Bailing the NFL out?

This week’s (cover date October 18, 2010) Sports Illustrated has three articles dealing directly with the economics of sports. I’m going to look at these three articles one at a time over the next few days.

In the first article (pp. 41-43), “Million-Dollar Maybes,” Jim Trotter takes on the issue of the high salaries/bonuses being paid by NFL teams to high draft choices. The essence of the argument advanced in the article is that teams that have high draft positions in the NFL draft have incurred large obligations under the league’s salary cap structure that have made it difficult for them to develop as teams. The three teams specifically mentioned are the Detroit Lions (drafting in the top 10 eight times since 2002; averaging under 4 wins per season, including an 0-16 year in 2008); the Oakland Raiders (in the top 8 six times in the past 7 years; no more than 5 wins in any season); and the St. Louis Rams, with 3 players potentially earnings $112 million if the final years of their contracts kick in—in addition to the early-career guarantees (3 wins in 2008-2009).

Trotter writes: “A hard rookie wage scale similar to the NBA’s slotting system would relieve some of the financial pressure on teams at the top of the draft.” What he does not address is why teams continue to offer such generous terms to high picks; my reading of the collective bargaining agreement is that teams choose to make these offers and that the players have little leverage, except to refuse to sign (and potentially, to play in Canada), which, given their options outside the NFL, doesn’t seem like a credible bargaining strategy to me.

Let me repeat that. The contracts signed by the players whose salaries are discussed in the article had little-to-no bargaining leverage and the teams voluntarily offered them extremely generous contracts, even knowing how well that was working out. Trotter does not discuss—he does not even mention—this disconnect. The tone of the article is that teams cannot avoid these contracts, somehow, and that only by bargaining explicit limits on salaries and bonuses for first-year players can teams avoid making extremely expensive (and, apparently, bad) decisions.

I may be missing something, but this does not make a lot of sense to me. Obviously, the NFL would like limits on compensation of first-year players; in the absence of higher salaries for players with more experience, such a limit would flow directly to the bottom line of the teams (and the league). Why the Players’ Association would bargain away the possibility of first-year players earning (what amounts to) windfalls, unless they know that they can make up those earnings for veterans has an obvious answer—they are extremely unlikely to, and (as Trotter notes) have made that clear.

There is only one reference to the real failure—that teams have perhaps incorrectly evaluated the potential of new draftees (p. 43)—and again, no mention of the fact that teams are voluntarily paying these salaries and bonuses.

Writing a “hard” rookie salary system in to the collective bargaining agreement is simply an attempt to win back, through bargaining, money that teams have lost through bad decision-making.