Archive for cba

As has been documented in some depth this offseason, the new collective bargaining agreement is bringing about consequences that might not have been fully understood — by the players, at least — at the time both sides were celebrating labor peace.

These latest developments weren’t entirely unexpected, however. Consider, for example, some previous statements by Scott Boras on the matter.

“The integrity of the game is at hand here,” Boras said. “Clubs are refusing to employ premium free agents for their true market value because of an artificial, collectively bargained process that does not help the game or the fans’ perception of the game. These players earned their free agency and played at very high levels to get it.

…

“Like any players, they want to play baseball. But they’re also looking at the long-term aspect of their careers. This system has placed them not in free agency, but it’s placed them in a jail.”

…

“The system they’ve been dealt has basically prevented them from free agency,” Boras said.

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Major League Baseball’s salary-arbitration process is a pretty ridiculous exercise. A player and team each submit a figure for how much that player should be paid the following season. At some point not long after that, each party argues in defense of their figure, employing an array of statistics that front offices don’t even use for the purposes of evaluation.

If a team’s representatives successfully make their case, then a panel of arbitrators chooses the number they’ve submitted. If the team fails to sufficiently badmouth their own player, then the panel of arbitrators chooses the player’s chosen figure. Even in the best-case scenario — i.e. when the player and team agree to terms before arbitration — they still arrive at that agreement based upon what would would transpire at a hypothetical arbitration hearing. There has to be a better way.

Travis Sawchik recently proposed the introduction of restricted free agency to baseball, an approach that would likely eliminate arbitration, allowing teams to match offers made by other franchises. Like Travis, I would like to see arbitration abolished. Also like Travis, I am concerned about the middle class of players who seem to be shorted in the current system.

I agree that something needs to be done and that restricted free agency represents a better approach than the one currently in place. That said, I do think there might be a better solution, one that doesn’t entirely dismantle the framework of the present system and yet allows players to receive compensation proportional to their talents.

I think the adoption of a new arbitration-type system might benefit from greater use of a mechanism that was first introduced during the 2012-13 offseason — namely, the qualifying offer.

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“I know all teams have plenty of money.”

—Giancarlo Stanton

This season’s National League MVP, Giancarlo Stanton, recently addressed rumors that Miami might trade him, noting that the club could immediately become a postseason contender with the addition of pitching. His suggestion that all teams have plenty of money certainly appears to be a response to speculation that the Marlins intend to slash payroll a few months after having been purchased for more than a billion dollars.

It also stands to reason that he was commenting upon the fact any club could theoretically afford to acquire Stanton and the $295 million remaining on his contract. In one sense, he’s probably right. Revenues in baseball are at an all-time high. For a number of reasons, however, there’s not a direct correlation in baseball between revenues and spending.

One main reason is the competitive-balance tax, formerly known as the luxury tax. The cap for the tax has increased at only about half the rate of MLB payrolls. Accordingly, more teams find themselves up against a tax that was made more painful in the last CBA. Those taxes have pretty drastic effects on the trade market for Giancarlo Stanton, putting some teams out of the bidding and making the cost for others high enough that a competitive offer might be unreasonable.

Two years ago, Nathaniel Grow wrote an excellent piece about the implications of the luxury tax this century, showing how many teams used the tax as a cap, which has driven down spending relative to revenue over the last decade. In the last few years, the tax threshold has grown at a very slow rate, such that, by the end of the current CBA, teams with an average payroll will find themselves just a single major free-agent signing away from transcending it. The graph below depicts both average team payrolls and the tax threshold since 2003.

Over the last 15 years, payroll has grown at a pace 50% faster than that of the competitive-balance tax amount. However, the chart above actually overstates the rate at which the competitive-balance threshold has grown. From 2003 until the beginning of the previous CBA in 2011, the luxury tax grew at a rate pretty close to MLB payrolls, even if it did depress salaries compared to revenue. Beginning with the CBA that started in 2011 and the new CBA, which goes through 2021, the competitive-balance tax has seen barely any growth, especially when it comes to payroll.

