Archive for Business

MLB Teams with Money to Spend in Free Agency

Last year’s free-agent class was one of the strongest we’ve ever seen. With legitimate aces like Zack Greinke and David Price heading the class plus young outfield talent in Jason Heyward and Justin Upton, a bona fide slugger in Chris Davis, along with a host of other mid-rotation starters and solid position player options, teams spent roughly three-quarters of a billion dollars on free agents in 2016 salaries alone. This season lacks talent at the top and depth in the middle, but that doesn’t mean we should expect to see a lot less spending. Nobody is likely to receive $200 million, but teams have plenty of money to spend and it has to go somewhere.

One way to think about how much money teams have to spend this offseason is to consider the salaries departing from their rosters. The chart below measures the money that has disappeared from clubs’ payrolls. To calculate each figure, I began with every club’s Opening Day obligations from 2016 and identified those players making at least $1 million in 2016 who either (a) were traded during the season or (b) have become a free agent in the meantime. I then added up the salaries of the departing players. This shows how much teams are losing in salary based on departures alone, with data gathered from Cot’s Contracts.

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We often think of payroll coming off the books as a benefit for clubs. Player contracts, especially large ones, tend not to be very valuable in their final years. Think about the Los Angeles Angels, for example, who enter the season with $60 million less in obligations. The team had large commitments to pitchers Jered Weaver and C.J. Wilson. While both of those pitchers were good at points of their careers, they provided little in terms of on-field value last year. The Angels, if they so choose, can now take the roughly $40 million formerly invested in those pitchers and put it to better use. If we work under the assumption that a win costs $8.5 million in free agency, the Angels could conceivably improve themselves by around five wins by spending that money on contributing players.

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Justice Dept Sues AT&T/DirecTV Over Dodgers Broadcasts

For the last three years, the overwhelming majority of baseball fans in Los Angeles have been unable to watch the Dodgers play on television. In 2014, the team partnered with cable provider Time Warner to launch SportsNet LA, a network dedicated to the franchise. Citing the excessive price that Time Warner was demanding from other cable providers for the rights to air SportsNet LA — such as an initial asking price of roughly $5 per subscriber per month — other service providers like AT&T, DirecTV, and Cox have subsequently refused to carry the network.

As a result, since 2014, upwards of 70% of Los Angeles residents have not had access to televised Dodgers games. Indeed, because Time Warner only offers cable services in parts of the Los Angeles metropolitan area, in many cases even if fans were willing to change cable providers to gain access to the Dodgers, they were nevertheless still unable to do so because none of the available providers in their neighborhood carried SportsNet LA.

Given its high asking price for the network, it’s not surprising that the public has typically painted Time Warner as the bad guy throughout this ordeal. According to a lawsuit filed last week by the U.S. Department of Justice, however, Los Angeles sports fans’ anger may have been misdirected, as it now appears that DirecTV — now owed by AT&T — may in fact be largely to blame for the Dodgers’ three-year blackout across much of Los Angeles.

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2016 World Series Netting Historic TV Ratings

This past Sunday night, one of the most important baseball games of the year went head-to-head with a primetime regular-season NFL broadcast on NBC. Millions more opted to watch the Chicago Cubs host their final home game of the year and stave off elimination in a close game. That Major League Baseball went head-to-head with the NFL and won isn’t that big of a deal. That MLB has garnered ratings not seen in a decade, however — and bested the top-rated program in all of television over the past few years — represents a big win for a sport receiving near-constant criticism for sagging ratings.

The broadcast of Game Five on Sunday night was one of the highest-rated broadcasts for the World Series in years. Since Boston ended their 86-year championship drought back in 2004, only one game has drawn more than the 23.6 million viewers Cleveland and Chicago netted on Sunday night: Game Seven of the 2011 World Series between the St. Louis Cardinals and Texas Rangers. If you remove clinching games, it was one of the most viewed games of the century. The table below shows the most-viewed non-clinching games since 2000, the year FOX exclusively began broadcasting the World Series.

