Why Mike Wallace (Likely) Won't Get Traded
With the Pittsburgh Steelers signing Antonio Brown and not Mike Wallace to a long-term extension, there was some suggestion the Steelers could look to trade an unhappy Wallace. GM Kevin Colbert shot down that idea, but I take that as seriously as I take most trade-related pronouncements. Virtually every NFL player is available for a trade, at the right price. What might that right price be, then, both for the Steelers and for a team looking to acquire Wallace?
I. The Steelers
If Wallace wants to be a free agent next offseason, he has to play for the Steelers this year. He may show up late, but has to report no later than the Tuesday following Week 10. If he wants to get paid a lot next offseason, he should try in the games he plays, and he won't leave the Steelers before any playoff games. That makes him valuable to the Steelers this year.
Just how valuable is hard to say. One rough approximation is the difference between a fair market value salary and his restricted free agent-tender salary of $2.742 million. Brown's deal was for a reported $42.5 million over 5 years, or $8.5 million per year. If that's Wallace's real fair market value, the difference is roughly $5.75 million. Since Wallace didn’t sign that deal, he believes his fair market value is higher than that. As I'll get to in a moment, whether the difference between Wallace’s real fair market value and his tender amount is $5.75 or 8 million in some ways does not matter that much.
Since the NFL does not permit draft picks to be traded for cash, we don't know what kind of draft pick $5.75 million, $8 million, or even $10 million translates to. Is it a fifth-round pick, third-round pick, or even multiple first-round picks? Second, any trade likely means the Steelers spend less money and are worse in 2012. In evaluating a Wallace trade, they must weigh the relative value of performance in 2012 and the value in future years from a draft pick. The Steelers are poised to be elite Super Bowl contenders in 2012. If winning a Super Bowl is prized particularly highly (and a smart GM might think so), a relatively smaller advantage in 2012 results is more valuable than a relatively larger advantage in the future. That increases Wallace’s value to the Steelers, and increases his trade price.
Further, if the Steelers lose Wallace in free agency, they may get a compensatory pick for him. Assuming, as seems likely, the Steelers do not sign enough free agents next offseason to offset his loss, they would likely receive a third-round pick in the 2014 draft. Discounting later picks by the standard one round, that equates to a fourth-round pick in the 2013 NFL draft.
Combining those elements, Wallace is a very valuable player to the Steelers, and one an opposing team would likely to have pay a high price to get. I'm not sure whether that's a first-round pick, a second-round pick, or multiple picks, but it's far more than the seventh-round pick Asante Samuel garnered the Eagles in trade earlier this year.
II. The Hypothetical Trade Partner
Any team that trades for Wallace would very likely sign him to a long-term extension. Another team might trade for him, but the value calculation would be similar to the one for the Steelers and there are a number of reasons to think Wallace would be less valuable to that team than he is to the Steelers.
The value calculation is different for a team looking to sign Wallace to a long-term deal. First, they do not stand to gain the compensatory pick the Steelers would get from Wallace leaving, so value simply goes away.
Second, this team gets the benefit of a fully-motivated Wallace who plays hard for the 2012 season. (Should, not will; see Chris Johnson.) This is worth something to their 2012 results, and, depending on the team, perhaps a bit more than it would be worth to the Steelers. Then again, depending on the team, maybe not.
Third, Wallace's subjective value goes away. He'll be making fair market value, not $2.742 million.
Fourth, not all of the other 31 teams in the NFL could trade for Wallace. A team that trades for him needs cap space in 2012 and beyond. The Houston Texans are a good example of this limitation -- they don’t have the cap space this year or next.
Fifth, Wallace is set to be an unrestricted free agent. A team could get him for nothing next offseason. Given his youth and likely contract length, this means by trading for him they're essentially advancing the term of his 2013 contract one year. Since a team could otherwise just win the free agency auction by bidding, to be willing to trade for him, they must believe that Wallace has value above and beyond his contract amount. This excess value may exist for some players like quarterbacks, but that the Steelers are willing to lose Wallace suggests they don't believe it's true for Wallace.
