THE BOOK--Playing The Percentages In Baseball

I am all for teams holding the players back.  I have no problem with them “lying” about it either.  To me, saying “we think he’s not ready yet, but he certainly will be on May 29” is just subtle way of saying “screw you, Players Association”.  And that makes me happy.

However, the teams are going to be the ones who get screwed at some point - with everyone keeping players in the minors longer, the top 17% is going to have less service time.  One of these years (maybe this year?) a team is going to hold a high-profile prospect back, only to find that he does end up in that top 17%.

I’m almost always siding with MLBPA.  But, the MLBPA deserves the slapping it gets here, because part of the strategy of the MLBPA was that the owners would operate with a virtual gun at their own heads, never really thinking about finances.

Now, the relationship between WAR, service time, and salaries is clear.  The teams are aware of it.  And, with the way Selig’s office influences slotting and other aspects along these lines, the MLBPA should be getting the wakeup call here.

Teams are still overpaying for free agents.  But, at some point they won’t.  And therefore, the teams will earn huge profits on the slave-wages they give to the arb and pre-arb players, and not simply pass it on to free agents.

What Is The Big Deal about teams holding back minor league players in an effort to avoid Super-2 status?  Isn’t this just one more legitimate roster-management issue?  If it buys an extra year of service before free agency, and it’s codified in the CBA, where is the crime here?  When you’re in a competitive situation, do you not look for ways to improve your chances under the existing rules?

What might REALLY be interesting here is that the service time required for Super-2 status may be declining, because I *believe* (can someone check this) that the cutoff date is determined by the average service time of rookie players… if this is true, then more players being held back means a lower service-average for rookies.  So if I’m right, some of these guys who’ve been held back might get Super-2 status anyway.

They can do whatever they want.  My point is why can’t they be honest about it?  That’s all I ask.  Not that they exercise their rights.  But that they can’t tell us the true reason.

***

The 17% is determined based on guys with at least 2 years, and less than 3 years, of service time.  So, we won’t know if he qualifies or not, until he gets into that group.

For example, a rookie could make the opening day roster, then be sent down for 4 months.  Then be full time in years 2 and 3.  His service time will be 2 years, 60 days.

>They can do whatever they want.  My point is
>why can’t they be honest about it?  That’s all
>I ask.  Not that they exercise their rights.
>But that they can’t tell us the true reason.

A noble sentiment, and I’m not being facetious: all else equal, I prefer honesty myself. But being entirely honest on this issue (’We’re trying to optimize our roster management and financial obligations by making sure we keep this player under team control for an additional year’ ) is likely to draw a lot of left-wing media criticism… and if there’s one thing MLB owners don’t like, it’s left-wing media criticism.

What I’d really like to see is some team’s GM explain why it’s Not An Evil Thing.  And it’s not.  But most people, at first blush, don’t understand this.  They see it as billionaire owners taking advantage of young players.  IMO, it’s something for the lawyers to bicker over vis. the next CBA.  Until then, it’s entirely legitimate.

Teams will continue to dance around the reasoning so long as they perceive it to be controversial.  And the media will continue to treat it as controversial until someone in an MLB FO explains the logic.  So we find ourselves in an uneasy stasis.

Correct, it’s no more evil than paying arb-players 50 cents on the free agent dollar.  Or giving out highly-discounted long-term packages to star players in their 20s (not yet free agents):
http://www.insidethebook.com/ee/index.php/site/comments/is_hanley_ramirez_worth_a_13_yr_248_million_deal_with_only_2_years_of_servi/

The media actually is pretty mute on this story.

Brian:  why in the world would you call it “left wing” media criticism? That’s just knee-jerk Limbaughism.  Are you under the illusion that sportswriters are all lefties?  And even if they were, what possible relevance would that have? 

It’s obvious why writers would criticize a team in this situation.  If the team were honest about their motives, they would have to admit that they are putting profits ahead of winning.  In this situation, it’s a straight tradeoff—I’m putting an inferior player on the field in order to save money.  The teams lie because they expect, correctly I imagine, that writers and fans—of ALL political persusasions—would be upset to see the owner so obviously choosing to have his team lose more often instead of spending the money.

Now, this tradeoff happens all the time, of course.  For example, when a team declines to hire a free agent who’s better than their current player at a position.  And fans understand that their team has financial constraints.  But refusing to play a player already on your payroll, when he deserves to play, just to save some money down the road—I think that’s a lot harder for fans to accept.  And politics has zero to do with that.

Now I’m not sure if you’re being a little bit facetious.  Are you saying simply that manipulation of Super-2 is no different that the inherent discounts in pre-FA contracts?  Or that arb deals and pre-FA contracts are also unfair?

I suspect the media is quieter with its criticism of pre-FA deals because there’s a greater understanding as to how and why they happen the way that they do.  The CBA is constructed in such a way to reward veterans, essentially at the expense of less-experienced players.  Stated another way, players have to earn their way to the Big Buxx with service time.  This is not TOO unlike most aspects of economic life.

I’m not peacocking: I know you know all of this, most likely better than I do.  But if you’re feeling that HanRam’s contract was unfair, then why did he sign it?  He could have waited for free agency if he felt his overall compensation would exceed that of the proposed deal.  What’s the value of security to a $400k/yr player versus the value of security to a 32 year old who has already earned $50mm?

>why in the world would you call it “left wing”
>media criticism? That’s just knee-jerk
>Limbaughism.

Ugh, out come the labels. I think ‘knee-jerk’ applies more to the above than to my comment. My politics, FWIW, are left-leaning. My comment referred to that part of the media which tends to paint issues like this as ‘oppression of the working man’.

It’s like a rabbi making Jewish jokes: I lean left myself, so I feel entitled

"If the team were honest about their motives, they would have to admit that they are putting profits ahead of winning.”

That is not true.  There is (outside of FLA) no MLB team putting “profits ahead of winning.” An MLB team has to have an operating budget.  That budget is, in part, based on revenues in.  That, obviously, differs substantially for different teams.  Are the Padre’s putting “profits ahead of winning” just because they don’t compete in FA dollars with the Yankees?  Of course not.

“Profits” and “winning” are both inseparable and unrelated.  This roster manipulation is part of the longer term attempt to win.  It is also part of “profits” in the sense that it will make the team more profitable by being better, for longer for less money.

