Longtime Agents Slash Fees, Try To Shake Up Industry
When deciding who will represent them in contract negotiations, professional baseball players can choose from hundreds of certified agents. There are big shops like Boras Corporation, Excel Sports Management (Casey Close) and Wasserman Media Group (Arn Tellum), and smaller agencies like Frye McCann, Sosnick Cobbe and Jet Sports Management. Whatever their size, most agencies charge a commission between four and five percent of the value of the player’s pro contract. For that commission, the agency does everything: negotiate the contract, arrange for equipment endorsement deals, and advise the player on financial planning and taxes. It’s a concierge approach: the player is cared for 24/7 in all aspects of his life, whether at home or on the road.
Proformance Baseball is trying a different approach. The Richmond, Virginia agency was created by Jeff Beck and Bean Stringfellow more than 20 years ago. The two met in Virginia Tech’s baseball program in the 1980’s. Stringfellow was drafted by the New York Yankee in 1984 (didn’t sign) and then re-drafted by the Atlanta Braves in 1985 but never made it to the majors. Beck started his career in the capital markets.
Proformance dropped its commission to one-and-a-half percent and will stick to what Stringfellow calls “the business of baseball” — negotiate the player’s contract and equipment deals, advise him on baseball rules, and answer questions when the player reaches out. No more flying to have lunch with the player six times a season. No more marketing efforts to land local appearances and commercials. No more financial planning and taxes.As Beck and Stringfellow see it, most agencies charge four to five percent commission to cover the costs of all the other services, whether a player wants or needs them.
This new approach was born of necessity after Proformance agent Jay Alou left the agency in March and took clients Jose Bautista and Ervin Santana with him. Santana had apparently become frustrated with Stringfellow after Santana rejected the Kansas City Royals’ qualifying offer but couldn’t find a team interested in signing him to a five-year/$112 million dollar contract. Santana eventually signed with the Atlanta Braves on a one-year deal worth $14.1 million, after the Braves lost starters Kris Medlen and Brandon Beachy to injuries.
When we spoke, Stringfellow called Alou’s departure with Bautista and Santana as “disruption” in the business, and nearly six months later, he seemed to still be smarting about the turn of events with Bautista and Santana. In early 2011, Stringfellow negotiated Bautista’s five-year/$65 million contract with the Toronto Blue Jays while the two sides sat in the hearing room ready to begin Bautista’s salary arbitration hearing.
The Major League Baseball Players Association doesn’t set minimum or maximum commission rates for certified agents. The four to five percent rate charged by most agencies is simply an industry standard that’s developed over the years. How did Beck and Stringfellow arrive at the one-and-a-half percent figure? They calculated how many hours they spend on average to negotiate a player’s contract and determined what “fair and reasonable” compensation for that work would look like.
According to Stringfellow, Proformance spends 300 hours or so on an arbitration-eligible player. Work begins in spring training and culminates the following winter when the contract is finalized. If an arbitration-eligible player signs a one-year deal for $10 million, Proformance will earn a one-time fee of $150,000 for that 300 hours of work, or $500 per hour — on par with, if not less than, what top attorneys charge for their time. Free agent contracts take well more than 300 hours of work, but have a higher rate of potential return. If a free agent signs a four-year deal at $15 million per year, Proformance will earn $225,ooo each year of the four-year deal, or $900,000.
Both Beck and Stringfellow described the response from potential new clients as “encouraging,” They are getting the word out through conversations with existing clients and on social media, although the new company website was nothing more than a placeholder at the time of this writing,
The two longtime friends and partners expect their new model to shake up the industry. Whether that happens depends on how many new clients they attract away from more traditional full-service agencies.
Wendy writes about sports and the business of sports. She's been published most recently by Vice Sports, Deadspin and NewYorker.com. You can find her work at wendythurm.pressfolios.com and follow her on Twitter @hangingsliders.
An interesting turn of events. I’ve long wondered why so few players choose not to represent themselves in non-arbitration situations. What would be the main factors prohibiting this approach? Complications owing to state to state taxation variances? Something else?
Incidentally, Wendy, please ask Appelman to get you a thrice-weekly article gig with FanGraphs, please! Dayn Perry once provided an interesting report on meeting Appelman over at NotGraphs. He seems like a reasonable fellow who might be amenable to my suggestion!
I think maybe the reason Wendy doesn’t write on here regularly is because she is best at writing about things like this, which seem to happen at random times. Interesting business or legal aspects of baseball don’t come on a regular schedule, so I think if she wrote a few times a week, she’d have trouble finding topics that fit her specialty.
Jamie Moyer is the most prominent player current or recently active player that I’m aware of who did not use an agent. I expect that the did retain an attorney to help on the legal and contractual components of the negotiations.