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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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Yesterday, after months of rumored negotiations, news broke that Disney had agreed to acquire a 33% stake in MLB’s streaming-video division, often referred to as BAM Tech. According the report, Disney — which has ABC and ESPN under its umbrella — agreed to acquire one-third of BAM Tech for $1.16 billion, which puts the overall valuation for the entire streaming division at $3.5 billion. As part of the deal, Disney also has the right to purchase another 33% of the company in the future, which would allow them to become majority owners of whatever they choose to call BAM Tech long-term.

The deal is certain to have far-reaching implications for the future of streaming video, and it also could have implications in the upcoming labor negotiations as owners attempt to separate non-baseball revenue from baseball revenue despite its origins within the game.

With this deal, it is clear that BAM Tech is set to be distinct from MLBAM, focusing on streaming efforts outside of baseball. This development was first announced last August, coinciding with a deal to acquire NHL’s streaming rights. MLBAM  has become a force in the industry, branching out from providing only MLB-related services several years ago to providing back-end help to ESPN, rolling out the WWE Network and HBO NOW, along with streaming the NCAA Tournament and PGA tour events.

MLB considered several options with their streaming-services business, from going public to staying put, but ultimately chose a strategic partnership with Disney. By retaining a large equity stake in BAM Tech, at least until the option to sell another third is due, MLB has bet on the continuing upside of the company. By partnering with Disney, the odds are good that more deals like what the league did with the NHL and HBO will come down the pike, and if MLB and Disney can grow the company together, the remaining equity the league holds will likely increase in value, perhaps significantly.

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Prior the announcement of new Collective Bargaining Agreement yesterday, many thought that one sticking point might be “hard slotting” of signing bonuses for draftees. While hard slotting did not literally happen, the system of penalties for teams going over the “draft cap” looks like it will have the same intended effect. I am far from an expert on the draft, but what is particularly interesting to me is that some seemed to have been surprised that the union would agree to this sort of provision. A bit of reflection makes it clear why the union not only let it pass, but was probably in favor of it. Amateurs, both domestic and international, are not members of the union. Money that is going to those non-members is not going to union members. Whether or not the new CBA is good for baseball overall (I tend to agree with those who think it is not) is one issue, the union’s self-interest is another. Rather than tackling it as a whole, I want to take at the look at the latter by focusing on some interesting quotes from a long-time internet favorite: Jeff Francoeur.

It is a bit uncomfortable to “pick on” Francoeur. It is not just that I am not worried about beating a dead horse. I have read and heard directly from people, people who are far from being fans of Francoeur’s game, that he really is a genuinely “good guy” (maybe it is a front for the press, but if so, he maintains it quite consistently). He exceeded all reasonable expectations to have a good 2011 season for the Royals — something for which both he and the Royals front office that signed him should be commended (in retrospect, at least). I am not a fan of the contract extension he received, but it was not awful.

However, none of that is at issue here. What piqued my interest in Francoeur last night was coming across this August 2011 article from the Kansas City Star about the (then-upcoming) CBA negotiations. The article rightly notes that the lauded Kansas City minor league system, which received a fair bit of mainstream national attention this season with the graduation of players like Eric Hosmer and Mike Moustakas, was largely built not only on big draft day bonuses for players like Hosmer and Moustakas, but also over-slot bonuses for players who dropped down because of sign-ability concerns such as Wil Myers. The article discusses the well-known, record-setting draft spending in recent years of rebuilding small-market franchises such as the Royals and Pirates, and how those franchises were “overspending” on the draft in order to make up for their relative inability to compete in free agency. It also has interesting quotes from Royals assistant general manager J. J. Picollo, who claims that the Royals have no problems with spending big in the draft, and general manager Dayton Moore, who says that while the Royals like the (now former) system, the team will have to adapt its strategies to the new context. Scott Boras is quoted saying what you would expect him to say: that spending restrictions are unfair because, among other things, they treat every draft class as equal, even though that obviously is not the case (simply compare the 2010 draft to the 2011 draft).