I’m saying that management has the leverage, and they are going to do whatever it takes to maximize that leverage, be it with the
- sign-with-me-or-I-get-a-comp-pick-next-year draft, or with
- sign-with-me-or-I-renew-anyway pre-arb salaries, or with
- compare-yourself-to-others-in-servitude arb salaries, or with
- controlling of service time.

It’s plainly obvious what they are doing with the first three items.  And no owner would try to make up a story contradicting it.

But, with service time manipulation, they not only do it, and instead of keeping quiet about it, proudly make up a reason about the player “now being ready” at the exact moment that it helps the team with service time!  I mean, really.  Either tell the truth, or don’t comment on it.

"If the team were honest about their motives, they would have to admit that they are putting profits ahead of winning.”

This is absolutely not true!  Teams are sacrificing a present-day improvement for future improvement.  I thought this was obvious.  The Orioles aren’t going to come close to contending this year - so what possible justification could you make for them playing Wieters now at the expense of 2014, when they certainly could be contending?

When was the last time you saw a legitimate contender hold a player back?  I’m sure it happens, but it’s not that common. It’s not an entirely fair question, because most contenders have more financial resources.  We might have seen last year with Longoria if he wasn’t signed.  I thought it was happening with Price, but it seems like the Rays knew he wasn’t ready.

Just off the top of my head…
Carlos Gomez?  not held back
Tommy Hanson - maybe.
Dexter Fowler - not held back.
Matt LaPorta - not held back.
Chris Coghlan - not held back.
Tim Lincecum - not held back.

"If the team were honest about their motives, they would have to admit that they are putting profits ahead of winning.”

What about the argument that they are doing what’s in the team’s best interests to win long-term at the expense of the short term.  Will the O’s be better with or without Matt Wieters in 2015?

I agree that teams are b*llsh*tting with their excuses, but I’m able to just ignore it.  I don’t care what they say, because I can’t control that.  I can control how I react to it, tho.  I know what they’re actually doing… and that’s enough for me.

Longoria was held back by 2 weeks, enough that he gave up 1 year of free agency.  That was a HUGE savings on the deal he got.

Brian: I think what bothers me is that the “reporters” report whatever the teams say, and they do not question them.  They are more like press release agents than journalists.

"Longoria was held back by 2 weeks, enough that he gave up 1 year of free agency.  That was a HUGE savings on the deal he got.”

I’m not sure I follow here.  Longo was held back by two weeks—that I agree—but assuming he never goes back down again, doesn’t that mean that at the end of the 2010 season, he will have accumulated 2 yrs 166 days?  And had he not signed his deal 6 days into his career, wouldn’t that have been more than enough to get him Super-2 status?  Or am I misunderstanding the comment? (always possible!)

"Brian: I think what bothers me is that the “reporters” report whatever the teams say, and they do not question them.  They are more like press release agents than journalists.”

I think this says more about the media as a whole than it does about the baseball media specifically… but even so, I’m not sure one can generalize. It seems to me that this is not the only place I’ve seen this discussion crop up.  It’s being covered in multiple places (the idea that teams may be holding certain players back for economic rather than short-term competitive reasons).

Either way, tho: I guess I still don’t see what the big deal is.  If the PA is unhappy with it, it’s an issue for the next CBA.  Under the existing agreement, there’s nothing wrong with it.  Whether teams choose to be candid about the reasons behind all their actions just doesn’t bug me so long as each team plays about 162 games (and so long as my favorite has a shot to play up to 19 more).

I think there’s something about releasing a player with a non-guaranteed contract and only owing him 1/6 though (Todd Walker) - you can’t do it for financial reasons.  Any chance there is something similar here?

My guess is the owners know the Union will file a grievance and complain about anything (you know, like protesting voluntary charitable contributions made by its members), and there’s just no reason for them to tell the truth in this situation.

Brian, he would get 5 years and a bit less than 172 days, and therefore not qualify for free agency until one more year.

Basically, he managed to have Longoria have 3 pre-arb years, 1 super 2 year, and 3 regular arb years (7 years in all), as opposed to 3 pre-arbs and 3 regular arb years (6 years in all).  The Rays managed to trade his first free agency year into a super2 year.  That’s one heckavu valuable trade.

Since the Orioles are a profit-making enterprise, these decisions always involve a potential tradeoff between winning and profit-taking.  There’s no reason to think all teams have the same, fixed profit margin.  But let’s leave that aside.  There’s still something different about these decisions, compared to, let’s say, the Nationals choosing not to hire a decent free-agent starter this winter because they didn’t expect to contend, and thus (arguably) saved that money for a time it would be better spent.  There has to be a reason teams routinely lie about this.

One thing that’s different is that Wieters is an O’s employee.  Fans know their team can’t always afford the best players, but they expect teams to put the best players they do have on the field. It just seems perverse to keep a player in the minors who you know will improve your team now.

Also important is the impact on the player kept in the minors.  By keeping Wieters in the minors for 2 months he should have been in Baltimore, Wieter’s chance of winning ROY were surely diminished.  His chances of hitting 400 HRs, or reaching 3000 hits, or being voted into the Hall of Fame have all been diminished.  Not by a lot, of course, but diminished.  He pays a price for this, and fans pay a price too. 

A system that incentivizes teams NOT to play the 750 best ballplayers is flawed.  It’s unfortunate that teams aren’t content with six years of exploitation wages, but look to play an additional angle (but I understand why they do it).  I don’t know the solution, but I hope someone figures it out....

"It’s unfortunate that teams aren’t content with six years of exploitation wages”

Chuckle, chuckle.  Is MLB ripe for a revolution?  Who, exactly, is starving in a business where the working-class minimum wage is north of $400k per year?

0-6 players are ‘underpaid’ relative to an absolute free market, but because of this, free agents are ‘overpaid’ relative to that same free market.  The dollars which DON’T go to the ‘slaves’ (lol) go to the free agents instead.  This is a tradeoff the PA specifically seeks in the CBA, with the blessing of the player reps, who are—not surprisingly—on average, well into their free agent years.

I find it hard to go all Karl Marx on baseball’s labor practices.