Kevin Millar also didn’t an agent
When you make millions of dollars a year, it makes less sense to spend your own time just to save tens of thousands of dollars. Especially since negotiations can occur during the regular season.
300 hours of specialized contract work is not something most players want or should want to do.
“An interesting turn of events. I’ve long wondered why so few players choose not to represent themselves in non-arbitration situations. What would be the main factors prohibiting this approach? Complications owing to state to state taxation variances? Something else?”
I think that it’s a question of optimizing skills. The skills that are needed to excel on a baseball field are not the same as those that are critical in contract negotiations. Sure, the player could forego an agent. But it’s likely that the player would spend even more time on the contract negotiations than would an agent who already understands the process. And due to experience, the agent is likely to obtain a better product than the neophyte player would obtain.
And that presumes the player would be effective in representing himslef in a negotiation. It’s more likely that a dispassionate party, such as an agent, would be better equipped in a negotiation.
I speak from experience as a business operations consultant. The situation for my clients is similar to that of an athlete and an agent. My clients retain my services because they know that if they tried to replicate what I do, they would face a steep learning to acquire the knowledge that I bring to the table. And the time that they would spend learning to do what I do is time that taken away from maximizing operations efficiency, which is my area of weakness and their area of strength.
In the end, the optimal strategy is to have someone who is expert in contracts handle the contracts, have someone who is expert in financial affairs handle finance, etc. Meanwhile. the player, qho is expert in the on-field performance that fuels the whole system, focus on maximizing that contribution.
Frankly, the most important thing a player can do is to take whatever steps are necessary to prolong his career. If contract negotiation detracts from that effort, the player is better off hiring someone to take of those details while the player focuses on training and conditioning.
Wendy, I am not clear about what point you are making (or not making) when you say that this approach was “born of necessity” out of the Alou situation. I assume that agents leave agencies all the time, but you don’t explain why Alou leaving necessitated unbundling the services offered by Proformance. Did Alou handle the other services you mention, so Proformance is no longer staffed to provide those services? Is there some other linkage or reason why one led to the other?
Alou took with him two of the agency’s top clients, and with it, a good chunk of their income. Looking at MLBTR’s agency database, Proformance currently has:
Alexi Amarista*
Alexi Casilla
Buck Coats
Robinzon Diaz
Carlos Paguero
Luis Perez
Danny Salazar
*there’s a note next to Amarista’s name that says Jay Alou and Junior Rojas, it’s possible that he may have gone with Alou.
Not too many of those guys are making big money. So the loss of Santana and Bautista would have been devastating for the agency, thus they needed to do something to separate themselves from the pack to lure bigger name clients making more money.
http://www.mlbtraderumors.com/2014/08/proformance-changing-agency-commission-standards.html
http://www.mlbtraderumors.com/agencydatabase
Pretty much sums it up. The old model wasn’t working for Beck and Stringfellow, so they are trying something new to stay in business.
How does the commission work when a player changes agents mid-contract?
The negotiating agent gets the money on that particular contract.
300 hours! Christ almighty what are they doing?! That’s 37.5 uninterrupted 8-hour work days!
I mean, sure there are discussions and meetings with the player, negotiations and meetings with a team or teams, looking over stats and putting together neat little booklets and slideshows showing that their player is the second coming of Mickey Mantle (or Sandy Koufax, if a pitcher), and…?
Probably one of those “we’ll bill for 300 hours, but we actually did about 50 hours of actual work, but everybody does it so nobody checks that close, wink wink” things that most every hourly contractor does, right?
(I say this as an hourly contract worker.)
I would actually assume they do close to 300 hours of work. They’re a smaller agency, so fewer players and thus fewer total work hours. And they do all this over the course of the season. I got to do a mock arbitration case last year for my internship and my team put in a good 40 hours and felt horribly unprepared.
They don’t bill for hours, genius. If you had bothered reading the article, you will know that they simply bill a percentage of the contract as commission.
…a percentage that is based on…estimated billable hours. If it’s 50 hours instead of 300, the justifiable commission rate decreases substantially.
Apparently you didn’t read the whole article either as the 300 hours is the estimated time to prepare an arbitration case and was used as the basis to calculate the 1.5% fee.
Nice try, but that is the internal evaluation that they used to come up with the commission percentage, which is the only thing that the end client sees – not the number of hours worked. As long as that rate is competitive, the number of hours worked is irrelevant.
But this will probably fly over some idiot’s head, as it usually does.
*Guffaw* Looks like you got served there, “genius”.
(Nothing more satisfying than someone thinking they’ve stuck it to you, and they are completely and totally incorrect in every way imaginable.)
