The Houston Texans just made defensive end J.J. Watt a very rich man, signing the 25-year-old to a six-year, $100-million contract extension that includes $51.876 million guaranteed.
Watt, the NFL defensive player of the year in 2012 and widely considered to be the league’s premier defensive player, was credited with a league-leading 20 1/2 sacks in 2012 and following that up with 10 1/2 sacks last season. But don’t let that last total fool you: Watt’s value didn’t deteriorate at all and is even more impressive when you consider he is double-teamed nearly all the time. He added 36 quarterback hits and 38 quarterback hurries, plus he led the league with 54 run stops in 2013.
According to Advanced Football Analytics win probability added, which measures each play in terms of how much it increased or decreased a team’s chances of winning the game, Watt was responsible for 2.32 wins in 2013 and 3.38 in 2012, the highest among defensive ends in either year.
And that’s why Watt is underpaid, even on this new contract.
In 2013, the league as a whole produced 256 regular season wins after spending $3.9 billion on player salary, valuing each win at $15.2 million. However, each team needs to have 53 men on their roster, and after factoring in minimum salaries ranging from $420,000 for rookies to $940,000 veterans, the value of a win changes.
For a 0-win replacement level, that means all 256 games are available to be won, and for a 1-win replacement level, 256 – 32*1 = 224 wins are available.
The NFL Win Value is therefore:
$3.068 billion / 256 = $12.0 million per win
or, alternatively (for 1-win repl lvl)
$3.068 billion / 224 = $13.7 million per win
You might take things a step further and consider playoff games. Franchises are paying players for more than just accumulating regular season wins. Playoff wins could be considered as valuable as multiple regular seasons wins. But if we simply weighted them equally to regular season wins, the total wins available becomes 267, and the Win Value drops slightly to $11.5 million per win. Counting playoff wins double puts the Win Value about $11 million per win.
Back to Watt, who is guaranteed to be valued at $8.6 million per year through the 2021 season. Using the win value above (counting playoff wins as double), his “true” value, based on 2013 is $25.5 million, or roughly one-third what Houston is paying him. If we base his value off his stellar 2012 season, that jumps to $37.2 million. And that’s just for one, NFL defensive player of the year campaign. Or, looked at another way, the value Houston got from Watt in his first three seasons (7.74 wins added) in which it payed him $7.66 million total is enough to cover more than $77 million in guarantees for six seasons of zero performance – and the Texans would still break even.
Granted, this is what an NFL team should pay for a player of Watt’s caliber, without regard to what it means for the rest of the roster. However, I think we can all agree that $8.6 million per year for a 25-year-old one-in-a-lifetime generational talent is a bargain at twice the price.