As you know, I’ve written a lot about how MLB’s economic system is unfair. Large market teams can spend with no concern about financial risks or dead contracts in the future. Small market teams have to be smart, and have a large group of players that are completely unavailable to them. The difference in payroll is about $100 M from what the mega teams spend and what most small market teams spend. The gap is even starting to grow between large market and mid-market teams.
It seems that people are taking notice. Over the last two days I’ve noticed three articles that touched on the small market vs large market issues in baseball. Two of the articles were specifically about the issues, while one unintentionally pointed out the advantage that large market teams have.
On Monday, Buster Olney wrote about MLB’s financial divide, and how it is creating concern. He pointed out how the Dodgers were able to sign Clayton Kershaw for $30 M per year, but the Braves are fighting to save money on Craig Kimbrel through arbitration, and running the risk of eventually not being able to afford him in a year or two. He also pointed out how the Rays have been considering moving David Price, how the Indians could eventually move Justin Masterson, and how the Reds let Shin-Soo Choo walk and could eventually do the same with Homer Bailey.
It’s one thing if you’re talking about the Rays and Pirates struggling to keep players. When you’ve got teams like the Braves struggling to keep players through the arbitration process, you know you have a problem.
In a similar article, Jeff Sullivan of FanGraphs wrote about the real market inefficiency in baseball. Sullivan’s article was another comparison between the “haves” and the “have-nots”. He really summed up the difference between the two groups with this summary of a player’s value.
If you think about it in the simplest terms possible, players are relatively cheap through their first six or seven years of team control. If they debut in their early 20s, that time runs out somewhere in the vicinity of 30. So when players start getting paid free-agent money, they’re usually getting worse, their peaks right behind them. And the best players demand long-term contracts, sometimes up to and exceeding ten years in length, and those have turned out pretty poorly in the past. You’d just pretty much always rather take a shot on a guy in his 20s than on a guy in his 30s.
When a team has more money, it can convince itself to spend it, and that’s practically beginning from an inefficient place. It might spend more on a “proven” player, or it might spend more to have a star player while the star is actively fading. When you have less money, you can’t afford to be anything but cold and objective, and you can’t afford so much to worry about labels like “proven” or “durable”.
Most players in free agency are a bad long-term investment. Those mega contracts to guys like Robinson Cano will work out in the first few years, and then they will look like a huge burden for the bulk of the contract. Big market teams can afford that burden, essentially paying more for the short-term production. Right now there’s a situation where small market teams can compete by focusing on young players, and not getting attached to established players. This means you’re going with an Andrew Lambo or Chris McGuiness, rather than Garrett Jones or Justin Morneau. The approach has worked for the Rays and Athletics for several years, and it is starting to pay off for the Pirates. But Sullivan brings up another point.
If everyone puts an appropriate premium on talented, cost-controlled youth, it’s going to be that much harder for smaller-market teams to exploit the competition.
What happens when big market teams realize that they can be like the Rays and win with young talent? What happens when these teams not only dominate the free agent market, but refuse to give up their young talent as well? Could we see the prices for arbitration players driven higher as money goes to the younger players? If that happens, then it could create a situation like Buster Olney described in Atlanta, where they wouldn’t even be able to afford to keep some of their top young players through their league-controlled years.
Finally, Ken Davidoff of the New York Post wrote about how the Pirates threw a wrench into the Yankees’ plans to sign Masahiro Tanaka and keep their payroll under $189 M. The Yankees planned on signing the top Japanese pitcher, by spending a ton of money on the posting fee, which didn’t count for luxury tax purposes. Frank Coonelly fought for changes to the posting system, and the system ended up being revised, to the point where any team that posted the max bid ($20 M) could sign Tanaka. What this means for the Yankees is that they now have to bid against other teams to sign Tanaka, and will have to pay more. That means they won’t be able to sign Tanaka and keep their payroll under $189 M, thus re-setting their luxury tax percentage.
Davidoff describes the “troubles” that face the Yankees, and it’s kind of comical when you look at it from a small market standpoint.
The Yankees, sore from a 2013 season in which they put up their worst winning percentage since 1992 and saw their attendance and television ratings plummet, aggressively signed free agents — most prominently Carlos Beltran, Jacoby Ellsbury and Brian McCann as well as re-signing Hiroki Kuroda — to put themselves in serious jeopardy of going over $189 million. Independent arbitrator Fredric Horowitz’s 162-game suspension of Alex Rodriguez restored the Yankees’ chances of financial salvation once more, but only if they don’t get Tanaka.
They’re at $170.058 million with 18 players plus A-Rod signed, and when you factor in the $11 million that must be included for benefits and $5 million for in-season call-ups, that leaves the Yankees with virtually no money to add a veteran reliever, let alone Tanaka. But if they somehow find a taker for Ichiro Suzuki and his $6.5 million, and if Brett Gardner and his $5.6 million salary end up elsewhere in a trade? Then they probably could have fit Tanaka and stayed below $189 million under the old rules. Not now.
To recap: on the Pirates side, fans are hoping that a top veteran pitcher returns, and maybe one big free agent could be added. On the Yankees side, they brought back their veteran pitcher, signed three of the top free agents, but they’re disappointed that they can’t afford the top pitcher on the market, plus a veteran reliever, without having to pay luxury tax.
Olney and Sullivan had good comparisons to illustrate the difference between the “haves” and the “have-nots”. But I think that summary by Davidoff unintentionally showed the difference between the two sides the best. Pretty much every small market team would be satisfied with one big free agent signing, or just keeping one of their most reliable starting pitchers. Most small market teams don’t see that happen. But when you’re a big market team, that’s just the norm.
Links and Notes
**The 2014 Prospect Guide is now available. You can purchase your copy here, and read about every prospect in the Pirates’ system. The book includes our top 50 prospects, as well as future potential ratings for every player.
**We have been releasing our top 20 prospects for the 2014 season, and this week we started the top 10. Today the countdown resumed with #9 – Luis Heredia.