THE AFL announced with great fanfare last week its plan to adopt free agency in 2012. But to
paraphrase Karl Marx, the plan is largely opium for the players. They might be appeased for now, but few will benefit -- and those few by not much.
The AFL players' freedom to ply their trade will remain more restricted than that of any other sportspeople on Earth.
I have long supported real free agency, and dismissed the “equalisation” arguments against it as
furphies, but this plan falls well short. Out-of-contract players will become “unrestricted free agents” (UFA) after eight seasons with one club -- if not among the club's top 10 earners -- or after 10 seasons otherwise. Delisted players will also be UFAs. Players in the top 10 in seasons nine-10 will be “restricted free agents” (RFA) -- pure oxymorons.
While the AFL Players Association has done well to extract any concessions from the AFL, there are five factors that suggest this plan won't improve the players' lot by much.
1) It does nothing about the worst anti-competitive restriction of all:
The only way to become an AFL footballer is through the draft. An 18-year-old must join whichever team drafts him, and accept the pay that the AFL and the AFLPA fix. Most must move interstate. Individual preferences and life circumstances are disregarded.
A player may want to live near family and friends (or not), or study a course best taught in a particular city. He might want to join the club he has always supported, or one with a culture that suits him, or one without drug or sexual assault problems.
If he were not forced to sign away his freedom as a condition of entering the draft, he could weigh up all the factors he cares about and join the club that suits him best.
Once drafted, he's bound to a 23-month club contract. But he's effectively stuck there unless the club delists or trades him, or he retires or lets his contract expire.
The AFL dictates that out-of-contract players are listed (bound to their clubs) until after trade week unless their clubs delist them. As a player's club can refuse to trade him, it -- not he -- determines the club(s) to engage in negotiations, and extracts any rent from a trade. If not traded, his only options are to re-sign with his club or re-enter the draft.
While he can specify the pay he requires in his draft nomination, he's likely to low-ball because the alternative is (at best) sitting out a season.
For all these reasons, players get paid much less than their worth.
But binding drafts aren't necessary for healthy competition. They're illegal in Europe. Not being able to count on draft picks gives clubs better incentives to identify and develop talent.
2) Few delisted players get recycled.
The plan may help some delisted players. As UFAs instead of draft re-nominees, they're more likely to receive better pay and go to more preferred clubs. However, the AFLPA estimates only about 20 percent of involuntarily delisted players get recycled -- that's about 15 players a year.
3) Few will last long enough.
Media reports have exaggerated the consequences of the AFLPA's estimate that at the end of a typical season (2010), about 130 (18.3 percent) of the AFL's 710 players would have spent at least eight seasons at a club.
Most (85) of those would have played fewer than 10 seasons, and most of those would be top-10 club earners (hence RFAs, not UFAs), most (60 percent) would be contracted beyond that season and some won't last beyond it anyway.
As the average AFL player's career lasts seven seasons, it is unsurprising the league set the minimum trigger at eight seasons. Worse, as career length is highly skewed, only about 21 percent of players will reach it.
While some six- or seven-season players may benefit as clubs try to lock them into contracts extending past the triggers, most don't last that long.
Nevertheless, the 18.3 percent statistic cited above understates the chance a first-time draftee will last eight seasons, because some current but less experienced players will eventually do so.
Analysis of the data provided by the AFLPA suggests a first-time draftee's chances of lasting eight or 10 seasons at one club are about 24 and 18 percent respectively. As annual attrition is about 15 percent for eight - and 10-season players, the chances of playing beyond eight and 10 seasons are (at most) 21 and 15 percent respectively.
The AFL claims its study of US basketball, baseball, football and hockey leagues influenced its plan. But only two of them employ the RFA concept, and the other RFA triggers are three and four seasons. And all of their UFA triggers are four and six seasons, not eight and 10.
The AFL plan's outrageously high triggers substantially reduce a player's chances of achieving free agency and the career values they then have left to market.
Under this plan, some of the game's greats, such as John Coleman, would never have achieved even RFA status. Is that fair?
4) The few players lasting eight and 10 seasons are in (or approaching) the twilight zone, and their bargaining power remains constrained.
Many eight - and 10-year players are past their peak and their attrition rate is high: a quarter of the eight-season players don't make 10, and almost no one makes 15.
As most of the 21 percent playing beyond season eight will be club top-10 earners, less than 10 percent will become UFAs. At most, 15 percent will be UFAs after season 10's end.
Both the plan and other AFL rules limit “free agent” negotiating power. As clubs will have the right of first refusal, RFAs must re-sign with their club if it matches a rival offer -- or re-enter the draft.
RFAs may be reluctant to switch clubs and forgo the option of becoming UFAs at season
10's end. Adverse selection may dampen other clubs' interest: RFAs who think they have fewer quality seasons left will be most willing to switch.
It is ridiculous that the plan penalises players for being among their club's best (paid) players after eight seasons; if they'd only played worse, they would be UFAs, not RFAs.
Even many 10-season UFAs will have limited bargaining powers unless the veteran’s rule is changed further. Under recently-announced changes, an amount (probably about $85,000) of salaries paid to veterans (players with 10+ seasons at one club) won’t be counted towards the salary cap.
As players switching clubs lose veteran status, all of their salaries will count towards the cap. This reduces the salaries that rival clubs would otherwise offer. Even for the very few veterans with $500,000 salaries, this is a significant impediment to trade; for lowly-paid veterans, it is insurmountable.
5) The time value of money.
Even if a first-time draftee lasts eight or 10 seasons and earns more after becoming a “free agent,” it won't make much difference to the present value of his career earnings.
Only a fraction of his career value is left to market. Even for a rare 15-season player, the first eight years account for about 70 percent of the present value of career earnings.
Even if he earned 50 percent more in his last five to seven seasons, his present value of career earnings would rise by only 10 to 15 percent.
Players have long pushed for free agency. After stalling for so long, why would the AFL agree to this plan? Because it gives away very little.
Negotiating with the AFL will never bring the players much joy. The Government must act to give players the same human rights as any other citizen: freedom to choose their initial employer and switch employers whenever they're not contractually bound.
Paul Kerin is Professorial Fellow, Strategy, at Melbourne Business School.
As published in The Australian on March 6, 2010.