Mailbag: Looming Strike, Free Agent Issues, Pitch Clock

A strike would probably be a very poor outcome for both sides, but the players seem to be feeling more militant. But it's hard to have sympathy for the players when their primary argument right now is "how dare you operate systemically and intelligently to mitigate risk!" They're going to need to reframe things pretty significantly and quickly (and there are plenty of better arguments to wield against ownership) because going into a labor war over Bryce Harper (who hasn't been an all-star caliber player in 2 of the last 3 season) not getting paid for 10 years as if he's 2015 Bryce Harper doesn't really play well...and the owners know it. This isn't like the 80's when FA weren't getting offers from anyone other than their own clubs.

Operating "systemically and intelligently to mitigate risk" ignores the fact that the owners and players (a) have a contractual relationship and ( will have a contractual relationship for the foreseeable future.  If the owners want to abuse the labor contract "systemically and intelligently to mitigate risk" to extract maximum profit for their side, the owners can't expect that the renegotiation of the contract will proceed smoothly.  Something about an equal and opposite reaction. 

To be clear, the coming labor strife isn't about superstars like Harper and Machado.  They get paid and they should get paid.  The coming labor strife is about all the players that have to take shorter-term deals for less money than expected or, even worse, minor league contracts.  The boneyard of free agency has never seen so many carcasses.  

This is the key, for me. There are few players who are legitimately "difference makers," either on the field or in terms of attracting attendance. For everyone else, a rising prospect is a "cheap" and close substitute, so it's not worth paying a lot more than the basic wage. This is basic economics and I think that some of the analytics have demonstrated this to GMs. The players can rant and rave, but they can't really change the economic laws of nature any more than Ford or Chrysler can return to the days of the 1960s when there were no substitutes for their unreliable gas-guzzlers.

If you represent the players, isn't the obvious response, "Okay, you want to let basic economics dictate pay?  Deal.  The players get market wages from day 1.  No team control.  Pure free agency."  The owners obviously balk and now "basic economics" is out the window as a framework for agreement.  

The whole point of a collective bargaining agreement is that the parties get to play with what you've termed the "economic laws of nature."

This new wave of front offices that has changed how players are viewed is going to bring about whole new wave player strikes and labor discontent in next few labor contracts. I look at how labor percentage of revenue has drop considerably in last few labor agreements. Then add in how management is not paying now for early good years of player later in his career we have all flash points to create a labor impasse. I got to believe these new front offices have set in motion where they are going to have to be paying young players millions of dollars based on their potential to become stars in baseball. They may have contained costs for owners on short term basis for last 10 years but now they will entering phase where now players coming up to big leagues will be paid big money after a year or two in the big leagues. This going to lead where baseball will be paying more in the development phase of player and if that development doesn't happen as it does with prospects the costs of players are going to escalate. The old system where they didn't pay for stars until later in there careers was more certain payment plan where they paid for actual performance but when that performance may of happened. Now they will be paying upfront for the potential and when they are producing the most. The problem is now they are going to have also pay huge money for the busts in baseball. Take for example now where would have the Twins be now with Buxton and Sano they would be paying these players now millions of dollars probably locked into contracts when they are still developing. The other choice would have been to let them go and loose the potential and let some other club develop your talent. Not all players develop the same look at Hicks look like a failure on the Twins part now he's developed into top player for Yankees. I am afraid these new front offices may have put smaller market teams in much worse position than they were before they did all there cost analytical work to cut player costs. If Baseball is going to fix this they are going to have to go where they are going to guarantee certain amount revenues to players and then between ownerships that all clubs are guaranteed amount of revenue paid from high revenue clubs but with agreement they also have to spend certain amount of revenue to field a team. I don't know how it will all get done but if not we will have failing franchises if they can't fix labor and differences between markets in next labor contracts.

There is no one solution to the economic issues facing baseball, but there are a number of individual solutions that could help.  In no particular order;

