Financial Valuation of Dynasty Teams (1 Viewer)

[Couch Potato]

The idea of current-plus-future value of fantasy players is something that has been evolving in the dynasty realm for awhile now, as we try to figure out how to take into account talent, age, upside, chance of injury, coaching and system changes, possible free agency and trades, and other factors when trying to evaluate a player's worth. We care about all this because these players don't get thrown back and redrafted the next year, and good long-term decisions hopefully increase the value of the dynasty team going forward.

I've been in FF for 20-something years, and like most of you I spent a lot of time in redraft leagues before playing in dynasty leagues. When an owner in a redraft league leaves, a new owner is found to fill the vacancy for the coming season and he pays the same entry fee as everyone else in the league. Since everyone starts out equally, that's as it should be.

In dynasty leagues, though, after year one teams don't begin each season equally even though the same entry fee is paid by all, and some teams clearly have better prospects for winning prize money in the coming year(s) than others. This makes dynasty teams financial assets. The better teams are worth more than the yearly entry fee and the worse teams are worth less for the upcoming year, and perhaps in future years too depending on the mix of players. If there is significant prize money involved, the total difference in monetary value between the good teams and the bad teams could be substantial. If an entry fee is $25/team, this is hardly worth discussing. But if it's $500, it's potentially a big deal.

I haven't seen this aspect of dynasty leagues discussed much here or anywhere else, and I wonder if it's worth exploring. Where I have seen a dynasty team's financial value discussed, it's because a weak team has been abandoned and a new owner must be found to take it over, often without a great chance of winning back the entry fee for the year. The league may be willing to offer the team to a new owner at a discount for this reason. In MOX dynasty leagues when an opening arises the team is announced as up for bid, up to full entry fee, and any shortage is covered by previously accumulated fees on future draft pick trades.

But what about the owner of a really good team who is leaving a league? He's built something of value. Does he just walk away or does he try to find a buyer for his team? If he does intend to find a buyer, what is his team worth? There's no "Dynasty League Ebay" to put it up on auction... not yet at least. Maybe we'll see auctions in the Dating Game forum at some point?

I guess I'm slow, but the idea of financial valuation never occurred to me until last preseason when someone in one of my leagues sent out an email letting the rest of us know he was cutting back on his leagues and would sell a championship team in another league if any of us were interested. I don't know how that turned out, but this valuation idea has been in the back of my mind since then.

It seems to me it's almost impossible to measure an outgoing owner's ability vis-a-vis a new buyer's ability, and although I'm certain building a good dynasty team is part luck, I've been pretty successful at it and am certain there's a fair amount of skill too. I have no idea how to value a business when that business is a mixture of physical assets (current players) and owner ability, but it seems that's what a dynasty team is like.

I'll give a concrete example to start, with my best current team (I guess I should mention here that this is for purposes of example only, that I'm not interested in selling this or any of my other dynasty teams). This is my Misfits & Outlaws I team, a 14-team dynasty league that began in 2003.

Entry fee is $100 plus MFL cost, and the $1400 payout goes like this:

Points champ............$150

Division champ............200 (2@100/ea)

Playoff teams..............400 (8@ 50/ea)

Round 1 winners.........200 (4@ 50/ea)

Round 2 winners.........200 (2@100/ea)

Super Bowl Champ... ..250

Total payout............$1400

My team was 12-1 in the regular season, points champ, division champ, and overall champ, so I won the maximum 150+100+50+50+100+250=$700 on my $100 entry fee. The team was runner-up in the league's first three years and is well set to be a contender in future years.

Scoring is 4 pts and 1/25 for QBs, standard stuff for RB, WR/TE, PK, and DT. No PPR.

Lineups are unique in that there are 2 flex spots (R/W/T), allowing for up to 4 RBs in a lineup. This makes RBs unusually valuable in this 14-team setup. Also, no TE required. Lineups: 1Q, 2R, 2W/T, 2flex, 1K, 1D.

League rosters: http://football13.myfantasyleague.com/2006...=18937&O=07

My 20-man roster:

Q - Bulger, Hasselbeck, Clemens, Croyle.

R - Tomlinson, Jackson STL, Jones-Drew, Edge James, Musa Smith, Bennett KC, Chris Taylor Hou.

