Baseball's Financial System and another strike/lockout...

[KeithStone53151]

To me, the problem isn't free agent compensation. i think the players are actually getting much closer to what their true value is on the open market than the drastically inflated salaries of the past. the problem is that the current cba makes it very profitable to keep players in the minors until the super two cutoff point causing players to have to play a whole extra season with their original team, as well as causing them to receive fewer dollars overall in arbitration. The simplest solution to all of this would be that any days in the majors in a given season would count as 1 full year towards arbitration, rather than the convoluted system that currently exists. Another solution could be completely eliminating pre arbitration years, putting all players into the arby process immediately upon arriving in the majors. The owners would never agree to all of that, but If I was the players union, I would focus on getting the younger players paid more so that and getting them to the majors faster, so that their eventual payday in free agency isn't the only way for them to get paid.

 

This is generally detrimental to small market clubs. Trying to balance big market clubs, small market clubs, and players wants/desires is going to be extremely difficult. I think the right answer is basically the nfl model. Salary cap, salary floors, drastically increased revenue sharing, significantly decreased team control. Big markets would hate it, I can't imagine players would dislike it assuming the floors/caps guaranteed players what they considered a fair market share. If the floors were set at 42% of revenue and the caps around 50%...can't see how they could complain.

[homer]

What they probably should do is just get rid of arbitration and let players become free agents instead. Then players would get their "worth" in their peak years instead of waiting until they are 29, 30, 31 years old.

[FVBrewerFan]

What they probably should do is just get rid of arbitration and let players become free agents instead. Then players would get their "worth" in their peak years instead of waiting until they are 29, 30, 31 years old.

 

And your Milwaukee Brewers would truly become the Washington Generals.

[xisxisxis]

All of the current rules that are part of the CBA are meant by the Union to maximize the % of revenues that goes to player salaries (P%) and for the owners to set in place a structure to minimize the % of revenues that the owners have to pay (O%). To me the issue comes down to the two parties agreeing on a hard % of revenues to be dedicated to player salaries (P% = O%). Once that is decided for a CBA, each year baseball goes about it's business and at the end of the year when Revenues are finalized and player salaries are known then the percentage of revenues that is player salaries (PS%) can be calculated. If PS% is less than O% then the owners will disburse the difference to the players based on the unions instructions/guidelines. If PS% is greater than O% then owners would adjust final player paychecks to deduct salary based on union guidelines. The owners decide how they will apportion costs if they have to pay the players or how they reclaim revenue if players are paid too much. The players/union decides how to disperse salary or how players would be taxed to make up the difference. These guidelines could even change year to year, but would need to be fixed by opening day to give plenty of time to make adjustments at the end of the year. Both the owners and players get a known % of revenues towards player salaries that is fixed throughout the contract. The only future negotiations would be what % of revenues are fixed for player salaries.

 

Most of the remainder of the current process can be retained to help small market teams compete with large market teams. I would change one part of the process:

 

players have three options, the first option cost the team nothing, the second and third options reduce the years of minimum salary by 1 for each option and increase the years of arbitration by 1 for each option such that players with the indicated options used have the indicated years of Minimum salary and arbitration:

 

0-1 options used --> 3 years minimum salary, 3 years arbitration

2 options used --> 2 years minimum salary, 4 years arbitration

3 options used --> 1 year minimum salary, 5 years arbitration

 

For many of the fringe prospects, there wouldn't be any real impact as they aren't going to earn huge arbitration salaries or may be let go from an organization sooner if their 3 options are used. For real high-ceiling prospects it reduces a teams ability to stash them in the minors for as long as possible and if a team decides to go that route then the player will ultimately benefit by getting to arbitration faster.

 

Another change I would install is the ability of teams to offer a proportion of a free agent contract as not guaranteed (75% max any year, max of 50% of total contract). So if a team releases a player who signed a FA contract he only receives the guaranteed amount. While the players union would scream at this under the current CBA, if the next CBA has the fixed revenue sharing % for player salaries then there really isn't an issue as any lost salary because of the non guaranteed part of the contract will come back if player salaries don't reach the agreed upon %. Teams would likely be much more willing to hand over bigger/longer contracts if they had some ability to end their commitment and recoup some savings.

 

Owners and players should just agree on a fixed % of revenues going for salary and most of the issues that come about are mitigated by that agreement and the silly negotiation over each of these rules aren't necessary as they don't impact total dollars.

 

Forgot: As part of the change to options, you would need to adjust the requirements of adding players to the 40-man (the Rule V eligibility would have to be adjusted to give teams more time before requiring them to be added to the 40-man)

[homer]

What they probably should do is just get rid of arbitration and let players become free agents instead. Then players would get their "worth" in their peak years instead of waiting until they are 29, 30, 31 years old.