Further: do the Orioles owe Matt Wieters the maximum conceiveable chance to reach personal milestones?  This seems to me to turn the whole idea of sports on its head.  Should Matt Wieters sue the Orioles in 1927 when, after an unfortunate beaning, he is forced to retire with 2,983 hits and 398 HR?

Come on, man: firstly, I’d have been surprised had Wieters’ presence in the MLB from opening day been worth more than 1 WAR to the Orioles; 2nd, I’d be shocked if that 1 WAR were enough to come anywhere close to pushing the O’s into the playoffs this season; 3rd, I think the O’s would be flummoxed themselves.

There’s a well-defined CBA governing the state of play between ownership and employees, and from what I can tell, all parties are exercising their rights thereunder.  All the rest is just the flapping of gums

Is the system flawed?  Sure.  But the players agreed to it, so now they can live with it. 

As for the “exploitative” wages.  Haha… Brian said it better than me, but this salary structure was agreed to by the players. 

Clearly they are happy to throw the marginal big-leaguers and career minor-leaguers under the bus, at the expense of the veterans.  Why?  I don’t know exactly, but Brian’s suggestion (that it’s due to the power of the player reps) makes perfect sense.

Also:
Where else do you see employees getting (year-to-year!) 800% salary increases after a few years?  If anything is absurd here, it’s the salary progression of arb-eligible players.

"If anything is absurd here, it’s the salary progression of arb-eligible players.”

Absurd in terms of the percentage increases, certainly… but in reality, the arb process serves as the stabilizing mechanism by which salaries adjust from 100% team controlled to free agency.

I forget which site first demonstrated it, but pre-arb players tend to earn 15-20% of what a 1st-year FA tends to get; a 1st year arb-eligible player gets about 40%; 2nd year 60%; and 3rd year 80%.  Whichever site that is, these are the percentages they use when evaluating long term deals signed by young players, and the framework seems to fit reality well enough.

The reason for the massive percentage increases, of course, is because, as demonstrated, newly minted players earn artificially depressed salaries, while free agents earn artificially inflated salaries (per the CBA)… so the adjustment mechanism (arbitration) has a lot of middle-ground to make up in a short three years.

I find that (the percentages being so smoothly increasing) hard to believe when increases from ~$500k to several million are commonplace.  Maybe I’m just biased by the extreme cases.

Totally agree with your last statement though, at least up until this year.  I think that teams are finally “getting it” and are easing up on handing out the bloated contracts to mediocre veterans.

So it’s actually pretty interesting - I think pretty soon we’re going to see some players get more in their last years of arbitration than they would as free agents - because it will take a bit longer for the arbitration salaries to correct.

Take someone like, say, Ryan Garko.  It wouldn’t be surprising to me to see him get around $5M in his final arb year, but only $3M or so as a free agent.  What do you think?

>I find that (the percentages being so smoothly >increasing) hard to believe when increases from >~$500k to several million are commonplace.

Considering that $500-600k is 20% of $2.5-$3mm, and that most free agents are not exactly stars, it doesn’t seem entirely unrealistic to me.  I wish I could recall which site it is, but I tend to pick up their work from a newsreader, so I’m not always focused on the origin.  But whoever it is did do the work to determine those percentages (I’ve seen the work somewhere in my hazy past).

I agree with you that we may soon see some anomalies in the transition from arbitration to free agency, given the current economic climate and the shift in MLB from veterans to younger players.  I think the primary driver behind this will be the difference between the processes themselves: arbitration is more mechanical and based almost entirely on precedent, where free agency is more of a true free market.  So arb salaries will probably continue to slavishly rise per recent history, while free agency should continue to adjust to the environment.

So your scenario—the $5mm 3rd-yr arb player getting a $3ish mm deal in the 1st year of free agency—seems realistic to me.  I think we’ll see this sort of thing happen.

Brian:  I don’t really understand your response.  I didn’t argue that the Orioles “owe” Wieters a chance to reach milestones or have the longest career possible.  My point is that those are good things for the game and for fans (and of course Wieters), and it’s unfortunate that the Orioles have been incentived to prevent them.  Do you disagree? 

My interest is in understanding why teams routinely lie about this behavior.  You don’t like my theory.  What’s yours?

And while you are of course entitled to any opinions you want to hold, I have to say that “left-leaning” does not mean what you think it means.

Guy:

I do disagree. I don’t really understand why you’d think any MLB team has EVER had an incentive to maximize a rookie’s chances at reaching career milestones, but PARTICULARLY in the modern era, when almost no player reaches those milestones with his original team.

Given the litany of things the Orioles care about, where on that list do you think individual player milestones might rank?  Right at or at least very close to the bottom would be my guess.  Only once a player has come close to reaching a milestone with a team does it come to matter, and those interests are largely economic, just like most others.  BTW, the Orioles are not incentivised, as you phrase it, to PREVENT Wieters reaching individual goals.  They simply have zero incentive to consider those goals at all.

>My interest is in understanding why
>teams routinely lie about this behavior.
>You don’t like my theory.  What’s yours?

I think various people in this discussion have addressed the likely reasons, including myself. Teams will lie for many reasons, but in this case it’s most likely some combination of fears vis. bad press or possible PA grievances.  Either of those explanations are perfectly adequate reasons.  You mention that I don’t agree with your theory, tho: I’ve only re-skimmed, but can’t find it.  What IS your theory as to why teams lie about this?

The 40/60/80 was said by me.

The only reason that the current wage system is acceptable is that, as was said, the transfer of wealth is going from the young stars to the older stars.  So, by the time their careers are over, the stars will end up with just about what they should have gotten (a bit more actually), while the scrubs are the ones who subsidize this.

Now, I said RIGHT NOW.  That’s because the owners have been incredibly stupid in taking the savings of the non-free agents and passing it along to the players, instead of pocketing it themselves. 

And the MLBPA has constructed the CBA on the expectation that the owners will continue to act irrationally.

Now, smart people are in charge.  I do not expect this to continue.  I expect teams to start to pocket a substantial amount of the pre-FA savings, and NOT pass it on to the free agents.  Players will start to earn a much smaller share of the pie.

The end-result will be an NHL or NBA system, where players are going to be guaranteed a certain percentage.  Indeed the MLBPA will be BEGGING for this system, and not conceding to it.

