Thursday, November 16, 2006

On The Bubble

Major League Baseball is giddy these days. There aren’t enough hands available to pat themselves on the back. Revenues are up. Attendance is at an all-time high. TV networks bid up their contracts with each passing season. Merchandizing deals are more lucrative than ever. New stadiums, many funded by the local citizenry, abound.

So delighted are owners and players alike, they easily signed a new long-term agreement guaranteeing labor peace for several years to come. Not a single representative from either constituency who stood around the overflowing pot of gold dared piss in it.

So why am I in such a lousy mood?

The Daisuke Matsuzaka deal has me seeing red. The posting system is a sham, open to all sorts of shenanigans and otherwise as opaque and ill-conceived as any process in baseball. The Japanese teams may think they have MLB over a barrel when it comes to purchasing the rights to negotiate let alone sign their players, but they are mistaken. Only Bud Selig and his cronies have failed to figure that out. The leverage MLB has but appears reluctant to use or unable to recognize is that players like Matsuzaka want to play on the biggest stage in the game. Given their desire to don American uniforms, what Japanese teams would be content to thwart these players’ desires, restrict their movement, and deal with their discontent? If MLB refused to play this sham preliminary game of posting and went right for the straight negotiation, there would be less room for shenanigans at the very least. Until MLB restructures the process, at a minimum they should fix this lousy process by declaring that the winning bidder has a right to move on to the final negotiation stage and conclude a deal in 30 days or the next highest bidder earns that right. Better yet, they should jettison the posting nonsense altogether.

That is only part of the problem, however. The bigger problem MLB faces is what to do about the whole free agent situation and salary structure in the first place. As I wrote the other day, did anyone who knows the difference between a strikeout and a walk really believe the small market teams had a chance let alone opportunity to bid for Matsuzaka’s services? We all knew it would be the Yankees, Red Sox or maybe one other wealthy team that would end up the winner. No one in Kansas City even bothered to learn how to pronounce his name.

Compare that situation to the NFL. When a major free agent makes himself available in the NFL no one, not ESPN, NFL Films, Terry Bradshaw or Ray Didinger, has the slightest idea who is going to land him unless, and only then, the player himself states his intentions clearly. NLF free agents are as apt to sign with a team offering the best deal as the best opportunity. And unlike MLB, all NFL teams are in a position to deal.

MLB likes to point to the last several World Series winners, a different one in each of the last seven years, and congratulate itself for parity, but this is just another illusion. Championships may rotate at the top levels of the game, but for nearly half the franchises there is no hope. They cannot compete for the top players so they are unlikely to compete for the top prize. Would a salary cap be the answer in baseball? I don’t really know. Has it worked well in football and basketball? I don’t know that either though it appears on the surface that basketball’s success with it is questionable. We do know that football teams regularly let veteran players go before their careers are finished for reasons having everything to do with caps and nothing to do with X’s and O’s.

Baseball, however, has institutionalized a class structure that guarantees haves and have-nots. All involved may believe this golden age and calf will go on forever, uninterrupted by reality let alone economics, but like all bubbles – tulips and real estate – eventually it is going to burst.


Oisín/Wizlah said...

Istitutionalised Class Structure !?! Whoah there with your crazy class warfare in sports thoughts! shame on you for suggesting that baseball might be prone to such a thing or even, god forbid, irrational exuberence and the laws of economics! It's just money-making sport, dammit!

Didn't you listen to a word casey stengel said that time in the senate when they asked him about MLB violating anti-trust laws?

Tom Goodman said...

I did listen to him and, like Mickey, agreed with everything he said!!

jeremy said...

I'm not so sure I agree. Let's take a look at the salaries of the teams that made the playoffs last year (yes I realize this is only one year, small sample size etc):

1. NY Yankees 198,662,180
5. NY Mets 100,901,085
6. LA Dodgers 99,176,950
13. St. Louis 86,912,217
14. Detroit 82,302,069
17. San Diego 68,897,179
19. Minnesota 63,810,048
21. Oakland 62,322,054

While this is slightly skewed towards the top, it seems to me that small market teams can still compete. Let's also not forget that some teams are basically content to simply be losing teams, because they're making money doing it.

