Much has been made about potential problems with an initial public offering proposal by San Francisco-based startup Fantex Holdings, which plans to sell stock for a stake in NFL Houston Texans’ running back Arian Foster’s future income.
Separate from all the business concerns around questions like “how does this Fantex tracking stock work?” and “what is the definition of Foster’s brand income?” are more immediate questions like Foster’s age and durability.
He is already 27 years old, considered an advanced age for a running back.
Foster would receive $10 million in exchange for a 20% stake in his future lifetime “brand income” – this is not all his income, just the part that relates to his football career. (All that money he might make writing children’s books – sorry, that’s off limits).
Future payments from on-field NFL contracts will count toward “brand income.” This is the part that is most easily quantifiable, before attempting to consider his post-NFL career as a possible endorser, talking head on a pre-game show, or participant in a reality show dancing competition.
Because the IPO would pay him $10 million for a 20% stake, $50 million is the break-even level for that investment to pay off. Focusing on just his on-field NFL contract salary part, the bulk of his brand income, how close could Foster get to $50 million?
His current contract runs out in 2016, with a maximum of $25.5 million remaining on it. Only $3.25 million of this is guaranteed, however. In his best-case scenario, Foster would survive the next three seasons without getting cut, allowing him to earn the full $25.5 million by 2016. Then starting in the 2017 season, when he will be 31 years old, could he earn $24.5 million for the rest of his NFL career?
Almost certainly not.
Here is a chart of the top-5o highest paid running backs in the league, compared to their current age.
1) Running backs don’t make that much money, actually.
Only 14 running backs – of any age – have contracts with an average salary over $4 million. The position is generally on the low-end for pay in the league, down there with punters and kickers. Foster’s current contract pays him $8.7 million per year, the fourth-highest average for NFL running backs. Any future contract he would get, at the age of 31, would certainly be for less money than that. $4 million would be the absolute most he might get at that advanced age.
2) Running backs get worse after the age of 27.
For running backs over the age of 27, 62% of them get worse in each successive year. With such declining production year after year, it’s no wonder that running backs basically all but disappear from the league after the age of 31. That’s why the chart of the NFL’s highest-paid running backs is clearly focused in the 26-28 age range.
3) There are not many 31-year-old running backs in the league.
Only eight running backs aged 31 or older were on NFL teams, out of a total of 139 in the league — that’s less than 6%. By age 35, they are completely gone. And the chart shows that no running backs over the age of 32 are ranked in the top-50 highest paid.
Consider the following end-game scenarios:
A) In a best case (aka miracle) scenario, if Foster turns out to be the greatest 30+ running back in NFL history, he might earn $4 million per year for four years, totaling $16 million. That’s still short of the target by $8.5 million.
B) More reasonably, based on the data above, he might be able to earn $2 million a year for two years, totaling only $4 million. In this case, he’d still be short by $20.5 million the amount needed for the initial investors to break even.
C) Very possibly, Foster will probably make nothing after this contract ends
D) He could get cut before the end of his current contract, leaving him short even more than $24.5 million.
If people want to believe Foster can make them money as an investment success, then they should forget about what he can do on the field. The only way the first football-player IPO turns out to be a winner will be if he turns a big profit when he’s not wearing cleats and pads.
