mediocre
    1990: Jeff George: Iffy (I would say good but never made a pro bowl and didn't win games)

    So of those 18 #1 overall picks, who really performed at or above the level expected of a #1 overall pick?
    Mario Williams, Eli Manning, Carson Palmer, Mike Vick, Peyton Manning, Orlando Pace, Keyshawn Johnson, Drew Bledsoe.
    8/18 success rate

    That's less than 50%!

    Flash, the problem with what you're saying is that there is no value added for a known quantity. Veteran FA's, all else being equal, should be worth slightly more than draftees just from the fact that they are a known talent and involve less risk. That study doesn't look like it considers any sort of premium for this.

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    flash9286
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    Flash, the problem with what you're saying is that there is no value added for a known quantity. Veteran FA's, all else being equal, should be worth slightly more than draftees just from the fact that they are a known talent and involve less risk. That study doesn't look like it considers any sort of premium for this.
    No doubt, I'm sure there is some kind of risk aversion discount factored in to the price of rookie Ks. There is also a rookie salary cap, which keeps rookie Ks down. All I was saying was on average, according to the measures used in the study, 1st picks return value over their initial Ks. As I said earlier, the stats used to measure performance are crude, so I'm not sure the results would hold up with better stats.
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    Quote Originally Posted by flash9286 View Post
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    No doubt, I'm sure there is some kind of risk aversion discount factored in to the price of rookie Ks. There is also a rookie salary cap, which keeps rookie Ks down. All I was saying was on average, according to the measures used in the study, 1st picks are underpaid, looking solely at relative performance.
    But there can't be. If there were then explain Anquan Boldin's present-day discount? He was valued at a 2nd round pick as an unknown. Santonio Holmes was a 1st round pick as an unknown. Both of those players have fallen significantly in value even though they have been productive.

    Logically, they should be worth more than they were as unknown prospects because they have produced and are significantly better than the other WR's taken in their respective drafts. They should also be worth more than they were as unknown prospects because there is substantially less risk associated with them now because you can predict their production next year far more accurately than you could predict their production of their rookie seasons.

    Like I said, when he was drafted, Anquan Boldin was believed to be LESS valuable than Taylor Jacobs, Bethel Johnson, Bryant Johnson, and Charles Rogers. He has exceeded all of those players by an order of magnitude. Yet, his value has declined to him plus a 5th rounder equaling a 3rd and a 4th.

    And that's not even considering the value of a known commodity which should add value to him with respect to draft picks.

    How is it that Anquan Boldin as an unknown was less valuable than a 1st round pick and now as a pro bowler, he's less valuable than a 2nd rounder? How has he declined in value?

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    Also, Boldin's age is not a factor because teams don't really draft rookies to keep them for their whole careers. Rookie contracts are typically what? 4-5 years? They're drafted for their output over those years, not over the course of their entire careers. So the fact that a rookie could play 10+ years but a veteran FA is only good for another 5 years, isn't relevant here.

    (Baltimore gave Boldin a 4-year contract so that is in keeping with the length of service of a typical rookie contract.)

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    Now, logically to me, if a team trades a player for a 3rd round pick, the idea would be that the team that gives up the player believes they can acquire a player of the same talent or greater, regardless of position, in the 3rd round. Otherwise, you're losing value. Considering how many drafted players (even first rounders) never amount to anything, this doesn't seem reasonable and their chances of replacing the talent of an average player, let alone a pro bowler, with one drafted in the 3rd round seem very slim.
    I think this is fundamentally wrong Al. Absolute performance isn't the only thing that matters. Performance relative to salary also matter because of the salary cap. To be successful teams have to find undervalued assets, Boldin isn't undervalued anymore. Teams don't have the cap space to sign every superstar player.
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    Quote Originally Posted by Al B. Sure! View Post
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    Bullcrap.

