Monday, February 8, 2016

Category: Business of Baseball

Taking Sides: Players vs. Owners

February 19th, 2011 | 3 comments »

As I read dozens of columns, blogs and tweets on Albert Pujols this week, I was struck by the number of people who think Pujols is being greedy or should take a “hometown discount” to stay with the Cardinals. I’ve always said I admire players like John Smoltz and Chipper Jones who either took less or restructured their contract to stay with the Braves. I like the idea of players staying with one team their entire career. Not like the days of the reserve clause where they were forced to stay, but when they love a team and a city so much they choose to stay.

All that being said, I don’t think any player should feel obligated to give a team a “hometown discount” just because he’s played there a long time. That brings us to Pujols. National writers and commentators seem to have come to consensus that what he’s asking for ($30 million/year for 10 years) isn’t outrageous in today’s market. However, I’ve been shocked by the number of everyday fans who are disgusted that he turned down what was reportedly up to a $210 million offer over 10 years from the Cardinals.

I thought about it and tweeted out the following:

Fans tend to side with owners because they hear player salaries in the media every single day. What if they heard owner revenue every day?

I firmly believe that fans take the owners side because they hear figures like $21 million per year and think, “Wow, that’s more than I’ll make in my entire lifetime. Who needs that much money? And he’s going to turn it down?!”

First, I think if you heard owner revenue numbers every single day and compared that figure to what they’re putting into payroll and other team expenses, you’d feel differently.

Second, it’s all relative. If Pujols had taken the Cardinals offer, he would have been making less than Ryan Howard and A-Rod. The bottom line is that he’s a better player than either of them and deserves to be making more per year.

I had a follower on Twitter (you can follow me @SportsBizMiss) engage with me after the tweet I shared above. He said perhaps if player salaries were lower it would be more affordable for fans to go to games. Really? No one can really believe that just because owners are paying less they’re going to make attending games cheaper. Have you ever seen a big slash in ticket prices following a decrease in payroll for any team in professional sports? I don’t think so. Every dollar the owners save is likely going right back into their pocket.

I asked this follower if two other guys with his same job title were making more than him but he was producing better work, would he be cool with that? He said probably not, but that it’s different because these guys are making hundreds of millions of dollars.

I’m sorry, but that does not make it different. Let’s say this follower makes $75k and his coworkers make $100k. Don’t you think the guy down the block making $25k feels roughly the same way about them as this follower does about baseball players?

Owners got salaries to where they are, not players. All a player can do is ask for the money, the owners don’t have to give it to him. I don’t think any owner has ever paid more than he thought a guy could be worth to him. No owner thinks, “Gee, that guy looks great in our uniform. He’s not going to win us games or put fans in the stands, but what the heck, give him what he wants!”

So, here we are with arguably the best player in baseball right now asking to be paid more than other guys who he’s out-performed. Why doesn’t he deserve that?

Mark my words, Pujols is worth $300 million over 10 years to someone.

UPDATE: Several followers on Twitter pointed out that it’s really the fans who are to blame for rising player salaries, because it’s their money that goes to pay these guys. That’s true, whether it’s directly from ticket and merchandise sales or indirectly through advertising and tv dollars thrown at teams in order to get to fans. So, if you want to complain about player salaries, I hope you’re not buying tickets or licensed merchandise or watching games on television. Doing those things would be the equivalent of enabling an alcoholic.

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Which League is the Healthiest?

November 18th, 2010 | Comment »

Back in July, I wrote about why I thought Major League Baseball was the healthiest of the four major professional sports leagues in the U.S.  I stand by what I said, and now I’m debating the health of all four leagues with Russell Scibetti over on The Business of Sports.  We took on baseball first and will be moving to the NBA next.  Stop by and get involved in the debate!

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Who Profits from the Postseason?

October 28th, 2010 | 2 comments »

I previously blogged this on Comcast Sports Southeast, but I wanted to repost here for those who don’t follow all my blogs.

Eight Men Out is one of my favorite baseball movies.  No matter how many times I watch, my heart still aches for Shoeless Joe.  I choose to believe the portrayal in the movie is completely accurate, and I’m devastated by how his baseball career came to an end.
Perhaps my affinity for this particular film is why I find the division of baseball’s postseason proceeds so interesting.  Have you ever wondered where all that money goes?  Who benefits more, the players or the clubs?

First, there’s a distinction between required and non-required games.  This is where Eight Men Out comes into play.  Required games are those that must be played: the first three of the Division Series and the first four of each of the League Championship Series and World Series.  The remaining games, that may or may not have to be played, are non-required games.