Sixth, by acquiring Wallace in a trade and not in free agency, he will not be offset against any of the new team's own free agent losses in the compensatory picks calculation. This value may be nothing. The teams that could trade for Wallace are the teams with cap space, who will likely be the teams to sign players next offseason and not get any compensatory picks anyway.
Wallace’s total value to any team that trades for him would equal the value that having him would add to their 2012 prospects, the potential value of any compensatory pick they would have foregone by signing him, and the excess of Wallace's value over his contract amount during the term of any extension. Given the likely modest value of the two former parts, any rational team willing to pay a high price must find him valuable over and above what they pay him.
It is worth noting that adjective "rational" in the last line of the prior paragraph. A GM less secure in his own seat and the future of his team than Colbert may selfishly engage in hyperbolic discounting, placing a particularly high value on the present and much less weight on the future, when he may be retired or otherwise out of his job. If you’ll get fired if your team goes 6-10 in 2012, then going 7-9 in 2012 could easily be much, much more important to you than whether the team goes 6-10 or 10-6 in 2016. This would affect the modest value of 2012 results and the weight you place on the future draft pick you would be willing to trade to the Steelers.
Unless the Steelers find a team that particularly values Wallace's acquisition, or a team that is hyperbolically discounting, then a Mike Wallace trade should not and likely will not happen. Then again, there's always the chance of a sucker, as the Seahawks' 2006 trade of a first-round pick for a similarly-situated Deion Branch shows.
12 comments, Last at 22 Aug 2012, 6:41pm
#1 by socccer101 // Aug 02, 2012 - 2:07pm
Some of the value analysis doesn't take into account all of the factors. For instance, "Wallace's subjective value goes away. He'll be making fair market value..." and "A team could get him for nothing next offseason" are not entirely true statements. A team trading for Wallace will (likely) get some discount from fair market price since there will not be an open auction. Additionally Wallace should take less money to guarantee his payday a year early - avoiding injury risk.
Wallace's value to the Steelers has to be diminished if he misses 10 games and thereby comes in cold and potentially out of shape and out of sync - particularly since the Steelers are installing a new system.
I don't buy the "fully motivated" Wallace, many athletes play better in contract years than they do once they sign their big contract.
Wallace's value to a team is not just to their 2012 prospects because they would almost certainly demand the right to negotiate with him before agreeing to trade terms (i.e. NYG letting Umenyiora's agent look for deals) and only finalize a deal once a long term contract with Wallace was agreed to. The trading team thereby gains considerable value from trading for Wallace long term not just for one year.
#2 by drobviousso // Aug 02, 2012 - 2:26pm
Bravo. There may a bit of a nit here or there, but this is the first attempt I've seen to apply some real economic rational in an article about NFL free agents. I can't see any substantive holes in your logic.
I feel like if this was 2 years ago, Wallace would be the newest Viking. They fit exactly the kind of partner that would have made a trade.
#3 by Chill (not verified) // Aug 02, 2012 - 3:58pm
Likely the trade won't happen, but there is a hole in the logic. It is not a simple task to win a player in free agency, even if you are completely willing to pay, and they would be perfectly happy working with you. If you believe your team is in need of a top receiver, may not be able get one in free agency, and that Mike Wallace is one, it would make perfect sense to make the trade with the Steelers. Likewise, if the Steelers believe Antonio Brown is a top receiver, it would make perfect sense to be willing to trade Wallace to this other team for a price they could reasonably be willing to pay. Having a top receiver can be a lot more valuable than having two.
This analysis is even truer once you realize that Mike Wallace likely sees playing under the RFA tag to be a massive insult, and people want to screw those insulting them in such a manner. It is quite possible that Wallace would choose to show up out of shape and quite surly for the last six games, and not really be an asset to the Steelers. It is human nature, especially since on most plays working hard gets a receiver nothing.
Once they work out a long term deal, Wallace will probably be just fine in attitude. With the unfortunate business over, he could focus entirely on his job. Is that what will happen? Probably, but a trade wouldn't be so crazy.
#7 by jebmak // Aug 03, 2012 - 1:59pm
Yeah, it depends on how much he is willing to screw himself over to get back at someone for a perceived insult.
