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More thoughts on the changing baseball economy

I basically wrote about this earlier this afternoon, but Sheehan’s article about salary arbitration this year is worth quoting:

These decisions, taken as a whole, reflect the evolution of a market. Not every team sees it the same way, but by and large, the industry is valuing experience less, valuing common talents less, and recognizing one of the first principles of performance analysis: talent in MLB isn’t a bell curve, but the right edge of that curve, with a few tremendous talents, and then a large pool of similar ones. There’s nothing special about Randy Winn or Jermaine Dye or Jon Garland, and what separates them from comparable players—experience—isn’t something worth paying millions of marginal dollars for. The industry is getting smarter, and it’s going to make for better baseball for all of us.

That’s exactly right.

This isn’t an issue of “stats vs scouts,” which is apparently how my last article was viewed. This is simply the market for baseball players evolving due to a change in player evaluation in front offices.

Part of that change is certainly due to a difference in evaluation methods — more teams are using statistical analysis to attempt to value both free agents and internal options. Another part of that change is probably economic: the guys signing the checks would rather their employees don’t throw their money around as much as they have in the past.

But, as Sheehan points out, another part of it is that front offices are simply getting smarter. They’ve realized that there really are only a small handful of players worth committing a large amount of resources — either in dollars, years, or roster spots. Beyond those few stars, everyone else in the majors (or, to a lesser extent, the high minors) is pretty close to equivalent. Why would you spend many millions of dollars on one when you can have another for half a million? It makes no sense.

Right now I think the front offices have swung too far in the opposite direction of their free-wheeling ways of yesteryear; this market, like any other, is operating like a pendulum on the way to equilibrium. But even still, the idea that this sort of analysis shows that “all free agents are basically worthless” is disingenuous at best; it smacks of sportswriter-like thinking, that “things were better back then,” and is clearly in opposition of change, no matter how inevitable or beneficial.

Ultimately, I agree with Sheehan (on this). This is going to make baseball better for everyone.*

*Except, of course, for the aging veterans who are no longer the beneficiaries of foolish contracts — but how much do you feel for those guys?

29 comments

29 Comments so far

  1. TT December 3rd, 2009 11:29 pm

    Again – where is the evidence to support this analysis? Where is this money going instead? If the argument is that spending on veterans isn’t worth the money, then what how is the money being spent that is worthwhile.

    When I look at the Twins, there has been no noticeable change in their operations. They have continued to emphasize investments in player development and keeping core players around. Their free market purchases supplement that and usually with players who are cheap with some upside potential that might pay off.

  2. FunBobby December 4th, 2009 7:02 am

    It appears as if teams are spending more money on draft picks and using it to lock up young stars like Grienke and Longoria. Longoria got a long term deal in his rookie year. That NEVER used to happen. The rays decided he was good enough that his arb numbers would be crazy high so they locked in some cost certainty.

  3. sirsean December 4th, 2009 8:07 am

    Exactly right. As I said in a previous comment (can you read, TT?), the money is still being spent, it’s just being spent in different places. Like on contracts for young players, on on the draft, and on international signings.

    You really think the Twins haven’t changed course at all? Who’s the worst free agent on the market this year? Do you think we’ll sign him like we did Batista/Sierra/Ponson/ROrtiz/Lamb?

    And what about the draft? The Twins went WAY above slot to sign Kyle Gibson. Never done that before.

    And internationally? The Twins signed Miguel Angel Sano to a $3M+ deal, something they’d never even considered before.

    And they signed Max Kepler to the largest bonus any European player has ever received.

    You don’t think things are changing? What sport have you been watching?

  4. Ragstoriches December 4th, 2009 8:07 am

    Isn’t it simply possible that baseball is becoming, like all other major sports, a “younger man’s game”? Prospects are increasingly more prepared to step in to MBL at a young age and perform at a high level? And that, given the state of the economy, teams are recognizing that these players are going to cost a fortune if they get to free agency (i.e. Joe Mauer) and that it’s probably worth the risk of signing them to long term deals without much experience (i.e. Longoria)? Isn’t it more likely the state of free agency is driven by economics and the nature of the league? Just like your average American in this recession, teams are being more careful with their money. Do they pay closer attention to stats? Probably, just like Americans pay closer attention to their budgets and portfolios. It’s driven by money, that’s it. Your argument is like saying people are spending less at Christmas this year because of the prevelance of online banking.

    When the economy returns, so too will bloated contracts to aging sluggers.

  5. sirsean December 4th, 2009 8:28 am

    My argument is nothing like that. If you truly believe that, I feel sorry for you. It’s more like saying that Americans are spending close to the same amount, maybe slightly less, but are getting better stuff because of the prevalence of deals on sites like Amazon — opportunities that simply didn’t exist in the past.

    And no, I don’t think big contracts for aging, declining sluggers will come roaring back with an economic recovery. For one thing, baseball hasn’t really been effecting that strongly by the economy. The league hit its second highest revenue in history this year, down just a couple percent from the peak. For another thing, teams are quite likely to see that spending their money more wisely is good for them in both the short and long term — why go back to making the mistakes of the past?

    And finally, I don’t believe that it’s happening because young players are somehow more capable of stepping in than they use to be. Barry Bonds was pretty awesome as a young player, and so were many, many others. Where were their pre-arbitration contracts?

