Archive for Economics

Under John Angelos, son of Peter Angelos, who took the team to the verge of the World Series in the 1990s, the Baltimore Orioles have been hamstrung by a lack of investment, uncertainty over potential relocation, and a lawsuit over control of the family fortune that contains allegations straight out of the Book of Genesis. A 100-win team with a once-in-a-generation core of up-the-middle talent has had its wings clipped by an owner whose picture should be on the Wikipedia page for Hanlon’s Razor.

Well, the O’s are finally getting out of purgatory. Angelos has agreed to sell the team to a group fronted by billionaire David Rubenstein. The new owners will reportedly purchase 40% of the team now, with Rubenstein replacing John Angelos as the Orioles’ control person once the sale goes through. His group will then have the option to buy full control at a later date.

Even before the sale is official, the Orioles have solved their no. 1 glaring weakness by acquiring Corbin Burnes for a draft pick and two players they didn’t really need. It’s as if the mere mention of Rubenstein changed the omens around the ballclub. Read the rest of this entry »

The San Diego Padres are falling apart a little, having divested themselves this winter of Juan Soto, Trent Grisham, Josh Hader, and (most likely) Blake Snell. But reinforcements are on the way, in the shape of Wandy Peralta, who on Wednesday agreed to a four-year, $16.5 million contract. Peralta might be the second-best active pitcher named Peralta, and the second-best left-handed pitcher in baseball history named Wandy, but he’s still a good reliever.

Peralta made 165 appearances over two and a half seasons with the Yankees, with a cumulative ERA of 2.82 despite pedestrian strikeout numbers. But in the age of heavy metal fastballs and sliders, Peralta is a little more refined and subtle. His most common pitch is a changeup, which is useful against lefties as well as righties, and it’s hard to square up. Read the rest of this entry »

Pity the accounting department for the Braves. They’ve had a terrifically busy offseason, which thus far has amounted to not a whole lot of change in terms of roster composition. Since the end of the postseason, they have signed one major league free agent and made no fewer than eight trades involving at least one major league player. They have also already traded or released not one but five players acquired by trade this offseason.

So what does it all amount to? Read the rest of this entry »

When Shohei Ohtani signed his record-setting contract on Saturday, the phrase “unprecedented deferrals” was at the forefront of the conversation. Not knowing how much “unprecedented” came out to in dollars and cents, we ran with a projection from Jon Becker based on the assumption that Ohtani would receive $400 million of his $700 million contract in deferred money.

At the time, that seemed like such a huge figure I struggled to believe it, even in the face of credible reports that at least half of Ohtani’s salary would be deferred. Surely it wasn’t possible to defer $400 million. But no, apparently the truth is even more incredible: Ohtani is taking a base salary of just $2 million a year, leaving $68 million to paid out, without interest, in each of the first 10 years after the contract ends. Read the rest of this entry »

By now, you’ve probably heard that Shohei Ohtani’s $700 million contract will pay him through 2043, with Ohtani deferring an unprecedented $680 million (over 97% of his contract). The structure calls for Ohtani to earn just $2 million each year of the contract, and then $68 million a year for the 10 years following the deal.

Ohtani will inarguably be taking home $700 million via this deal, and I disagree with the notion that the contract should be described as anything other than that big number from a bottom-line perspective. But what matters, especially with regards to the Competitive Balance Tax (CBT), is the present value of the contract.

Article XXIII of the CBA concerns the CBT, and the key component for determining payrolls for CBT purposes is the average annual value (AAV) of contracts. If Ohtani’s contract didn’t contain any deferrals, his AAV would be $70 million, calculated by simply dividing $700 million by the 10 years of his contract. Where things get complicated is with deferrals. When money is deferred in a contract, the value of that money depreciates over time, and it is the depreciated value of the contract that is used as the numerator, or replacement for the $700 million, in the AAV calculation. Ohtani’s deferrals will be paid without interest, which is key for depreciating the value of the payment; interest would have increased the present value of the contract, and as such, the AAV and corresponding CBT hit. Read the rest of this entry »

No one likes to talk about baseball as a business. Heck, I don’t like to talk about it, and I’m what passes for an expert in the subject around here. It’s tedious, the creeping financialization of everything in life. Baseball should be the crack of the bat and the glint of sunglasses as an outfielder charges across the grass towards a smashed line drive, not an accounting ledger filled with contracts and receipts. But inevitably Major League Baseball, which often gets shortened to “baseball” as though it embodies the entire sport, is about profit, which means it’s about money.

