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.