1. Teams must spend 75% of proprietary revenue as a salary floor, else face a 10 to 1 fine for every dollar under that level, while also being ineligible for revenue sharing.  Revenue sharing will be made available to any team in the bottom 15 of proprietary revenue
2. A hard salary cap is instituted, with teams not allowed to exceed it for any reason.  This will narrow the gap between the top and bottom of the league, meaning more teams have a realistic chance to make the playoffs, providing the incentive to improve
3. Add 2 more teams to the league (Las Vegas, Charlotte, Nashville, New Orleans, Montreal, Vancouver are all possibilities), which provides more demand for players, meaning teams will need to pay more to get them, as well as eliminating the need for permanent interleague play
4. Expand the playoffs to 8 teams from each league, with no play-in games.  First round series are best of 3, second round is best of 5, and LC's and WS are best of 7.  It creates more revenue, more division races, and more incentive to be competitive
5. All players become restricted free agents 6 years after being drafted (4 if from college), and unrestricted free agents 8 years after being drafted (6 if from college).  International players hit RFA after 8 years, and UFA after 10 years.  Arbitration starts after 4 years for HS draftees, 3 years for college, and 7 years for internationals
6. The year in which a player is signed/drafted does not count as a year.  If a player is injured and undergoes surgery, his "clock stops" and he loses one year of service time.  If the player is hurt, elects against surgery, but after rehabilitation needs surgery, he loses one year of service time, plus another year if he misses more than 50% of a second season
7. The prior two rules would incentivize teams to bring players up when they think they're ready--no more service time games.  Minor league pay would further be set at 10% of the rookie minimum for short season leagues, 20% for A/A+, 35% for AA, and 50% for AAA

I'm sure there are more that could be implemented, but I'd love to have a debate on the perceived efficacy of these rules.

One thing about free agency in 2019 ... most of the free agents were practically geriatric. There were maybe four free agents under 30 who were worth cracking the wallet wide open for, and that number doesn't change much if you up the age to 32/33 either.

Plus, the big spending teams have what they want/need. It's not like a cheap team is going to step in and spend Yankees-style just because the Yankees already feel they are set.

Last year free agency seemed truly weird but this year it makes sense.

I never understand why people blame the players for their salaries. The owners set the market. The owners charge the ticket prices and concessions. The owners ask for tax payers money. 

 

If you pay the players "what they are worth" (which in itself is debatable) do you think the owners are going to lower prices or pocket the money? In my opinion the only reason we choose to get mad at the players is that their money is public. I guarantee if you saw what the owners take home was you would not be so quick to blame the players for asking for the money they are asking.

 

I would love to know more about your thoughts on this subject.

The average salary for a baseball player in 1998 was 1,398,831 per year.  In 2018 it was 4,250,000.  That is nearly a 300% increase in salary for the average player over the last 20 years and yet there is talk of a strike looming?  Please.....OK.....please

The average salary for a baseball player in 1998 was 1,398,831 per year.  In 2018 it was 4,250,000.  That is nearly a 300% increase in salary for the average player over the last 20 years and yet there is talk of a strike looming?  Please.....OK.....please

I forgot about the part where the players are just supposed to shut up and be happy while team revenue and profit increase at a faster rate than player pay.  

It makes some sense that the big market teams a la the Yankees are already set, why spend a bunch more when you already have Stanton, Judge, etc... Also, why are players from other countries not included in the draft. That makes no sense to me. If they were included in the draft then the rules for these players could become more in line with each other. International players should have to declare for the draft. Then these phenoms will have to go to who drafts them. Not be able to hold out and go where ever. If they played professionally in Korea, or the Dominican then treat then like they just came out of college?

I don’t think there is any way Gonzalez would play 1b with Sano playing 3b.

I wonder if non-guaranteed contracts (similar to the NFL) would change the way players and owners approach free agency.  Give HUGE money up front in the form of signing bonuses + X amount guaranteed.  But a caveat I would add is at least half of the full contract must be guaranteed.

An Example for Harper could then be:

10 years $350M.  $30M signing bonus,  $190M guaranteed money.

So in that scenario Harper would get $32M per year (assuming straight-line) + $30M signing bonus.

So Harper gets $32M x 5 years = $160M + $30M Bonus = $190M.  If Harper is no longer any good going into his age 32 season whoever signs him could cut him. And not owe him the remaining $160M.

The best part of this type of contract for baseball is say after year 4 his team is falling apart.  They could trade him and the new team would in theory only be on the hook for 1 year + the remainder of the current season if they wanted, or they could keep him through the contract's entirety if he performs well.  It helps the original team get out from under than deal and rebuild, I think that also helps teams like the Twins be able to compete for these monster contracts because they would not be hampered by horrible $32M a year contract for a 33 year old guy who no longer is a superstar.

So the new analytics type GMs are learning that huge, long-term contracts are not economically feasible, especially in the the last years of the contract. The gravy train is over.

From what I understand, there's no way to verify each team's revenue.  We can calculate payroll, of course.  From what I can gather, the revenue numbers are about:

Revenue

2010 - 6.14B

2011 - 6.36B

2012 - 6.81B

2013 - 7.1B

2014 - 7.86B

2015 - 8.39B

2016 - 9.03B

2017 - 9.46B

2018 - 10.3B

Payroll is:

2010 - 2.91B

2011 - 3.0B

2012 - 3.15B 

2013 - 3.35B

2014 - 3.63B

2015 - 3.9B

2016 - 4.07B

2017 - 4.25B

2018 - 4.22B

2019 - SPOTRAC NUMBER - Currently 3.78B

I agree we don't know the whole story behind the numbers.  It's rough and can be misleading.  These numbers indicate revenue is up about 68% since 2010 and payroll is up 46%.  Take that for what you will.  

