This is part two of a two part series. Read part one here.
I apologize, but to get this next part, you need to learn some economics. Don’t worry. It’ll be easy (I had my boyfriend read it before publishing so if he can understand it… anyone can).
First, look at why teams choose players. Teams select players for one of two reasons: they can help them win or they can help them make more money (ideally, both, but this is not a perfect world people!). I’ll start you with on-field performance.
There are two terms you need to know: marginal cost and marginal utility. Marginal cost is ‘the amount total cost increases when quantity produced increases by one.’ We can look at marginal cost as the additional amount a player is paid per game, which is $2,900. Marginal utility is the gain in an increase in consumption of a good. In Folau terms, marginal utility is the amount Izzy contributes when he plays a game which can be judged by any of his statistics. His averages are the stats we look at, because that gives the break-down of what he does each game.
Are you still with me? THANK YOU. We’re almost there!
Economics says that a player is only worth the money if his marginal cost equals his marginal utility. In short: a player’s contribution’s need to be worth nearly $3,000 each game. If you remember what I wrote in part one… considering Folau’s exorbitant salary, he needs to be contributing $100,000 per game. Of course it depends on how much a club values certain stats, but I think it’s safe to say that he’s not. There’s no fighting it. Maybe it is due to a position thing and he’ll get his bearings – I truly hope he does. But for the 2012 season? Nope. Not happening.
Alright, take a deep breath. That’s nearly all the economics out of the way! You did it!
The second reason teams choose players is because they believe they can contribute to revenue. Considering his on-field performance, this must be the reason he was employed by GWS. He has been marketable since day one – coming from the NRL was a good story, especially after Karmichael Hunt went to the Gold Coast’s new team. He was in every single commercial leading up to the first game and has been involved in several advertisements and campaigns, all of which give GWS and the AFL publicity. Even now, with so many articles, regardless of content, GWS is becoming more and more popular. Unfortunately, I can’t evaluate this. Why? Because I have nothing to compare it to. Would the team have been more or less financially successful without him? Are there fans that came out just to see him? Does he contribute in other ways such as leadership and team morale? I have no idea.
That’s the problem with player’s salaries and determining if they’re worth it: there are too many intangibles. I don’t foresee that ending anytime soon.
You wanted to know if Israel Folau is overpaid? That’s really for you to decide.
Are his thirteen points worth $1.5 million? Does he contribute $100,000 of performance or revenue for each game he plays? Has he increased attendance and revenue enough to justify his salary? You tell me… I just do the math.