For those of you who haven't read Part 1, Part 2 or Part 3, I'll start with some facts:
Players who change teams perform worse
This one is very straightforward. AV per player drops by a greater amount for both starters and non-starters when a player changes teams.
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| Figure 15 - Coefficients of Prior AV for Prior Starters |
We can assume that teams are better at scouting and valuing their own players than players on other teams, so that’s part of the reason why players who change teams decrease in value. The other one as shown in this figure is the interaction between players in football. Offensive roles, especially on the line, require close cooperation with other players so changing teams results in a less effective player.
Players who change teams get paid less
This one is less intuitive. When I think of free agents who have changed teams, I am usually thinking of the too-big-to-turn-down offer from another team (to be fair I’m usually thinking of the Indians losing Manny Ramirez to Boston). What the data show us for the NFL during the 2003-09 period, however, is that players changing teams are actually earning less than comparable players who stay on the same team.
There are a couple things that could be affecting this. First of all, not all players can change teams in all years. If a player has a significant signing bonus spread over many years and a team in a tight cap situation, they may decide to keep him rather than cut him and take the cap hit. This would show up in our data as a player who maintained (plus or minus a bit) his salary from year to year even though the decision was not driven by the age and performance metrics we are looking at.
Second, and more interestingly, I think this may be an example of sticky wages. Employees tend to reject falling nominal wages, leading businesses to prefer layoffs over reducing salaries. Since behavioral factors make it tough to come to agreement on reduced wages players whose current teams would be willing to keep them at a reduced salary may be shifted into the “changed teams” pool. With players destined for a salary cut in the group the results are skewed that way even if other players take the Manny Ramirez route and land a big pay raise.
Teams with more homegrown players perform better
Way back in part 1 we saw that teams with more homegrown players, particularly with more homegrown starters, outperform those with fewer. The effect is small but persistent. In the 2010-2012 period there are still very few examples of teams with few homegrown starters performing well. The change is that more teams appear to be embracing draft-driven rebuilds (as opposed to free agent-driven) so there are more examples of teams with many homegrown starters performing poorly.
What about value?
We can’t say anything definitively about the value given the regression results in part 3. Instead we’ll look to Brian Burke’s article on the topic of draft picks, ‘Bricklayers or Gladiators,’ for inspiration. The conclusion of the article – that performance concentrated in one person is more valuable than equivalent performance from multiple people – applies directly to the results we have here. With players changing teams delivering value indistinguishable from players staying with their teams, the dominant factor in preferring those who stay with their teams is their performance level.
If the players changing teams definitively provided better value we would have our work cut out for us figuring out whether the lower performance is worth it in light of the higher value. Luckily for me I don’t have to look into that.
One last stat to consider on the Bricklayer/Gladiator topic (click the link above and read the article if you haven’t already) – among prior starters who change teams performance drops from 5.76 to 4.53 or 21%. Among prior starters who don’t change teams performance drops only 14% from 7.40 to 6.41. Starting from a lower base those who change teams drop more in relative and absolute terms.
The impact of the CBA
To think about how the agreement between the NFL and the players union affects player personnel decisions, consider the following 2 by 2[1]. The y-axis indicates whether a player’s current team wants to keep them at the market rate. The x-axis indicates whether any other team in the league would want to sign the player at the market rate.
All of this assumes the market rate for a player, which varies depending on the interest from other teams, the CBA minimum salary and, for some players, the franchise tag.
Starting in the top right, the CBA provides teams with significant leverage over players because most contracts contain significant non-guaranteed money. If a team wants to keep a player they can continue under the contract or renegotiate with the remaining years of the original contract as leverage for good players and the threat of release as leverage for lesser players. Most starters on their rookie contract fall in this quadrant as other teams would gladly take them at the price of their current contract.
Teams also enjoy ongoing leverage over elite players via the franchise tag. If a team wants to they can hold a player indefinitely via the tag – two years is the practical max – and the fact that players know this is more power for the team in contract negotiations. Players who are wanted by their current team and other teams are more likely to end up with their original team even if another team might conceivably give them more money. The other team can’t make that offer because the current team can invoke the tag and pull the player off the market (I know this is out of sequence with the tag coming before the free agent period opens, but stick with me). The big players – Brees, Brady, and Manning, in the future perhaps Colin Kaepernick, JJ Watt or Richard Sherman – never hit the market and sign deals that are below what they would get on the open market.
