Fixing the NFL Draft - The NFL Auction

The National Football League has a compensation problem. In April, the Detroit Lions made Quarterback Matt Stafford one of the highest paid players in the league. The problem? Stafford isn't one of the best players in the league. In fact, he's hasn't played a single down in the NFL. Stafford was the top choice in this year's NFL Draft, the yearly process for assigning players entering the league to teams. The money awarded to the top draft pick has grown 10-20% each year over the last decade, and this growth has caused the contracts to balloon to unsustainable levels. And the money that top pick receives sets the scale for all the players picked later in the first round, forcing teams to spend as much on unproven first-round rookies as they do on all-pro free-agents. It certainly doesn't help matters that the most incompetent organizations (e.g. the Detroit Lions) tend to be the ones that negotiate the top, precedent-setting deals. So instead of increasing team parity (the whole point of the draft in the first place), the worst teams cripple themselves with huge financial obligations towards players of questionable worth.

This guy would get a $50 million contract today.

The whole thing's so backwards that savvy General Managers now consider second round draft picks to be more valuable, due to their lower cost (it's no coincidence that the best-run front-office in the league, the New England Patriots, acquired four second round picks in the 2009 draft). When the draft hurts the teams it was designed to help, it has catastrophically failed.

The league would probably like to change the system to one similar to the NBA's, where rookies are paid according to a standardized scale, at much lower wages than they could command on the free market. This system would obviously fail the players by using the league's monopoly powers to force them into an indentured servitude for the first few years of their playing career.

Most importantly, the system fails the fans by turning what should be an thrilling and hopeful day into a endless slog. The draft as it currently exists was never intended to be a television event, so the fact that it closely resembles watching fat guys pick their fantasy baseball teams has only recently become an issue.

Current system: like this, but everyone inexplicably wearing a suit

Fortunately, there's a solution that will please the league by keeping overall rookie salaries at a fixed percentage of league revenue, the players by giving them a chance to achieve fair market value for their services, and the fans by producing a more exciting and efficient rookie allocation system.

THE NFL ROOKIE AUCTION

You know what's really good at determining fair prices for one-of-a-kind commodities (e.g. NFL rookies)? Auctions. But instead of a free market for rookie placement and salary, we use a pointless slotting system, basically guaranteeing one side will be getting screwed, be it the players (NBA model) or the teams (NFL model).

So how would an auction for NFL rookies work?

1. A list of players entering the draft is assembled (ordered randomly, alphabetically, whatever).
2. A league representative announces a player.
3. Each team is given 5 minutes to bid with a salary.
4. The winner is announced. That player automatically signs with high bidder.

It's that easy. The bids could be made publicly (so teams could consciously outbid one another) or secretly (creating more excitement and chaos). Pre-determined standards would determine the other details of the contract. For example, the top 10% of players would get 5 year contracts, the bottom 10% 2 year contracts, with the rest falling somewhere in between. Players would receive a fixed percentage of the overall salary offer in guaranteed money. Teams would probably have to be given wide latitude in prorating the contract for salary cap purposes, but that wouldn't affect the overall salary or guaranteed money.

What this system lacks is a parity mechanism, since the teams that could bid the most would be those with the most salary cap space, not the worst teams in the league (there's oddly little correlation between cap room and wins). That's easily fixed, however: At the start of each offseason, each team would pay an equal amount of money into a "rookie pool." The league would then redistribute the money, and the worst teams would receive the largest share. Teams could only use the money from this pool to bid on players and pay rookie contracts. Teams could trade money in one year's pool for money in a later year or for veteran players (similar to the current system of trading draft picks). Structured correctly, this would give struggling teams a large advantage in acquiring new talent.

What are the advantages to this system?

Players are priced according to their real value because every team has a chance to bid on them. By creating an open market for rookies, teams will not be forced to overpay to sign their draft picks, and players won't be forced into indentured servitude for far less than their market value.

Even better, an auction would create more flexibility to the teams. Rather than being forced to engage in complicated back-room pick-trading to acquire desired players, teams can simply bid a large percentage of their yearly allowance on prized players. Want Matt Stafford? You don't have to convince the Lions to trade you their pick, just outbid them! One of the least-mentioned problems with the current draft is that it doesn't guarantee that players end up on the teams that value them most highly, purely by quirks of the order of draft picks.

And if a team would rather have two "first rounders" than one top 5 pick, they can simply spread more of their cash around. Teams could choose to load up on 50 minimum salary types or dump everything into one can't-miss prospect, instead of being locked in to an arbitrary number and quality of players. The auction system's increased flexibility allows bad teams to improve more quickly than the current draft system does.

There's been a proposal to move the first-round of the draft into prime time. This is based on the very mistaken premise that the commissioner reading names at a podium every 15 minutes isn't watching-grass-grow boring. And that's the first round, when we've actually heard of the players being chosen. The later rounds, full of no-name future career backups is so boring that even hardcore NFL personnel junkies find sitting through the thing difficult.

The NFL Draft: Bafflingly considered to be exciting prime-time programming.

But imagine an auction. The best players come up throughout the day, on a fixed schedule, instead of having the action front-loaded. "Coming up at 3:15 -- Jets! Redskins! -- Mark Sanchez bidding war! And at the top of the hour, will the Raiders overpay Darrius Heyward-Bey by more than $5 mil/year?!" Currently it's relatively easy to figure out, before the draft, a small pool of players who each team will select. This makes the draft boring. But an auction would be unpredictable, as even the best GMs will lose bids they expect to win and acquire unexpected bargains.

Players win, teams win, fans win. What's not to like? Well, front-office personnel might dislike an auction as being less predictable and more prone to catastrophic and embarrassing mistakes (especially if the league reveals ALL the bidders on each player. Grossly overpaying for your draft picks would probably cost a GM his job). That an auction is harder on front offices than a draft is a feature, not a bug.

The current rookie allocation system is collapsing. It is unfair to players, to teams and to the fans. Instead of papering over the flaws, the league can construct a robust, innovative free-market system that will permanently solve the compensation problem, provide contracts to new players and offer fans an exciting spectacle to replace the C-SPAN-like draft we currently have. So come on, NFL. What's stopping you? Embrace the auction.