Archive for December 6th, 2010

Baseball’s recession is officially over. In case you weren’t paying attention when Bud Selig announced that the sport raked in $7 billion in 2010 (an over 15% spike during an economic downturn), the Nationals sent a friendly reminder by inking Jayson Werth’s to a mega-$126mn, seven-year deal.

Although many in the baseball world were left scratching their heads after the Nationals’ announcement, there really shouldn’t be any mystery. After a flattish period in 2008-2009 marked by “fiscal restraint”, baseball has resumed its exponential revenue growth, which should usher in an offseason of big money deals. By the spring, contracts to Adrian Gonzalez, Carl Crawford and Cliff Lee should join Jayson Werth’s and Troy Tulowitzki’s as being among the most lucrative in the game’s history.

The first big sign that the market would be more robust this year occurred when Adam Dunn signed with the White Sox. Only two years earlier, the slugging first baseman/outfielder was forced to accept a two-year/$20 million deal at the age of 29. This year, however, he was rewarded with a four-year/$56 million deal (to likely be a DH no less). Also, in addition to throwing money at the big names, major league owners awash in cash have once again begun to extend their generosity to lesser players. Lance Berkman ($8 million), Rod Barajas $3.25 million and Juan Uribe ($21 million/three years) are just three examples of contracts that probably wouldn’t have been offered over the last two off seasons.

The return of bigger contracts isn’t a bad thing, although it will likely be portrayed as such. What it reveals is that the sport is not only financially healthy today, but the internal projections for future growth are robust. However, is this a case of the rich getting richer and a widening gulf between baseballs haves and have nots?

The Adrian Gonzalez trade to Boston has already been naively portrayed as “exhibit A” for why baseball needs an economic overhaul (i.e., a salary cap). And, you can’t blame people for feeling that way after listening to Padres GM Jed Hoyer talk about how the team couldn’t afford to re-sign him after the 2011 season. But, is that statement true?

2010 Operating Income, By Team ($ million)

Source: Forbes.com

According to Forbes, the San Diego Padres ranked fifth in baseball with $32.1 million in 2009 operating profit, despite having revenue near the bottom of the sport. I guess it helps to have a new ballpark built with 57% public financing? No one asked Hoyer why a team with such an impressive EBITDA couldn’t afford a player like Gonzalez, but too many in the media seem to accept it as a given that “smaller markets” can’t afford high priced free agents. If asked, he undoubtedly would have had a creative answer, but the bottom line is the Padres are more interested in their bottom line than place in the standings.

Ironically, during his press conference, Hoyer talked about hope for increased attendance and a new lucrative cable deal, both of which might help the team expand its payroll in the future. It was a curious statement because when it comes to making money, you usually have to spend it first. After all, can the Padres really expect more fans in the seats if the team flounders in the NL West? Also, wouldn’t it have more leverage negotiating a cable deal while the team is playing well? Maybe Hoyer thinks the team can still be competitive, but without Gonzalez, it’s hard to see how the already offense-starved Padres are going to score any runs at all. After surprising the baseball world with a 90 win season in 2010, the Padres now seem poised for an immediate return to the cellar. If that happens, why should San Diego care about the Padres?

Since 2002, the Padres’ franchise value has increased 132%, while its revenue has increased 87%, according to Forbes. Meanwhile, its payroll rose only 5%, which helps explain how the team went from an $8 million EBITDA loss to over $32 million in operating profit last year. How much more successful (both on the field and in the board room) could the team have been if it invested more of its growth into players? We’ll never know, but the bigger question is whether the Padres are going to treat the current decade in the same manner as it did the last one? Unfortunately for fans in San Diego, it seems as if that might be the case. If so, their outrage shouldn’t be directed at the economics of the sport, but instead toward an ownership group reaping its benefits.

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(In addition to appearing at The Captain’s Blog, this post is also being syndicated at TheYankeeU.)

Pat Gillick was an accomplished baseball executive for well over 40 years, including 27 seasons as a general manager for four different franchises. Although he isn’t a blight on the Hall of Fame, his election this afternoon by the new Expansion Era committee process is an absurdity when juxtaposed against the exclusion of two much more worthy candidates.

Marvin Miller, flanked by Joe Torre, announces the end of the first player’s strike (Photo: AP).

The mission of the Hall of Fame is (or at least should be) to honor excellence and preserve history, but unfortunately, the new era-based committee process seems just as prone to the cronyism that corrupted past iterations. One could not write the story of baseball’s expansion era, which the Hall of Fame defines as 1973 to the present, without devoting massive chapters to the contributions of MLBPA executive director Marvin Miller (1966 to 1982) and Yankees’ principal owner George M. Steinbrenner III (1973-2010). By excluding each member, the Hall of Fame is presenting an incomplete history…one influenced more by personal relationships than impact on the game.

The argument against Miller seems to be from those who think free agency ruined the game. “Because of the fiery union leader, the wholesome sport of baseball was undermined by greedy players no longer interested in simply playing for the love of the game”, Miller’s detractors have usually argued in one way or another. Sadly, such sentiment is pervasive, even though Miller’s labor revolution ushered in an era of growth and competitive balance. If he was an NFL commissioner, he’d be widely lauded as a hero. In the baseball world, however, he is still viewed by many as an enemy, especially by former executives who failed time and time again when squaring off against him at the bargaining table. By collecting 11 of 12 votes needed, Miller just missed joining Gillick, but as long as the committee contains a strong element of his past adversaries, getting over the hump could be difficult.

Steinbrenner was an industry leader during his tenure as Yankees owner.

Steinbrenner’s exclusion comes as a surprise because it seemed as if part of the reason for the Hall’s new voting process was so the recently deceased Yankee owner could be awarded with immediate posthumous enshrinement. Incredibly, however, he received less than eight votes. Even Dave Concepcion received eight! There is no legitimate argument for not electing Steinbrenner. The history of baseball without mention of Steinbrenner is simply incomplete, and that fact should override any other concern. The idea that his two suspensions should detract from his overall contribution to the game is ill conceived, especially because a careful look at each situation reveals that Steinbrenner was unfairly treated during both investigations. Putting that aside, the bottom line is George Steinbrenner was arguably the most gigantic figure during the expansion era, so having fewer than half the electors recognize his accomplishments doesn’t speak well for the process.

Getting back to Gillick, his three world championships and 2,276-1,388 record as a general manager are impressive, but are they Hall of Fame worthy? The only other men who have been elected purely as front office executives are all legendary figures in the game: Ed Barrow, who was the architect of the first Yankees’ dynasty; George Weiss, who carried the flag from Barrow by winning seven World Series in the Bronx; and Branch Rickey, who was a pioneer in so many regards, not the least of which was his role in breaking the color barrier. Two other men elected based largely on contributions as an executive were Larry and Lee McPhail. Again, both father and son left behind a legendary imprint on the game well beyond wins and losses. With all due respect to Gillick, he has not had the same impact as the front office executive he now joins in the Hall of Fame.

Most of the unworthy Hall of Fame selections in the past have emanated from the backroom politics of the veteran’s committee process. Instead of focusing on the historical integrity of enshrinement, committee members lobbied for friends and ex-teammates, resulting in more than a few curious selections. Sadly, it seems as if that process hasn’t changed. By having 16 contemporary voters preside over friend and enemy alike, the vote is almost certain to be impacted by personal bias.

Marvin Miller and George Steinbrenner were such towering figures that their legacies will grow regardless of whether they are elected to the Hall of Fame. It is a shame, however, that for at least the next three years, visitors to that institution will be witness to an incomplete history.

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