If the owners are smart, they will continue the current system, as it works perfectly for a group of rational GMs (of which we have more and more).

The end-result will be an NHL or NBA system,
>where players are going to be guaranteed a
>certain percentage.

This makes sense to me.  Right now, if you add MLB and minor league salaries, it comes to about 57% of revenues (51% to MLB, 6% to MiLB), which is about the same as the NBA and NHL.  If you are right that the owners will begin to act more rationally as a GROUP, then the piece of the baseball pie going to players will shrink (as you suggest), and I agree with your scenarion: that the PA will make a guaranteed pct. a central part of their demands in some future CBA.

It amazes me that it took an explosion in open-source analysis to prove to teams that more young players should get a chance.  A replacement level player is replacement level whether he is 36 earning $4mm or $25 earning $400k.  It never made sense to me that there were so many older scrubs still pulling down big paychecks.  I suspect the rude awakening for older ballplayers has only just begun to arrive.

"It never made sense to me that there were so many older scrubs still pulling down big paychecks.  I suspect the rude awakening for older ballplayers has only just begun to arrive. “

I hope so.  No offense to the older players, but as a baseball fan, it just infuriated me when the Pirates and Giants (those are the teams that stick out, though of course there are many) would continually sign these $2-5M players (often a few at a time) because they “can’t afford to sign” a big-time player. 

“If you are right that the owners will begin to act more rationally as a GROUP, then the piece of the baseball pie going to players will shrink (as you suggest), and I agree with your scenarion: that the PA will make a guaranteed pct. a central part of their demands in some future CBA. “

Either that, or they will attempt to change the salary structure in such a way that the young players (say, years 2-4) make more money.

Guy:  You can look up the patterns of campaign contributions at the Baseball Reference of the political world at Open Secrets.org and establish a clear pattern of support for left wing candidates and causes.  Or, you can do the Yogi-thing and learn a lot by watching.

The MLBPA has gotten to its position today by exploiting the stupidity of its opposition.  It will be interesting to watch it develop strategy against the quants.

"Either that, or they will attempt to change the salary structure in such a way that the young players (say, years 2-4) make more money.”

This I consider unlikely, purely because that contingency (2-4 yr players) has never had, and is never likely to have, a great deal of power in the player/owner relationship.  The power lies with the veterans, so I would expect the CBA to tilt that way as well.  If all parties behave rationally from here on out, I would expect some natural redistribution of income from older guys to younger guys via lockup deals… but I don’t expect to see this codified in any CBA.

The PA can’t really do anything about ownership’s declining willingness to shower money on underproductive older veterans, so one might expect them to go for other forms of compensation, such as increased pension benefits.  Just a thought.

I think folks here have demonstrated a solid understanding of all the economic factors behind player personnel decisions like these. Likewise, I think everyone understands how a player’s early years provide greater cost control to the teams and the later years frequently offer the players greater opportunity. The issue at hand, though, is the public comments teams make in these types of situations, and I really think the only way to look at the words is to view them through the perspective of marketing and public relations. The temptation is often to view those as selling (marketing) and spin (public relations), but I think that would be an oversimplification of the value marketing and PR can provide.

Marketing is an opportunity to manage customer expectations, allows a company to position itself in its marketplace (aka branding), and can be used for topical messaging. This is augmented by public relations which manages the spoken or written communications of the business. Our inclination is often to associate these practices as only being directed at existing or potential customers, but they can just as well be directed at others, such as employees, investors or market rivals. When done well, the marketing and PR align with the product (or service) and keep customer expectations in line with what they will receive (whether a product or service). If those are achieved, the likelihood is that they engender customer satisfaction, repeat business, and increased business through positive word of mouth.

All of these marketing and PR actions take place in an environment with numerous obstacles which must be overcome. Chief among them are the cultural tendency to focus on negative news (it has a longer lifespan than positive news), consumers impervious to traditional marketing strategies (this is usually referred to as consumer cynicism), average consumers have only a cursory level of knowledge about the product or service, and that each industry has different customer expectations (i.e., you have a 2:30 doctor appointment but aren’t seen until 3, you’re thinking, “That wasn’t too bad,” but a restaurant that makes you wait 30 minutes from your reservation will elicit a very different response from you).

Now, to apply all that to baseball (or sports), can mean different things. On one end is a team like the Yankees which markets themselves as a premium brand offering a championship-caliber product every year. On the other end is a team like the Pirates which might promote good value on family entertainment while giving fans a chance to see up-and-coming stars. The person going to a Yankees game is likely bothered by a loss and the person at the Pirates game is more likely to think it was a good time even if the home team lost. If a team’s on-field performance is closer to the Pirates than the Yankees, a talented player has, at best, marginal positive impact on revenues or publicity.

And that brings us to the Orioles and Matt Wieters. Let’s start with the fans. The team has been on an 11-year run of under-.500 performance. Fan expectations and ticket sales are generally a reflection of prior-season performance (the 2009 Rays are an example) which can be augmented with expectation-raising off-season moves (the 2008 Tigers are an example). The Orioles have little reason for fan support in these regards. This is compounded by the fact that coming into the season, the general consensus was that the three best teams in the league play in the same division, that the Orioles completely lacked a pitching staff providing any basis for hope, and a perception that the front office is one of ineptitude wrought by years of poor moves by owner Peter Angelos.

Looking at the business side of things, the organization surely doesn’t expect strong on-field performance this season. A decimated system takes years to rebuild, and they only began the process recently. On top of that, major personnel decisions are made before Spring Training, and it would have been premature to anoint Wieters a starter too far in advance simply because they couldn’t be certain he was ready and the risk of more negative fan reaction should the plan fail is substantial. And even if his Spring Training performance warranted a Major League roster spot, there was basically nothing to gain. For one, the bulk of ticket sales have already been made, the early season is among the worst times for attendance even for strong teams, and (as has been discussed) placing him on the Major League roster only begins the clock on his arbitration and free agency eligibility. On this final point, it’s important to remember that the average fan doesn’t know about Super 2’s or the fact that Wieter’s agent (Scott Boras) will almost certainly eschew any early long-term contracts and will leverage free agency once possible.