 

And your Milwaukee Brewers would truly become the Washington Generals.

 

I dunno. There'd be so many guys as free agents it'd probably water down the total amount spent. Back in the day Charlie Finley, the A's owner, wanted every player to sign one year deals and every player would be a free agent each year. The players didn't want it because they knew it'd drive salaries down.

[FVBrewerFan]

What they probably should do is just get rid of arbitration and let players become free agents instead. Then players would get their "worth" in their peak years instead of waiting until they are 29, 30, 31 years old.

 

And your Milwaukee Brewers would truly become the Washington Generals.

 

I dunno. There'd be so many guys as free agents it'd probably water down the total amount spent. Back in the day Charlie Finley, the A's owner, wanted every player to sign one year deals and every player would be a free agent each year. The players didn't want it because they knew it'd drive salaries down.

 

Look at the roster. Sure, Braun would make a lot less but look at some of the others. Yelich, Hader, Knebel, Aguilar, Shaw, Burnes, etc. No way they could keep all those guys. They could use Braun's salary to pay some of them but they would lose Yelich for sure, probably Hader or Shaw. And that's this year. If Burnes, Woodruff, Peralta, Arcia all improve in the next year or two no way you can keep most of them either.

 

Put in a hard cap, I will be willing to negotiate FA.

[jerichoholicninja]

Honest question, does either side care at all about competitive balance?

 

All the players want is more money. And while I'm sure owners would prefer to have a winning team, ultimately whatever they bring to the table will have making sure their clubs are profitable first and foremost.

[homer]

Revenue is up yet minor league salaries are a joke and people are paying more to go to games. There is more to it than just MLB salaries.

[3and2Fastball]

I keep coming back to how the value of the Brewers has quadrupled ($220 million to about $1 Billion) since Mark A bought the team. With a new TV contract coming, plus revenue sharing, etc I'm just not seeing how a "small market" team like the Brewers can't do a lot more with payroll especially in the contending seasons.

 

I'm definitely on the players' side with this.

[Baldkin]

Revenue is up yet minor league salaries are a joke and people are paying more to go to games. There is more to it than just MLB salaries.

 

So true. It shocks me every report I see about how little minor leaguers make.

[3and2Fastball]

I think if teams want to retain 6 years of control they'll need to seriously up the league minimum and have earlier arbitration years or something.

[DHonks]

There won’t be a work stoppage. However, the union will push for things besides “more days off” like last time. A salary floor is possible. More revenue sharing so more teams can spend freely. Less punishment for signing free agents. I prefer teams not losing picks, but rather teams getting extra picks for net acquisitions (like the NFL does).

[jerichoholicninja]

From the player's perspective I don't know if "seriously upping the major league minimum" would be all that great for its members. Obviously they'll be getting more money, and they'll like that, but it will result in older 4A players being priced out of the league pretty quickly. Why pay the veteran "premium" for Eric Sogard or some end of the line 35 year old starting pitcher when you could call up some minor league scrub and get the same production for much less of a cost. Basically the bottom barrel union talent would never vote for that and the guys it would actually benefit aren't even union members to vote in favor of it.

[homer]

 

Look at the roster. Sure, Braun would make a lot less but look at some of the others. Yelich, Hader, Knebel, Aguilar, Shaw, Burnes, etc. No way they could keep all those guys. They could use Braun's salary to pay some of them but they would lose Yelich for sure, probably Hader or Shaw. And that's this year. If Burnes, Woodruff, Peralta, Arcia all improve in the next year or two no way you can keep most of them either.

 

Put in a hard cap, I will be willing to negotiate FA.

 

Again, the pool of available players league wide would be such that all those guys listed wouldn't be signing for massive deals so possible Brewers resign many of them. And you are listing guys that we'd lose but not thinking about who we might gain. It's not like those guys, if they left, would all be replaced by Johnny AAAA.

 

It would make for a lot more roster turnover which is why as a fan I wouldn't like it (I prefer to watch guys on the same team for several seasons) but it would certainly allow players to get their "worth".

[Baldkin]

There won’t be a work stoppage. However, the union will push for things besides “more days off” like last time. A salary floor is possible. More revenue sharing so more teams can spend freely. Less punishment for signing free agents. I prefer teams not losing picks, but rather teams getting extra picks for net acquisitions (like the NFL does).

 

I think the next big thing will be a forced salary floor for teams. It's something the NBA does - you can be below the floor, but the guys who played for you that year just get paid out based on roster-time whatever amount you're below the floor.