@ LHPSU. You’re kind of a dick. But completely correct here. Good job.
Not really. Obviously the hours after irrelevant in the end product.
But the entire premise of the billing structure is based upon the idea that this takes on average 300 hours.
The only way to arrive at this is to count time as “work” that no reasonable working person would consider such.
For instance: “while at dinner with my wife my mind briefly wandered to player x’s upcoming arbitration case. For a short while as my wife talked any possible changes in the pattern of our window dressings I played out a scenario where I could make more money. My wife, noticing my sudden lack of attention became angry, called me a selfish douche bag and commented on the utterly unsatisfying nature of serial activity in our relationship. At which time I decided to feign interest in further conversation topics so as to avoid the necessity of deeper relationship talk. The entire dinner took one hour and forty five minutes. A quantifiable portion of which was in fact spent deliberating upon a business matter. Therefore I shall bill this event as a working dinner. And also deduct said working dinner as an expense on end of year taxes. Note to self: pay with corporate card.”
For a pre-arbitration player you pretty much need to have stuff ready at any time in case the team wants to talk an extension. If a team and player are interested in an extension that doesn’t mean one will be signed necessarily but you still need to work on it.
Then teams and agents will rarely see eye to eye leading in a large number of meetings and more and more analysis done. 300 hours honestly sounds low to me. Especially because its unlikely one person is doing all the work.
Its not 300 hrs for the agent. They have staff who do the grunt work and likely calculate those hrs as part of the 300
That’s a very good point. Talking about 300 man hours. 100 of which is doing stats analysis and comparisons. The analysis is, of course, done by an unpaid college intern.
And without all those trips to check up on the players, Jeff can finally get back to touring again.
Mr. Observant, it would appear to me that much of the value that an agent delivers in contract negotiations would stem from his/her network, namely in drumming up rumors or counter-offers to create leverage and improve a player’s alternatives to signing with the incumbent team. This would be very hard for a player to do on his own.
Actually makes quite a bit of sense in a way. Why does Logan Forsythe need to pay all that extra loot for Head and Shoulders commercials. I’m sure Boras and friends have all kinds of fluff stuffed into that 4-5 %. Now signing with Boras has it’s perks especially for Pujols/Cano types but Willie Bloomquist/Nick Punto types as well; Awesome facilities, training regimens, 5 star restaurants in every city. I like the model though and this sounds like a step in the right direction to me.
Why did you compare agent’s “hourly rate” to attorneys? How does a top agent’s hourly rate compare to, say, a top plumber?
I would guess she used attorneys because most (all?) states require someone to be a licensed attorney if he or she is negotiating or drafting a contract on behalf of somebody else.
Because Wendy is an attorney. And as a top attorney, she’s making bank.
Much of what an agent does is similar to what attorneys do. Many agents are licensed attorneys, although it’s not a requirement.
Yeah but think of the services they could provide if they were all licensed plumbers!
Well, some of them do peddle steaming loads whilst trying to sell their players… (or at least try to wipe away as much poop as they can)
Buyer beware though. In RE the std commission is 5% yet some agents will negotiate down to 3% (they have to share with buyers agent so that’s about 1.5% for them). However, they will just look for a quick sale and pressure you to take the first offer that comes along. They won’t do much for you, the house will sell itself basically and they just walk you through the closing. Probably best works in a sellers market
I think the 1.5% for players agents might work best for the players making more than league average. For the fringe player or league average player who needs help selling their services they might be better off paying the higher commission.
Do you have any evidence to support your claim of inferior representation for the diminished services provided? Because that would be a game changer and would probably out weigh any value you might receive as a player.
I have a good friend who’s in the real estate industry and we often talk about how broken that commission system is.
I ran some numbers once and found that in the past ~20 years, the cost of living is up ~50% but the cost of housing is up 100% (obviously this varies a lot depending on location). Since commissions have remained at 6%, realtor compensation has increased 33% even though the job is probably easier because of technology.
Likewise in baseball with contracts increasing say 5-10x over 10-20 years, there’s no reason agents couldn’t cut their commissions in half or even 2/3 and still be fairly compensated.
Agreed. The fact that commissions don’t tier downward as the sale price increases is absurd. I’m surprised nobody has launched a lower-cost model in this field yet.
Bean Stringfellow.
Bean Stringfellow.
He had sadistic parents.
For what it’s worth, someone with the net worth of a professional baseball player likely wouldn’t pay more than 0.50% or so for financial planning services. If the baseball contract negotiations are covered by a 1.5% fee, a full service agency is charging an extra 2-3% to cover outside contract negotiations. For a veteran player, using this type of approach could be a considerable savings.