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Introducing First Round Exchange

About six months ago, I asked Drew for feedback on a fantasy sports game concept related to professional sports entry drafts. Drew generously shared his feedback, as well as his Silicon Valley wisdom and connections, even though he forthrightly disclaimed, "I’ll be honest…this is not something I would likely play." Nonetheless, as the game has now launched at FRX - FIRST ROUND EXCHANGE, Drew offered to let me share some of the backstory on this venture. Perhaps he is thinking that some of you will be curious enough to check out the game and Play the DraftTM. Never one to walk from a challenge, perhaps Drew will be compelled by Mel to compete on the Mel Kiper, Jr. Global Exchange. BC readers have long felt he’s been high on Jerrod Johnson’s draft stock…perhaps we shall see if he still rates high enough for Drew’s portfolio.

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"How deep can the NFL fetish go?" – Jason Gay, Wall Street Journal, February 28, 2011

"These go to eleven." – Nigel Tufnel, Spinal Tap, 1984

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You see it all the time on SportsCenter, the NFL Network and on your favorite sports blog: the stock market metaphor used in context of the NFL Draft.

Draft analysts naturally reach for the stock market metaphor because it works so well. Athletes are competing in a kind of marketplace: the more they are valued by competing teams, the earlier they will be selected, and the more money they will eventually earn in salary, signing bonus and guaranteed pay. Workout stats move the market. Rumors move the market. The Draft is several weeks away…we want to know who’s up and who’s down today!

Metaphorically inspired, First Round Exchange (FRX) is a virtual stock market game, where draft-eligible athletes are "stocks" that game participants buy and sell for their personal portfolio. The simple objective is to find undervalued draft stocks – buy low, sell high, and build the overall value of your fund.

NFL Rookie Salaries as the Financial Basis for FRX

FRX uses rookie salaries – the cap value, not the signing bonus or guaranteed value – as the financial basis for the game. For example, Matt Stafford’s 2009 contract was publicized as a 6-year, $72 million deal, with $41.7 million guaranteed and incentives that could pay him an extra $6 million over the contract term. What doesn’t make the headlines is that his rookie salary – the amount that counted for against the team’s salary cap – was just $3.1 million.

We analyzed 10 years of NFL rookie salary data, found that the distribution of rookie salaries followed a similar pattern year after year, and used the data and pattern to forecast rookie salaries in 2011 to arrive at the financial basis for the FRX virtual stock market game. Fans Playing the Draft with FRX in 2011 know today that the #1 pick will have a final value of $3.3 million, the #2 pick will settle for $3.05 million, and so on. For the 2011 Draft, the FRX game concludes at the end of the 3rd round (which includes one supplemental draft pick this year), and the projected rookie salaries for each draft selection are shown on the game website.

How to Play the DraftTM

Every "fund" begins with $10 million of virtual cash, and your goal is to maximize the value of your fund at the end of the 3rd round of the Draft. You accomplish this by acquiring athlete stocks with a market price that is lower than what you believe the final "cap value" will be on the night of the Draft.

The "market price" is calculated by FRX from more than 20 "top 100" mock drafts from writers/bloggers that actively cover and write about the Draft. We convert every athlete on each Top 100 to the final value on the price chart and average the values to arrive at the market price. Since no two mock drafts have the same 100 athletes in their top 100, we established a "floor price" of $400k for this year’s game, both for the market price calculations and the stocks of athletes not selected in the first 3 rounds.

With a $10 million fund, you need to budget your picks according to the stocks you believe have the greatest upside value. With the top 8 picks priced between $2.4 and $3.0 million, you can only afford two or three in any single fund. There’s no minimum number of stocks for a fund, but the maximum is 15 if your strategy is to focus on "small-cap" stocks – projected 3rd round or later selections that might get "Tebowed" into the first round and deliver major profits for your fund.

Mel Kiper’s Challenge

For the featured FRX Vintage Year product, we are proud to introduce the Mel Kiper, Jr. Global Exchange.

Download the original here.

For the cost of a cold draft at JerryWorld, avid fans can try a new fantasy sports experience while watching the NFL Draft. They can compete for blogosphere bragging rights, a free copy of Mel Kiper’s Draft Review (top 20%), and potentially an invitation to compete in an "expert’s league" in 2012 (top 10%). Furthermore, the managers of the top 15 funds will be invited to a 15-minute phone interview with Mel, where they can choose to reveal their secrets or simply talk football.

All fans signing up to play in the FRX Vintage Year game will receive exclusive promotional offers with each new product we release. The company has plans for stock exchange games related to entry drafts in other sports and also some "in-season" games for football and basketball.

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As a longtime BC reader, I’m anxious to hear some reader feedback. Drew said if we can make it here, we can make it anywhere. So please check us out at First Round Exchange.