Wednesday, November 29, 2006

Off to the Races, by Mike Klein

The baseball season may be long over for the players, but as far as the GMs are concerned, this month (and the upcoming week in particular) are the playoffs. I'm talking about free agency, the MBLPA's knight in shining armor that burst from its mother's womb 30 years ago with such calm, shining eyes, announcing to the world that, "you can't push John Q. Shortstop around any more!" Anyone who has read Ball Four, Jim Bouton's seminal 1969 book about the real life of baseball players, knows that, prior to free agency, the players got the very short end of a very long stick. In 1969, the minimum major league salary for a ballplayer was $10,000 (about $56,000 in 2006 dollars), not terrible, but bad considering that before reaching the majors, players often toiled for many years in the minor leagues for much less pay. Bouton related tales of bully tactics the team owners would use to keep salaries down and felt (correctly) that the owners were getting rich at the players' expense.

Fast forward to the winter of 2000-2001: Manny Ramirez gets a $160 million deal from the Red Sox, and Alex Rodriguez gets a (now infamous) $252 million dollar deal from the Texas Rangers. The deals are so big that, suddenly, and largely for the first time, the common fan thinks that free agency might be going to far. Then the Yankees (and later the Red Sox, Mets and others) started raising their payrolls to new heights (the Yankees reached the $200 million plateau in 2005, whereas a few years prior no team had ever hit the $100 million mark) and suddenly the idea of a "salary cap" is being thrown around both within and without the sport. A salary cap, of course would limit how much money the players can make, so it was almost a 100% certainly that a cap = players strike. In the end, none of this became a real problem because between 2001 and the current offseason (a) free agency cooled off and it looked like giant nine-figure contracts were a thing of the past and (b) the sport was making so much money that the owners were getting rich, even with the high salaries paid to players.

I should stop there for a minute though: "the owners were getting rich." Not all owners have been getting rich. Mid-sized market teams (Seattle, Cleveland, St. Louis) and big-market teams (Yankees, Mets, Giants, Dodgers, etc.) have been getting rich and, in particular, teams with their own TV networks have been getting rich (due to a loophole which allows TV revenues to go un-taxed by MLB). The small market teams have either been "sly, and gettin' by" (A's, Twins, Marlins) or "pretty much dead, ‘cause they couldn't stay ahead" (Devil Rays, Royals, Pirates, Nationals). Beside the residents of those latter teams’ cities, no one has seemed to mind much the inequality of the teams, using the crutch "if the A's can do it with a low payroll and smart trades/ player development, then it's the Devil Rays’ own fault they aren't competitive." This is partially true, the Rays and Nats in particular have been self-skunked by constantly asking for too much in trades and ending up with nothing (the non-trade of Alfonso Soriano this year was a case-in-point). These low-revenue teams have been helped by revenue sharing from the high-revenue clubs, but they've all been essentially lost causes without good, young, and inexpensive talent (something the more successful small-market teams have been awash with).

So why write about this now? Well, it's almost as if the 2000-2001 offseason was free agency's first nip of classy booze and this month is its 21st birthday. Alfonso Soriano, a soon-to-be 31-year-old with two good seasons on his resume, gets an 8-year deal worth $17 million per. Fat and ill-fielding slugger Carlos Lee gets a $100 million deal over six years. Gary Matthews Jr., he of the great glove and one offensive season that was better than below-average, gets $55 million over five years. Juan Pierre, who is getting older and increasingly less useful, gets $45 million over five. I won't even get into the $51.1 million posting bid the Red Sox made for Japanese ace Daisuke Matzuzaka, and the majority of big-name pitchers have yet to sign.

So the Devils Rays, Royals, Pirates etc. just went from 6-feet-under to 7. Big deal. I believe that the teams that will really be affected by this spending upturn will be the "clever"/lucky small market teams, and some of the mid-market teams that have been making a lot of money, but not nearly as much as the big boys. All these small, smart teams seem to get by with a mix of young players and moderately priced free agents (the Marlins seem to be the exception, fielding essentially an entire roster of pre-free agent players). Let's focus on the Twins: two cornerstones of their team the past few seasons were Johan Santana (a.k.a. the best pitcher in baseball – by far) and Brad Radke (whose body and right arm are now living in separate, but adjacent, cities). After the 2004 season, Santana signed a four-year, $40 million dollar deal. This deal bought out his last two arbitration years and his first two free agent years (he would have been a free agent this current offseason).

Santana is young (27) and won the American League Cy Young award unanimously this past month (he also won the award in 2004 and got robbed in 2005). Any guesses to how much this guy commands on the open market? Try $160 million over eight years, minimum. That same offseason, Radke signed a 2-year $18 million deal to stay with the only team he's ever played for. Now, I believe that Santana is a loyal player with good values blah blah blah, but I don't think for a second that he would have signed this extension if he knew what kind of money would have been on the table just two short years later. Likewise, if 2004 were 2006, Radke would have been in line for a much larger contract. I don't believe that the Twins can afford much more than they paid these two guys, and, while I believe that Santana and Radke would still have taken a pay cut to stay in Minnesota, I don't think they would have gone as low as Minnesota needed them to. Translation: Santana and Radke walk and the Twins are no longer a competitive team.

Many people like to blame the Yankees and their insane payroll for "ruining" baseball's competitiveness. While I hate the Yankees, I don't believe any one team has the power to do such damage (the Yanks are 0 for 6 for world championships during their post-2000 spending deluge). The Yankees’ 2006 payroll was $199 million (actually a bit above $200 million if you use average annual values of contracts, which what baseball bases revenue sharing numbers upon). The Red Sox come in next at $120 million. After the Sox, about a third of baseball (11 teams) is clumped between $88 and $104 million. Put another way, the big-market teams spent an average of about $105 million on payroll in 2006. The current free agency market looks to have at least a 20% inflation rate over past markets (and this number may be a low estimate). The end result is that these big-market teams seem to be willing to spend an additional $250+ million on their payrolls, money that will be used on premium players, as well as to keep average-to-above-average talent away from competitors (and small market teams). A single Yankees team can only do so much damage, but if a third of baseball starts spending like they're from the Bronx, many teams simply will not be able to keep up.

So what to do about this? A salary cap doesn't seem to be the solution: (a) it would cause a players’ strike and (b) the money is obviously out there, so if it doesn't go to the players than it would go to the owners. Revenue sharing is a good thing, and I think there needs to be more of it. Additionally, as much of the big clubs' muscle comes from their TV networks (think YES, NESN), I think this revenue stream should also be taxed by MLB. Finally: more money from baseball should be earmarked for charity. If a certain portion of profits is going to charity, the money simply won't be available for the players to vie for. Sounds simple and stupid, but the owners are only spending all this money because they have it.

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