    Let's look at #1 picks from 1990-2007; With a #1 overall pick, you expect a star; not a mediocre player:
    2007: Jamarcus Russel: Garbage
    2006: Mario Williams: Good (pro bowl)
    2005: Alex Smith: Would have been garbage; after last year, mediocre player.
    2004: Eli Manning: Good (pro bowl)
    2003: Carson Palmer: Good (had some very good seasons; pro bowl)
    2002: David Carr: Bad
    2001: Mike Vick: Good (pro bowl)
    2000: Courtney Brown: Mediocre/Bad
    1999: Tim Couch: Bad
    1998: Peyton Manning: Elite
    1997: Orlando Pace: Elite
    1996: Keyshawn Johnson: Good (pro bowl)
    1995: Ki-Jana Carter: Garbage
    1994: Dan Wilkinson: Mediocre
    1993: Drew Bledsoe: Good (pro bowl)
    1992: Steve Emtman: Bad
    1991: Russel Maryland: Mediocre
    1990: Jeff George: Iffy (I would say good but never made a pro bowl and didn't win games)

    So of those 18 #1 overall picks, who really performed at or above the level expected of a #1 overall pick?
    Mario Williams, Eli Manning, Carson Palmer, Mike Vick, Peyton Manning, Orlando Pace, Keyshawn Johnson, Drew Bledsoe.
    8/18 success rate

    That's less than 50%!

    Flash, the problem with what you're saying is that there is no value added for a known quantity. Veteran FA's, all else being equal, should be worth slightly more than draftees just from the fact that they are a known talent and involve less risk. That study doesn't look like it considers any sort of premium for this.
    Take a look at the veteran contracts that players like DeAngelo Hall, Javon Walker, and Adam Archuleta get, Hell, I could go on all day listing veteran contract busts at defensive tackle alone. Albert Haynesworth, Redskins. Corey Redding, Lions. Tommy Kelly, Raiders. Dana Stubblefield, Redskins. Daryl Gardener, Broncos. Corey Simon, Colts. Want more skill positions? How about Ahman Green, Texans? Edgerrin James, Cardinals. David Boston, Chargers. Az-Zahir Hakim, Lions. Want bona-fide superstars who still managed to suck on mega-bucks contracts? Deion Sanders, Redskins. Jason Taylor, Redskins. Remember when the Patriots were awesome for signing Adalius Thomas as the biggest-name free agent of 2007? He's cut now, and nobody even seems interested in signing him.

    I'm just doing this from memory, and the truth is that people are pretty bad at remembering overpaid veteran contracts. Even if he is cut tomorrow (and believe me, he deserves to be), Albert Haynesworth will have more of Dan Snyder's money in one year (45m+) than Jamarcus Russell squeezed out of Al Davis in three. (39m)

    So why isn't Haynesworth remembered as the most colossal management mistake in NFL history? He's more of a waste of cap money than Russell or Ryan Leaf, by a long shot.

    It's because those two guys were drafted. It's because their franchises were one pick away from Calvin Johnson and Peyton Manning. It's because the sterling successes of the draft make the bad picks even worse by comparison. But those bad draft picks aren't the most overpaid players. Not even close.
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    I think the thing that sticks in people's collective craw is the tens of millions that routinely go to draftees with no pro track record, specifically top-10 picks.

    It's very easy to overlook the mid-to-late rounders who hit it big, providing top-pick performance in 2nd-round and later salary slots of under a million/year (like Devin Hester's first 2 seasons).

    To me, the big problem is the huge disparity between the very top picks and the mid- to late first rounders. You can get the #1 rookie at a given position in the middle of the first round and hit paydirt at, say, SLB or TE for a relatively modest contract. Most GMs would much rather have, say, both #15 and 16 as opposed to a #1 or 2 overall.

    Jag, your point about veteran free agent busts is a good one. But at least in those cases, the GMs are taking risks on known talents with specific track records. They may overpay (Julius Peppers comes to mind) but if they bust out, it's generally considered to be the player falling flat, while the GM is seen as "trying to win at all costs." It's an interesting dynamic.
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    You're right that the successful picks from beyond the top 10 are always way, way, way underpaid. I think that's acceptable, and probably a good thing. It rewards teams that make steals in the draft, and doesn't force them to pay for non-premium college players.