W - Wayne, Jackson SEA, Coles, Glenn, Bryant SF, Jenkins, Dem. Williams BAL.

K - Gramatica

D - Vikings

So... let's say this was your team and you wanted to sell. Actually, it might make more sense to ask what you'd pay if you wanted to buy. How would you value it? How would you weigh the payout setup and expected 2007 + future year winnings, the player talent, the luck factor, etc. to come up with a fair value?

Or in general terms - ignoring the team above - what steps would you take in deciding what to pay (premium, discount, or actual entry fee) for any established dynasty team? I don't have answers at this point, only questions. If anyone wants to help tackle it, help me explore this, please have at it.

 

[Biabreakable]

This isn't really what your asking about CP but bear with me on this a bit..

Pretty long time ago playing dynasty I was looking at trying to develop a salary cap based on how players performed each season. This was a somewhat over ambitious idea that never was completed. But it might be a way to try to judge how much a Dynasty team may be worth in a auction.

The main basis would be total points scored for each player. You would then have to assign a $/point system and each team would then have a objective value based on how well the team performed the year before.

Another way you could do this is by taking the averages of how players have performed over the last 2 or 3 seasons.

The main thing that people are going to say and wonder is.. well that team scored X points last year but that doesen't mean it will repeat that performance next year. And it certainly won't. But this is somthing you can leave open to the potential buyers to decide if the team is worth its value or price moving forward.

It would be kind of funny to have every owner be able to bid on every team based on this value of points scored the previous year. Your league could have a musical chairs type situation of changing teams each year or owners who want to keep thier team might have to pay more to do so. I could see this situation possibly creating some big pots with owners willing to do it. And good owners might be willing to take thier chances with lesser scoring teams that they think they can turn into winners.

Going back to my unfinished salary cap idea based off total points scored. I thought this would be an interesting way to play as it would increase owners responsibilities as managers of thier teams. They would have to decide every year if thier best players are worth the price moving forward based off how they scored the year before. Players who missed time the year before because of injuries or other reasons would get a huge break in terms of cost for thier owners the following year. Things like this would effectivly give teams who had bad "luck" a big break in terms of thier cap the next year. Some very intersting trading would come out of this as well I am sure.

The salary cap is what would have to be very carefully thought out as whatever this cap is would not be limited by what a team could score. A team that has a great year depending on where the cap is set would have a hard time keeping all thier players and it would limit thier ability to add more. Tough choices would have to be made at times. And good players would become avialable free agents for other teams to add if they can afford them.

Well this is kind of where I got stuck about the idea.. is how high should the salary cap be?

If you played by a salary cap system like this LT owners would have to pay a record price to keep him based on how much he scored this year. It is fairly likely that championship teams would need to cut players from thier roster each year if they were close to the salary cap the year before. It just depends on how high you set the cap.

Even without playing with a salary cap like I suggested though this seems to me to be the place to start when trying to determine what the actual value of each team in the league may be.

 

[Nugget]

I could see a future of auction bidding ebay style on a dynasty team. You could set a minimum acceptable offer. I think something would need to be set up in the league charter as to who owns the team and the league. Concerns would be over the league folding and liability. Interesting concept and good topic.

 

[beto]

wow, excellent topic, it must be January

Your idea is fine as long as more people are coming into this hobby than leaving. After we pass that axis dynasty leagues will really suffer.

 

[DevilDog919]

Nice idea CP. I sold a team last year and made a nice profit of $200. The fee each year was $75 and you could win $500. That team had just came in 2nd, losing the championship game...but still looked nice for the future. There was no equation to figure the price though, curious to see if someone can come up with some sort of equation also.

 

[jeter23]

I know of one FBG that usually sells his teams when he is planning on leaving a league, but as a commish, I would have a problem with this. I and the rest of my leaguemates like to have some say who will be joining our league.

 

[Jeff Pasquino]

wow, excellent topic, it must be January

Your idea is fine as long as more people are coming into this hobby than leaving. After we pass that axis dynasty leagues will really suffer.

I'll have to come back to this one.

 

[streamkeeper]

I know of one FBG that usually sells his teams when he is planning on leaving a league, but as a commish, I would have a problem with this. I and the rest of my leaguemates like to have some say who will be joining our league.

I agreed with everyone else, until I read the post above. I would never open up the league I manage to the highest bidder.