Under the current collective bargaining agreement, the players receive 60% of gate receipts in required games.  All of the proceeds are put into a fund, which is not distributed until after the postseason is completed.  Those profits are then split according to this formula:

World Series Winner                                              36%
World Series Loser                                                 24%
League Championship Series Losers (2)        24%
Division Series Losers (4)                                     12%
Non-Wild Card Second Place Teams (4)            4%

That last one is the most interesting.  Clubs who finish the season in second place in their division and who do not win the Wild Card and advance to the postseason still receive a share!
There are also set minimums to be distributed if the above formula does not achieve the desired result.  Here are the minimums:

World Series Winner                                   $2,416,450.00

World Series Loser                                      $1,611,000.00

League Championship Losers (each)   $805,500.00

Division Series Losers (each)                  $644,400.00

Non-Wild Card Second Place Clubs       $161,100.00

Once the funds are distributed according to the above formula, the players on the recipient team vote to decide how funds will be divided.  Players entitled to vote are all of those who were eligible for World Series participation and who were with the team as of June 1st.  Attendance at the meeting is limited to players.  However, Major League Rule 45 states that the field manager is entitled to give his opinion on the distribution before leaving the room.  The players may also choose to allow him to stay for the meeting.

One of the more interesting provisions of Major League Rule 45 is with regards to a player who has been with more than one club during the season.  If more than one of his clubs from that season is in the postseason, he can actually receive a share from each club that participated in the postseason.  However, there are provisions that limit his total amount received to the amount he would have received if given a full share as a player who was eligible and with the team prior to June 1st.

The players may also vote to give cash distributions to non-uniformed personnel, although it may not exceed the value of a full share.

What about the clubs?  There is no distinction made between the home and visiting team.  Instead, the two clubs playing split the gate receipts evenly.  For required games, they receive the remaining 40% share after payout to the players fund.  For non-required games, however, they split 100 percent.  Why the distinction?  Think Eight Men Out.  It appears the concern is that players might be tempted to throw games in order to play more games and earn additional money.

Think it’s only the players and clubs who profit?  Think again.  The Commissioner’s office receives a flat 15% off the top on all World Series gate receipts.  It also receives a percentage of all gate receipts from the League Championship Series.  That percentage is set each year by the Commissioner and approved by the Major League Executive Council.  

Of course, the real money is in the increased ticket/box sales each club might experience the following season, increased advertising revenue, a larger fan base and other sources of revenue that are bound to see a spike as a result of a club’s postseason appearance.

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Baseball is Not Broken

September 22nd, 2010 | 15 comments »

I literally stopped what I was working on when I saw a Google alert pop up in my Inbox that read “Major League Baseball: A broken sport in need of fixing.”

As much as I analyze, and sometimes criticize Major League Baseball, I do not believe it is “broken.”  In fact, I stand by a piece I wrote a couple of months ago, proclaiming MLB to be the healthiest of the sports leagues.  Chief amongst the reasons for this proclamation is the fact that is the only sport I believe is not in danger of a strike/lockout at the end of the current collective bargaining agreement.  And despite all the arguments for a salary cap, I remain firmly against one.

I never do this, but I think I’ll pick apart this article that arrived in my Inbox this afternoon piece by piece.  I’m on board in the beginning…

In this writer’s opinion, the revenue sharing system in Major League Baseball is a good concept, but has still not been implemented correctly. 

I agree.  You can see my piece in The Hardball Times on how the leaked financials showed revenue sharing needs some work.

I believe that teams that generate substantially higher revenues should have to contribute significantly more into the revenue sharing pool than they do. 

How much more? Oh, probably anywhere from about 200-400% more.

Sound insane to you? If it does then your mentality is probably part of the overall problem and not the solution to the colossal mess we have in Major League Baseball right now.

And now he’s lost me.  Revenue sharing should be increased by 200-400%?  I don’t think so.  While the leaked financials did illustrate that revenue sharing is necessary, they also showed that teams may be relying on that money to cover operating expenses while pocketing revenue.  Not to mention that owners of clubs in larger markets pay significantly more for their club, and deserve to reap some benefit with that.  In 2002, three teams were sold and bought.  The Red Sox, who are obviously in a large market, sold for $380m (taking on about $40m in debt).  The New York Mets, another large market team, sold for $391m.  The Marlins, the poster child for small market teams, sold for $158m.  Ever heard you get what you pay for? 

If you want to call this counterbalancing solution “socialism” then …so be it.

Hell, call it whatever you want to.

I call it restoring a competitive balance in Major League Baseball, which has been hijacked, primarily, by a virtual cabal of corporate entities that operate within the framework of the broken system that MLB has implemented. 

