Proof that signing NFL free agents is more cost-effective than keeping homegrown players – Conventional wisdom about NFL free agency and team-building is totally wrong.
How many times have you heard an NFL analyst say smart teams do not spend money in free agency? I’m sure you’ve already heard it a few times this offseason as teams have spent ridiculous money on players who aren’t exactly game changers.
Guys go on the open market, then teams overpay. Smart teams draft well, then lock up to good contracts. I thought this was true, and have championed this approach to team-building in the past. It seems intuitive, right? But is there any tangible proof that this method of team-building actually works? Is giving a homegrown player an extension a more efficient use of cap money than signing a free agent?
That was one of the questions I wanted to tackle when I developed my “Value Above Market Price” metric, which I introduced earlier in the week. You can read a more extensive breakdown of the stat and why it’s important here. Here’s how we calculate it.
Value Above Market Price, explained
The goal of Value Above Market Price (VAMP) is to measure how much a player is being paid for his production by a team compared to the league-wide market rate for his position.
A player’s VAMP is based on his production and cap hit in a given season compared to league averages. To calculate a player’s “production score,” I simply multiplied his Pro Football Focus grade by the number of snaps he played. Let’s use Patrick Mahomes as an example. Mahomes scored a PFF grade of 92.9 and played 1,165 snaps in 2018. So his “production score” was 108,228.
Then I had to figure how much the league was paying for each point in that production score, and I did so for each position. So for quarterbacks, I added up every QB’s cap hit and divided it by the total “production score” of all QBs. That told us that in 2018, NFL teams paid $203.16 for every production point. (More on that later.)
Using that number, I can determine how much Mahomes’ production was worth based on the market price for quarterbacks. We’ll call that number his “Real Market Value”…
Finally, to get Mahomes’ VAMP, I just subtract his cap hit from his Real Market Value…
Essentially, Mahomes provided the Chiefs with an additional $18.2 million in production. He was the MVP in more ways than one.
Essentially, VAMP tells us what kind of return a team is getting on its investment in a player. Mahomes is such a great deal because he’s on his rookie deal, and productive players on their first deal are the best value in the NFL — by far. But teams don’t have any say there; they just draft and pay what the scale dictates.
The real work comes in deciding who to give second contracts to, and how much to pay them.
In theory, we can use VAMP to figure out if players who were extended by their current teams offer more value than free agent pickups do. To do that, we averaged the …read more