Regardless of actual numbers, the players union will look at these numbers and be mighty skeptical of owners--rightfully so.   

I wonder if non-guaranteed contracts (similar to the NFL) would change the way players and owners approach free agency.  Give HUGE money up front in the form of signing bonuses + X amount guaranteed.  But a caveat I would add is at least half of the full contract must be guaranteed.

 

An Example for Harper could then be:

 

10 years $350M.  $30M signing bonus,  $190M guaranteed money.

 

So in that scenario Harper would get $32M per year (assuming straight-line) + $30M signing bonus.

 

So Harper gets $32M x 5 years = $160M + $30M Bonus = $190M.  If Harper is no longer any good going into his age 32 season whoever signs him could cut him. And not owe him the remaining $160M.

 

The best part of this type of contract for baseball is say after year 4 his team is falling apart.  They could trade him and the new team would in theory only be on the hook for 1 year + the remainder of the current season if they wanted, or they could keep him through the contract's entirety if he performs well.  It helps the original team get out from under than deal and rebuild, I think that also helps teams like the Twins be able to compete for these monster contracts because they would not be hampered by horrible $32M a year contract for a 33 year old guy who no longer is a superstar.

The players are not going to give up guaranteed contracts.  They'd pool their money with a different group of billionaires and start their own baseball league before agreeing to non-guaranteed contracts.  

That being said, non-guaranteed contracts would change free agency, but I'm not sure it'd be good for small market teams.  What small market teams "save" in being able to cut underperforming players, they'd lose in bonus and contract size.  I mean, how much do you think Harper could get on a 5 year deal right now?  40M per?  The Twins would never be in on a guy that's 1/3 or their total payroll--not even for 5 years.

I think the solution is players are going to need to get to FA sooner to be paid what they are truly worth sooner.  If more players hit FA in their 25, 26, 27 years then they can market their prime years and talent to the highest bidders sooner. 

 

The problem with that approach will be that small markets will have more trouble keeping the best talent on their teams as teams with greater monetary resources will have the advantage to buy the best performing players during their prime years.

 

Everyone knows it doesn't make sense to pay for unproductive years anymore. Players only have so many years to maximize their earning in this sport. So something has to change if the players want salaries to stay high. It is going to be tough to make this work for both sides, but I would start by reducing the service time it takes fro players to reach FA.  

I can appreciate shortening the years of control would be good for the players but I am quite concerned it would be bad for the game and really bad for small markets.  The big markets have easily double the spending capacity for players as compared to small markets.  What's the effect on mid and small markets when they lose key players a year earlier?

I would start with a raise to MiLB players.  Talk about not getting a piece of the pie ... MLB player salaries have grown at roughly 7 times the adjusted rate of inflation.  They have done extremely well and MiLB players work for peanuts. 

Next raise MLB minimums to something like 750K / 1M in the first two years and start arbitration a year earlier. 

I'm 100% on the players' side. They do all the work. They should get rewarded at least as fast as owner's revenue grows.

And, all a salary cap does is put more money in rich owner's hands, rather than player's.

You really think the teams, the league and leadership / promotion of the game had nothing to do with the success of this industry? You live in a very one-sided world.

I'm in favor of a five-second pitch clock. Discuss!

-- limit.

TLDR

All I want is pay to grow at the same rate as revenue. And I literally never said what you typed. Not once did I say that. Maybe we could talk about what we say, and not what we didn't say?

Does your employer increase wages in parallel to growth in profit?  Employers pay an amount that is sufficient to attract people over other options and retain them.  The next best option to MLB is the Nippon league at about 1/10 of MLB.  You are expecting MLB to operate differently than every other business.  Employees are not entitled to a share of the profits in any other industry. 

Do you have corresponding growth rates for revenue, operating income, and franchise values?

You apparently did not understand the point. Microsoft and several other companies grew as much or more than MLB.  Compensation to their employees did not grow at 7X the adjusted rate of inflation. Businesses don't pay more or less because of changes in revenue. They pay an amount sufficient to attract and retain employees. Would MLB players go do something else if the average comp was 2.2 instead of 4.4M annually?

Perhaps a more important question than when the CBA expires is when does the current national TV contract expire. With ratings and attendance trending down, it is extremely likely that next contract will be a significant decrease. That’s still an enormous part of revenue. I think teams are being proactive reducing payroll because revenue is about to take a major hit.