I don’t know where to start, but I’ll stick with that last paragraph at this point.  Obviously the author is insinuating there is no competitive balance in balance.  Untrue.  I’ve shown this chart before to demonstrate how the leagues compare from 2000-2009:

  Percentage of Teams Participating in Playoffs Number of Different Participants Number of Different Champions
MLB 27% (8 of 30 teams) 23 of 30 8
NFL 38% (12 of 32 teams) 29 of 32 7
NBA 53% (16 of 30 teams) 29 of 30 5
NHL 53% (16 of 30 teams) 30 of 30 7

The biggest difference?  I’d argue it’s the playoff format.  Baseball allows in the least number of teams.  The NBA and NHL let in more than half their teams.  So, at the beginning of the season, you have a better than 50% chance of making the playoffs.  Does this mean the NBA or NHL is more balanced competitively than MLB.  Nope.  In fact, as you can see above, MLB has had the highest number in terms of different champions during this time period.  No competitive balance, huh?

To put it bluntly, MLB, the Players Association Union and the New York Yankees are all greed mongering power players that are in collusion, have ruined the game of baseball, and have threatened the very fabric of professional sports in the process.

Thank God that the NFL, NBA, and NHL have all implemented some form of salary cap that has prevented their sports from becoming the ridiculous and idiotic mockery that MLB has become.

I feel that MLB is probably the closest thing to Professional Wrestling that has ever existed in the history of organized sports, and I even hesitate to call MLB a real sport anymore because the results of the games and seasons are nearly as predictable as hokey wrestling matches, where the conclusions are all scripted and ultimately predetermined. 

I hate the Yankees too, but not because I think they’ve ruined the sport.  I think most of us just wish we had an ownership group like they do – one that cares about fielding a winning team and isn’t just in the ownership game as a tax shelter or for some other corporate reason that leaves them less inclined to pour their profits back into baseball.

Oh, and the other leagues aren’t a “ridiculous and idiotic mockery” when they reject contracts that fit within the rules of the CBA ?  How about when they launch a labor website where they take shots at their own players?  Or maybe when they a player air his Decision and subsequent smoke-filled rise from the floor with his new teammates on national tv?  Puh-lease.

The New York Yankees (the team with the highest payroll in the league by an incredibly wide margin) have made it to the playoffs 15 out of the last 16 years, while the Pittsburgh Pirates and Kansas City Royals (teams with traditionally the lowest payrolls in the league) have failed to make the playoffs for that same 16 year period …and beyond. 

Perhaps even more frighteningly, this trend, or gap between the haves and the have-nots of the league seems to be expanding …with no end anywhere in sight.

So, to all you skeptics of the notion that money cannot buy success, …do the simple and undeniable math.

Ask yourselves, honestly, why does one team succeed and sit in the lofty penthouse of the league while others fail miserably and wallow in the smelly outhouse of obscurity?

What’s the common denominator here?

This isn’t a brain teaser or rocket science, …it’s good old fashioned common sense.

It isn’t too hard to figure out that The New York Yankees willfully and shamefully buy their success.

All of it.

And Major League Baseball allows this to happen because of their greed for the financial revenue that the New York Yankees bring in regularly to the league.

Can money buy you a winning team?  Probably.  Can it buy a championship?  Not necessarily.  Can you win without being the biggest spender?  Absolutely.  Who have the Yankees been battling it out for the division lead with all season?  The Tampa Bay Rays, who rank 21 out of 30 in terms of payroll.  It’s not the first time they’ve done it either.  What about the Red Sox and Mets, the league’s #2 and #5 payrolls?  They’re already mathematically eliminated.  Meanwhile, you’ve got the Rangers and Padres, at #27 and #29 respectively, very much in the playoff hunt.   

And if you want to know why the Pirates aren’t improving, I point you again to my piece in The Hardball Times on the leaked financials and what they taught us.

Why not just triple, or quadruple, the luxury tax and solve most of the problems with the lack of parity and stop the rapid erosion of competition within the sport?

In this suggested equation, none of the revenue would be lost for the sport and the competitive nature of the game would be greatly restored. 

This would change nothing.  The Yankees would simply continue to factor the competitive balance tax into their budget.

Lastly, I realize that are still many people in complete denial about the very premise of this article (that there is, indeed, a broken system that has led to an environment of gross inequality within the sport). 

The people who argue against this premise usually are quick to refer to the Tampa Bay Rays as an example that some teams “don’t need to spend money to win” in MLB.

This is complete and utter nonsense.

First of all, the Tampa Bay Rays are an anomaly that came about in a perfect storm of player development as a result of years of losing. 

An anomaly?  Really?  In 2008, the Rays contended for the championship in the World Series.  In 2009, they had their second straight winning season.  In 2010, they’re in a heated battle for the division title against the Yankees.  One year might be an anomaly.  Three years is not.

