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Free Agents and Big Markets

Part Three of the SB Nation Small Market Roundtable was hosted over at Stampede Blue (our Colts blogger) on the topic of free agents and markets and how those interact. Don't forget to check out Part One (Relocation) and Part Two (Stadiums) if you're interested.

Big Blue Shoe did a respectable job covering small markets and free agents and even went out of his way to mention the Redskins by name. As you could probably guess, we did not get complemented on our free agent strategy. For the most part I agree with BBS' post though felt compelled to respond to a few points (mostly just expanding on them) given that he's called us out. Large portions of his post will be left out here so keep in mind much of my criticism lacks context, which you can get by reading his entire post.

Naturally, with more possibilities in terms of quality of living, endorsements, and (with certain markets) climate, players are going to gravitate to large market free agent opportunities more so than small market opportunities if (and it is a big if) all things are equal.

Take the recent episode involving Willis McGahee. Willis was recently traded from the Buffalo Bills to the Baltimore Ravens. While in Buffalo, Willis actually complained that there wasn't much to do...

I think there is truth to this but I also would not want to overstate the emphasis here. The main motivator for players is financial and I would count Willis McGahee among the exceptions. Most people will learn to live comfortably wherever they end up especially with a lifestyle buoyed by somewhere between hundreds of thousands of dollars and millions of dollars per year. I would wager that the big vs. small market appeal has about a comparable effect on a player's decision as warm vs. cold weather. That is to say, it isn't something that thousands of dollars cannot fix.

A familiar example of location influencing a decision more than the benjamins is our own David Macklin, who turned down more lucrative offers from the Saints, Chiefs, and Eagles to join Your Washington Redskins thanks in no small part to the fact that he's a Virginia native. I doubt it had anything to do with the size of the television market here.

This past off-season, the major free agent signings that got all the headlines involved players going to big market clubs. Nate Clements, a mediocre CB in Buffalo, left the small market Bills to sign an 8 year, $80 million dollar contract with the San Francisco 49ers, making him the highest paid defensive player in the NFL. LBer Adalius Thomas left the big market Baltimore Ravens, but rather than sign with a club like Buffalo or Jacksonville, he signed with the New England Patriots, another big market team. The reason large market teams are able to offer Clements-like contracts to these players has more to do with local revenues than it does anything else. Markets like Dallas and Seattle are able to create and generate more local revenue, thus resulting in them building new, luxury stadiums (usually with the help of taxpayer money) that will in turn generate (drum roll please) more local revenue.
Selective memory at work here as BBS neglects to mention that a former big-market Derrick Dockery followed the cheese northwards to small-market Buffalo to the tune of 49M with an 18M signing bonus. Really what we have above is two examples of players joining big markets, and only one of them leaves a small market team (and in this case Buffalo had no trouble overpaying for Derrick Dockery).

Interesting factoid from above as well. Presumption here is that San Fransisco was enabled to pay Nate Clements large sums of moneys because of "local revenue". At least as of August of 2006 that certainly wasn't the case. Per Forbes, the Buffalo Bills franchise was worth more in total, generated more revenue, and had an operating income of nearly triple the San Fransisco 49ers. What enabled the latter team to take Nate Clements was a friendly cap number and the Bills' unwillingness to overpay for a guy they knew more about than anyone else. We'll see who was right after Clements plays a few years in San Fransisco.

The inherent problem with this is local revenue is not shared among the 32 NFL teams. League revenue, like broadcasting and ad revenue, shares about 80% of its revenues with the 32 NFL teams. That, coupled with a hard salary cap, makes it possible for a team in Indianapolis to win more games the last ten years than the teams in Chicago, Dallas, and San Francisco.
First, why is it a "problem" that revenues made locally (frequently through the marketing efforts of those franchises) are overwhelmingly kept by the teams that actually generate that income? I think Buffalo Bills' fans would consider it an "inherent problem" if local revenues were going towards the Washington Redskins. But why not the other way around?

Secondly, I think BBS is again overstating the problem. Revenue sharing is a future predicament, the presumption being total NFL revenues will increase more and more in the future, which will justify larger salaries for the players, since they will rightfully demand a larger slice of an increasing pie. The reason this might become a problem is that locally generated revenues in big markets are driving this increase in total revenue. Thus the salary cap might (eventually) outpace the budget of small market teams, like Buffalo and Indy. That is a future problem that will have to be addressed through revenue sharing, though that would also demand a good faith effort on small market teams to maximize their local revenues enough to justify a subsidy. More on that below.