There’s a storm brewing on that front. As Travis Sawchik deftly reported over at The Score, the old way of doing business is standing on wobbly legs. Local TV deals make up a sizable portion of the league’s overall revenue. That makes perfect sense – baseball is a regional game, and its biggest draw, from an entertainment standpoint, is the sheer size of its inventory. Teams play 162 games a year, all through the hardest times to fill programming – the dog days of summer, Saturday evenings, national holidays, you name it. Sportico estimated that teams were paid roughly $2.25 billion for local broadcast rights in 2023. Read the rest of this entry »

It feels like the Rays have been trying to ditch Tropicana Field since they got there, and apparently it’s finally going to happen. The Royals are likewise pursuing plans to build a replacement for Kauffman Stadium, though the club announced Wednesday that the planned reveal of a new ballpark site was being postponed for the time being.

Both clubs want to replace their aging, arguably obsolete concrete bowls with something more modern — more glitzy. The unspoken promise is that the Royals and Rays — two small-market teams that ranked 25th and 27th in payroll this season, respectively — would turn their new taxpayer-funded playgrounds into an economic engine that would not only boost community welfare but also allow the team to compete economically with the Yankees, Dodgers, and so forth.

We all know this is bunk. Read the rest of this entry »

Lenin might not have actually said: “There are decades where nothing happens; and there are weeks where decades happen.” But that doesn’t mean not-Lenin was wrong. College football just lived through such a week, as the Big Ten’s addition of UCLA and USC for the coming football season snowballed into an all-out raid on the Pac-12. Oregon and Washington are following the two Los Angeles schools to richer pastures. The Big 12, already in the process of adding four mid-major schools to replace the outgoing Texas and Oklahoma, is swooping in to pick Arizona, Arizona State, Colorado, and Utah from off the curb. Left with the proposition of propping up a rump four-team conference, Cal and Stanford are being courted by the ACC. Those schools, with their sterling academic reputations, are considered a good cultural fit for a conference that already includes Duke and Virginia; the same could be said about UCLA and the Big Ten.

If those institutions want to keep up the pretense of looking smart, they’re going to have to rename these conferences. An Atlantic Coast Conference with two teams in California? An 18-team Big Ten? A 16-team Big 12? People are going to start to think these jokers can’t count or read a map. But that’s of secondary importance. What this audience wants to know, surely, is what this means for college baseball. Read the rest of this entry »

I was supposed to write about Elly De La Cruz. The Reds’ 21-year-old rookie shortstop has taken the baseball world by storm during his two-week major league career. He’s as fast, as powerful as any player has ever been, and by all accounts, he is a star in the making. He could be the Julio Rodríguez of Oneil Cruzes.

Instead, Rob Manfred addressed the media after a scheduled owners’ meeting in New York. When the commissioner addresses the media, at best there’s a tense verbal interplay between reporters and a subject who’s either unable or unwilling to reveal the whole truth. It’s the Socratic equivalent of the dance-fighting from West Side Story. At worst, Dan Le Batard pulls Manfred’s pants down over the phone.

Manfred’s performance on Thursday was closer to the latter than the former. So now, instead of talking about a re-energized game being bolstered by an influx of prodigious young talent, we’re talking about Rob Manfred. That’s never a good place to start. Read the rest of this entry »

Owning a baseball team isn’t work in any meaningful sense. If it were, John J. Fisher would be out of a job by now. Fisher’s Athletics are on pace to have the worst single-season record of any AL or NL team since 1899. It’s not even June yet and they’re 24 1/2 games out of first place and 18 games out of third. Their 4-23 record in divisional play has floated every other team in the AL West over .500. Only one qualified starter, Jordan Lyles, has an ERA worse than Oakland’s team ERA. The baseball stinks, and ironically, A’s fans are seeing more of it anyone else. There is no rest for the weary.

The story of professional baseball since the 2010s has been that of a divorce between competitive and financial incentives. Winning does not beget profit; quite the opposite in some cases. But even as a commercial enterprise, the Athletics have been an astonishing failure. Their attendance is the worst in the league by far, with some midweek games against uninspiring opponents drawing as few as 2,000 paying customers. After a blowout win in Oakland over the weekend, the Astros’ social media team tweeted “10 runs in front of tens of fans” in reference to the pitiable attendance at the Coliseum.

There’s a long tradition of fans (or operatives, in this case) of big-market teams mocking their counterparts who cheer for less successful clubs by tweeting pictures of empty seats. It predates the idiom “poverty franchise,” but carries the same sentiment. Look at this worthless team of losers and the uncommitted dilettantes who can’t be bothered to cheer them on. Surely our greater commitment will be rewarded by the baseball gods, they say.

That brand of banter is increasingly viewed as impolite, and not just because it wasn’t long ago that the Astros lost 100 games a year with no one in the stands to witness their ineptitude. It’s because more and more, owners like Fisher are making clear that unwavering allegiance is folly. Read the rest of this entry »