WSJ - How Smart Teams Spend Money

[Digetydog]

Interesting story in the WSJ on how smart teams spend their money. As one might imagine, the Jets did not make the list of "smart" teams.

Sorry about the formatting issues below.

How the Smartest NFL Teams Spend Money - WSJ By STU WOO

http://professional.wsj.com/article/...LE_Video_Third

Colts quarterback Andrew Luck is playing at a Peyton Manning-like level despite a rookie salary.For the people who run NFL teams, getting to the Super Bowl becomes a matter of solving an extravagant jigsaw puzzle. Not the kind of puzzle you buy at the museum that has a little print of Monet's haystacks on it, mind you, but one of those 5,000-piece monsters that forces you to recreate every inch of Michelangelo's Creation of Adam.

Because the NFL has rules that limit spending, each franchise starts with virtually the same resources. So the challenge is to figure out how to arrange all the pieces to put the best possible team on the field. Do you splurge on a once-elite quarterback who is just returning from multiple neck surgeries? Or is it better to divide that cash for a linebacker, a tight end and a pair of beefy tackles?

The point, here, is that the NFL is basically a form of competitive economics—and by looking at the financial decisions teams make, you can learn a fair bit about the essential nature of modern football.

In advance of this weekend, when the playoffs begin, the Journal compared player salary payments for this year's 12 playoff teams with the 20 franchises that didn't make it. The goal: to figure out which spending strategies work—and which don't. The numbers, which are based on figures that were current at the end of the regular season, come from Spotrac, a website that compiles salary data.


CONCLUSION NO. 1: You can spend a lot of money on players who play for other teams and still make the playoffs.

The Indianapolis Colts, New England Patriots and Houston Texans all advanced despite what seems like a handicap: spending a lot of cash on players who play elsewhere. In addition to the NFL's salary cap—$121 million this season—which limits a team's total spending (baseball doesn't have one; just ask the Los Angeles Dodgers) there's a nasty little thing called "dead money." Under the NFL's peculiar accounting system, a team can prorate a player's salary or bonus over a number of years. They might also guarantee a portion of a player's salary over the length of the deal. These tactics help teams stretch to sign star players when they need them, but they can also backfire.

Even if a player leaves or gets cut, that prorated or guaranteed money still counts against the salary cap, which reduces the amount of money a team can allocate to its current players.

How to Spend $100 Million on Football Players
See how NFL teams divvied up its payroll among active players this season.

View Interactive
.NFL Playoff Dossiers 2013
Read each team's scouting report and a graphed presentation of their 2012 seasons in the Massey-Peabody index.

View Interactive
. More photos and interactive graphics
.Logic suggests teams with less dead money will do better, since they can afford to pay more for current talent. But this year's playoff teams had an average of $11.1 million in dead money, $3.3 million more than the average non-playoff team. The Colts, Patriots and Texans were among the league's top five dead-money leaders.

The reason for that, said former Colts executive Bill Polian, is that perennial winners such as the Patriots have better players they want to keep. The only way to do that is to offer contracts as long as six years, even if the players are in their late 20s. "They know full well that the player will not complete the contract," Polian says. "But if you're competing for a championship, that's a thing to do."

This year's Colts went 11-5 despite a league-leading $38.6 million in dead money, which is more than half of the $75 million the team is paying to its active, non-injured players. More than $10 million of that dead money is going to former Colts QB Peyton Manning, who led the Denver Broncos to the AFC's top seed this season.

Polian said the Colts' success this year is largely due to rookie QB Andrew Luck, who is competing at a Manning level while making a rookie salary. And that leads us nicely to...


CONCLUSION NO. 2: You don't need an expensive QB.

This year's playoff teams allotted an average of $8.4 million for quarterbacks. That's $1.5 million less than the average non-playoff team. There are three starting rookies in the playoffs —Luck, Seattle's Russell Wilson and Washington's Robert Griffin III—and also second-year quarterbacks Andy Dalton of Cincinnati and Minnesota's Christian Ponder.

(San Francisco's Colin Kaepernick is in his second year, but he's a replacement for an expensive starter, Alex Smith.)

These quarterbacks were all drafted after the league's collective-bargaining agreement went into effect—a deal that cut how much teams can pay top draft picks. So Griffin is making just $3.8 million this year, compared with the $15.6 million that St. Louis is shelling out on 2010 No. 1 overall pick Sam Bradford.

