Free Agent Contracts Ruin People's Perceptions

The same arguments over and over

It feels like a bit of deja vu.

This time last year people were freaking out about the big salary that Eddie Nketiah was getting himself as he was able to negotiate as a free agent. This year it is Reiss Nelson and his reported contract (supposedly in the 100k a week range but with very little detail about how much is bonuses vs base) is getting people wondering if that is too much.

How much a player makes is obviously important to them. It is important to the team, but this is also roughly half of the equation for what a player costs a team with the cost of acquisition making up in many instances a hefty share.

I believe that money is fungible. From a team’s perspective, it all essentially goes down as a cost to have the player on the team. This glosses over things like the timing of transfer payments, agent fees, or many other items and oversimplifies things but I think as a framework it is accurate enough to help think through things.

To help illustrate things I did some quick and dirty estimations of the per-season costs for the players on Arsenal’s roster. The data on salary is not good and I know this but hopefully, it is not good in similar directions as to not totally screw things up and the transfer fees for players are broken down on a fee per year of the initial contract length basis.

As you can see, for the vast majority of players the transfer fee makes up roughly 40-60% of the total cost to have the player on the team per season. Players that have been with the team longer than the initial contract or came in on a free deal or through the academy end up having a significantly lower cost to the team.

If we go back the Nelson example and tweak it slightly, so he has 2 years left on his deal at 40k a week and Arsenal were looking to sell him, what fee would we expect?

Let’s say it was a 15m fee and he get’s a bump to 60k a week at his new club on a five-year deal. That team is committing 6.7 million to him in total cost per season. If instead, he runs his contract down to where he is a free agent (like he did) and instead a team pays him 100k a week with 0 transfer fee, they are only committing 5.2 million to him. He is getting paid more but costs less, and I think this is probably a pretty realistic scenario for what Nelson could have seen in the market and it is a big reason why players SHOULD start looking to use free agency more, to capture a larger share of the money that clubs commit towards them.

But what about selling him, isn’t that harder? Let’s think through that situation too.

If he is not worth his salary with his performance, selling him is going to be hard regardless of anything. In the basic sense, a player’s transfer value is the surplus value that they are worth in the future above what they are being paid for the years ahead of them.

If you expect a player to be worth 50 million in value in the coming seasons you would gladly pay that player 100k a week plus a 20 million transfer fee and come out feeling good.

If you expect a player to be worth 25 million in value over the coming seasons you would perhaps reluctantly pay 100k a week but also demand that you get them on a free transfer and feel the same, with the total cost coming to roughly the same in this oversimplified scenario.

So, in the end it still comes down to the player’s performance and the expectation of what he can provide to a future team. If a player is playing well selling is easier, if they are not, regardless of the salary that becomes harder (and it is really more you take a loss on transfer fee/subsidize future wages).

But doesn’t that screw up the wage structure?

I think this is something that it could end up being a potential issue. If a player is lower in the squad pecking order but is being paid more than a more pivotal player that can cause strain, even if from the team’s perspective the more pivotal player is costing more.

A player’s agent could help explain the situation more and this probably pushes players to be more likely to want to run down contracts to capture more of the total cost as wages.

Ultimately the team needs to work hard to ensure that they have a good balance between contract length and wage that reflects what they expect a player to produce compared to market value. It is always a tough balance and this isn’t unique to a player who is on a free transfer.