Most-Viewed Non-Clinching World Series Games Since 2000
Series Year Game Viewers
BOS-STL 2004 2 25.46 M
BOS-STL 2004 3 24.42 M
ARI-NYY 2001 4 23.69 M
CHC-CLE 2016 5 23.60 M
ARI-NYY 2001 2 23.55 M
ARI-NYY 2001 3 23.41 M
BOS-STL 2004 1 23.17 M
NYY-PHI 2009 4 22.76 M
ARI-NYY 2001 6 22.67 M
ARI-NYY 2001 5 21.32 M
STL-TEX 2011 6 21.07 M
FLA-NYY 2003 4 20.88 M
FLA-NYY 2003 2 20.55 M
SOURCE: Sports Media Watch

More people tuned into to see Sunday night’s World Series game than watched Game One in 2004 when the Red Sox began their attempt to end the curse. The game drew more viewers than the epic extra-inning Game Six between the Cardinals and Rangers in 2011. Indeed, only one non-2004 World Series game exceeded Sunday night’s in terms of viewership: the Diamondbacks-Yankees contest from 2001, best remembered for Derek Jeter’s 10th-inning walk-off homer against Byung-Hyun Kim.

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MLB Network Playoff Gamble Pays Off, Aids Viewers

Criticisms regarding the length of games and pace of play are likely to continue being a focus for commissioner Rob Manfred as he continues to court a younger audience. Baseball games themselves remain MLB’s main product. Increasingly, however, access to that product has become an issue — an issue that could dwarf any pace-of-play problems in the coming years. As more consumers ditch cable, the lifeblood of Major League Baseball television revenues, fewer fans will have access to MLB games. Access is particularly important in the playoffs, where games receive the most national attention, and MLB’s decision in recent years to broadcast multiple games from it own MLB Network have limited viewership. However, MLB’s decision this season to offer a free preview of the network during the first week of the playoffs appears to have paid off.

There was once an outcry when playoff games moved from network television to cable, but that battle — to the degree that it ever existed — has been long lost. The World Series still airs on FOX, but both League Championship Series now appear exclusively on cable, as does the Division Series. Baseball isn’t alone in this regard, either. While the NFL, with its relatively light postseason schedule (only 11 games total), has managed to avoid moving games to cable, the NBA broadcasts both of its conference finals on cable networks. The NCAA’s championship games for both basketball and football, meanwhile, are found on channels that require a cable subscription. MLB’s decision to use its own network represents a bit of a difference case, however, than either of these.

MLB Network has been carrying playoff games for multiple years now, but with just 30-some posteason games available, the decision to remove two of them from wider circulation on standard cable packages — in essence to promote the league’s network — is a bit of a gamble, representing the equivalent of a healthy advertising investment. Broadcast networks are available in roughly 95% of television households, so putting a game on FOX renders it almost universally accessible to all baseball fans. Moving from FOX to say ESPN, TBS, or FS1 lowers that number to around 75-80% of television households. While that number might not be ideal, the number of subscribers approaches 100 million and reaches a vast majority of fans — both those who already fans of the game, as well as those who might be in the future. MLB Network lacks those numbers.

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MLB Largely Prevails in Scout-Pay Lawsuit

One can be forgiven for having forgotten about the Wyckoff v. Office of the Commissioner of Baseball lawsuit. The class action case — filed back in July 2015 by Jordan Wyckoff, a former scout for the Kansas City Royals — accused Major League Baseball and its teams of violating both federal antitrust and employment law by colluding to deprive amateur and professional scouts both of the minimum wage and overtime compensation. Specifically, the case contended that MLB teams have unlawfully agreed not to compete with one another for the services of their scouts, with the result that wages for these employees have, in some cases, been depressed to as little as $5 per hour once all of their various job duties have been accounted for.