It seems to me that a teams drafting and trades have a much bigger effect on a team's success. In fact, there was an
about this in the Hardball Times just today.

Oisín/Wizlah said...

Interesting article, jeremy, although Dave Studeman points a study which suggests the 6 'haves' have managed 90 or more wins 26 times vs the 'have-nots' 10 times since 1998.

And while Oakland remain the classic example of how to buck the trend through careful drafting and constantly exploiting market misperceptions, they remain the exception which proves the rule. Other than the marlins, I can't think of another single small-market team that well run. 2 teams out the whole of MLB does not parity make.

And the fact remains that the best and most expensive of the FAs frequently go to the very rich. The A-Rods, the Manny's, Beltran , Matsuzuka - these guys don't go the the small market teams. Whilst I agree with you that FA's do not always have an impact proportionate to the money spent, the top-tier rarely under-perform stat-for-dollar. If they don't buy you guarantees in the post-season, they do at least get you there, year -in, year-out.

The rest of us don't get a chance to take that gamble - the very rich are the exclusive playthings of the very rich.

Tom Goodman said...

jeremy: Thanks for that link. It does put things in a slightly different perspective but in the end does little to change my mind. If I were to modify anything I said it would be that the rich teams sign most of the most expensive FA's (some better players than others) and thus keep them out of general circulation, that is to say, away from the teams with less resources. The Yankees had all that high-priced talent on last year's team and didn't make it to the LCS or WS, but their ability to sign big FA's in the first place assures them they will advance further than the second-class teams who have no chance of siging the same players.

Let's look at a team that had among the smallest if not the smallest payroll last year, the Marlins, and their history of success. When they made it to the WS and won, twice, they did so by acquiring a lot of FA's or soon-to-be-FA's (before and during the season) whom they had no intention of keeping and didn't. Their owners could afford such gambles in part because they planned to and did make their ultimate profit selling off the franchise. Arizona did a similar thing in signing their big FA's to win a championship and then running the franchise into the ground fianancially before being forced to sell it. So, I guess there are more angles to this class system than I first mentioned, but in the end nearly all teams who hope to compete will either have the money to acquire the talent and/or keep it away from other teams (there are numerous examples of team's acquiring players to keep them away from other teams - the Phils did it with Ugueth Urbina to keep him from the Marlins, Mets and Braves) or their owners have plans to unload the franchise no matter how fiscally irresponsible some signings may have been and in the end profit anyway.

Sgning FA's may not guarantee success, but it guarantees the same players won't be landing in places like Kansas City, Pittsburgh or Milwaukee, too, or that those teams will not be able to hold onto what they already have.

RickSchuBlues said...

Part of the problem is that there isn't enough major-league talent to stock all 30 rosters; inevitably, teams that either are in smaller markets or who can't develop quality prospects are going to suffer. Teams that fit both of these descriptions will suffer for years on end.

Tom Goodman said...

Well, when you consider the internatinal talent pool that number is increasing all the time and is reflected in the makeup of major league rosters. I don't think the talent pool is the problem.

RickSchuBlues said...

If the talent pool isn't the problem, why is everyone scrounging over marginal free-agents and failing to make impact trades to improve their teams year after year? What team ever has enough pitching? What team has more than one or two legitimate major-league players on their benches, or more than two or three in the bullpen?

Latin players have filled the percentile in baseball that has been largely vacated by African-American players. The very minor influx of Asian players - just a few a year - is not enough to really account for a broad new source for talent.

The thinning out of talent is traceable to excessive expansion, and to a lesser extent the ciphoning off of potential players to other sports which have grown in stature. Baseball is not played at the same level it was played at in the '60s, '70s, and '80s largely because too many teams are employing players who are not qualified to be on a big-league roster. For a team as flawed as the Cardinals to be able to win a World Championship kind of drives that point home, as far as I'm concerned.

George S said...

We all know that money alone will not make a winner. You have to have good management as well. And we can see some teams who can compete with less money but better management. But these are exceptions that people use to justify a flawed system.
The idea of a salary cap has been tossed around in various discussions, but I don’t think a salary cap is the answer. How has it worked in the NBA and the NFL? Most people would agree that it has worked well in the NFL, and not so well in the NBA. Why? Two big reasons.

