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Free Agent Spending vs. Long-Term Success: Part 1

Free Agent Spending vs. Long-Term Success: Part 1

Thus far, the Jacksonville Jaguars seem poised to be the free agency spending leaders this offseason. By our calculations, since the start of the legal tampering period, the Jags have agreed to terms with eight players for a combined total value of $276,162,000. 

Shad Khan is no stranger to spending big in free agency. In the 10 years that Khan has owned the team, Jacksonville has been a top 10 spender in free agency every year but one. They have also been a top 3 spender on 4 occasions and the top spender twice. These figures do not even include this offseason, where they have already out-spent their 2021 total by more than $111 million.

Season 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012
Rank 1* 3 10 6 8 1 1 2 10 28 8

Every offseason we see one or two teams (such as Jacksonville) who are determined to spend more than anybody else in the league. Last year, the Patriots uncharacteristically spent $288,711,000 — an NFL record for free agent spending. In 2020, it was the Dolphins spending $236,757,000 — $101 million more than the second leading spender that year. While bringing in high-priced free agents is an easy way to acquire talented players, we were curious how often these spending leaders actually improved their team from one year to the next.

To answer this, we looked at the top 3 free agent spending leaders over the past 10 offseasons (2012-2021). We did not look at the total amount of money spent in one offseason, as that would include rookie contracts, trades, extensions, and more. Our study simply looked at the amount of money that teams spent on free agents in one offseason. This will be the first part of our two part analysis on free agent spending and how teams should go about the free agency period based on historical data.

A good team to look at for this study was the aforementioned 2020 Miami Dolphins. The year prior, the Dolphins had broken up their roster in an attempt to “Tank for Tua,”  trading former first-round picks, cutting starters, and leaving the organization largely depleted of talent. With their 14 selections in that upcoming draft (the most draft capital in the league at the time), it seemed evident that Miami was in a rebuild and would try to create a younger, homegrown roster. However, they must have had a change of heart to be more competitive right away and went all-in during the free agency period, spending $236,757,500 on free agents alone. The Dolphins immediately improved, doubling their win total from the 2019 season and just missed the playoffs. Based on this success, we wondered how often teams increased their win total from the previous year after spending big in free agency. 

Using the data set described above, we noticed that after spending a lot in free agency, teams saw immediate dividends. This happened the majority of the time, as 70% of teams improved their win total compared to the previous year. By spending a lot on available talent, more often than not, teams got better right away. Below we looked at a few teams who exemplified this and really improved after one spending period. 

As shown in the graph above, each of these four teams who spent a large sum of money on free agents, significantly improved their win total from the year prior. The 2018 Bears and 2017 Jaguars both won seven more games after bringing in their expensive free agency class.  

Next, we wanted to see how good these teams actually got. Rather than just looking at if teams got better compared to their previous season, we decided to see how teams compared to the rest of the league, identifying how many finished with winning records. 

It turned out that just 14 of the 30 teams we studied (46.7%) finished their first season after spending with winning records. Spending money may increase your chances of improving, but it is no guarantee that you will be a contender, or even finish over .500. 

As shown by the scatterplot above, the highlighted points of the 2020 Dolphins and 2021 Patriots finished above .500. Similarly, the 2019 Packers finished with the best record of the group at 13-3. On the other side of the coin, the high-spending 2016 Jaguars finished with a record of just 3-13 and the 2012 Bucs won just two games. 

To this point, we have only looked at the effect free agent spending has on the team’s first year record. However, we also wanted to look at what spending meant for long term success, as allocating too much money to veterans in one offseason could be detrimental to a team’s ability to retain key players down the road. 

To do this, we looked at a teams' combined record for the three years after spending big on free agents. For example, the Bears spent $172,305,000 in the 2018 offseason on free agents, so we looked at their record from the 2018-2020 seasons, which was 28-20. 

*The 2020 and 2021 free agency classes were removed from this data because they have yet to play three years as a class. 

Above, we highlighted the same teams from before that all saw immediate success, with large win increases compared to the year previous. However, all four teams saw a pretty significant dip in wins in the two years that followed. 

This was the case for the majority of high spending teams, as only 33% of teams finished with a winning record over the three-season span after their free agent spending spree. 

There were a few teams to have success and get over the hump of spending in their three-year period. This was the case for the 2014 Broncos, 2019 Packers, and 2019 Bills, who all finished with records well above .500 in the period. These teams were able to avoid the trend largely because of the QBs they had on their team, Peyton Manning, Aaron Rodgers, and a young, budding Josh Allen, respectively. The Broncos’ Year 3 decline in the below graph can be largely attributed to Manning’s retirement.

In 2021, the Patriots spent $288,711,000 on free agents alone during the offseason. This type of spending was very uncharacteristic of Bill Belichick, who had spent an average of $53,364,862 each offseason for the previous 10 years. Like many other free agent spending leaders, the Patriots saw increased success in 2021 - going from 7-9 to 10-7 and making the playoffs as the 5 seed.. 

However, the team might already be seeing the effects of an abnormally large 2021 free agent signing period. New England was unwilling to re-sign (or even franchise tag) Pro-Bowl CB J.C. Jackson as well as veteran LB Dont’a Hightower. The Pats also released EDGE Kyle Van Noy, after returning to New England for just one season, and, most recently, traded OG Shaq Mason in large part due to his $10 million 2022 cap hit. 

While they are still operating with a QB playing on a rookie contract for at least the next two seasons — which certainly has its proven benefits — they could see a regression back to below .500 if these cap casualties are not replaced.

It is also worth noting that 27 of the 30 teams included in the study were .500 or worse the year prior to their massive free agency period. Many of our insiders believe that there is truth to the fact that bad teams must pay some sort of “premium” in order to get free agents to come to their team, which may be the catalyst of many of these teams’ spending.

In Part 2 of this analysis, we will dive into the guarantee structures and other key factors that impact the long term success/failure of the top free agent spending teams.