From the team’s perspective, then, there is no reason to have Wieters start the year in the Majors. It won’t help on-field performance in the near term, but it will in the long term, in addition to the financial incentives it offers the team. And I don’t think any fan with a reasonable understanding of the team’s financial and player personnel situations would disagree. So if you’re the Orioles, the following type of late-March public statement from GM Andy MacPhail would have a purely negative effect: “We’ve decided to reassign Matt Wieters to Triple A. No doubt, he had an impressive camp, he looked good – no, he looked great – but we feel it’s in the best long-term interests of the Orioles if we bring him up in late May. This will save us money in the short term and it will ensure that we have Matt playing for us until at least 2015 instead of 2014.”

The reaction to such an honest comment would be immediately and completely negative: the perception would be that the team is sacrificing the present for the future, the team isn’t interested in winning as soon as possible, and the team is being cheap. The truth, though, is none of those. This season can’t be sacrificed if it’s already hopeless, at most keeping Wieters in AAA has a negligible impact on winning soon, and the team is not being cheap but is instead being financially savvy within the framework of the CBA. In sum, the marketing and public relations that come with such a comment are all negative – fan and media chatter will be critical, ticket sales can only be hurt by this, the average fan will not appreciate the long-term benefits, and the negative perceptions can linger for years (just like how the front office is still seen as inept despite the generally good work of Andy MacPhail).

A perfect real-world example of this in action is the famous White Sox White Flag trade of 1997. They were 3.5 games out of first place as the July trade deadline approached, and they made moves indicative of conceding the season. For one, most fans don’t realize that a team 3.5 games out of the division lead at the juncture is – historically speaking – unlikely to overcome the deficit. Two, fans overlooked or didn’t understand that all the players the White Sox gave up were not likely to be retained after the season since they were impending free agents. Finally, there was little down-the-road appreciation for the fact that the players acquired were key elements to the team’s 2000 division title. No matter how well owner Jerry Reinsdorf or GM Ron Schueler explained the trade, the fans and media were extremely critical. Looking back, though, I think many could reasonably argue the worthiness of this trade, but it’s important to note that real-time and long-term perceptions by fans and media are rarely reasonable, nor do they sufficiently account for the long-term business needs.

So, when all this is applied to the Wieters situation, what did Andy MacPhail say? From a marketing and public relations perspective, I’d say he made a wise comment: “I think he had a good camp. He certainly had a good spring offensively. He’s certainly one of the best disciplined young hitters that I’ve ever seen in my career. I think there is probably more work to do on the defensive side of the equation. Hopefully, he’ll continue the type of year he had last year and it won’t be long before we see him in Baltimore. Those things become self-evident over time.”

(I should note that the Baltimore Sun writer Peter Schmuck noted this in the immediately following paragraph: “The move is both strategic and economic. The club wants to give Wieters the chance to excel at the Triple-A level the way he did at Single-A Frederick and Double-A Bowie. Team officials also want to hold him back to preserve a seventh year under club reserve, a strategy the Tampa Bay Rays employed with Evan Longoria....” At least in this case, the reporter did behave like a journalist instead of like a press release agent.)

To put this long-winded explanation into a concise summary, the team stood to gain on many levels by assigning Wieters to Triple A to start the season. Even if the reasons were solely financial, there is nothing positive which can come from publicly saying that. While knowledgeable fans may want to hear a team say the direct truth, the business only stands to lose by doing so.

Finally, I find it interesting that in response to so many baseball-related moves, it’s common for fans and media to refer to the sport as a business. Yet, when evaluating situations like these, that facet of the sport – and business is imbued throughout it – is suddenly disregarded. From a business perspective, though, I don’t find any fault with how the Orioles publicly spoke about Matt Wieters starting the year in the Minors, and I’d say the same thing about the Rays and their handling of Evan Longoria and David Price.

Maybe this is off-topic, but since the post had Wieters name on it, I thought I’d ask this question:

Has your (should your) expectations of him be different given his .890 OPS over 161 plate appearances in Triple A this year?  I know a lot of people were sky high on him, but my guess is that if you input the 161 appearance sfrom this year in any system, it would dampen the expectations a little bit.

My expectations are no different.

Oliver says:
projection out of college
266/346/431 341-wOBA

2008 A/AA MLE
331/411/561 416-wOBA

new projection for 2009
294/373/487 371-wOBA

2009 AAA MLE
295/364/504 373-wOBA

Brian, what was your projection going in to 2009 and what is it now?

King Yao, you bring up an interesting topic.  A player can actually perform considerably worse this year than last year, yet his projection goes up (or stays the same)!  In fact, as long as his performance this year is better than his projection going into this year, more or less, then his projection will go up.

So, for Brain, if his projection going into 2009 were less than .373, then his current projection should go up. If it was more than .373, it should go down.  And if his projection going into 2009 was around .373, then his current projection should be around the same.  That is why I asked him to give us his numbers going into 2009 and his current ones.  I only see “new projection for 2009.” Although the fact that the new projection is right around what he actually did this year strongly suggests that his projection going into 2009 was very similar as well (should be a little less).

An extreme example will explain what I mean:

Let’s say that a player’s BA in 2008 was .380 in 150 AB.  Well, our projection for him in 2009 will be something like .290 (I am guessing).

What if he hits .330 in 2009 in the first 300 AB?  That is considerably worse than he did last year.  Will his .290 projection go up or down?  It will go up of course, since he now has a .347 BA in 450 PA, which is a projection of like .300 or so.

NaOH said:
“From a business perspective, though, I don’t find any fault with how the Orioles publicly spoke about Matt Wieters starting the year in the Minors, and I’d say the same thing about the Rays and their handling of Evan Longoria and David Price.”

My examination of the situation is firmly rooted in the business end of things, and this is why I completely agree with you. Whether they choose to own up to it publicly or not, ownership’s actions in this regard are entirely consistent with the CBA and with sound business practice. Are corporations always forthright publicly with their reasons for a specific action?  Absolutely not.  They spin every situation in the way which reflects best upon them.  Why anyone would think baseball owners should behave differently is beyond me.