 

[Couch Potato]

I know of one FBG that usually sells his teams when he is planning on leaving a league, but as a commish, I would have a problem with this. I and the rest of my leaguemates like to have some say who will be joining our league.

I agreed with everyone else, until I read the post above. I would never open up the league I manage to the highest bidder.

This issue crossed my mind too. Screening potential owners is very difficult on the internet though. Unless the buyer is known to other league owners as a bad owner (unlikely), he's as worthy of approval as anyone else coming along. His willingness to buy a team may actually say good things about his seriousness.Also, most leagues allow co-ownership of teams. It wouldn't be difficult for a seller to tell the league he was adding a co-owner, not tell them it was really a buyer, stick around in name only for a year before officially leaving.Most leagues don't have such rigorous standards that a buyer would (or should) be excluded. In fact, many leagues have one current owner who is already worse than any new guy you'd bring in.

 

[BigJim®]

Nice idea CP. I sold a team last year and made a nice profit of $200. The fee each year was $75 and you could win $500. That team had just came in 2nd, losing the championship game...but still looked nice for the future. There was no equation to figure the price though, curious to see if someone can come up with some sort of equation also.

How did that team do? It's an interesting topic. I can't personally imagine selling a good dynasty team I built. Also, most guys serious enough to get a dynasty team understand the flukish side to FF. How many times does the team you picked at preseason actually win? My league has polled pre-season predictions each year and prognastication is currently 2 correct picks and 23 incorrect picks since 2002. A guy would probably have to make quite an investment (or be a crook) to make real money doing this. You'd better served using a golden touch working for FBGs.

 

[JayMan]

The main basis would be total points scored for each player. You would then have to assign a $/point system and each team would then have a objective value based on how well the team performed the year before.Another way you could do this is by taking the averages of how players have performed over the last 2 or 3 seasons.[...]The salary cap is what would have to be very carefully thought out as whatever this cap is would not be limited by what a team could score. A team that has a great year depending on where the cap is set would have a hard time keeping all thier players and it would limit thier ability to add more. Tough choices would have to be made at times. And good players would become avialable free agents for other teams to add if they can afford them.Well this is kind of where I got stuck about the idea.. is how high should the salary cap be?If you played by a salary cap system like this LT owners would have to pay a record price to keep him based on how much he scored this year. It is fairly likely that championship teams would need to cut players from thier roster each year if they were close to the salary cap the year before. It just depends on how high you set the cap.Even without playing with a salary cap like I suggested though this seems to me to be the place to start when trying to determine what the actual value of each team in the league may be.

I will have to come back to this to give a more complete answer... as I play in a 200$ entry fee league that works exactly like this... In fact, it's the IDP [DYNASTY] league I prefer... For example, we use the following formula to give weights to a player's salary:1. 3 or more years: 3/6 * (last year) + 2/6 * (previous year) + 1/6 * (previous previous year);2. 2 years: 2/3 * (last year) + 1/3 * (previous year);3. rookies: last yearThe (last / previous years) tags above are related to end of year VBD values for every player... Two hard salary caps are set: in-season and off-season... where the off-season cap is only 90% of the in-season cap - making sure that every year some players get back in the free agent pool (only adding to the strategies of the league for trades / draft picks / etc.)There is also the possiblity to sign players to multi-year contracts (up to 4 years) thus freezing the current salary of that player for the contract length... but getting penalized (cap hit) if you wish to cut that player before the end of their contract....Sorry CP and others... It's not really related to the subject of the initial post... even though it would sure help in figuring out what team should be sold higher if an owner wished to leave - that never happened in the 7 years I've played so far - as we can see that the best teams have alot more player management to do once the in-season becomes the off-season - their overall team salary being higher than the less fortunate teams...I'll get back to this... great subject CP!

 

[turnit643]

Great topic!

Need to stop in again and see where it goes.

 

[x260bm]

I have played in dynasty leagues for a long time now. The leagues I play in are 100 leagues that have high owner turnover. I can tell you without a doubt that who owns the team is way more important than the players on the team. I have seen a lot of really good teams totally destroyed by new owners. I have also seen extremely bad teams turned into contenders in one season. If you want charge more for a good team that fine. It makes sense. Also, keep in mind that there is luck involved with winning in playoffs. Setting a team’s price based on playoff performance may not be the best idea.