Unfortunately for the Rays, they will lose Carl Crawford (arguably, their best player) to free agency in the off season; they will lose their closer Rapheal Soriano (one of the smarter trades they accomplished, acquiring him before he attained superstar status), and they will lose Evan Longoria and David Price (their other two franchise players) as soon as their contracts expire and they become eligible for free agency. 

And to all the skeptic of this reality, these are not scenarios that are based on speculation, …these are cold hard facts:

The Rays simply don’t have the economic resources to retain these players for the amount of money that the free agent market will ultimately demand.

 First, Soriano wasn’t some unknown they took a chance on who surprised everyone with a great year.  I’m a Braves fan and was devastated to lose him.  He was already lights out, and the Rays paid the not so paltry sum of $7 million for him, along with trading the Braves a reliever. 

As for the Rays not having the economic resources…untrue.  They showed net income of over $11 million in 2007 and over $4 million in 2008.  They’ve also shown a willingness to increase payroll.  That’s where the real problem with revenue sharing lies.  The Rays have increased payroll (they’re at double their 2007 payroll in 2010) and scouting and development costs, have put a winning product on the field, and have suffered decreased net income as a result of the current revenue sharing system. 

That’s where the work needs to be done.  And it will not be done by increasing revenue sharing by 200-400%.  It will be done by revamping the system to one that rewards teams for putting their money back into the game instead of pocketing it all.  It will be done by creating incentives and rewards for people who act more like the Yankees and commit to putting a winning product on the field, whether it’s through signing free agents or improving scouting and developing.

Baseball is not broken.

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Five Reasons Baseball is the Healthiest Sports League

July 25th, 2010 | 10 comments »

While the word “lockout” is being increasingly used in discussions about the NBA and NFL, and the NHL Players Association is still searching for an executive director, Major League Baseball is enjoying one of the most prosperous and competitive eras in its history.  Owners and players seem to be getting along, attendance is good, and division races are hot.  Here’s a look at five reasons (in no particular order) why baseball is the most healthy professional sports league in 2010:

The words “strike” and “lockout” are as far from the collective minds of baseball owners, players and fans as they’ve ever been.  There is no doubt in my mind, or that of anyone else who is familiar with the situation, that the owners and players will come to an agreement before the current collective bargaining agreement expires in December 2011.  Both sides have indicated that discussions will begin following the 2010 season, and neither side has announced any extreme or unreasonable demands.  Meanwhile, the NFL and NFL Players Association are airing their arguments over competing websites and appear to be making no discernable progress towards a new agreement to replace their current agreement expiring in March 2011.  The NBA isn’t fairing much better, and the NHL Players Association still hasn’t appointed an executive director, although they have extended their current collective bargaining agreement through the 2011-2012 season.

Baseball doesn’t need a salary cap for greater parity amongst teams.  The only league without a salary cap, Major League Baseball has as much balance as any of the other leagues.  Although direct comparisons are a little tough because the playoff formats differ, I’ve put together a handy chart to demonstrate how the leagues compare from 2000-2009:

  Percentage of Teams Participating in Playoffs Number of Different Participants Number of Different Champions
MLB 27% (8 of 30 teams) 23 of 30 8
NFL 38% (12 of 32 teams) 29 of 32 7
NBA 53% (16 of 30 teams) 29 of 30 5
NHL 53% (16 of 30 teams) 30 of 30 7

Each time the owners and players prepare to negotiate a new agreement, we all wonder if baseball will finally get a salary cap like the other professional sports leagues.  I, for one, am relieved to hear there will be no push for a salary cap this time.  (If you’re interested in my case against a salary cap in baseball, see here.)  In an interview with Sarah Spain back in October, Bud Selig indicated that there is no need for a salary cap in MLB, because the league already has more parity than ever before.  He went on to point out that he’ll be looking to tweak the revenue sharing system with the new agreement in 2011, but I don’t think that will come as a surprise to the Players Association or anyone else.

MLB survived the economic issues of 2009 with very little impact on attendance.  MLB attendance suffered a 6% decline in 2009, but that number is a bit deceiving.  The two new ballparks in New York, each of which is smaller than its predecessor, have been estimated to account for approximately 30% of the decline last season.  Even at a 6% decline, the 2009 attendance was the fifth highest in MLB history, following seasons that saw the first (2007) and second (2008) highest attendance marks.  When put into perspective, MLB weathered the economic downturn of 2009 with very little impact to the overall league picture.