MGL, good point.  I wasn’t even thinking of that possibilty.  I was more thinking of PECOTA’s high projections (IIRC, they had him rated as the 3rd bets major league hitter going into 2009), so my first thought was how much lower would his projection be now given this year’s AAA stats.

I think a lot of people are expecting Wieters to be Mickey Mantle redux right out of the box, and so I’m skeptical of most projections sets at this point… particularly PECOTA.  I suspect he’ll hit well enough this year, but not quite as well as publicly available projections would have it.  I do think, tho, that he stands a better than even chance for a major early breakout in 2010.

I had the lowest projection for him going into the season, but he’s upped it with his AAA play - that is an extreme pitcher’s park so his MLE for 2009 looks pretty much like his AAA stat line.

Before the season 274/352/439 (I’m sure everyone will say that is too low, I know, but that’s what the computer spits out)

Now: 278/356/454

I’d be very happy if he hits that - he’d be the 2nd best catcher in the league after Mauer, have a good shot at rookie of the year, and be well under the .840 OPS I need to win my bet with MGL.

mgl - I should not have said ‘new’ projection - that was the preseason 2009. As the 2009 MLE is almost exactly what I had projected for 2009, the in season projection has barely budged.

294/373/487 - 373 preseason
292/368/485 - 369 now

My BPro article this week, Fantasy themed, has a paragraph on Wieters, and takes a shot at PECOTA’s projection. Main topic is breakouts or outliers? I believe Wieters’ 2008 was an outlier, in 2009 he he fell back to a point midway between his college numbers (assuming I translated them closely enough) and his 2008 MLEs. Still a great hitting catcher.

This isn’t exactly the same type of circumstance as what happened with players like Wieters or Longoria, but Paul Depodesta included the following on his blog when he gave the five reasons why the Padres traded Jody Gerut for Tony Gwynn Jr.:

“Money - Nobody likes to talk about it, but the fact is that dollars must factor in our decision making. It doesn’t mean that we’re just looking to move payroll, but every team has to evaluate the cost of each of [sic] player on their roster. In this case, Jody was making $1,775,000 this year compared with Tony Jr’s $405,000. That spread will likely increase next year as Jody will once again will [sic] eligible for arbitration.”

Perhaps this is one of the reasons the blog is titled “It Might Be Dangerous… You Go First.”

Teams are still overpaying for free agents.  But, at some point they won’t.  And therefore, the teams will earn huge profits on the slave-wages they give to the arb and pre-arb players, and not simply pass it on to free agents.

Tom - I’m kind of curious about this thinking.  I’m not as convinced that they’ll quit overpaying for FA but then I might be misunderstanding your point.  When you say overpaying, do you mean in terms of the value of a win generally?  As in, teams are paying players more than the wins that they’re providing are worth?

Also - I’ve seen the various commentary saying that MLB is paying players about 41% of gross revenues these days.  What I’m wondering is if that accounts for the value of the MLBAM revenue stream.  I can understand how salaries would go down as a percentage of revenue in those circumstances, because you’re starting to see pretty significant revenue streams that have no connection to winning at all.

Tyler:

Teams are paying 51% of revenues to MLB players and 6% to minor leaguers, totaling 57%, which is a virtual match with the NHL and NBA.  Tom will clarify if I am wrong, but I believe what he means by ‘overpaying FA’ refers to some combination of two things:

1) Because of the structure of the CBA, players in years 0-6 are underpaid *relative to a true free market*.  To date, teams have tended to take those savings and pass them along to free agents. I think Tom might posit, and I would agree, that it’s more rational to either pocket these profits or to invest them in the production of further 0-6 yr players, given that the CBA causes them to be underpriced.  I would argue that this trend is already well underway, and the evidence would be the long line of unsigned FA still waiting for jobs.

2) The market is starting to realize, once again, that player skills tend to deteriorate rapidly at some point into the 30s.  This is exacerbated by the recent falloff in offense, even moreso because of the flood of PED revelations accompanying this dropoff.  Teams are starting to wonder - rightly - why they should invest a great deal of money in an older player whose declining skills can probably be replicated (but on the upswing) my a more affordable, more controllable player 10 or more years younger.

I do not mean to put words in Tom’s mouth: he will represent his own position.  But this is my belief, and I believe Tom probably shares much of it.

Tyler: I believe MLBAM revenue would have to be included in the MLB revenue. But note that MLBAM doesn’t provide much direct revenue. We know that MLBAM has sold about 400,000 subscriptions to MLB.tv, MLB.tv Premium and Gameday Audio. Let’s just assume they sell 500,000 subscriptions for the year. Those three products have three distinct price points, but let’s just assume they sell them in equal numbers. That would be $34.2mm in revenue. The MLB iPhone app has sales of at least 130,000. Even if it triples to 400,000 (unlikely), that’s $2.8mm in revenue. They also have sales on an MLB mobile service for the Blackberry platform and they also have the ad revenue generated by traffic to MLB web sites. Those numbers are not known, but let’s aim high and say they have revenue of $35mm.

In total, then, that’s about $72mm in MLBAM revenue. In most any business, a 30% profit margin is considered exceptional. Let’s give MLBAM the benefit of the doubt again and say all their expenses are well controlled and they have a profit margin of 50%. That would mean they’re looking at $36mm in profit, or $1.2mm per club.

So, having used numbers that significantly favor MLBAM, the per-club profit is not much. Basically, the way to look at MLBAM is that right now it’s a marginally profitable effort on a direct level. Basically, every $1mm in MLBAM profit is only equal to about $33,500 per club, but the substantial gain is how MLBAM serves greater revenue streams: merchandise sales, ticket sales, and the other highly profitable aspects of maintaining fan interest.

NaOH:

Isn’t MLB Network also part of MLBAM?  MLBAM is going to be a MASSIVE revenue driver for MLB.  The destiny of those profits could turn into a key issue for an upcoming CBA negotiation.

Brian, I don’t think the MLB Network is a part of MLBAM; I believe it’s a separate entity. Technically, the MLB Network is a solely existing company, just like the RSNs which some teams own. This means that the network pays a rights fee, in this case MLB Network pays MLB (aka, the 30 clubs). Either way, let’s add in that revenue.