 

[Illegal Pants Downfield]

Interesting topic...I love the Shark Pool in the "offseason"

 

[Organized Chaos]

I guess I'm slow, but the idea of financial valuation never occurred to me until last preseason when someone in one of my leagues sent out an email letting the rest of us know he was cutting back on his leagues and would sell a championship team in another league if any of us were interested. I don't know how that turned out, but this valuation idea has been in the back of my mind since then.

Great post CP. This was most likely me that you are referring to. My daughter was born on September 14 and I decided to cut back to 2 leagues (Local and the Dynasty league that I play in with CP), I gave up 3 teams.(1) 3 player keeper that was runner up in SB. Keepers were P. Manning, LJ, Steve Smith

(1) IDP dynasty league champ that had the best Defensive team and a solid O with Culpepper, LT2, K Jones etc...

(1) Dynasty auction league.

All three leagues were part of http://cffheaven.com and had a solid reputation.

After getting approval from the commish, I decided to try and move these teams, rather then just flat out drop them and get nothing for the hard work I put in.

These are small buy in leagues (<50$) but the competition and chatter are great.

I made it known in my other leagues that the teams were available and I was taking offers, I ended up getting buyers for the Keeper and IDP league, basically, they offered the same value as the league buy in and I accepted.

Looks like one team was runner up and the other was league high point scorer so it worked out ok for both of us.

 

[B. Nugget]

I can speak about this from a first hand perspective because I just took over a dynasty team 2 weeks ago that is getting ready to enter its 3rd season.

The commish is in another league with me and I expressed an interest via email that if he had an opening in one of his leagues to let me know because I was dropping a long standing redraft league and wanted to get into another dynasty.

He let me know that there could be 2 potential openings and that there was a deadline set where the owners had to announce their intentions and pay their 2007 dues.

I thought it was a done deal when I found out that there was an opening, but then the owner of that team had me and a couple of other people wanting into the league email them a mini-resume of our FF background. I guess I met that challenge and he offered the team to me for $30 plus the 2007 dues.

Ideally, I would have liked to keep the $30 in my pocket, but it was a good team with 2 straight playoff appearances and that $30 wasn't enough to turn me against doing it, besides I've read where people have charged $100+ for the rights to take over a team and I thought $30 was a very small price to pay to have an instant contender.

The league has now implemented a new rule where a majority vote can give any owner the boot and majority vote must be obtained for us to accept a new owner. We had 2 very qualified owners trying to get into this league and it actually worked out well.

We've been trading like crazy and this league is by far the most active league I've been in and I'm having a blast. That $30 was well spent if you ask me!

 

[-OZ-]

It's not a bad idea for high cash leagues, but I generally prefer a dispersal draft for new owners in my larger leagues. In those, we generally have at least a couple owners leaving each year.

Before you jump all over yourself saying "great leagues don't lose that many owners", one is a 32 team league, the others were 24 and 20. You will lose a couple each year in those sized leagues.

 

[Couch Potato]

I guess I'm slow, but the idea of financial valuation never occurred to me until last preseason when someone in one of my leagues sent out an email letting the rest of us know he was cutting back on his leagues and would sell a championship team in another league if any of us were interested. I don't know how that turned out, but this valuation idea has been in the back of my mind since then.

Great post CP. This was most likely me that you are referring to.

Yes, OC. It was your email that got me thinking about this. At first I thought "Huh? Sell a team? Don't people just quit leagues?" But over the season I thought about the idea many times, resulting in my original post.Thanks to everyone above who has contributed so far. I think for purposes of this thread and trying to flesh out the value idea I want to make a couple of assumptions.

1) While I agree with posts above that say the value of the outgoing owner is probably an important part of a dynasty team's real value, I also think every incoming owner believes he is going to be just as good. Whether this is true or not doesn't really matter since it is the incoming guy's perception of the team's value that will influence what he pays, and few of us have egos that allow us to say "He's a better owner than I'll be. I'll probably run this team into the ground. So I'm not willing to pay as much as it appears to be worth." On the flip side, even if the outgoing owner knows his intangible value is a big part of the overall value, he's happy for the incoming guy's ego to cause the price to not be reduced. So, for purposes of valuation I'll make the assumption that the value of the team is calculated with the difference between outgoing and incoming owner value as zero.