MLB had record revenue in 2009.  Piggy-backing on the last point, MLB had record revenue in 2009 of $6.6 billion.  Meanwhile, the NFL came in at $6.5 billion, the NBA at $3.2 billion and the NHL at $2.4 billion.  In one of the worst economies of baseball’s history, it produced record revenue. 

MLB Advanced Media is a cash cow.  I’ve wanted to write something nice and long about this for awhile, but I’ll have to settle for this brief blurb for now.  MLBAM is the reason baseball is pulling away from the other leagues in terms of revenue.  The numbers are few and far between, and the most recent ones I have are from 2007, but I’m confident that MLBAM is what has, and what will continue to, set baseball apart from the other leagues.  Under the MLBAM umbrella is, MLB Extra Innings, MLB’s deal with XM Radio, and MLB Network. 

As of 2007, saw 8-10 million unique visitors every single day.  It provided games to over 500,000 live package subscribers and approximately 27 million of 80 million tickets were purchased online.  In addition, MLB struck a 5-year deal with Stub Hub to be the official reselling outlet, which allows MLB to essentially profit twice from the same ticket.  Revenue has grown from $36 million in 2001 to $450 million in 2007, and is projected to increase by 30% each year.  MLBAM doesn’t just control content for MLB, it also provides live feed for other sporting events like the NCAA basketball tournament and the French Open in tennis.  MLBAM streams more than 12,000 live events per year, more than any other web producer in the world. 

XM Radio will bring in $650 million over its eleven-year contract with MLB.  DirecTV very nearly reached a $700 million, seven-year exclusive contract with MLB for Extra Innings (which offers live, out-of-market games to subscribers for a yearly access fee), but eventually settled for a non-exclusive contract and a shared 1/3 interest in MLB Network with Comcast, Time Warner and Cox Communications.  MLB Network was expected to generate $201 million in 2009, including $151 million in subscriber fees and $50 million in advertising revenue.  It’s projected to be worth over $1 billion by 2015. 

An interesting note is that MLB Network is in approximately 50 million homes, earning around $0.24 per subscriber per month.  By comparison, ESPN is in hundreds of millions of homes worldwide earning approximately $3.65 per subscriber in the US.  Bottom-line: MLB Network has plenty of room for growth and every reason to believe it will continue to grow.

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My Interview on Leading Off

July 10th, 2010 | Comment »

I had the pleasure of being interviewed by Joe Shuta on his show Leading Off, which airs on Wednesday nights on WFBG in Altoona, Pennsylvania.  You can click on the link below for the audio (it doesn’t actually download, it’ll take you to a third party site and begin playing the audio).

Here are some of the topics we covered:

  • Does baseball need a hard salary cap?
  • Can all of the clubs in baseball afford to compete?
  • Should Jose Canseco be applauded or shunned for his revelations about steroids in baseball?
  • Does baseball need more instant replay?
  • Why are sports so important in America?
  • What has been the impact of the economy in America on the national pasttime?
  • And for fun…would I keep a foul ball or give it to a kid?
  • Much, much more!


Download Kristi Dosh & Joe Shuta – Leading Off

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You Can Also Find me on SportsMoney!

May 24th, 2010 | 2 comments »

For those who don’t know, you can now find me on SportsMoney on!  I’ll still be writing here, and mostly about different topics, but check out my SportsMoney posts as well:

The Tebow Effect (I know it’s hard to believe, but I do watch other sports sometimes!)

Why NFL’s Supreme Court Loss Isn’t Much of a Loss 

Where Does Roy Oswalt Fit?

BCS to Congress: Stay Out!

Are MLB Players Overpaid?

Is Revenue Sharing the Great Equalizer in MLB?

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Is Scott Boras the Most Influential Man in Baseball?

May 20th, 2010 | 2 comments »

I’ve decided to resurrect an oldie, but a goodie, here.  I first posted this in July 2008, and it’s one of my favorites.  Without further adieu…

Though it pains me to ask, I often wonder if Scott Boras is the most influential man in baseball.  Not just today, but in the past couple of decades.  Players like Alex Rodriquez have him to thank for their unprecedented, multi-million, multi-year contracts.  Use the search terms “Scott Boras is Satan” on Yahoo! or Google and you’ll find a host of baseball fans equating Boras with the man down under.  If he’s not the most influential man in baseball, he certainly might be the most hated. 

As a fan, I’ve spent the past decade or so hating Scott Boras myself.  I blamed everything that was wrong with the game on him and the players’ union.  In reality, the pendulum has simply swung from one extreme to the other. 