What's further bringing down the average cost of a playoff quarterback this year is the success of later draft picks, which are even cheaper under the CBA. Wilson, picked in this year's third round, is earning a close-to-league minimum $545,000. "This is the first quarterback draft class we've seen in the new cap era," says sports agent David Canter, who says the trend of cheaper QBs in the playoffs might continue for the next few years.

It also didn't help that many pricey quarterbacks underperformed or played for disappointing teams, including Drew Brees of the New Orleans Saints, Philip Rivers of the San Diego Chargers and the New York Jets combo of Mark Sanchez and Tim Tebow.


CONCLUSION NO. 3: You can give nearly half your money to three players.

NFL rosters have 53 players. Denver is doling out 41% of the cash it's spending on active, non-injured players to just three guys: Manning and veteran superstar defenders Elvis Dumervil and Champ Bailey.

What helped the Broncos is, again, the league's CBA—specifically, a rule that allows teams to roll over unused salary-cap space for the next season. If a team last year was $10 million under the salary cap, for instance, they could roll it over to this year, meaning they could spend $131 million rather than $121 million, which could more than offset any dead money.

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Denver is doling out 41% of its money on Elvis Dumervil, Champ Bailey (pictured) and Peyton Manning.
.The Broncos this year had $26 million in cap rollover, second-most in the league. That made it easier to pay Manning $18 million this season. "If the don't have that cap rollover, they don't have Peyton Manning," Canter said.

If the Broncos manage to win the Super Bowl, teams may look to replicate Denver's formula. Theoretically, teams that know they're going to have a bad year could try to have the lowest payroll allowed under the CBA to try to roll over cap space to the next year.

The only thing stopping them, Polian says, is pride. "It's good theory, but in practice, nobody ever believes they're going to have a bad year."

Of course, the strategy might not work. The team that entered 2012 with the most cap-rollover benefits was the Jacksonville Jaguars, who went 2-14.

[RMJK]

This is why Tanny is gone. We don't spend our money wisely. Very good article. A rookie QB can save us a bunch but it is a needle in the haystack.

[RaoulDuke]

Good read, thanks.

[Savage69]

Originally Posted by Digetydog

CONCLUSION NO. 2: You don't need an expensive QB.

This year's playoff teams allotted an average of $8.4 million for quarterbacks. That's $1.5 million less than the average non-playoff team. There are three starting rookies in the playoffs —Luck, Seattle's Russell Wilson and Washington's Robert Griffin III—and also second-year quarterbacks Andy Dalton of Cincinnati and Minnesota's Christian Ponder.

That's thanks to the new CBA that has a fixed salary for rookie picks..

[RMJK]

Originally Posted by Savage69

That's thanks to the new CBA that has a fixed salary for rookie picks..

Too bad this wasn't the case when we got Sanchize.

[nyahay bus]

Originally Posted by Savage69

That's thanks to the new CBA that has a fixed salary for rookie picks..

Exactly. It has nothing to do with being smart.

[Jungle Shift Jet]

how about posting the list

[GreenGeek]

Although this is a nice and un-biased analysis, it is nonetheless flawed due to the major changes in the CBA. I think that the analysis would be better if they extended it over many years and compared the successful formulas from one or two decades ago to the averages over the past five years.

[IM3]

Its either have a low paid neophyte QB from the draft and find a way to surround him with talent with the cap space OR have a stud (Rodgers, Manning, Brady, Brees) and let them carry your team with an average defense.

Instead we are paying Sanchez a lot of our cap space for below replacement level production. And it's not really anyone's fault, just that the old CBA ****ed you hard if you busted on a top 5 pick, especially a QB. The Lions are sort of screwed with the next Stafford contract by the same reasoning.

[sec.101row23]

Originally Posted by nyahay bus

Exactly. It has nothing to do with being smart.

Plus a team like the Colts can eat 38 million in dead money because they had zero expectations to field a competitive team this year. They used this year to clear dead money and get financially healthy for the future. It just so happens that their rookie QB led them to the playoffs.

[RMJK]

Originally Posted by IM3

Its either have a low paid neophyte QB from the draft and find a way to surround him with talent with the cap space OR have a stud (Rodgers, Manning, Brady, Brees) and let them carry your team with an average defense.

Instead we are paying Sanchez a lot of our cap space for below replacement level production. And it's not really anyone's fault, just that the old CBA ****ed you hard if you busted on a top 5 pick, especially a QB. The Lions are sort of screwed with the next Stafford contract by the same reasoning.