2) In leagues where the rights to the team do not belong to an owner but to the league as a whole, as some of you have mentioned, this value concept would be less applicable, and that's cool. It doesn't render the topic invalid in general though. It's possible that this 'financial asset' concept will gain popularity and become part of the evolutionary process of dynasty leagues, and leagues that don't let owners own the selling rights to their teams will see this potential value as a benefit to all owners and will change their rules. League approval of a new owner would still have to be obtained - that would still be there. But when an owner of a team with a value greater than entry cost leaves, if the outgoing owner isn't allowed to sell, that value is transferred directly to the new owner. It's a direct giveaway. Other owners think "Hmm.. this new guy already has a better than average shot at prize money and has done nothing but show up to earn this." Owners of other good teams, while they may never sell, might like to know they have their opportunity to be rewarded for their efforts if and when they go, rather than have the value go to a brand new owner for free.

Also, if a decent valuation model can be achieved it would help even leagues without individual selling rights when vacancies of lousy teams occur. It would help them figure out how much of a discount they might have to give to attract new potential owners.

Anyway, this issue of "owner-owned team" vs. "league-owned team" is probably better suited for a separate discussion in a separate thread. In this thread, I want to assume an owner does have the right to sell so we can proceed with the concept of value rather than be sidetracked over whether or not it should be allowable.

 

[-OZ-]

Anyway, this issue of "owner-owned team" vs. "league-owned team" is probably better suited for a separate discussion in a separate thread. In this thread, I want to assume an owner does have the right to sell so we can proceed with the concept of value rather than be sidetracked over whether or not it should be allowable.

Fair enough.I'd go with an auction type sale, perhaps hosted on the dating game forum?

Post all relevant information on the team, the league, etc. Provide links to the league and any discussion forum it may have, top bidder takes the team. Pay the league fee with part of the bid, the rest goes to the owner.

The only problem that may arise is if the bids don't exceed the league fee. Would the past owner have to pay to make up for his mismanagement?

 

[Couch Potato]

The only problem that may arise is if the bids don't exceed the league fee. Would the past owner have to pay to make up for his mismanagement?

If an owner is putting the team up for bid, minimum acceptable bid would have to be the price of the league fee, and if it isn't achieved the owner would just quit the league like in any other league. Then the league itself would find a new owner using any discount process (if necessary) currently in place. I suppose it could be in the league bylaws that outgoing owners are to make up the difference, but in practice that would be unenforceable.

 

[Dave Stauff]

I'm pleased to see a thread on this topic - one I've mulled over for the last couple years. I could see some natural evolution toward a "marketplace" for the sale of dynasty teams, but with a "buyer beware" mentality. The stumbling block I see is the stability of the league itself. How does the new owner who is shelling out the "big bucks" just to acquire a monster roster know that the commissioner will be around for the long haul? In many leagues, there is no succession planning that goes into the administration of the league and if the commish decides to retire (poor health or family issues could drive this decision), the league folds and what do you have to show for your investment. I'd love to make a recreational buck or two buying low and selling high (after rebuilding), but I don't see the dynamics in place in most leagues. It sounded like one of the other posters paid a commissioner a small stipend to claim an orphan team - this seems the more likely model to emerge because the commissioner is the one that holds the key to longevity of the league.

 

[Couch Potato]

I'm pleased to see a thread on this topic - one I've mulled over for the last couple years. I could see some natural evolution toward a "marketplace" for the sale of dynasty teams, but with a "buyer beware" mentality. The stumbling block I see is the stability of the league itself. How does the new owner who is shelling out the "big bucks" just to acquire a monster roster know that the commissioner will be around for the long haul? In many leagues, there is no succession planning that goes into the administration of the league and if the commish decides to retire (poor health or family issues could drive this decision), the league folds and what do you have to show for your investment. I'd love to make a recreational buck or two buying low and selling high (after rebuilding), but I don't see the dynamics in place in most leagues. It sounded like one of the other posters paid a commissioner a small stipend to claim an orphan team - this seems the more likely model to emerge because the commissioner is the one that holds the key to longevity of the league.