Let me begin with a history lesson.  In the beginning, the owners literally owned the players, in every literal sense of the term.  Owners could unilaterally decide when to trade or sign a player and how much to raise his salary (subject to very little limitation).  The reserve clause, in its inaugural form, allowed clubs to reserve only five players.  However, it wasn’t long before the reserve clause was an integral part of every player contract.  Owners convinced players that the reserve clause was essential to preserve what’s been called “competitive balance” in baseball.  The idea of competitive balance was best stated by sports economist Simon Rottenberg, who said, “But in baseball no team can be successful unless its competitors also survive and prosper sufficiently so that the differences in the quality of play among teams is not ‘too great’.”  In fact, as late as the 1950s, baseball players testified in Congressional hearings that the reserve clause was vital to the preservation of baseball.  And it wasn’t just any average player testifying, it was players like Ted Williams and Stan Musial (although, keep in mind, they were still the highest paid players of their time, even if it was a pittance).  The reserve clause, by its very nature, depressed player salaries, however.  Thus, as you can imagine, it was only a matter of time before the players would become discontent with the system.

Things came to a head in 1970 when Curt Flood challenged the reserve clause after being traded and refusing to report.  There were cases before that, but I won’t belabor the point here (you can read my legal journal article for more detail).  Unfortunately, Curt Flood lost his case and the reserve clause remained intact until Andy Messersmith and Dave McNally asserted they had achieved free agency for the 1976 season.  Basically, because they never signed their contracts for the prior season, they asserted they were no longer subject to the reserve clause at the conclusion of the 1975 season.  The case proceeded to arbitration within MLB instead of to the Supreme Court as Flood’s case had.  The interesting thing to note is that the MLB arbitrator at the time, Peter Seitz, had previously represented NBA player Rick Barry in his successful efforts to strike down that league’s identical reserve clause.  Seitz urged the players and owners to negotiate with one another to no avail.  Eventually Seitz ruled that Messersmith and McNally were indeed free agents and the business of baseball (and the game) was changed forever. 

Fast forward to the present where Scott Boras represents free agents and negotiates for them multi-million dollar, often record-breaking, contracts.  As fans, we hate him because at one point or another he’s represented someone on our team who ended up playing elsewhere because Boras demanded more money than our team could afford to pay to keep the player.  We blame him for the inflated salaries in baseball and for making the game about money and not about playing out of team loyalty or for love of the game.  Former player and current baseball commentator, Rob Dibble, has said it before and I’ll say it again: “For Love of the Game” was just a movie.  Yes, there are guys that seem to be more genuine and play for love of the game and not for money.  For the Braves, these have been players like Chipper Jones and John Smoltz, who have given hometown discounts to the Braves in the past to facilitate their resigning. 

But in the end, we as fans need to realize that baseball players have a far more finite career than the average person, so it makes some sense that they make a lot more money than we do.  When their career ends, either due to an injury or retirement, their earning capacity out in the real world may be very small.  Sure, some of them go on to coaching and broadcasting careers, but that’s only a small percentage of the guys who have played the game.  For those who retire young, they may not have any marketable skills out in the real world and may not have amassed very much during their playing years.  For others, they began the game at such a young age that they lacked the ability to manage their money wisely (although I hear baseball has made strides in this area by providing education and counseling).  There are a whole host of reasons why a baseball player would want to seek to maximize his earnings during his playing years, just like any other average person does in his career.  Instead, we see the multi-million dollar contracts or we lose our favorite player to another team because our team couldn’t afford him and we have to find someone to blame.  We blame the player, the union…and we blame Scott Boras.

Though my gut feeling is to dislike the guy, I have to admit that he’s simply doing his job.  He’s supposed to be a zealous advocate for his client and his job is get his client the deal the client wants.  If the client wants the most money he can get, Boras is the man for the job.  He’s a sharp negotiator and great at his job.  You really can’t blame him for that.  Instead, blame the owners who negotiate with him.  If no one would pay the big bucks, Boras wouldn’t be the infamous character he is.  If the owners really thought he was a detriment to the game, they would all refuse to negotiate with him.  Instead, they fork over the big bucks to one of his clients because they believe that player can make them, the owner, more cash.  I guarantee you that in the long run the owner only spends what he thinks he’ll get back in revenue from increased ticket sales, advertising, apparel, etc. 

So, is Scott Boras the most influential man in baseball?  Baseball America named him the most influential non-player in baseball in 2007.  Is he the most influential man in baseball ever?  I don’t think so.  This decade?  Last decade?  Some would certainly say so.  Is he also the most hated man in baseball?  For many, he is.  Love him or hate him, he certainly has shaped the modern era of baseball.  For that reason, I’ll be dedicating an entire chapter of my book to what I’ll call “The Scott Boras Era.” [Sadly, for Boras, this chapter didn’t make it in my final book after all!]

