Baseball Musings
Baseball Musings
February 02, 2004
Baseball Economics

Here's an excellent article by Dave Sheinin of the Washington Post on the changing landscape of baseball economics.


With baseball's free agent signing period almost over, the size and length of player contracts have fallen for a second straight offseason, threatening to upset the tenuous labor peace the sport has enjoyed since its new collective bargaining agreement was signed 16 months ago.

The owners' strategy of flooding the market with players and exercising financial restraint has created a new economic climate in Major League Baseball that is forcing players to accept deals that are shorter and less lucrative than those signed by free agents in previous winters.

It also has intensified the union's examination of the owners' negotiating practices and resurrected suspicions that the owners are conspiring to keep salaries low. "We may not be very far from raising charges" of collusion, one union source said.


Sheinin makes some good points as to why this is happening:

  • It's tough to get insurance.

  • Owners are aware that past huge contracts have been mistakes.

  • Bargain hunters. (I'll call this the Billy Beane effect.)

  • The flood of free agents.


The last is a point I've made in the past. Here's Sheinin's take on it:

Suddenly, the supply of players is outrunning the demand.

"We've had a role reversal," said William B. Gould IV, the former chairman of the National Labor Relations Board who helped broker the end of the 1994-95 strike. "In the 1970s when free agency was first established, the clubs were very anxious to limit the number of free agents. . . . Now, the clubs are anxious to create 'more' free agents because they realize the laws of supply and demand will cause prices to drop."

This winter, a record 211 players filed for free agency. Teams added another 58 players to that marketplace on Dec. 21 by declining to offer contracts to, or non-tendering, their arbitration-eligible players. With teams willing to wait for prices to drop after the non-tender date, some free agents felt pressure to sign early so as not to be shut out when the extra players hit the market.

"For second-tier players and below the market has changed," said Baltimore-based agent Ron Shapiro. "The teams seem to wait longer and have moved themselves from a bidding process to a buying process."


I love the way he sums up the article with these quotes:

"There have been some clubs that have been very aggressive, and some not very aggressive due to their financial situation," said Dombrowski, whose team is trying to recover from a 119-loss season. "Some players have made lots of money and some haven't. It's a free market, and decisions are made on individual basis. I always chuckle when I hear [talk of collusion] because, frankly, some players we've pursued are not even interested in talking to us."

The players and their agents have a slightly different take. "What has happened over the last two years, unfortunately, is vindication for the union [for saying] that the owners didn't need new a system. They needed to use the current system more effectively," Berry said. "The question is, are they using it too effectively?"


A more effective use of the system. The free agent system worked for the players for so long because owners wanted to get rid of it and go back to the old days of the reserve clause. They spent so much time trying to figure out how to destroy it they never bothered to figure out how to work it to their advantage. Now they are seeing the light. I don't know if the union will be able to prove collusion. I don't even know if it exists. But for the first time in my memory, the teams have figured out how to use the system as well as the players.


Posted by David Pinto at 04:50 PM | Management | TrackBack (0)
Comments

This is the beginning of the proof that unlimited free agency is the players' worst nightmare.

Posted by: Zooty Zoot at February 2, 2004 06:04 PM

Funny how the union vetoing ARod's Red Sox contract - because it might have a negative effect on player salaries isn't collusion, but the owners showing financial restraint is.

Posted by: Chris O'Donnell at February 2, 2004 08:36 PM

The Player's Union vetoing the restructured A-Rod contract wasn't collusion because the Union is required to approve any "additional covenants" attached to a player contract. Every contract that is signed, beyond the basics that are in the Uniform Player contract, has to be approved by the Union.

I don't know that the owners' current actions are collusion. Right now, it just looks like they finally got wise to the free agent market. But one of the consequences of the owners' previous violation of the collective bargaining agreement is that people are less likely to give them the benefit of the doubt.

Posted by: Derek Jacques at February 2, 2004 09:15 PM

Another possible explanation is that there is a disincentive to spend to try to win (especially for small-market teams), and many teams are following the money. After all, it's not expensive to field a bad team.

Posted by: amusingfool at February 3, 2004 08:59 AM

I'm a yankee fan, but what there doing is ridiculous. when does the roof come in to play? higher team salaries mean higher ticket prices. Higher ticket prices mean less and less middle and poor people being able to attend games. that cant be good after all there is a hell of a lot more middle class and poor people than there is rich. isnt there? put a 100 million dollar cap for every team and bring prices down. after all how many good to great games have you seen since teams began passing the 100 million mark?

Posted by: juan vilafane at February 24, 2004 08:22 AM