    However, the objections are usually leveled at the premium college players. If that list above shows anything, it shows that players with a "proven" NFL track record are just as capable (or even more capable) of failure.

    Is it really that outrageous that Amobi Okoye got a 15 million dollar contract in the same year that Corey Redding got a 50 million dollar one? Okoye is a smart guy, a three-year starter, and a hard worker; Redding has been cut twice. Is it really that outrageous that Brian Orakpo got a 25 million dollar contract to Albert Haynesworth's 125 million? Even the guys at the bottom of the top ten are paid too little, if anything.

    Maybe it's just the top few picks, then, that bother people. I'm sorry, but it's absurd to fuss over the fact that Brandon Lloyd didn't get paid as much as Calvin Johnson when they got their contracts four years ago. Apparently some people think that a handful of mediocre years on the 49ers makes you a "proven" player, while being the best college receiver since 1996 is meaningless.

    Only one of those two receivers had proven himself to be worthy of a monster contract, and that was Calvin Johnson. If Brandon Lloyd wanted to be paid like Calvin Johnson, he should have ****ing played like Calvin Johnson.
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    flash9286
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    New question to answer. Why do teams continually renegotiate contracts (e.g. Andre Johnson)? Don't they have all the leverage? Would owners be better off with guaranteed contracts?
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    Teams renegotiate contracts either to extend them or to move around money from one year to another. For example, if AJ's contract was
    $5MM,$7MM,$9MM,$11MM,$13MM
    (not actually possible as the first few years increase more than allowed, but that idea)
    in the fifth year he'd be a $13MM cap hit, plus the signing bonus prorated. So $16 or $17MM cap hit.

    In that fifth year, then, or even in the fourth, you have an incentive to offer him a new deal: 4 years for whatever, with a signing bonus covering part of his $13MM. Say, 4 years, $36MM, including $20MM signing bonus. So you have
    $2MM, $3.4MM, $4.6MM, $6MM
    plus $5MM bonus each year. That means he's only a $7MM + $3MM (the old bonus) this year, or $10MM hit, instead of $17MM.

    Alternately, you could do it for the opposite reason - if you have a ton of cap space, you could renegotiate the contract so that this year's hit is much higher, and then in later years it's lower (say, set this year to have a bunch of bonus money that is probably going to be hit but still doesn't hit the no salary decrease rule, or just take the cap hit for the previous signing bonus all this year).

    There are a lot of games people play like that, and there is a reason most teams employ at least one full time cap management specialist whose sole job is figuring out how to keep the team in the most favorable salary cap position...
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    Ah, I hadn't seen the latest AJ drama. I think in those situations it's just that a team does have an incentive to have happier players, and if their demands are not unreasonable then why not give them the extension they'd get anyway? I wouldn't be surprised if AJ didn't make some concessions to help their cap situation in any event.
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    A player in the nearing the last year of his deal, provided that he's good, has massive leverage. Almost as much as a free agent.

    Why? Because he can just say "**** you, I'll play for one more year, and then I'm going somewhere else."
    "You're the biggest user of hindsight that I've ever known. Your favorite team, in any sport, is the one that just won. If you were a woman, you'd likely be a slut." - Slowwhand, to Imran

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  21. #21
    flash9286
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    That is understandable. But AJ had 5 years left on his contract. Chris Johnson's contract was to 2013.
    Kids, you tried your best and you failed miserably. The lesson is, never try. -Homer

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    snoopy369
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    Sure, but they're also the most valuable players on their teams. Not only would their team play much worse without them, but fans would stop coming.

    Look at Vince et al in San Diego. He's not getting a deal, partly because SD owners are a bunch of hard-nosed folks who won't renegotiate as a matter of principle, but also because he lost the support of fans when he got in trouble with the law, and because he's not nearly as important as AJ or CJ are to their teams. Hence, no new deal.