 

Right now, teams who are rebuilding have no reason to spend any money -- and if the big markets are going to dip under the Luxury tax every 3-4 years to avoid that 50% penalty, that's a huge amount of revenue that isn't going to the players (even if the Luxury tax funds only go to them indirectly) -- if they are aiming for that 50% number. The Yankees last year had ~650M in revenue and spent 165M on salaries.

[DuWayne Steurer]

I know this is Deadspin, but it's not a Deadspin article. It's a really great breakdown of the value of wins....the REAL value of wins, and the actual value of free agents, and why teams just aren't paying for big-money free agents anymore.

 

https://deadspin.com/baseball-doesnt-need-collusion-to-turn-off-the-hot-stov-1831644811

[xisxisxis]

I found this bit very interesting:

 

So while outright collusion among owners is certainly possible, it isn’t necessary to explain what’s going on. It’s far more likely that what we’re seeing in recent winters is simply the hard cold math resulting from a mismatch between how much money each team is raking in overall and how much of that revenue each individual player can lay claim to being responsible for.

 

“A lot of us in academia wrote about that and actually told the players’ association that that was going to be the effect,” says Stanford sports economist Roger Noll. “And they didn’t really believe us, because they thought that salaries were driven simply by total income, not by the increment to income driven by a player.”

So the Players Union were told that this could happen and they didn't believe it. Maybe the players need to address with the union why they didn't get it right...

 

To expand on what I posted earlier, the players union wants to maximize the amount of revenues that go to player salaries and the owners want to minimize that amount. They set in place the current CBA rules as each thinks different articles enhance their position. To prevent unexpected outcomes as the owners changing their habits based on current market forces, both sides should negotiate to a fixed % of revenues going to player salaries. Then both sides limit their downside to unexpected market forces.

[TooLiveBrew]

Could there be a system worked out where there was a greater % of revenue sharing, with the increased shared dollars used to pay pre-arb players more?

 

I haven't thought this out fully yet, but in general I mean something like (using the Brewers as an example) where the Brewers would only have a certain salary amount count against a salary cap for pre-arb players (let's say $500K/yr/player), & then revenue sharing dollars ensure a pre-arb player's full salary is $1M or something.

 

Interested to hear if folks think my concept is good, bad, or meh. I agree that players should earn more in their first 3-6 seasons, but clearly the intent of the current system is to try to help small markets with inexpensive young players.

[reillymcshane]

I know this is Deadspin, but it's not a Deadspin article. It's a really great breakdown of the value of wins....the REAL value of wins, and the actual value of free agents, and why teams just aren't paying for big-money free agents anymore.

 

https://deadspin.com/baseball-doesnt-need-collusion-to-turn-off-the-hot-stov-1831644811

Thanks for sharing. Interesting stuff.

[wntrtxn21]

I found this bit very interesting:

 

So while outright collusion among owners is certainly possible, it isn’t necessary to explain what’s going on. It’s far more likely that what we’re seeing in recent winters is simply the hard cold math resulting from a mismatch between how much money each team is raking in overall and how much of that revenue each individual player can lay claim to being responsible for.

 

“A lot of us in academia wrote about that and actually told the players’ association that that was going to be the effect,” says Stanford sports economist Roger Noll. “And they didn’t really believe us, because they thought that salaries were driven simply by total income, not by the increment to income driven by a player.”

So the Players Union were told that this could happen and they didn't believe it. Maybe the players need to address with the union why they didn't get it right...

 

To expand on what I posted earlier, the players union wants to maximize the amount of revenues that go to player salaries and the owners want to minimize that amount. They set in place the current CBA rules as each thinks different articles enhance their position. To prevent unexpected outcomes as the owners changing their habits based on current market forces, both sides should negotiate to a fixed % of revenues going to player salaries. Then both sides limit their downside to unexpected market forces.

 

 

The huge problem with % of revenue is; whose revenue? Would it go by team, by avg. revenue in the league? The revenue for the Cubs, Dodgers, Yankees, etc.. far exceeds the smaller market teams' revenues. Baseball already has a monstrous problem with money differential by market and forcing small market teams to spend even more every year would make it worse. It would be hard to convince owners that they HAD to spend X amount without some kind of cap.

[MrTPlush]

There is a big problem. Players, for the most part, didn't mind the cheap salaries when they started out because they made up for it in later years. If teams are going to "get smart" and not pay for veterans and long contracts the players aren't going to be okay getting $1mil for three years and then get a HUGE pay boost to like $5mil when they are a perennial all star.

 

When the collective bargaining agreement is done there will need to be a massive overhaul to the pre arby and arby years. Getting severely underpaid for 6 years and then be "too old" is a problem. It seems the only way to get a big contract these days is to ride the arbitration train and hit FA at 27-29. Take any kind of contract to buy out those years and suddenly you are trying to get the big payday at 30-31 which isn't going well recently.