Shawn Hoffman of Squawking Baseball recently did a post on this. He estimated a $30-50mm rights fee, or $1-2mm per club. Again, let’s give MLB a significant benefit of the doubt. I’ll take Shawn’s high number times three. That’s $150mm (a lot), but “only” $5mm per team. That’s not a huge number, but it is a decent amount of revenue for each team without them having to add any additional expenses. Put another way, they’re playing the games anyway, and the teams did nothing differently and still made an additional $5mm.

If you’re interested, the recent Squawking Baseball post is here: http://www.squawkingbaseball.com/?p=684

Ditto Brian/44.

My mistake: I had forgotten that MLB Network also has non-MLB partners.  I have a feeling the PA will fight for a piece of this pie, tho, when the time comes.

Unless there’s a percentage-based salary structure in place, I don’t think the Players Association has any direct entitlement to the money from the MLB Network. Basically, the money earned from the MLB Network is no different than the League’s contract with Fox, ESPN, TBS or Sirius. The benefit to the players is, in a sense, indirect. The teams have more revenue, and this allows them to spend more on payroll.

NaOH:
“Unless there’s a percentage-based salary structure in place, I don’t think the Players Association has any direct entitlement...”

Agreed, good sir. But more money in the owner’s pockets usually correlates with greater demands from the PA in CBA talks. That’s what I meant. Of course, we shouldn’t be surprised if eventually the PA does pursue a %-based structure.

I understand what you’re saying, Brian, but the history of the Players Association indicates they tend to prevent salary impediments more than they seek percentage-based revenues. Of course, if the approaches Tyler put forth (comment #44) really take hold and lead to substantial restraint on free agent and arbitration salaries we might see the PA take a different stance.

NaOH: You made my point better than I did. This is a different market, and front offices are behaving rationally. So a different stance from the PA really shouldn’t shock us at this stage.

PS comment#44 was mine, not Tyler’s.  I was responding to Tyler.

Sorry for the incorrect attribution, Brian.

Assuming the Players Association will eventually make a push for percentage-based revenues, I don’t think we’ll see it happen with the next CBA. Negotiations will, presumably, begin soon since the current CBA runs through 2011. The methods for salary restraint you mentioned are not likely to be tremendously noticeable by then, especially in light of the broad economic climate. My guess (key word there), is that if the PA makes a push for a percentage-based structure, it won’t be until the following CBA is negotiated.

What I’d like to know – whether from you or someone else – is how long it should take before we can see industrywide effects from the salary restraint methods you mentioned. I’m in the process of assembling some salary data, and – while the data set isn’t complete – what I’m noticing is that virtually all teams spend money the same way. Basically, the top 5 (or 10) salary earners on each team are taking a tremendous percentage of each team’s payroll.

The tendency amongst fans and writers is to think a team like the Yankees is spending very differently than, say, the Twins. But what I’m seeing is that the only difference is in how much the teams are spending, not how they’re allocating the money.

"Jody was making $1,775,000 this year compared with Tony Jr’s $405,000.”

But Jody is worth $2m, Tony Jr is not worth $405k. It’s fine to cut costs if you can get the same return, but not when it hurts the team, gwynn is well below replacement level.

Depodesta didn’t say the move was strictly about money. The other factors were age, service time, the Gwynn-family connection, and, most importantly, other players. On this last point, this is what he meant:

“Jody Gerut is a productive offensive outfielder who can play all three outfield positions and is cost effective in relative terms. Well, that also describes Scott Hairston and possibly Drew Macias (who are both younger and have less service time than Jody). This move was about creating at-bats for others like Hairston, Macias, and even Headley as much as it was about the straight-up deal.

So, in summary, though we gave up a good player in Jody Gerut, we got younger, created more cost flexibility, and have provided more opportunity for other players who have a chance to be with us for a longer period of time. It’s not without risks, but that’s the rationale.”

One thing I haven’t seen mentioned here - teams HAVE to get some years of cost-controlled players at a significant discount, or they won’t develop players. (At least, not in the way they do now.) There is a significant overhead involved that’s not being accounted for in a simple WAR-to-dollars analysis here. Carribean training academies, scouting departments, a whole farm team system and signing bonuses for draftees who go bust… all of that adds up.

Colin, I think most of the expenses you referenced would be included in the costs Brian mentioned in comment #44.

Colin, I agree that you have player development overhead.  I usually use about 10% of average team revenues.

Free agents get the lion’s share of payroll.  I forget the percentage exactly, but it’s somewhere around two-thirds.  If you add in the player development costs to a team’s “payroll”, it drops down to 60%.  Free agents do not provide anything close to 60% of the league WAR.  I’m trying to remember my research, or maybe studes will confirm it from his research, but they provide I think 40% of the WAR.  Any way you slice it, free agents get an enormous unwarranted premium.

At same point, the younger players will realize how even signing the long-term pre-FA deals is very limiting.  Indeed, the kinds of deals the young MLB players sign looks very similar to the kinds of deals young NHL players sign… even though:
1 - MLB revenue is double that of NHL revenue
2 - teams losing restricted young players can get a plethora of quality draft picks, and they still refuse those in order to lock up their own players (implying an incredible value that restricted players are forced to leave on the table)

Even if you don’t buy argument 2, argument 1 is hard to challenge.

MLBPA is frankly out of its league here in hoping on the irrationality of owners as a way to balance the scales.

At same point, the younger players will realize how even signing the long-term pre-FA deals is very limiting.

I assume we mean “limiting” in an economic sense. But I wonder if this will actually be the reaction of many players. For one, we’ve already noted that teams seem to be becoming smarter about signing free agents. That means there will be less free agent dollars being spent and large payouts will be reserved for only the top echelon of free agents.

Secondly, the long-term, pre-FA contracts provide the signing player an added benefit, namely financial security. In addition, this security provides added protection because these players are many years from the necessary service time to vest a lifetime of PA benefits, namely health insurance and the pension plan.

Even lately when the money has generally been quite good, more players have opted for the long-term security (i.e., Longoria) rather than taking the year-by-year path to maximize income (i.e., Papelbon).

Tom says:
“At same point, the younger players will realize how even signing the long-term pre-FA deals is very limiting.”

