Draft Capital As A Proxy For Player Value
Draft picks, especially early-round picks, are valuable assets in the NFL marketplace. Teams love them as they are a ticket which allow them to dream about obtaining possible franchise cornerstones. Actual players, on the other hand, often fail to arouse as much demand on the trade market. In most cases even newly drafted players, should their team wish to trade them immediately, would not recoup the draft capital just expended on them. This is the result of teams having disparate player-needs and differing opinions about individual players. Similar to a car being driven off the lot, once a draft pick is converted into an actual player, it is difficult to recoup the draft capital expended.
Taking a step back, NFL players in general can be viewed as depreciating assets. The average NFL career lasts less than four years. Only the top players might play for ten years at a high level and almost all of them (with the exception of quarterbacks, kickers, and punters) will be out of the league by the age of 35.
We sought to clarify which position groups retain their value in the NFL’s player market. To do this, we required an objective measure of what a player’s value is.
In the early 1990’s, Jimmy Johnson developed a “draft pick value chart” which placed a numerical value on every draft slot in the NFL draft from 1 to 224. For players traded for a draft pick, we can utilize the value of the draft pick received to gauge the player’s value.
For example, on August 28, 2017, the Buffalo Bills traded Reggie Ragland to the Kansas City Chiefs for a fourth-round pick in the 2019 draft. The draft capital (fourth-round pick) that the Bills received is an objective measure of Ragland’s value. Since Ragland was drafted in the second round of the 2016 draft, using draft capital as a proxy for value, his value has decreased under the control of the Bills.
However, if Player A is traded for Player B and we don’t have an objective measure of Player B’s value, we don’t have one for Player A either.
Using draft capital as a measure of a player’s value, we analyzed all the trades consummated for a period of ten-plus full seasons (2007 to the present). Players who are traded are not necessarily representative of the entire body of NFL players because high-performing players are rarely traded, especially when playing under their cheaper rookie contracts. Many trades involve players who are either struggling on the field, who are past their prime or who are fringe players. Occasionally, there will be a player such as Brandon Marshall who performs well on the field but is traded for locker-room reasons.
Analyzing trade data captures the declining value of Reggie Ragland from 2016 to 2017 but does not capture the increase of Dak Prescott’s value who was drafted in the fourth round in the 2016 draft but might fetch a second-round pick (or better) today. Nevertheless, reviewing the trade details provides ten years’ worth of data to deduce which player positions retain value well.
In total, 678 trades were made between March 2, 2007 (beginning of the 2007 league year) and September 2, 2017. Of those trades, 279 involved only one player. The remaining 399 trades either consisted of draft picks only (i.e. teams maneuvering up and down the draft via trading packages of picks for one or more additional picks) or of trades which involved more than one player. As an example of the latter, the Eagles traded Jordan Matthews and a third-round pick for Ronald Darby. In this scenario, the value of both Jordan Matthews and Ronald Darby cannot be objectively proven. Our data set was the 279 trades which involved only one player.
Trades which involve only one player occur in two different scenarios:
- A simple trade of Player X for a single draft pick (e.g. fifth-round pick). In this case, we deduce that Player X is worth the fifth-round pick he was traded for.
- Player Y is traded along with another draft pick (e.g. second-round pick) in exchange for a better draft pick (e.g. first-round pick). In this case, the value of Player Y is the spread in value between the two draft picks.
Present Value of Future Draft Picks
The NFL draft takes place in late April/early May every year. Any trades made after the draft naturally involve only future draft picks. Thus, when the Los Angeles Rams traded Greg Robinson to the Lions on June 15, 2017 for a sixth-round pick, the pick traded was from the 2018 draft. Occasionally, teams will trade picks in drafts which are more than a year in the future. The Bills, for example, won’t receive their fourth-round pick for trading Reggie Ragland to the Chiefs until the 2019 draft.
In those situations, one might consider discounting the value of the draft pick traded because the acquiring team has to wait a season or more until it actually receives its new asset. From a market perspective, NFL teams generally deduct one draft round per every season waited. Thus, a team which gives up a third-round pick in this year’s draft will receive a second-round pick in the following year’s draft.
This is can be viewed as an application of the “present value” concept. A second-round pick that is not to be received for another year is the equivalent of a third-round pick in this year’s draft. However, there is a distinction between this situation and the financial concept of the “present value of future cash flows”. The present value concept says that $100 to be received a year from now should be reduced by the appropriate discount rate, and thus might only be valued at $90 today. In the financial world, future cash flows are devalued for several reasons, including inflation and the loss of investment opportunity. The logic is that if a party had received the full amount of $100 in September 2017 as opposed to September 2018, they could have invested it and made an additional $10 on it, for example, over the course of the year that they were, in actual fact, waiting for the money.
However, those concepts are not applicable to draft picks. In theory (in actuality there is an ebb and flow to the quality of players in the draft from year-to-year), a second-round pick in the 2018 draft will get you just as good a player as a second-round pick in the 2019 draft. Draft picks are neither subject to inflation nor can you “invest” a second-round pick and have it increase in value to be a better draft pick or turn into multiple additional draft picks in the future.
The main reason future draft picks are devalued is because the general manager who trades this year’s pick cannot be sure he will be around next year to make the draft pick. For a general manager with job stability, when the opportunity arises, a smart strategy is to trade out of a draft by flipping a lower pick in the current year’s draft for a superior pick in a future year’s draft. Bill Belichick, who has job security, has been trading out of drafts for years. Because of the above rationale, we did not devalue draft picks in future years when we conducted our study. Had we done so, it would have resulted in even higher player depreciation.
