As a follow up to my initial post about the marginal cost of the fifth-year option, I wanted to respond to some of the feedback I’ve been receiving on the piece. The first question came from Bryce Johnston on Twitter, regarding whether there was additional value in trading into the later part of the first round from the early part of the second round. The short answer is yes.
To make this a simple comparison, I calculated the average Approximate Value above replacement level by position for draft selections 33 through 40 for the years 1980 through 2011. Using the 2015 fifth year option salaries for picks in the later part of the first round and the 2015 positional franchise tags, I created a table comparing the differing costs for each position’s fifth year of play. In this example, we are assuming that the player who the team is moving up to draft earlier would be available in that 33-40 range. That is not a great assumption, but it will be fine for the purposes of this calculation. If anything, drafting in the latter part of the first round will allow teams to find slightly better players than at the beginning of the second round.
Translated into 2015 cap dollars, a team would have to spend the following for each unit of AV above replacement level:
Tight ends were omitted because on average they were below replacement level in their fifth year. In every case, the amount of money spent on the fifth-year option for these players is less than the franchise tag. However, this is not the only thing we need to take into account, as the contract for these players for the first four years will be more expensive because of the NFL’s slotted rookie salary scale. Fortunately, the contracts for the players drafted in the first round in 2011 are all publicly available, so we can do a simple comparison, pick-by-pick and position-by-position. We will take the initial four-year contract and then add the fifth-year option to the end of the first-round contracts and the franchise tag to the end of the second-round contracts.
The total cost of the five years of team control are listed below for each pick and position.
The rows for picks 24, 32, 33, and 40 have been highlighted for the purpose of calculations shown below. Notice how different the total costs are for picks as far apart as 24 and 40. Five years of team control for a first-round pick are cheaper than five years for a second-round pick for the range of selections examined from 2011-2015.
Below, I have calculated the simple percent change between 24 and 40, 24 and 33, 32 and 33, and 32 and 40, respectively. In the case of the smallest difference, taking a tight end 24th instead of 40th, the team would still save 10.22% over the life of the contract. In the case of the most savings, a team drafting a defensive end 32nd instead of 33rd would have saved 32.55% over the course of the five years. That is a very substantial amount, something where teams should definitely be trying to take advantage.
An example of a team already taking advantage of this difference in value is the Minnesota Vikings during the 2014 draft, where they traded up from 40 to 32 to select Teddy Bridgewater and gain access to the fifth-year option on his rookie contract. Other teams would be wise to follow suit in the near future, as this is a great opportunity for teams to capitalize on a distinction in value.
In all likelihood, since the franchise tag carries such a large salary, teams would be hesitant to use the franchise tag on just any player that they drafted in the early second round. Frankly, this means that the fifth year of team control afforded by the franchise tag is often useless because the salaries offered are so prohibitively high. We’ve seen this in years past, with only five players receiving a franchise tag in 2015: Dez Bryant, Demaryius Thomas, Justin Houston, Jason Pierre-Paul, and Stephen Gostkowski. None of these players ended up playing the 2015 season on the franchise tag salary, with all but Pierre-Paul agreeing to long-term deals after receiving the tag. Pierre-Paul obviously represents a special case, given his firework incident in July.
Essentially, this means that a franchise tag does not bring nearly the same amount of value to teams because it would be unreasonable to keep most players on the roster at that salary level. The fifth-year option provides teams with that same fifth year of team control at a much more reasonable price.
As a result of the fifth-year option being so valuable to teams, I would also imagine that trading into the first round should come at even more of a premium now. Not only would the draft capital have to be equitable, but the team moving into the first round would also have to compensate the team dropping into the second round for losing the ability to exercise a fifth-year option on a drafted player. Alternatively, if teams can execute trades to move into the first round from the early second round without adding this extra compensation in the trade, this would be a great way to find hidden value in the trade market. Smart teams would do well to take advantage of moving into the first round for the extra year of control, particularly if they intend to draft a quarterback or an edge rusher with that newly acquired first-round pick.
Data courtesy of pro-football-reference.com, NFL.com. Image courtesy of Bleacher Report.
Georgetown Class of 2016
LinkedIn: Carl Yedor