[KeithStone53151]

There is a big problem. Players, for the most part, didn't mind the cheap salaries when they started out because they made up for it in later years. If teams are going to "get smart" and not pay for veterans and long contracts the players aren't going to be okay getting $1mil for three years and then get a HUGE pay boost to like $5mil when they are a perennial all star.

 

When the collective bargaining agreement is done there will need to be a massive overhaul to the pre arby and arby years. Getting severely underpaid for 6 years and then be "too old" is a problem. It seems the only way to get a big contract these days is to ride the arbitration train and hit FA at 27-29. Take any kind of contract to buy out those years and suddenly you are trying to get the big payday at 30-31 which isn't going well recently.

 

And that's if a team even let's you up to the majors in your very early 20s. Often teams hold players in the minors longer than they should. Look at Vlad and Jimenez in the minors currently. Those guys are going to destroy MLB pitching from day 1 in the majors, they are being held back because of "defense"...yeah ok buddy.

 

I agree that the correct answer is to get players more money earlier in their careers. That of course, would cause competitive balance issues and negatively impact small market teams. I think a system mirroring the NFL is best. Salary caps and floors, but in this system...find a way to get money into younger players hands sooner.

[NievesNoNO]

I know this is Deadspin, but it's not a Deadspin article. It's a really great breakdown of the value of wins....the REAL value of wins, and the actual value of free agents, and why teams just aren't paying for big-money free agents anymore.

 

https://deadspin.com/baseball-doesnt-need-collusion-to-turn-off-the-hot-stov-1831644811

 

Interesting. Thanks for sharing.

 

"And the numbers were eye-opening: Just about every baseball free agent was being paid more than he was actually worth to his team in terms of the added revenue it would see thanks to extra wins. According to one researcher, Graham Tyler—then an undergrad econ student at Brown, and until recently the Rays’ director of player operations thanks in part to his pioneering studies in this area—teams only earn an extra $1.5 million from each additional win, meaning that a truly rational profit-maximizing owner (more on this in a minute) wouldn’t spend more than $6.75 million a year on a Machado-level talent. Anything more than that, and you’re better off staging a Marlins-style teardown"

 

I'd love to see the study related to this. So, is this saying that the difference to the owner revenue based on mostly park attendance and game day revenue streams for say a 60 win team vs 100 win team is roughly $60 million?

 

I'd like to know what the baseline is that is being used. Are they saying it's 1.5 million per win across the board or at a certain level? I'd have a hard time believing there's any difference in revenue between a 80 win and 85 win team.

[owbc]

There are a couple of ways that the arbitration clock could be fixed. One is to have it start the second a player gets drafted (with different clocks for HS vs. college). Another is to have it based on age rather than service time. The times would be based on the current average age of arbitration and free agency. Either one solves the problem with top prospects without dramatically upsetting the status quo.

 

In addition, players claimed off the waiver wire should automatically reset to a period of arbitration, regardless of age. That solves the Jesus Aguilar situation--the Brewers are rewarded for finding him by getting extra arbitration years and Jesus Aguilar gets rewarded for being a late-bloomer. The exact length of the arbitration period could be based on a number of factors including service time.

[xisxisxis]

The huge problem with % of revenue is; whose revenue?

The collective bargaining agreement would be based on total revenue in baseball and they agree on X% to player salaries.

 

The owners set up guidelines on how to meet that obligation (shortfalls or excess) and the players union sets up guidelines how to deal with excess or shortfalls to the targeted salary amount. At the end of the year, if there is a shortfall to X% then based on the owners guidelines, additional salary is apportioned to the players based on union guidelines. On the other hand, If there is an excess of money to players, then the owners withhold some of the final paycheck $ from the players based on union guidelines and that money is dispersed to owners based on their guidelines to account for the excess pay.

 

The point is that the owners are only then negotiating with other owners on how to meet their obligation and the players union is installing guidelines to make sure their members are paid equitably.

 

I'd love to see the study related to this. So, is this saying that the difference to the owner revenue based on mostly park attendance and game day revenue streams for say a 60 win team vs 100 win team is roughly $60 million?

 

I'd like to know what the baseline is that is being used. Are they saying it's 1.5 million per win across the board or at a certain level? I'd have a hard time believing there's any difference in revenue between a 80 win and 85 win team.

I would think you are right and that context matters.

 

You can find Graham Tyler's Graduate thesis (PDF) at the bottom of the page here:

 

http://www.perfectgamefound.org/tpgf-fellow-graham-tyler/