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The Salary Cap Debate Continues…

May 11th, 2010 | 1 comment »

Last week, I engaged in one of the best debates I’ve ever had on whether Major League Baseball should have a salary cap.  This is going to require a little jumping around, but if you’re at all interested in this issue, it’s all worth the read!

Here is what you need to read – be sure you read the comments as well!  I have comments posted to both of Larry’s first two articles and will soon comment on the third.  There are some great thoughts from everyone involved!

Start here: Thinking Cap – Part 1 by Larry at It’s All About The Money

Then go here: Why MLB Does Not Need a Salary Cap by yours truly here at It’s a Swing and a Miss

Then back to Larry: Thinking Cap – Part 2 by Larry at It’s All About The Money

And Larry again: Thinking Cap – Part 3 by Larry at It’s All About The Money

Then come back here later this week (hopefully tomorrow) for my article on what the great equalizer really is…hint: it’s not a salary cap, salary floor or slotting in the first-year draft.

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Hard Slotting Coming to MLB Draft?

May 10th, 2010 | 20 comments »

First off, thanks to Pete Toms over at Biz of Baseball for posting a summary of Rob Manfred’s speech at Harvard regarding the upcoming collective bargaining negotiations.  I had somehow missed this and am so glad I caught it!

Before I tell you why I’m against hard slotting in the MLB draft and what my alternative suggestion might be, I’d like to make an observation.  When I’m preparing to write something like this, I do a lot of research.  I hate being corrected or proved wrong – maybe that’s the lawyer in me.  Regardless, I came across something interesting.  What’s even more interesting is that I still find it interesting, despite it being something I already knew!  Anyhow, I digress, back to what’s so darn interesting.  Do you know how many articles and blogs there are about NBA and NFL draft slotting?  Not many.  Do you know how many there are about MLB and whether or not there should be a slotting system?  More than I can count!  NBA and NFL players make big bucks, and there are certainly some dynasty-type teams in both leagues…so why do MLB fans care SO much more about issues like this?  Well, because it’s the national pasttime, and we all want a piece of it, I guess.  Anyone who follows sports even a little knows there are FAR more analysts and bloggers in baseball than the other sports, but I still continue to find it fascinating.  What can I say, I’m easily amused.

Back to the issue at hand: slotting in the MLB first-year players draft.  If you read my salary cap post, you can probably guess that I’m not a fan of hard slotting.  It agitates that old free market economy concept I love so much.  Even so, I’ve come up with an alternative I’m still mulling over.  Before I get to that though, let’s review the NBA and NFL system and discuss why MLB does not have hard slotting at this point.

To set the stage for those who are unfamiliar with the NBA and NFL systems, here is a (super) brief overview.  The NBA does not have signing bonuses.  Instead, they have salary slotting.  A player receives a set salary based solely on the slot where he is drafted.  Period.  It’s that cut and dry. 

In the NFL, signing bonuses exist but are becoming less common.  Any signing bonus paid to a player up-front is pro-rated over the life of his contract in terms of the team’s salary cap calculations  If the player is cut before the end of his contract, the entire sum of signing bonus that remains is calculated into the upcoming season’s salary cap.  So, there is an emerging trend of little to no signing bonus and more guaranteed contract years (in the past when signing bonuses were larger, contracts were not guaranteed and a player who was cut was not owed the remainder of his contract, nor was it calculated into the salary cap calculations). 

Now to why hard slotting is absent from MLB.  First, the NBA and NFL systems will not work in MLB.  The biggest reason is because of the minor league system in baseball.  A drafted player is not expected to perform at the big league level immediately, nor is he receiving much in the way of salary in those early years in the minors (with the exception of the very top picks).     

Which leads me to what I hear most people say: shouldn’t the MLBPA support the idea of hard slotting?  I hate to pick on anyone, but one of the first articles I found was by Jeff Fletcher at MLB Fanhouse.  Here’s the pertinent part of his article:

I can’t figure out why baseball still doesn’t have a NBA-style bonus structure.

I mean, I know why. It’s because the players’ union has not allowed the owners to implement one in collective bargaining. One of these days the major league players in the union are going to realize: “Hey, all that money going to amateur kids could be going to us!”

I’m not here to blame Jeff Fletcher.  He holds the same misguided belief I once had about why there is no hard slotting in MLB.  Think about it…why would the MLBPA not want hard slotting?  Like Jeff says, huge bonuses to unproven guys is money not being spent on MLB players.  (As a side note for those who don’t know, the MLBPA does NOT represent the interests of minor league players.)  So, why wouldn’t MLBPA be begging for hard slotting?