This article also contains statements such as this:

The general view among industry insiders is that the players’ union will staunchly oppose any “hard slotting” in the draft, rebelling against any policy that could be considered a salary cap — even if that cap is relegated to players who have never played an inning of professional baseball.

While we do not know exactly what happened during the negotiations, it seems fair to infer from the results that the union probably did not “staunchly oppose” the draft spending restrictions. Indeed, there are indications from the article in the Star that point in the opposite direction. While agents such as Boras have an obvious interest in not having draft spending restrictions, current major league players were not at one with agents like Boras in this case, as this quote from a member of the player’s association committee indicates:

“My problem sometimes,” Royals outfielder Jeff Francoeur says, “is that you get a first-round pick, and that’s a lot of money to pay a high school kid who’s 18, and you don’t exactly know what you’re always gonna get. But at the same time, that’s the great thing about baseball — the free-agent market — you can get what you can get.”

Francoeur is serving on a players’ association committee as both sides prepare for negotiation, and he’s thought about the options. Maybe you move the signing deadline up to the beginning of July, he says, and that would lessen the leverage of draft picks and get them out playing earlier.

This much is certain: The multimillion dollar signing bonuses are catching the eye of veteran major-leaguers.

“I think it’s just getting out of control now,” Francoeur says.

Were things “out of control” prior to the new CBA? It depends on your point of view, I suppose. From Francoeur’s current perspective as a journeyman veteran, they may have been. The Royals convinced local boy (picked fifth overall in the 2011 draft) Bubba Starling to sign with them rather than go to the University Nebraska to play football by giving him a $7.5 million bonus. That is slightly more than the guaranteed annual salary players like Francoeur and Clint Barmes will get in their recent two-year deals. Maybe Starling’s sounded a bit familiar to Francoeur. After all, in 2002, there was a certain first-rounder the Braves wanted to sign. He was a local, two-sport star who had a commitment to play football at Clemson. The threat of leaving for college football probably helped him out a bit. Although he was only drafted 23rd, he received a $2.2 million signing bonus (a record bonus for the Braves until they signed number seven pick Mike Minor in 2009). Whatever happened to that guy?

Of course, there is a difference between the fifth spot (where Starling was picked this season) and the 23rd, where Francoeur was picked in 2002. But Francoeur as an amateur did embody a couple properties of the sort of players that people are concerned are at issue with the new CBA: the multi-sport high athlete, and the player getting more than one might expect at a lower spot because he slipped due to a college commitment. One player is not a full study, but this does not indicate that things are now “out of control.” Francoeur received a $2.2 million bonus to sign with the Braves in 2002. In 2011, the 23rd overall pick was Alex Meyer, who received a $2 million bonus to sign with the Nationals. In fact, by my quick count there were ten players picked above the 23rd spot in the 2011 draft who received smaller bonuses than Francoeur did ten years ago. One might argue that the 2002 draft was “deeper,” (I am not making that argument, just to be clear) but that would grant Boras’s point about restrictions on draft spending not allowing for flexibility to account for such things.

This is not meant to call Francoeur out as a hypocrite (at least not any more than most of us), a bad person, or anything like that. His comments from August do put certain things into an interesting perspective, such as this anecdote from Lee Judge (whose Judging the Royals blog and accompanying Ron Polk points system deserve their own post or series of posts on NotGraphs) about Francoeur asking the team to take down a clubhouse picture of some of the minor league prospects. Judge took this as an example of Francoeur showing veteran leadership. Will McDonald pointed out at the time what is apparent after reading the August article: Francoeur’s request could just as easily be interpreted as an indication of unenlightened self-interest.

[Judge also writes: “If you want to know how to approach the game, teammates or life, watch Jeff Francoeur.” I am not making this up.]

I would not want anyone to take away from this that I am anti-MLBPA or anti-labor in general. The opposite is closer to the truth. However, I do think that Francoeur’s attitude towards “out of control” signing bonuses towards draftees (who, like their international compatriots, had their future fates altered without being party to the negotiations) likely reflects that of his fellow MLBPA members: I got mine, and now I want it again. That attitude is far from commendable, but it is sadly understandable.