Detroit is trying to renegotiate a long term deal with MS as we speak. I wish we had a QB with his talents.

[Savage69]

Originally Posted by sec.101row23

Plus a team like the Colts can eat 38 million in dead money because they had zero expectations to field a competitive team this year. They used this year to clear dead money and get financially healthy for the future. It just so happens that their rookie QB led them to the playoffs.

He played great except against the Jets..

[Savage69]

Originally Posted by RMJK

Detroit is trying to renegotiate a long term deal with MS as we speak. I wish we had a QB with his talents.

Throw Megatron in and we have a deal..

[eaglenj]

Originally Posted by sec.101row23

Plus a team like the Colts can eat 38 million in dead money because they had zero expectations to field a competitive team this year. They used this year to clear dead money and get financially healthy for the future. It just so happens that their rookie QB led them to the playoffs.

One thing that is important about the dead money, is that successful teams know that if a player is on the fringe of being cut then they are probably not going to play a lot and could harm the locker room.

The question the Jets need to ask is not whether or not its worth sanchez being here to "get value" from his salary....but rather, is him being here going to hurt the team, more then paying him not to be here.

Would we have been a better team with barts contract as "dead money" and demario playing or having him on the team, causing distractions, taking playing time away from a young player, etc?

"Eating" money sometimes can add to the locker room and team atmosphere....thats money well spent IMO

[revischrist]

Awful article. Guy apparently is unaware of the new rookie salary cap rules that make guys like Luck and RG3 appear like "wiser" investments than Bradford. It's not like the Colts and Skins did anything intelligent by taking the two obvious choices at their spot, nor did they do anything intelligent by getting those guys to sign cheapear contracts than Bradford.

This isn't really a science. Teams with top end QBs win in the NFL (see, pitt, gb, NE, Saints, Mannings). No matter how "Smart" you are with your money you won't win consistently without top end QB play.

[crasherino]

Originally Posted by RMJK

This is why Tanny is gone. We don't spend our money wisely. Very good article. A rookie QB can save us a bunch but it is a needle in the haystack.

Originally Posted by RMJK

Too bad this wasn't the case when we got Sanchize.

Not sure you can blame Sanchez's rookie deal on Tanny. Considering where he was picked and the history of top 10 QB contracts, it was a very good deal.

The Skins and Colts lucked out tremendously by 1. finding their franchise QB and 2. doing so after the new CBA was in effect. Not having to pay Sam Bradford money for guys who were rated higher than Bradford is an absolute windfall for them.

[Savage69]

Originally Posted by crasherino

Not sure you can blame Sanchez's rookie deal on Tanny. Considering where he was picked and the history of top 10 QB contracts, it was a very good deal.

The Skins and Colts lucked out tremendously by 1. finding their franchise QB and 2. doing so after the new CBA was in effect. Not having to pay Sam Bradford money for guys who were rated higher than Bradford is an absolute windfall for them.

But the extension you can..

[RMJK]

Originally Posted by crasherino

Not sure you can blame Sanchez's rookie deal on Tanny. Considering where he was picked and the history of top 10 QB contracts, it was a very good deal.

The Skins and Colts lucked out tremendously by 1. finding their franchise QB and 2. doing so after the new CBA was in effect. Not having to pay Sam Bradford money for guys who were rated higher than Bradford is an absolute windfall for them.

I agree. I'm just being a wisea$$. If the CBA rules applied during Sanchez original signing we would still be in Cap hell because of the Extention we gave him.

[sec.101row23]

Originally Posted by eaglenj

One thing that is important about the dead money, is that successful teams know that if a player is on the fringe of being cut then they are probably not going to play a lot and could harm the locker room.

The question the Jets need to ask is not whether or not its worth sanchez being here to "get value" from his salary....but rather, is him being here going to hurt the team, more then paying him not to be here.

Would we have been a better team with barts contract as "dead money" and demario playing or having him on the team, causing distractions, taking playing time away from a young player, etc?

"Eating" money sometimes can add to the locker room and team atmosphere....thats money well spent IMO

As far as Bart goes, his dead money is only 1.5 million, so there is zero reason to have him anywhere near this team next year.

I could see a guy like Pace, who has 3 million in dead money being brought back for that amount. The Jets will have a lot of roster spots to fill and if you can fill one with a guy who was going to cost you dead money anyway, then its feasible.

[RMJK]

Originally Posted by Savage69

Throw Megatron in and we have a deal..

We could only wish.