Late last year, MLB filed a motion asking the court to dismiss Wyckoff’s antitrust claims under its historic antitrust exemption. At the same time, MLB also argued that the suit’s minimum-wage claims should be dismissed against all but the Royals, since Wyckoff — the only plaintiff named in the suit who was asserting a violation of the minimum-wage and overtime rules — had never been employed by any of the other 29 MLB clubs.

Since then, the parties have waited… and waited… and then waited some more for the court to issue a ruling. That wait mercifully came to an end this past Thursday when Judge Paul Gardephe finally released his long-anticipated decision, more than nine months after MLB’s motion had first been filed.

In his opinion, Judge Gardephe granted MLB all of the relief it had requested, dismissing the overwhelming majority of Wyckoff’s case. As a result, while Wyckoff can continue to pursue his claim for back-pay from the Royals, any hopes he may have had that his suit would spur more systemic changes to the market for MLB scouts appear to have fallen short.

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Steve Clevenger and the Precedent for Insensitive Comments

Seattle Mariners’ backup catcher Steve Clevenger is not particularly sympathetic to the Black Lives Matter movement. Rather than keep his feelings on the matter to himself, however, he decided to share them with the world on Thursday afternoon in the following tweets:

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Not surprisingly, the public response to Clevenger’s comments was swift and unforgiving. Within hours, the Mariners released an official statement distancing the team from the remarks. And although Clevenger later apologized for the tweets, the Mariners nevertheless announced on Friday that the team was suspending him without pay for the remainder of the season.

On the one hand, the impact of the suspension on Clevenger will be relatively modest, as he was already on the 60-day disabled list with a broken hand, and thus was unlikely to play again for the Mariners this season. On the other hand, however, by being suspended without pay, Clevenger will forfeit the roughly $32,000 he would have earned over the season’s final 10 games.

It does not appear as though Clevenger will challenge his punishment, according to a report by Maury Brown. If Clevenger were to change his mind and file an appeal, however, then it is possible that he could get his suspension reduced by an arbitrator. Specifically, although Major League Baseball and its teams generally have the legal right to punish players in this manner, Clevenger could argue that a suspension of this length is at odds with those handed down in similar, prior cases.

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An End-of-Summer MLB Legal Update

Like any multi-billion dollar business, Major League Baseball is consistently defending itself from at least a handful of different lawsuits at any given time. And while we at FanGraphs attempt to keep you, the loyal reader, appraised of any major happenings in these cases, throughout the year a number of less noteworthy developments occur in these suits that, while potentially significant, nevertheless do not warrant a standalone write-up of their own.

The purpose of this post is to update you on several such recent developments in two ongoing lawsuits against MLB, those challenging the league’s minor-league pay and fan-safety practices, respectively.

Minor-League Wage Litigation

Back in July, I discussed the significant victory that MLB secured in the litigation challenging its minor-league pay practices under federal and state minimum-wage law. Specifically, as I noted at the time, the court refused to certify the case as a class-action lawsuit due to several important differences between the work experiences of, and compensation received by, minor-league players.

Given the significant setback that this decision represented for the minor-league players — removing more than 2,000 players from the case — it appeared inevitable that the plaintiffs would seek to have the decision overturned on appeal. Rather than immediately pursue an appeal to a higher court, however, the plaintiffs have instead opted to take a second crack at convincing the trial court to approve the case for class-action status.

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Money Is Buying Wins Again in 2016

If the playoffs started today, the Washington Nationals, Chicago Cubs, Los Angeles Dodgers, San Francisco Giants, and St. Louis Cardinals would be in the playoffs on the National League side. The top-five payrolls in the NL belong to those same five teams. Over in the American League, the Cleveland Indians seem likely to make the playoffs while the New York Yankees likely will not — and the Los Angeles Angels aren’t anywhere near the playoffs, but these are merely exceptions to the rule. Anecdotally it certainly seems like money matters this year after several years of parity. Digging into the numbers of the relationship between money and wins, the numbers indicate that a team’s payroll really is more important now than at any other time in the last decade.

