Observations From Major League Baseball’s Winter Meetings

I attended two days of the baseball winter meetings this week. Two days is a lot as it is constant discussions of the state of the game.   All of this took place in the lobby of Disney’s Dolphin Resort Hotel, a 2,000 room hotel sited near its twin, the Swan.  The audience is made up of team executives and a few owners, clouds of agents, and droves of office seekers, the “I won my fantasy league the last two years,” wannabees, who flock to these meetings seeking jobs. The meeting also includes a trade show, which for me this year, became a focus on batting helmets, catcher’s masks and bats. 

The main focus of this meeting, and most of the meetings I’ve attended, is money. As one owner told me early on Wednesday, the income is huge, but the expenses are huge as well. Same game, same story. He and I then discussed the situation that I first pointed out to him when we first met decades ago, is that the labor contract with the players had a built in flaw that forces salaries to rise, predictably and inexorably. The main flaw, and there are several, is that player salaries are based on comparable worth analysis. That means if a pitcher with a 15-15 record makes $10,000,000 per year, then all 15-15 pitchers should make $10,000,000. (That is a simplistic view as other factors like service time also apply, but you get the point.) The flaw is that it only takes one owner (or GM) to upset the system by grossly overpaying in a category. Say these 15-15 pitchers are all making $10,000,000 and suddenly someone pays $15,000,000 for a 15-15 pitcher, and then over the next year or two, all salaries in this category are raised and the salary inflation game is on. This inflationary spiral has been fueled by mistakes by owners for years and will continue, and a system built on errors will ultimately fail. 

So how can this fail if revenues are so huge? It is because long term contracts to players now total $100,000,000 dollars or more and some exceed $200,000,000. The comparable worth analysis suggests the outcome of that. “My guy is not as good as your guy, but he is half as good, so pay him $50,000,000!) This actually goes on. The counter offer is that there is only one star and a thousand average, fungible players. But up go salaries all the time. 

So why doesn’t ownership do something? The answer is fairly easy to understand. First, unlike football with its massive revenue sharing that makes all owners partners in a joint enterprise, baseball has three tiers of owners. The top tier loves the current system where they set salaries and dominate leagues, the middle third tolerates this as the revenue sharing system helps them a little and they can afford more players and compete with the top third on occasion. The bottom third just gets crushed or they operate very well, Oakland and Tampa Bay are in this class. Furthermore, where there is no way a two-thirds majority would vote to change the system, there is no stomach for confrontation with the union on the labor system and “labor peace” is today’s mantra of progressive leadership,

The result of all of this is that teams are now seeing that they can’t afford their players. An example of this is the Prince Fielder trade by the Tigers. Fielder is a large fellow with a long term contract. That means significant liability for the team; add to that  the prospect of Miguel Cabrera’s free agent contract, and Fielder had to go.  The LA Angels are facing the Trout free agent contract and have the horrible Pujols contract to deal with with no ability to trade Pujols. Clearly Trout is better than Pujols and should get paid better, right? Comparable worth analysis says “Yes.” Angels owner Artie Moreno is said to hum the country song with the refrain,”What was I thinking?” to himself as he contemplates his team. But his action makes Oakland viable.  However, the Yankees did call Robinson Cano’s bluff and let him go to Seattle for half of his demand in New York. A smart move by the Yankees, but Seattle?, “What were they thinking?”

My activities with helmets was because of contact I’ve had with a company that makes a “foam” with enormous ability to absorb hits; In batting helmets, this means much better protection, in catcher’s and umpire’s face masks, it means reduced or zero concussions. However, the tech company that developed this product entered into an exclusive, world-wide license agreement with a lower range equipment manufacturer. I asked them “what do you mean by “exclusive.” What does this mean in terms of time, space, categories, etc.?” He said, ‘It’s exclusive world wide.and just started.” So we wait to see what happens.

As to bats, this is a fascinating category and there are more bat manufacturers every year. There is the battle between maple and ash, and the ash guys saying maple splinters too much and is a hazard. This game will go on forever, The “new” technology in the area is the oldest as well as manufacturers are “boning” bats with steel bones to harden the hitting surface. The boning came from the practice of rubbing the bat against a cow’s femur to “tighten” the grain. This also, incidentally, slightly flattened the hitting surface, but just slightly. One bat manufacturer was saying his main competitor’s bats were actually an octagon with eight flat facets, so it wasn’t round as the rule requires.  So the equipment game goes on and will continue as it has for a century.

My final discussion took place at the airport as a GM was lamenting his team’s position in the revenue rankings. He was saying the big markets were raising salaries and it was hard to compete. I suggested that it would continue until his owner put together a coalition of similarly situated owners to take control of the game.  We will probably have the same conversation next year. 

Spring Training is just around the corner.  

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