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Monday, May 01, 2006 

The NFL Draft and position value

SuperOyster’s software creates a market out of positions in a line. The value of any position in a line is dictated by particular market dynamics, thus optimizing the market for all parties involved. Our software helps regular merchants and individuals understand the economic benefits of any position in a waiting list.

Certain entities have already realized that a position on a list has a tangible value. One such group is the National Football League. Ever wonder how pro football teams manage the complexity of the NFL Draft? If you aren’t familiar with professional football, let me take a second to describe what the NFL draft is all about. Each year, a special event is held in New York City (this year’s was in Radio City Music Hall) where teams take turns selecting eligible collegiate football players to join their club. The team with the worst record the previous season chooses first and the team with the best record chooses last. The selection process has multiple rounds thus providing each team anywhere between 7 and 10 picks. Essentially, this process is a line or waiting list with over 200 positions.

Since the draft is so important to the success of the team, each team has started placing a tangible value on their positions in the draft. The highest valued position is the first selection, the second highest valued position is the second selection and so on. Each team has their own “value chart” that establishes the value per position, though each team’s chart is usually pretty similar. This chart helps them assess whether or not a trade is worth making and also helps them determine how much they should be paying a particular draft selection. An example chart (complements of the redzone.org) can be found below:

The big surprise from this year’s NFL draft was Quarterback Matt Leinart. Originally, he was slated to be the #2 or #3 selection in last year’s draft. Matt decided to stay in school to help his team reach the NCAA Championship. Though it was an admirable decision on his part, it also detracted from long term value. Matt entered the NFL draft this year, and much to his chagrin, he was chosen as the 10th selection. His value depreciated by 50%, thus probably costing him over $10 million in salary. Note postion #2 was worth 2600 and position #10 is worth 1300 points in the chart above.

This is yet another example of how important it is to understand the true value of a position in a line. With software from SuperOyster, everyone – the merchant, the position holder and prospective customers all are better informed about the positions in a line.