In addition to Jimmy Johnson’s draft chart, Chase Stuart of footballperspective.com has developed his own draft value chart which is based on actual player performance and the draft slot in which they were chosen. We utilized both charts in our analysis.
Jimmy Johnson’s draft value chart is heavily weighted toward the top picks in the first round. Points allocated range from 3,000 points for the first overall pick to 1,000 points for the 16th pick, and 590 points for the 32nd pick (last pick of the first round) down to two points for the 224th pick. In Jimmy’s chart, 61 % of the total points are allocated to the first round.
Chase Stuart’s chart has a slower decline, starting from 34.6 points for the number one overall pick to 12.5 points for the 32nd pick, and down to 0.1 points for the 224th pick. Only 41 % of the total points are allocated to draft slots in the first round.
Their charts assume seven rounds of 32 picks.
In recent years, the NFL started to provide 32 compensatory picks to teams based on their player losses in free agency. These 32 picks are layered onto the back-end of rounds three to seven of the draft. Those additional picks result in 256 players being drafted over the seven rounds of an NFL draft. As both Jimmy Johnson’s and Chase Stuart’s value charts were developed assuming 224 picks in the draft, we gave picks 225 to 256 the same value as pick 224 which is the nominal amount described above. When draft picks were traded and it was known which exact pick was being traded (i.e. the pick was traded between February and April), the value of the slot per the draft value charts were utilized. Otherwise, the pick was valued based on the average value of all draft picks in its round.
The chart below shows the average point value for draft picks within each of the rounds.
Retainage by Position
Based on the methodology described above, the below chart is a summary of the data, sorted by player position. Cost is the original draft capital used to draft the player. If the player was undrafted, the cost is zero. Sales is the draft capital received by the team when the player was traded away. Retainage is the percentage of the original cost still remaining in the player’s value based on his sales price.
Using Jimmy’s chart, the retainage percentages are lower because much of his chart’s value is tied to the top 15 picks, and it is rare for a team to receive one of those picks as “sales proceeds” in exchange for a player. Chase’s chart, which has point values declining more gradually, allocates more value to mid-round picks which can be received as “sales proceeds”, and allows for higher retainage percentages.
Excluding punters and kickers who were only part of one or two trades and are generally undrafted (very low cost), the position with the best retainage was defensive end. This was driven by trades for experienced premium pass rushers such as Jared Allen, Richard Seymour, Jason Taylor and Derrick Burgess for whom teams were willing to pay high prices, despite the fact that some of them were of advanced age. In one of the largest gains in player value, the Vikings traded a first-round pick and two third-picks in the 2008 draft to the Chiefs for Jared Allen who was originally a fourth-round pick. They also swapped sixth-round picks (Chiefs got Vikings 2008 pick, Vikings got Chiefs 2009 pick) in that trade. Using Jimmy’s chart, his original cost was 46 points (126th pick of the draft) and his “sale” brought back 1,357 points. That’s a “return on investment” of 30x the principal cost.
Based on both value charts, the linebacker’s value, on the other hand, did not hold up well with low retainage percentages. High draft picks such as Rolando McClain, Jon Beason (later in his career when traded to the NY Giants), Keith Rivers, Barkevious Mingo, Aaron Curry and Ernie Sims are examples of players who were traded at steep discounts compared to their original draft status. Rolando McClain was the eighth pick in the draft (1,400 points according to Jimmy’s chart), yet when the Ravens traded him to the Cowboys, they got 8.2 points in draft capital in return which translates to a loss of 99 % of the draft capital expended by the Ravens.
Quarterbacks made up the largest component of draft capital expended (23,000 points out of the overall 127,000 points or 19 %) as well as player value sold (6,000 out of 27,500 or 22 %). They had a retainage percentage of 26 % which leans toward the higher end of the spectrum.
Retainage by Team
We also analyzed how individual teams fared in their trades by comparing original costs incurred when obtaining the player with the “sales proceeds” they received when they traded the player away. Players signed in free agency have a cost of zero which results in lower player costs in this analysis. In the first study, when calculating Retainage by Position, the cost was the original draft capital expended on the player, regardless if the player was still with the team that drafted him. In this analysis, Retainage by Team, the cost is what the current team paid to obtain the player. Thus, there will be a difference “cost” figure for the two analysis for a player was drafted by team A, completed his rookie contract and then signs with a new team (Team B) in free agency. In the Retainage Analysis By Position the draft capital expended on him would have been a cost, whereas, in the Retainage by Team, his cost is zero for the new team.
As you can see, the Denver Broncos topped both charts (this ignores the Cowboys because they were only involved in a few minor trades). One reason for the Broncos high retainage was the healthy return they received when trading Brandon Marshall attributed. He was originally drafted in the fourth round (119th overall) and was traded to the Miami Dolphins in April 2010 for the 43rd overall pick in the 2010 draft and another second-round pick in the 2011 draft.
At the bottom of both charts are the Los Angeles Rams who, after several unproductive seasons, traded to high draft picks Greg Robinson (2nd overall), Jimmy Kennedy (12th overall), Adam Carriker (13th overall) and Tye Hill (15th overall) for minimal return.
The Houston Texans also appear at the bottom because of the minimal returns they received when trading away expensive assets such as Travis Johnson (15th overall pick), Matt Schaub (started at QB for a number of years after they acquired him for two 2nd round picks), DeMeco Ryans (33rd overall pick) and DeVier Posey (68th overall pick).
Based on actual trades consummated by teams over the past ten years, the defensive ends, wide receivers, and quarterbacks have shown that they retain their value better than most NFL players. The value of linebackers, guards, and defensive tackles, on the other side, did not hold up well.