There are 15 teams this season whose opening-day payrolls exceeded $130 million. Among those 15 teams, only the Los Angeles Angels possessed a losing record through Tuesday’s games, and if the playoffs started today, the top half of teams by payroll would claim nine of the 10 available playoff spots. Of that bottom 15, the only teams with a winning record are the Pittsburgh Pirates, Houston Astros, Miami Marlins, and Cleveland Indians. Cleveland would represent the only team among that group to qualify for the playoffs if the season ended today. If this seems unusual, it is. And it isn’t.

Last season at around this time, I looked at the relationship between wins and payroll and found that there was nothing significant. The correlation coefficient between wins and payroll was .17, and that number had been part of a decline that had been occurring over the previous decade. As Brian MacPherson pointed out when he researched the issue the year prior, the relationship between wins and payroll had been declining since the start of this decade. At the end of last season, the correlation coefficient for wins and payroll in 2015 was a very low .22, but in discussing the issue last year, I pointed to two causes for concern (if a lack of parity is concerning).

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MLB Television Viewership Up Five Percent

Without rehashing the baseball-is-dying trope, it should be noted that the television ratings for this year’s All-Star Game took a pretty steep dive. Over the past half-decade, the ratings had held pretty steady, which is actually a positive trend relative to the general decline in television viewership as a whole — as well as the lack of interest in the other major sports’ All-Star contests. While the All-Star game still managed to draw nearly 9 million viewers, that figure also represent a 20% drop from last year’s contest — and seems to indicate that the exhibition lacks some of the draw that the event possessed when major-league broadcasts were few and far between. 

In the grand scheme of baseball viewership, however, the All-Star game appears to represent an anomaly rather than a building trend. Because even as fewer people tuned into the midsummer class than almost ever before, local television ratings, which are up again over last season, indicate that more and more viewers are watching baseball on a regular basis.

Two years ago, the Royals came out of nowhere to make the World Series. Last year, that momentum carried over to viewers as Kansas City led MLB teams in local ratings. After winning the World Series last year, Kansas City is still watching a ton of baseball. Ratings-wise the two teams from Missouri boast the top two spots in baseball, per Forbes.

Screenshot 2016-08-10 at 9.02.32 AM

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Insuring Prince Fielder

On Tuesday, we learned that Prince Fielder’s career has come to an end following his second major neck surgery in just the last three years. Jeff Sullivan provided a fitting eulogy for Fielder’s career a couple days ago. While the news is certainly devastating for Fielder on a personal level, this post concerns another matter — namely, the potential financial implications of Fielder’s injury, both for the Texas Rangers and Fielder himself. At the heart of the matter: the nine-year, $214 million contract Fielder signed in 2012, a deal that guarantees him another $24 million annually from 2017 through 2020.

For starters, it’s important to note that Fielder is not officially retiring from baseball, but rather has been declared medically disabled and therefore is no longer considered to be physically able to play the game. This is an important distinction legally, because had Fielder voluntarily decided to retire, then he would have forfeited the roughly $104 million remaining on his contract. Instead, by being declared medically unable to play, Fielder remains entitled to the full amount he’s owed under his contract.

Because Texas reportedly has an insurance policy covering his contract in the event of injury, the Rangers will not be on the hook for the entirety of the team’s remaining financial obligation to Fielder. Instead, the club will apparently only be responsible for paying Fielder $9 million per year from 2017 to 2020, with the rest of his salary covered by the team’s insurer (who will reportedly contribute another $9 million per year) and the Detroit Tigers (who are on the hook for the final $6 million per season, based on the terms of the trade that brought Fielder to Texas in exchange for Ian Kinsler in 2013).

That having been said, although the precise terms of the Rangers’ insurance policy are not publicly available, it appears likely that this $9 million in cost savings will not come without some strings attached for the club. Moreover, it’s also possible that the team’s insurance company could still yet find a way to avoid paying some or all of its share of Fielder’s contract.

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