Saturday , December 15 2018
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The Economics of Le’Veon Bell’s Gamble

Summary:
The Le’Veon Bell drama has created some financial excitement in the NFL. For those who aren’t familiar with this situation, here’s the short version: Bell, who plays for the Pittsburgh Steelers, is one of the NFL’s top running backs (arguably, THE top RB). Bell was given a franchise tag in 2017 and then again in 2018. The franchise tag is a contract that the team can give to one player on their team that gives them exclusive rights to that player for one season. This guarantees their contract and locks them in at a relatively expensive rate for one season. It’s designed to protect small market teams from the poaching of larger and richer markets without forcing them into a more expensive long-term contract. Bell wanted a long-term contract with more guaranteed money. After all, he’s a

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The Le’Veon Bell drama has created some financial excitement in the NFL. For those who aren’t familiar with this situation, here’s the short version:

Bell, who plays for the Pittsburgh Steelers, is one of the NFL’s top running backs (arguably, THE top RB). Bell was given a franchise tag in 2017 and then again in 2018. The franchise tag is a contract that the team can give to one player on their team that gives them exclusive rights to that player for one season. This guarantees their contract and locks them in at a relatively expensive rate for one season. It’s designed to protect small market teams from the poaching of larger and richer markets without forcing them into a more expensive long-term contract.

Bell wanted a long-term contract with more guaranteed money. After all, he’s a 27 year old running back heading into year 6 of his career at a position where the average running back lasts just 3.3 years. The owners are trying to avoid dishing out excessive guaranteed money on a long-term basis for a position player that is entering the riskiest phase of his career. Bell played a risky game of chicken for the first half of the season and then, instead of earning his $14.5 million guaranteed (or, what would have been half that for the second half of the season) in 2018 Bell decided to sit out the season and hope that he will get more guaranteed money over the long-term from a different team.

I think Bell was getting bad advice from his agent throughout this process and misplayed the strength of his hand. After all, the economics of the NFL are not good for the players. The players have collective bargaining power, but they do so against one of the strongest oligopolies in the world. This oligopoly is comprised of old rich capitalists who made all their money mastering some other craft. Part of that mastery involved winning labor negotiations, every damn day.

What do I think will happen here? I think Bell will be made an example of. Bell has set a bad precedent for the owners to allow by letting someone avoid a franchise tag. The Collective Bargaining Agreement doesn’t even account for how we can treat this situation. And the owners can’t allow a player to just avoid a tag like this because then they’ll be forced to start shelling out more guaranteed money on average when the whole point of the tag is to reduce the amount of guaranteed money that a team wants a pay one of their best players.

Now, it would be against Collective Bargaining Agreement for the owners to collude against Bell. But they don’t really have to. We saw this with the Colin Kaepernick case. But unlike Kaepernick, the owners have a stronger case here. After all, Bell has shown himself to be:

1) Disloyal to his contract and his employer. Loyalty is everything in team sports and this is what doomed Kaepernick. Kaepernick hurt the team (and his collective employers) by becoming a political liability. Kaepernick, while loyal to a higher cause, was disloyal to the NFL.

2) Potentially more fragile than he otherwise would have been by not playing. This one is trickier for the owners, but Bell is going to be a 28 year old playing a position where most people don’t last 3 full seasons. And Bell has been a workhorse. He had 406 touches in 2017 which was 17% higher than the next highest back and 50% higher than the league average. In the NFL touches mean injury risk. Bell knew this. But the owners also know this. And by sitting out a full year all Bell did was become a year older and full season removed from the consistent workouts that could have made him more durable. In other words, he’s arguably more fragile now than he would have been had he played the 2017 season and limited his touches.

So, this is going to be a very interesting offseason. Bell will be hoping for a $60 million+ contract with guaranteed money well north of the $14.5 million he would have been guaranteed to get had he played in 2017. But I suspect Bell is going to run into a capitalist buzzsaw where he maybe gets a huge contract, but gets less guaranteed money than he would have earned had he stayed with the Steelers in 2017.

Cullen Roche
Former mail delivery boy turned multi-asset investment manager, author, Ironman & chicken farmer. Probably should have stayed with mail delivery....

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