The players who get to free agency just below this elite level, those who aren’t worth the franchise tag but still perform on the field, frequently end up in the bottom right. This type of player is too expensive for the current team – either in the team’s independent judgment of their value or in the context of their broader salary cap situation. These players are also most susceptible to the effects of the Winner’s Curse since they have multiple teams bidding on them. In the 2013 free agent market players like Mike Wallace, Paul Kruger and Wes Welker typify this group.
In addition to these there are the players whose team does not want them because of other known reasons – someone who needs a “change of scenery” would fit in this category, as would veterans chasing a ring leaving a team that is obviously rebuilding or players displaced by a switch in scheme.
Finally, there are players whose team does not want them because of non-publicly-known information. Teams might believe a player has an elevated risk of injury. They might know about behavior issues that have not been leaked to the media or caused any league discipline. They might simply have more information about the player’s ability – reports from the coaching and scouting staff based on practice, off-season workouts and other sources.
The left side as a whole does not have a lot of players in it. As for the top left, other than a smattering of franchise favorites on elevated veteran’s minimum salaries who wouldn’t be picked up by other teams, it is likely to be filled with players on their rookie contracts who have relatively low cap hits and provide depth on the roster. Other teams don’t have any reason to believe they are better than their end-of-roster players – though cast-offs from successful franchises might generate more interest.
The part of the CBA that really affects this quadrant is the minimum salary. If a player in this quadrant could be replaced by a rookie undrafted free agent, that’s probably the end of their time with their team. When they hit the market, however, they end up in Canada or the Arena League rather than another team because once their existing team doesn’t want them they move top left to bottom left.
If you’re a GM, how do you deal with all this?
This is going to sound simplistic: acquire players most likely to provide value for you.
Players on their rookie contract are hit or miss, but the misses are cheap and the hits more than cover them. I (and many others) have devoted considerable time to demonstrating that there is no persistent skill demonstrated in the draft. Teams who had a good draft the prior year are no more likely to have one this year. Teams who make a good pick are no more likely to have their subsequent pick be a good one. Selections made after trading up, when teams are so confident that they pay a premium to obtain the pick, are no better than those made with an assigned pick.
Given the low probability of any individual pick becoming a home run teams need to acquire as many picks as they can and supplement those with undrafted free agents and promising players from other leagues. The only constraint on this process should be the ability of coaches and scouting staff to evaluate the players while keeping up with all of their other duties.
Even teams in relatively good shape in terms of roster depth should be preoccupied with acquiring players to develop into starters so they will maintain roster flexibility as existing starters become too expensive over time. This is a classic problem for Super Bowl winners as there are too many players looking for a raise – and plenty of teams are willing to provide one – to fit under one salary cap.
If you need to plug holes in free agency, behave like a value investor. Seek out places where value is most likely by identifying where there is favorable reason for the player to be available. Players jettisoned in a salary cap-related purge over those let go from a team with tons of cap space. Players released due to off field concerns over those available cheaper than you thought (e.g., Davone Bess) for no obvious reason. Players who haven’t had the chance to prove themselves – stuck behind stars if possible – over those who have started and failed to impress.
None of this is revolutionary stuff. Teams face long odds going through free agency because a player’s original team has far more information about them than anyone else. All other teams considering the player are left with whatever the player has done in games, whatever information is still relevant from the draft scouting process and whatever they glean from coaches or players who have second- or third-hand information.
As demonstrated way back in the first post of this series, teams with more homegrown starters tend to outperform those with fewer. Under a rookie wage scale that favors teams even more than before don’t expect that to change anytime soon.
[1] As a consultant I am obligated to use 2 by 2s in any situation in which a concept could be clearly explained, but would be made slightly more opaque and mysterious through use of a stylized graph, implying analytical rigor and insight not present