Your points on this aspect of the issue is well taken, but I think you’re completely ignoring one VERY important factor, which is that for these players, this is their FIRST big contract.  It’s the contract which, if their career is to end for reasons unforeseen, sets them and their families up for a reasonably comfortable life.  No contract subsequent to this first deal will have the same magnitude of impact on a player’s overall quality of life.

Yes, money is left on the table.  We’ve explored the multiple reasons why this is so.  But it’s not because the players or their agents are stupid or irrational.  Or at least, I’m convinced it’s not.

NaOH:
“Sorry for the incorrect attribution, Brian.”

No prob, big guy.  I’m not trying to pad my resume and I wasn’t offended… just want to keep straight who’s saying what

Your points on this aspect of the issue is well taken, but I think you’re completely ignoring one VERY important factor

Why do NHL players sign the same deals, and in many cases, much better deals?  NHL has half the revenues.  There is alot less money on the table for NHL players, so the players would be justified in expecting half as much money.  They don’t.

I agree that players are simply dazzled by the dollars.  Owners are taking a huge advantage of that.

The minimum salary in MLB is LOWER than the NHL.  In order to compare the two (MLB has double the revenues), the MLB minimum salary should be around $1MM. 

I’m also not “completely ignoring” anything.  My name is not Steve Phillips.  I may not say it here in particular, but I’ve said it in the past.

“Why do NHL players sign the same deals, and in many cases, much better deals?  NHL has half the revenues.”

Perhaps I’m overlooking something (and that’s certainly possible considering my knowledge of NHL finances), but to me this elicits a different question: Why are NHL owners offering such large deals considering the revenue they have?

Tom:

Do you have some data I can see on the deals young NHL stars sign?  My first point would be that we are comparing apples to oranges here: an NHL team has FAR fewer players, and is MUCH more heavily dependent on stars, superstars, stars-to-be, etc.  Much like the NBA.  A single superstar in MLB does not make nearly the competitive difference that a single superstar can make in the NBA or NHL.  The right player can carry a formerly marginal team to an NBA championship, for example.  Not happening in MLB.  Also, NBA and NHL teams spread their payroll across a far lighter roster, and have no minor league or development costs to factor in.

Finally, are the owners really to blame here, assuming there’s anything going on in the first place?  The players, their agents… these aren’t complete morons.  If you can see that they’re all getting duped (I’m unconvinced), why don’t they see it?  Are young MLB stars telling their agents to get stuffed in just this one circumstance (the first multiyear deal)?  Is the agent simply not doing his job for any of these young players?  Or is it perhaps that the payroll and roster dynamics in MLB differ a great deal from those of other sports?

I don’t KNOW the answer.  But I suspect it’s the latter.

NaOH:
“Why are NHL owners offering such large deals considering the revenue they have?”

I think the post I just put up offers some ideas on this.

Tom sez:
?I’m also not “completely ignoring” anything.  My name is not Steve Phillips.  I may not say it here in particular, but I’ve said it in the past.”

Lol.  I didn’t mean to imply substandard intelligence or anything.

"an NHL team has FAR fewer players”

There’s 20 players who play every game, and pretty much a rotation of 23 players.

Indeed, if the NHL expanded to 25 players, the top 16-17 players would still be playing the exact same amount, just like in MLB.

Therefore, for all intents and purposes, NHL and MLB has the same roster sizes: regardless of whether you have a 23, 25, or 40-man limit, the playing time of the top 16-17 players will remain unchanged.

Why do NHL players sign the same deals, and in many cases, much better deals?  NHL has half the revenues.  There is alot less money on the table for NHL players, so the players would be justified in expecting half as much money.  They don’t.

It’s tough to compare this on an apples to apples basis for the reasons cited above.  I also think that the salary floor matters and will drive some of this.  Suddenly, for a lot of smaller market teams, it might make sense to lavish money your star young players.  You have to spend $40MM anyway - instead of pissing it away on the overpriced UFA guys, doesn’t it make more sense to try and buy out some of your better player’s UFA years?  I can see the argument that it does.  Combine that with an arbitration system and everything changes.

an NHL team...is MUCH more heavily dependent on stars, superstars, stars-to-be, etc.  Much like the NBA.  A single superstar in MLB does not make nearly the competitive difference that a single superstar can make in the NBA or NHL.

I’d argue this as well - I think that hockey’s closer to baseball than people appreciate, in terms of the contributions made by stars.  I’ve looked at the numbers and made reasonable assumptions and I don’t think that there are stars in the NHL like there are in the NBA.  Hockey players (other than goalies) don’t spend 40 minutes a game on the ice, for one.

I think the historical interplay of baseball’s protected monopoly status with the particulars of the contemporary labor structure need to be addressed. The history of the MLBPA is extraordinarily top down, which has an awful lot to do with the AL/NL protected monopoly. The reserve clause in the context of the minor league affiliate system that developed conterminously with the 1922 antitrust exemption has since been altered, not abolished. The only players in position to challenge the monopoly have not been the marginal players but the very best players whose talents lend legitimacy to the league.

The major league players who sign extensions before they hit free agency are getting ripped off, value-wise, precisely because that’s the entire point of baseball’s labor structure. NHL, NBA, and NFL have age limits and other mechanisms for player control that have been put in place because those unions have always had leverage due to the sometime existence of other competitive leagues (ABA, AFL, WHA, etc.). MLB is the only sport that has succeeded in getting everyone to more or less sign off on a truly gargantuan monopoly.

The issue of the monopoly goes beyond its mere economic consequences in that baseball ownership - working hand in hand with an oft-obsequious media which profits from promoting the game - has immense cultural power in determining how fans and young players view the game and its competitive structure. MLB culture on the one hand makes it essentially impossible for the players or fans to organize a major league or major league system that cuts out the middle-men owners who contribute nothing but start-up capital and a scintilla of business acumen, and on the other hand MLB culture makes it so that many players are more prone to take offers that don’t value them highly enough.

There is simply no mechanism through which the 0-6 players can seriously challenge the system without the support of the 6+ players, and the reality that most of them (certainly the ones signing extensions) hope to ascend to the 6+ class makes it highly unlikely that they would ever attempt to do so.

The idea that MLB and its possessive development system is what baseball is or what baseball ought to be would need to be seriously challenged on a much wider level before we would stop seeing these generous-to-owners extensions being signed by players before their six years.