Even a quick look at the numbers shows why teams across the league are obsessing over compensatory picks. And a minute considering the logic behind the system reveals the absurdity of it.

By Reid Foster

When the NFL adopted free agency in 1994 after decades of litigation, owners were afraid of losing star players. To mitigate this risk and ensure teams retained some modicum of their control over players, the league simultaneously instituted the franchise tag as well as compensatory picks. Using a secret formula based on salary, playing time, and postseason honors, 32 picks in the upcoming draft, between the third and seventh rounds (and a maximum of four per team), are distributed as compensation to teams that lost more good free agents than they signed the previous offseason.

How Things Have Changed in the Past Decade

From a labor standpoint, the system of compensatory picks has always been iffy at best. Three changes in the last 10 years have further exacerbated the players’ concerns:

• 2009: Players who teams have the ability to retain can now count towards the comp formula. There was no official announcement, but the Patriots declined a team option on Donte Stallworth’s deal and still netted a fifth-round compensatory pick for him, the first known instance.

• 2011: The new rookie wage scale is adopted.

• 2017: NFL begins to allow teams to trade comp picks.

The Reality: The system of compensatory picks serves to squeeze the market for top free agents and make marginal players on the fringe even more disposable.

How It Squeezes Top Free Agents

Many were curious how hard New England would push to re-sign their top free agents, defensive end Trey Flowers and offensive tackle Trent Brown, this offseason. Knowing full well the third-round picks they were in line to receive, it wasn’t a decision at all—the collective bargaining agreement already made that choice for them. Why pay Flowers $18 million per year or Brown $16.25 million annually if you can get a third-round pick who you’ll pay an average of less than $800,000 per year over their first three seasons? There’s almost no chance that either player will generate $15 million more of value—annually—than whoever is taken with that draft pick.

By incentivizing New England to let its own free agents walk, the compensatory-pick system shrunk Flowers’s and Brown’s potential market by one bidder. Due to team needs, available cap space, scheme fits and other factors, realistically, Flowers’s market, like with many free agents, was likely limited to about five teams, Patriots included. That means he lost 20% of his leverage he would have had.

Furthermore, in a league with a hard salary cap, it doesn’t make sense that teams would need some form of recuperation for players that leave in free agency. It’s not like certain teams have financial capabilities that others can’t match—like in Major League Baseball (which also has a compensatory pick system) where there’s a well-founded fear from small-market teams that they won’t be able to stop players from leaving for the Yankees or Dodgers. The NFL’s hard cap means that the decision to re-sign a free agent doesn’t equal picking between having that player and having nothing. It means the decision between having that player and having the cap space to use on another player.

How It Hurts Marginal Players

It’s important to note that not every free agent qualifies for the compensatory pick formula. By and large, players that qualify are good enough that they will get picked up by other teams. However, the compensatory picks doled out represent 32 opportunities that are being extended to players not already in the league.

One agent told CBS’s Jason La Canfora last month, “The guy who is getting squeezed is the second-tier veteran player. The teams know how cheap the draft picks are, and they can use the comp pick formula for leverage, too, and they know it’s a gamble for the player to wait until after the draft when they don’t count against the formula because that need might not still be there.”

According to MMQB research, since the advent of the rookie wage scale, more than half of seventh-round draft picks have lasted on the roster through a second season. The cliché that draft picks “lottery tickets” isn’t accurate—not every player will pan out, but more often than not, they will contribute. That’s why players on rookie contracts provide half of all NFL value, per Chase Stuart.

The rookie wage scale allows teams to funnel in quality players they can dramatically underpay and compensatory picks spike the flow of that cheap labor. In doing so, the two combine to put an unfair burden on players to accept contracts with less money and less guarantees.

Using data from OvertheCap.com*, here’s the annual per-year value of the contracts signed this offseason for each tier of free agents (as it pertains to the pick formula) compared to the contract for compensatory picks in each round this year:

APY of contracts for free agents that warranted third-round pick valuations: $14,780,952

Three-year APY for third-round compensatory pick in the 2019 draft: $790,543

APY of contracts for free agents that warranted fourth-round picks: $9,566,666

Three-year APY for fourth-round compensatory pick in the 2019 draft: $707,096

APY of contracts for free agents that warranted fifth-round picks: $7,833,333

Three-year APY for fifth-round compensatory pick in the 2019 draft: $643,719

APY of contracts for free agents that warranted sixth-round picks: $4,625,208

Three-year APY for sixth-round compensatory pick in the 2019 draft: $616,958

APY of contracts for free agents that warranted seventh-round picks: $1,972,713

Three-year APY for seventh-round compensatory pick in the 2019 draft: $603,645

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