I mentioned above "owner-owned" vs. "league-owned" teams, but you're right that there is the third league type - "Commissioner-owned" leagues. These leagues often don't allow for league vote on important matters, Commissioners can change rules when they want, or kick owners out on a whim, etc. I've been in a couple of those and got the hell out as soon as I saw what they were really about.While I've seen badly led leagues disband because of these kinds of Commissioner setups, in good leagues that are set up properly I think continuity is better than you're suggesting. I took over as Commissioner in two leagues this year where the previous Commish had to drop the duties, and in both those leagues when my time to step down arrives I believe another owner will volunteer. In today's leagues, where there is generally a hosting site (MFL, CBS, Yahoo, whatever) rather than the Commissioner's personal home page, the loss of a Commissioner really shouldn't mean a dynasty league is doomed if the other owners feel they are invested in their teams.

 

[pk4239]

I think we can get a pretty good idea of what a good team should sell for based on what a bad team would sell for. Assuming buyers are rational, a big if, a team buying a good team would expect the same return as a poor.

Teams that under perform should improve via draft picks, returning injured players, and trading strategies that allow them to acquire younger players for players that have less appealing long term outlooks. At the same time outperforming teams should regress towards the mean for the exact opposite reasons.

Making a few assumptions we can calculate the required rate of return for a poor team and apply that to a good.

Assumptions:

10 Teams, $100 entry fee.

Payout $400 to the first place team $300 to the 2nd, $200 to the 3rd and $100 to the 4th.

If all the teams were equal the probability of making the playoffs would be 0.40 (four out of 10 teams.)

Teams that make the playoffs have an equal chance of winning the league, meaning that if you finish in the top four your expected return would be $250 (1 in 4 chance of winning the total pool of $1000).

The team’s probability of making the playoffs will regress to the mean as follows.

Good Team.

Year 0: 100% (They made the playoffs)

Year 1: 80%

Year 2: 55%

Year 3: 40% (The mean probability)

Bad Team

Year 0: 0% (They missed the playoffs)

Year 1: 25%

Year 2 : 40%

Year 3: 55% (Better than average chance to make the playoffs)

Over three years the worst team would expect to win $300, but since he realizes that he has little chance of profiting during the first two seasons he expects a discount on his entry fee for year 1. Just from looking at the Dating boards this discount usually is in the 20% to 30% range, so for this example I will use 25%. Over three years his entry fees equal $275 ($75, $100, $100). Thus his expected return is 9.09% (300/275-1).

A good team should expect the same return. ($x + $100 +$100) = $450/(1.0909). Solving for X the current value of the good team is $212.5 when the value of the worst team is $75.

This is a pretty simple version of the formula in actually you should reflect the timing of the entry fees and payouts, but it is something to mess around with.

 

[Wilbur Wood]

I will give you an analytical answer, as others have commented that the real answer is what the market will bear.

I would simply apply basis Auction $ valuation theory to every player in the league in the prior year. I always use a notional salary cap per team of $260 because that's what my auction league's use and that's what most magazine auction values are based upon. So in a 14 team league there is $3,640 aggregate salary dollars and $ value per fantasy point scored can be tallied for all players in the league. A championship caliber team may have had players generate well excess of $260 of value in the prior season. Say that the best team generated $400 of value, which expressed as a % would be 154% (400/260) over the league baseline.

Now a judgement call needs to be made as to whether (on average) the roster of such team is "over or under" the peformance peak of its players. Suppose it is largely a veteran team that is past its peak so a 10% haircut may be appropriate for the 154% factor. Draft choices can also dictate an adjustment -- For ease of illustration just focus on the upcoming 1st round. A projected $ value of draft picks 1.01 thru 1.14 needs to be determined (I'd use a "proxy" method by looking at a comparable 2006 vet who would be viewed equivalent in value to the rookies. If the average 1st round rookie is worth ~ $18 (by proxy) and rookie 1.01 is worth $40 than that franchise has a projected $22 gain. If the championship team has pick 1.14 and that rookie slot is worth $10 than there is a projected $10 loss of relative value ($400 - $10 = $390 ~ 150% above the baseline (prior to any discount for age).

This method will determine the "relative" value of all teams in the league versus each other. Now prize money allocation is not linear and the profile of prize money in the league may also need to be acconted for.

But a minimum it is worthwhile to know that your team is worth 150% of an "average" team in the league.