This memo seemed to ease the concerns of owners like Ralph Wilson and Mike Brown, which should give fans of NFL small market teams hope. Unlike lost causes like Major League Baseball, the NFL has a pro-active culture that often puts forth good faith efforts to correct problems such as revenue sharing, player conduct, etc. The NFL is not stupid. They know the reason for their success is the perception created that any team can win any given Sunday. Such a statement cannot be said with a straight face in leagues like the MLB. NFL Owners like Jerry Jones and Daniel Snyder simply cannot buy their way to a Super Bowl. Such a philosophy was Jerry Jones' back in the early 1990s. Since the advent of the hard salary cap, Jones' Cowboys have yet to win a playoff game.
The generic stab at evil big market owners like Jerry Jones and Dan Snyder is expected in the context of the post. This is a common theme throughout the blogosphere and media that rich franchises are inherently wrong/evil/stupid/etc. I find it strange given how the long term viability of the NFL, expressed here by BBS as the necessity of a strict salary cap and its attendant parity, is totally dependent on Dan Snyder and Jerry Jones playing ball. Revenue sharing doesn't mean all franchises share revenue with all other franchises. It means rich franchises, like the Redskins and Cowboys share with poor franchises, like the Indy Colts. BBS acknowledged this earlier ("That, coupled with a hard salary cap, makes it possible for a team in Indianapolis to win more games the last ten years than the teams in Chicago, Dallas, and San Francisco"). The only incentive Dan Snyder has to share his locally made revenues with the rest of the league is the long term viability of the NFL depends on it. That may or may not be a compelling reason, though I doubt it for him personally. Your Washington Redskins are hundreds of millions of dollars more valuable than any other franchise. Our operating income is nearly twice that of any other team, thanks largely to the incredible marketing efforts of Snyder who should receive due business credit for generating huge revenue from a team that is very mediocre. Even in the event that the NFL went away from the salary cap, and overall interest in the NFL decreased, it's unlikely that Dan Snyder would lose a penny, nor would the Redskins. Personally I love the salary cap, and parity, but wonder if Dan Snyder has the incentive to maintain a system that clearly does not work in his favor, especially one that takes dollars out of his pocket and hands them to competitors.

I mentioned earlier about a good faith effort on the part of small markets to increase revenue outside of charity revenue sharing programs, because it doesn't make any sense for rich, well-run teams to subsidize poorly managed ones simply in virtue of their bad television markets. Small teams should be run efficiently if they want to claim other people's dollars. One reason why the Redskins generate more revenue than the Bills or Bengals is because we've sold the naming rights of our stadium to the tune of 7M dollars per year. Lest you think that's a small sum, 7M is around the difference in annual revenue between the big market New York Giants and the small market Bills. Or the about twice the difference in annual revenue between the small market Colts and the big market 49ers.

So why should Redskins' fans have to suffer a horribly corporate stadium name just so we can subsidize Paul Brown Stadium (named after Mike Brown's father) or Ralph Wilson Stadium (named after himself)? I know both these teams are not exploiting every means of generating revenue, yet their hands are out. Ralph Wilson and Mike Brown need to tell me directly why I need to fund their poorly managed franchises? I sympathize with any team that at least goes through the motions and pretends to generate as much revenue as possible, but you have to prove that subsidizing you is worth it, namely through your own efforts to maximize income. Naming your stadium after yourself is not what I'd consider a good-faith effort at aggressively pursuing profits.

This post is already longer than I had anticipated, so let me close with something said that may draw criticism or depressed nods of acknowledgment from Redskins' fans:

Drafting smart and sticking to your salary cap plan will often win you more games. This is why such a high premium is placed on the NFL Draft. A team has a better chance of winning drafting a Patrick Willis than it does signing an Adalius Thomas. The best example of this is the Washington Redskins. The Skins place little emphasis on the draft and a heavy emphasis on signing free agents. This explains why the Redskins have STUNK pretty much since the days of Mark Rypien and Earnest Byner.
I'll let reader(s) go after that in the comments section.