THE BOOK--Playing The Percentages In Baseball

I assume that most NHL players who suffer serious (i.e. little chance they’ll play at all over the rest of their contracts) get bought out?  If this is the case, how can the players break even?  Presumably they’d break in the way you mentioned in the cases where they are healthy, just ineffective (relative to their contract).  So the buyouts for injuries can only make the buyouts a net win for teams, right?

I am very pro-team, but I can’t really support buyouts of any kind.  If the team is stupid enough to sign the player, they live with the deal.

I still don’t understand why all contracts in football aren’t guaranteed (maybe I’m wrong about that?).  Presumably there is some player, somewhere, who would say “I will take less money in exchange for the security”, and lower his financial demands enough that the team is happy to guarantee his contract?

Jon, I’m not up like crazy on it, but I’d say that most buyouts (and there are NOT alot of them to begin with) are with the ineffective players (Bobby Holik, e.g.) that teams need to shed for cap purposes.

Guys on the low-end don’t have long-term deals to begin with, so they don’t bother buying them out.

Between football and baseball, I don’t think either system is necessarily better or more fair for players or for teams.  So long as both sides understand what they are getting into, make intelligent choices, and the rules are not changed halfway through the contract.

Football players can be cut at any time.  So they get their security through large signing bonuses, which they keep as long as they fulfill their end of the contract. (Ricky Williams had to pay some of his back when he quit the team in the middle of a deal).

In baseball, since it is guaranteed, players will often defer large amounts to the later years of the contract.  A superstar getting a 6 year deal might get 10 million in year one, followed by 13, 15, 17, 19, and 21).  Would a football player sign that? (if his present value was similar?)

Hell no!  He’d know that the team would take 3 years of his best play, and cut him as soon as his price goes up and his skills start to decline.  Instead, he’d make sure about 25 million of that came in a signing bonus.

Right, OVERALL, the league and the union comes out equal, regardless of what the deal is.  (As long as the revenue is shared the same way.)

The question is if one subgroup is disproportionately affected.  With the NHL, we see that the individual players are not affected.  And the teams get to pare down their cap its.  So, it works.

But, what if the buyout was at 33% instead of 67%?  Well, some guys with bloated contracts would take a hit.  But with revenue sharing, the rest of the players would profit.  It would be fairer in that it will be closer to tie-ing actual performance to salary, rather than what it is now (expected performance).

If you make the buyout closer to 0% (say 10%), players lose the security, and then anyone who gets hurt alot, or happens to luck into a bad year will really feel it.

So, it’s a question of trying to find the class of players that are currently being biased (undeservedly) favorably, and trying to balance it out.

In the NHL, the Bobby Holik and Alexei Yashin contracts were easy targets to try to correct.  In MLB, the disproportionateness (that a word?) is in the long-term deal of free agents vis-a-vis the exploitation of the under-28 crowd.  Something’s going to give, in some fashion or other (not necessarily buyouts).

The team that loses him get to have his contract reduced on the books because they get to spread the buyout over 8 years for cap purposes.  The team getting the player pays fair value for the player.  Everyone wins.

I don’t generally think that the team buying out the contract wins.  Generally, it is impossible for them to get a better player with the 1/3 in dollars that they saving.  Financially, it’s usually a loser move IMO.

IIRC, it tends to be a more a move that occurs when the team is under cap or financial pressure - ANA with Bertuzzi or NYR with Holik are obvious examples.

This probably warrants a post to see if there’s one where you can argue it as a hockey move that made sense.

Here’s how I am thinking it.

I had a 6-yr mortgage on a house for 45MM.  I paid off 2 years and 15MM of that.  I still have a 4-yr mortgage at 30MM.

However, in those two years, the housing market plummeted.  The house is now worth 10MM.

Here are my choices:
a. continue to live in this house, worth 10MM and pay 30MM for it
b. give the bank the house back, plus 20MM

If I do option a, I am left with a property worth 10MM, to which I will pay 30MM.

If I do option b, I am left with no property, and 20MM less.  I can take the other 10MM I would have spent and bought a house for 10MM.

In either case, I am left with the same thing.

The difference is that I get to defer my taxes on the deal.

To the extent that Holik or Bertuzzi or Yashin or whoever has lost at least 67% of his value, it’s a no-brainer.  If he has lost say only 60% of his value, then you have to decide if the wiggle room of the cap is worth it.

The same thing is possible in baseball without any rule changes, if it’s a break even situation as in the examples.  The Angels can pay 2/3 of Gary Matthews’ contract and trade him and the remainder to a team that thinks he’s worth 3.5 million.

Actully, I don’t think any team would pay 3.5M for Matthews at this point (considering Abreu only got 5M).  So if the Hockey rule were in effect, the Angels would be the winners and Matthews would be a loser.

One thing I didn’t see discussed above that might help clarify a bit: When contracts are bought out, the salary cap hits are spread out over twice as many years as the original term of the contract.  So your cap hit is reduced to 1/3 of the original contract’s cap hit- since the cap is TIGHT right now through the next couple years, it could possibly be more valuable to keep paying a small hit over more years. 

The value all lies in the cap hit reduction.  Not sure how much everyone knows about NHL contracts, but it is interesting how there is basically no way to ever reduce a cap hit, rather than the buyouts discussed above.  You can also send to the minors, a la Wade Redden.  The upcoming cap crunch in 10-11 (Hawks fan, btw, so I hear about this constantly) is interesting because everyone is freaking out that their team will not have room to sign players they need, but basically NO teams have the space to significantly add cap dollars.  A few teams like Carolina, Buffalo etc. have internal limits that they might raise in event of such a fire sale type market, but Buffalo especially can’t do that for more than a year or two I’d think- their tickets are incredibly cheap and thus revenues limited even with ravenous fan support.  Tangent aside…

Tango, in your mortgage example, I guess it would be like paying off the 20MM over twice as long...which is much more likely to be a good deal.

Overall, and I think you have commented on this in the past, the NHL’s system is BY FAR the fairest of the four major sports.

I don’t want to speak for the other sports other than MLB and NHL.

From what I remember with the NBA, everyone is a free agent after the first contract?  And you only have two rounds of draft picks to begin with?  So Lebron is a free agent at age 22?  I like that.

The NFL gives out huge contracts to draft picks as well, don’t they?

So, I don’t know if the NHL is the fairest, but MLB is almost certainly the least fair.

It takes about 10 years for a MLB player to get recover from his low wages.  That is, an MLB player gets paid 30 cents on the free agent dollar for his first 6 years (or around 50 cents on the fair price).  It takes about 4 more years of premium pay as a free agent for him to have earned in dollars as much as he produced on the field.  So, anyone with an MLB career of less than 10 years has been underpaid, and anyone with over 10 years has been overpaid (generally speaking).  The wages of the stars is being supported by the non-stars.

In the NHL, it doesn’t work like that.  Players get to fair market value much faster.  I presume in the NBA, it’s probably the same.

What is incredible is how the rank-and-file in the MLBPA, which is the majority of players obviously, are oblivious to all this.