#4 by Danish Denver-Fan // Aug 02, 2012 - 6:10pm
Won't there be a bit of value in the fact that a trade gives you exclusive negotiating. I mean if 10 teams are throwing offers at Wallace in free angency, that's bound to drive up the price, right?
#5 by akn // Aug 03, 2012 - 12:24am
Well, that's value that diminishes over time (unless you're willing to franchise him next year and start this whole dance again). Plus, I doubt you'll get fair trade value unless Wallace agrees ahead of time to some sort of sign-and-trade.
#8 by Vicious Chicke… (not verified) // Aug 03, 2012 - 4:46pm
Wallace would HAVE to agree to a sign and trade, otherwise he cant be traded. The Steelers cant trade him because they dont have rights to him, no team does. Only Pittsburgh CAN have his rights, but that wont happen until Wallace signs the tender.
So basically Wallace, his agent, or the Steelers would have to find a team that was willing to meet everyone's compensation desires...whatever they may be.
For Wallace, it is clearly more than $8.5 million per year. For the Steelers I would have to assume a 2nd round pick or more in the upcoming draft.
As the article states, finding a team with 1) a desperate need for a receiver who is showing that money is more important than team, 2) a spare high draft pick, 3) plenty of cap space in very unlikely.
#10 by akn // Aug 04, 2012 - 1:48pm
I was working under that assumption that Wallace will eventually sign his tender by week 10 at the latest (and much more likely by the first regular season game), after which the original point applies. Otherwise he loses the year and will be RFA again.
But we both agree there isn't a team out there currently willing to meet so many high demands to make a trade happen.
#6 by Ryan D. // Aug 03, 2012 - 8:24am
This sounds like the kind of deal Marty Hurney will probably consider. Personally, I would love to have Mike Wallace in Carolina, with Cam Newton, Steve Smith, Greg Olson, and our committee of running backs. However, I wouldn't want to give up as much as the Steelers would probably want to make it happen.
#9 by JonFrum // Aug 03, 2012 - 9:17pm
I know it may be standard, but I don't understand the 'one round discount/year thing. An NFL player is not like money. A dollar is worth more now than a year from now because of inflation, and because I can invest the money now and collect interest (at least theoretically). An NFL draft pick/player has the same value over his first contract whether I pick him this year or next. In both cases, I have the guy for the first four years of his career - there is no difference between a player playing in years 1-4 and one playing in years 2-5 - it's four years either way.
I've been talking about the players value to the franchise so far. A coach or GM may value a player/draft pick more this year than next if he's on the hot seat, but that has nothing to do with the inherent value of the draft pick. This is how Belichick managed to work the league for years. He had the confidence in his position to push off draft picks to the future to serve the long-term interests of the franchise over the win-now imperative - and he still won a lot of games.
#11 by Cyrus // Aug 05, 2012 - 12:38pm
It isn't exactly the same as net present value in accounting. It is the theory that a player helping you now is worth more than a player helping you in the future.
For example, lets consider the value of a first round pick three years from now. Is it worth a first this year? Equal value in theory, but the Net Present Value to the team is lower (discounted) because you have to wait three years for the payoff.
For high picks, like a 1st rounder from a team that isn't improving, I would argue that there should be less discounting, so a 1st in three years from a team that is usually pretty bad could be worth a late 2nd this year or at least a 3rd. (Instead of the 1 round/year discount, which would have it be worth a 4)
#12 by erniecohen // Aug 22, 2012 - 6:41pm
The whole 1 round per year is nuts. I don't know why every team doesn't jump on the opportunity to make such trades. Wouldn't you trade your 7th round pick every year for a 1st 6 years later?
You could argue that a first-round pick next year is actually on average worth *more* than a first-round pick this year. After all, if the value of winning a championship grows faster than the value of money, you would rather win championships later, right?
My guess is that most of the time when such trades happen, the team wanting the pick this year overpays because they want a particular player that has fallen a round further than expected, so they feel that they are getting a player they were already willing to spend a higher pick on anyway.