Keep it simple, stupid.  The MLBPA loves seeing kids like Strasburg get giant bonuses.  Why?  Well, it makes it a heck of a lot easier to get more money for their players!  If some unproven kid going to minor league ball is worth some enormous bonus, what is a proven and successful major leaguer worth?  An ungodly amount, that’s how much.  Player X is a right-handed reliever who was 17-4 last year with a 2.20 ERA.  He just watched Player Y get a $7 million signing bonus from his club straight out of college.  What can the club possibly say when Player X comes in for salary negotiations and wants $9 million next year?  All Player X has to do is point out the $7 million given to the kid who might never make it to the Majors.  The club now has no ground to stand on and better start drawing up the contract! 

Bottom line: the MLBPA is not going to support hard slotting, because it will have the upward effect of depressing salaries in the bigs.  Don’t even argue with me that it might not – the point is the mere possibility that it will.  The MLBPA isn’t taking that chance.

Personally, I don’t support hard slotting.  I have the same reasoning as my argument against a salary cap – why does this have to be about restricting a person’s ability to make money?  When I was looking for my first attorney gig, there was a range of “signing bonus” money firms gave out for moving and bar expenses.  Do I think the American Bar Association should come in and set the signing bonus?  Of course not.  I should be able to factor that into my decision.  So should ballplayers.  If they say they want to play for Team X or that they will only sign for $5 million or they’ll go play college ball, fine.  That’s their right as an available employee. 

Does signability affect the draft?  Absolutely.  Have I pointed out before when a player like Jeff Francoeur says he wants to play for the Braves or he’ll go play college ball?  Yep!  Does it keep the draft from being perfectly fair?  Sure it does.  But if the Nationals can come up with $15 million ($7.5 million signing bonus and the rest in pro-rated salary over 4 years) to sign the top pick, then clearly signing bonuses aren’t keeping clubs from getting their dream pick.  So the Yankees pay first round money to guys they get in the fifth round, so what?  If the guy was really first round material, he would have gone first round and gotten the money from someone else.  Let the Yankees throw their money around to unproven players.

I can hear you screaming about fairness and the evil empire (aka, the Yankees), so I’ll offer an alternative that I could stomach.  The MLBPA won’t support my alternative idea, but I’m throwing it out to appease the rest of you.  The MLBPA might not be good at compromising, but I am!

I say MLB and the MLBPA sit down and set a threshold amount that can be spent by each club on signing bonuses for each year of the upcoming CBA.  So, let’s just say for sake of having an example, each club can spend $15 million on signing bonuses for the 2010 draft.  They can divide it up any way they choose between the rounds, but cannot exceed the maximum total amount.  This still limits the amount a player is going to receive, but there’s some flexibility.  If he’s really worth it, a team will spend a huge chunk of their allotted amount on him.  In a hard slotting system, he’s got no chance.

The system is still flawed, because inevitably the teams will simply sign the player to a  contract like Strasburg’s where he receives large sums over the next few years as salary.  Then you have to go to a system like the NBA where there are no signing bonuses and only slotted salaries.  Now I have a problem again.  My free-market sensibilities cannot handle slotted salaries.  Same reason I’m against a salary cap.  Hey, at least I’m consistent!

So, even I have a hard time defending my alternative.  It’s the best I’ve come up with if we simply must have some change.  However, I’m ultimately not in favor.  I don’t really believe that clubs are that greatly affected by the lack of  hard slotting in the draft.  Don’t believe me?  Consider what I found in an article by the Pittsburgh Tribune-Review.  The Pirates only signed 23 of their 50 picks in the 2009 draft, which John Grupp notes is the lowest number of signings amongst MLB clubs.  However, the Pirates GM, Neal Huntington, revealed their strategy: they used large signing bonuses to get top high school pitching talent that slipped in the draft.  He seems to think they were successful in their strategy.  The Pirates spent $8.08 million on their top ten picks, which ranked sixth among all thirty clubs.  What does that tell me?  The Pirates might not be the richest club (not even close, actually), but they had a strategy and used what they did have to get what they wanted.  I didn’t hear any remorse about the 37 guys they didn’t sign.  I’m guessing they weren’t worth the money they wanted.

If you ask me (which you’ve basically done by choosing to read this), the real problem is in terms of international signings.  Not all clubs can afford to play that game, which I think is a far bigger problem than signing bonuses.  More to come in the future on what I think should be done there.

I’ll close with another random tidbit I find interesting.  The large majority of my followers on Twitter and on this website are Yankees fans.  We’re here talking competitive balance, revenue sharing, the competitive balance tax, salary caps and draft slotting, and my biggest contingent of followers are Yankees fans.  Some of them even support all or some of these concepts!  I find it endlessly intriguing.  Yankees fans: watch for my post later this week about my weekend in Boston at the Red Sox-Yankees series!

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