1) The NFL cap is a ‘hard’ cap. That is, there are no exceptions. None. If you go over the cap, you have to cut players. The NBA has a ‘soft’ cap, riddled with loopholes and exceptions (Larry Bird rights, no cap on keeping your own FAs, etc.) So big market teams can still outspend small market teams in the NBA.
2) In the NFL contracts are not guaranteed. You can cut a player at any time. In the NBA you cannot. You have to live with a bad contract on your books for years, keeping many teams from being competitive for a long time.

Non-guaranteed contracts is the key to a competitive environment.

I would not advocate a salary cap in MLB since the MLBPA would fight it tooth and nail. But I would suggest that they no longer have guaranteed contracts. This frees up even smaller market teams to bid on the best players. In my opinion, smaller market teams do not bid today not because they don’t want to pay a superstar, but because they cannot afford the risk of being saddled with a monster contract if the player fizzles out. It destroys their financial flexibility for years. The rich teams do not concern themselves with that: they just move on.
If teams could cut players whenever they wanted, what would happen? Top-tier players would still get big $$, but you would no longer have the absurd Adrian Beltre scenarios. If he didn’t produce, Seattle could just cut him. In a case like the Phillies, if they couldn’t trade him, or negotiate a new deal, they would simply release Pat Burrell and move on, making him a FA. He would then sign somewhere for closer to his true market value.
Is this unfair to players? Only to the extent that they might no longer be able to ride a ‘contract year’ mistake forever. They would have to produce every season. And after all, teams would not be releasing players for the fun of it. They would want to keep good players and would pay more if the risk of a dead-weight contract was reduced.
I would suggest that a team pay the player something along the lines of 10% of the remaining value of the contract in order to release him.

Yeah, the Yankees and a few others would still outbid everybody. But think again of the Adrian Beltre scenario. He’s not a bad player (neither is Burrell) but no small-market team can take him today because of his contract. If he were cut, teams like KC and Milwaukee could very possibly afford him and players like that help make a team very competitive. Letting smaller market teams be able to afford the second level (very good) players is the key to having a competitive league. The monster superstars will almost always go to the big guys.

And finally, yes, the talent pool is too low. When 16 wins gets you a CYA there is not enough talent. There are many reasons for this, some mentioned above, but I’ll have to save that for another day.

Tom Goodman said...

First, RSB, I don't know what I was thinking because I have said the same thing you have at other times: the talent pool is siphoned off and watered down because of so many other sports competing for athletes. I was mistaken in my earlier commment but I do believe the pool will expand somewhat with the infusion of Asian players. The Latin players have replaced many Black Americans, who prefer other sports these days, and the wave of Asian players will make a dent as well. As for 16 games winning the Cy Young and being another indicator of this dilution, if we are to believe the press, Matsuzaka will win 30 games his first year and put an end to that problem!!!

George: The players might fight a hard cap but something like it is necessary. The whole issue of guaranteed contracts is difficult to penetrate because of the way deals are structured with deferred payments and other maneuvers used in part to avoid entering luxury tax land and to also probably help with cash flow and other matters. If you look at the Soriano pursuit now underway you can see that a No Trade clause is a possible sticking point with the demand for a trade rule for veterans having been eliminated from the current agreement with MLB so it is going to be nearly impossible to do away with guaranteed contracts, too.

BenJah said...

having non-guaranteed contracts, like football, and a so called "soft-cap" like in basketball would be great. sorry to be captain obvious, but clearly the problem is utterly dense and complicated.

this may be innappropriate, but reading your post i got an image in my mind of japanese baseball officials bending bud selig over a barrel, and it nearly made me cry i was laughing so hard.

George S said...

I think folks might be overestimating the impact of Asian players on the overall talent pool. The Asian players that have come to the major leagues have been superstars in Asia. There aren't that many of them. The next tier of Asian talent is not quite good enough to improve the overall pool: they're not above-average by major league standards.
Secondly, Asian players, unlike Latin players, are NOT leaving impoverished underdeveloped countries to come to the US. They are already well off in most cases and have comfortable lives. Leaving Korea, Taiwan or Japan for a job in KC, Minnesota or Philly is not that attractive unless you are going to be a starter and/or earn big $$.
In 10-20 years that will all be different, but not for the foreseeable future.