    Fans leave in droves when they feel their favorite player is being screwed by their team.
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  23. #23
    Al B. Sure!
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    Quote Originally Posted by snoopy369 View Post
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    Fans leave in droves when they feel their favorite player is being screwed by their team.
    Unless his name is Donovan McNabb

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    flash9286
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    Professional sports has to be the only situation in which people believe a contracting party should be able to disregard a contract because they have "outperformed the contract." Also, heard Woody Johnson appealed to the parol evidence rule .
    Kids, you tried your best and you failed miserably. The lesson is, never try. -Homer

  25. #25
    Al B. Sure!
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    Flash, you have to consider something though...

    Take Chris Johnson's situation. Here you have a late 1st rounder that was drafted on a team that had, at the time, two 2nd round young prospects at runningback in LenDale White and Chris Henry (hey they both at the time were thought to be pretty good backs). His bargaining position was so poor that he had to accept what the Titans were giving him, as does pretty much every player drafted after the first half of the 1st round... Chris Johnson couldn't be like, "I'm capable of rushing for 2000 yards within the next two years. Trust me, guys. Pay me the big bucks."

    So after rushing for 2000 yards, we come to the situation where he's making only $550K and is one of the lowest paid starting RB's in the league.

    Now, you might say, well he can suck it up because it's his contract and he can hit paydirt when he reaches free agency but what if he breaks his leg? Anything can happen and his career could be over on any given Sunday and for all his talent and all he did for the Titans, he would never have been properly compensated.

    Suppose he didn't like the Titans' offer. What is he to do? He can't sign with another team until a year later when he can reapply for the draft. He can't go back to school because he signed an agent before getting drafted.

    So when it comes to rookie signings, there's a clear asymmetry in the bargaining positions of the teams and the players.

    Also, teams reneg on contracts all the time. I mean, what are 'cuts'?

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    snoopy369
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    Salaries aren't guaranteed in the NFL, Al.
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    Al B. Sure!
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    Quote Originally Posted by snoopy369 View Post
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    Salaries aren't guaranteed in the NFL, Al.
    What does that have to do with the intrinsically unfair bargaining position of rookies who weren't taken in the first half of the first round?

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    flash9286
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    Flash, you have to consider something though...

    Take Chris Johnson's situation. Here you have a late 1st rounder that was drafted on a team that had, at the time, two 2nd round young prospects at runningback in LenDale White and Chris Henry (hey they both at the time were thought to be pretty good backs). His bargaining position was so poor that he had to accept what the Titans were giving him, as does pretty much every player drafted after the first half of the 1st round... Chris Johnson couldn't be like, "I'm capable of rushing for 2000 yards within the next two years. Trust me, guys. Pay me the big bucks."

    So after rushing for 2000 yards, we come to the situation where he's making only $550K and is one of the lowest paid starting RB's in the league.

    Now, you might say, well he can suck it up because it's his contract and he can hit paydirt when he reaches free agency but what if he breaks his leg? Anything can happen and his career could be over on any given Sunday and for all his talent and all he did for the Titans, he would never have been properly compensated.

    Suppose he didn't like the Titans' offer. What is he to do? He can't sign with another team until a year later when he can reapply for the draft. He can't go back to school because he signed an agent before getting drafted.

    So when it comes to rookie signings, there's a clear asymmetry in the bargaining positions of the teams and the players.
    I'll give you that there is some unequal bargaining power because of way the draft works. But that is really more a player union issue. Presumably, the player union got something in return for screwing the rookies. There could different rules that gives the rookies more bargaining power. The rookies benefit if they stay around long enough to became veterans. And I'm not exactly sure of the rules, but if CJ really thought he was really going to be that good couldn't he have signed a shorter term deal? (I can't remember off the top of my head if rookies have a floor on how long their rookie K last).


    Also, teams reneg on contracts all the time. I mean, what are 'cuts'?
    Teams don't reneg, it is written into the contracts that they have the right to cut the players and not give them any non-guaranteed money. That is why the thing that really matters is guaranteed money. I'm tired of hearing how NFL Ks aren't guaranteed. Guaranteeing NFL Ks wouldn't change anything, NFL Ks are effectively guaranteed through signing bonuses already.
    Kids, you tried your best and you failed miserably. The lesson is, never try. -Homer

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