    For all this talk about “evidence,” I feel like the only one that has any. If you feel like coming back with examples or logical arguments, that’s good. But trying to fit someone else’s argument into a braindead analogy and getting it totally wrong to suit your own purposes isn’t worthwhile.

  6. Ragstoriches December 4th, 2009 9:00 am

    Okay, lets talk logic here. It’s a “fact” that teams are spending less money on old free agents. I agree with you there. But here we diverge. Your “evidence” is a couple opinion hot-stove pieces by national baseball writers. Do you dispute that America is in the midst of a recession? I hope not. Okay, so that’s fact number 2. I attempted to illustrate a possible cause-and-effect relationship between two facts: the recession is causing teams to be tighter with money. Sounds pretty logical, doesn’t it, using facts to support a theory? May not be correct, but at least my analysis is based on something tangible. You, on the other hand, are using 2 opinions to assign a self-satisfying cause (GMs finally use complicated stats to evaluate players, like I’ve been doing all along) to an effect (thus making old vets worth less). You are substantiating your case with opinions, I substantiate mine with fact.

    Who’s being logical here again?

  7. sirsean December 4th, 2009 9:24 am

    I never disputed that America is in a recession — but I do dispute that it’s significantly effected baseball as a whole and the market for baseball players specifically. Do you dispute that? Because, you know, you seem to have ignored the fact I cited earlier that revenues this year were the second highest in the history of baseball and were down only a couple percent from the previous year’s peak.

    Okay, so fact number two is that you “attempted to illustrate a possible cause-and-effect relationship” … okay, yes, I’ll consent that it’s a fact that you attempted to do that. But the two facts you claim to have attempted to link, apparently, were “the recession” and “teams are being tighter with money.” I’ve stated that I don’t believe the recession is having a large effect on the baseball economy (if any). And are teams being tighter with their money? Is that a fact? Or is that just an opinion that you have?

    Most teams have the same amount of money available. Some teams, like the Pirates, are using it to pay down debt from purchasing the team — I don’t have a problem with that, and it happens regardless of economic conditions. Other teams, like the White Sox, won’t be spending money this offseason because they took on $100M in contracts during the season (Peavy, Rios). Other teams, like the Dodgers and the Padres, are going through off-field issues that have little or nothing to do with the economy but are preventing them from being able to spend money like they normally would. The Royals? Well, they’re setting records in draft bonuses given out; the Twins are spending plenty of money in the same way. So are plenty of other teams, like the Nationals. Money is still being spent — but in a different way.

    Money that used to be spent on big contracts for older players is now instead going to draft bonuses, international signings, and locking up young stars.

    Now, why is money being spent in a different way? I contend that the reason money is being spent in a different way is not because, as you seem to think, “teams have less money to spend because of the economy.” That opinion does not logically follow from the fact that teams are not spending less money and are not effected by the economy.

    Maybe it’s because teams are doing a different kind of analysis that is showing them that they’ve been spending their money unwisely for years — and I think it’s worth pointing out that the quote that said this was happening was from a current assistant GM of a major league baseball team, so it’s probably more than the opinion of bloggers and writers. In fact, that’s not strong enough. It is more than the opinion of writers. It’s a fact of front offices changing their assumptions and methods.

    Then again, maybe this is all just random ebb and flow of talent, and is happening because the current set of older players isn’t as good as, or aging as well as, the older players of a few years ago. It’s possible that the next crop of talent will age better, and that they’ll continue to be paid throughout their 30s. It’s also possible that the previous crop of stars aged so well because of the use of performance enhancing drugs — I’m not saying it is, and I’m not accusing anyone, but this is often cited as one of the reasons people were taking those drugs, and being able to perform at unprecedented levels into the late-30s and early-40s appeared to be one of the effects of those drugs.

    And maybe it’s just random, and there’s no real cause for it. And those contracts will come back later.

    I don’t think either of the latter two options is as likely as the first one, that teams are doing a better job of evaluating talent. That’s the opinion that I submitted, based on the facts that I’ve outlined.

    I hope you’re not too confused by all this.

  8. fishin buddy December 4th, 2009 9:29 am

    I agree with the “Front Offices are smarter now” argument. Unless you are the Yankees who can buy anyone they wish, most clubs have realized that young talent with upside is superior to old talent in decline.

    This is especially true in the post PED era. In 2000 a 35 year old player still had a few good years left. Now, without PEDs, a 35 year old player will play like an old man in few short years. In my opinion, the biggest advantage of PEDs was the extension of a career by four or five years.

    I expect that five years from now if you were to compare the peak career ages from the PED era with pre and post PED usage you will find this to be true.

    Agents, players and fans realize that an old player on PEDs is more valuable (based on preformance) than an old player without PEDs. Thus, the recent decrease in old player salaries.

  9. sirsean December 4th, 2009 9:36 am

    Two things:

    1) Even the Yankees have been acting smarter. They refused to offer Abreu arbitration last year when he probably would have been awarded around $16M — he signed a 1/$5M contract. Same with Pettitte, who would have gotten $15M in arbitration, but signed a 1/$5.5M contract. This year, they didn’t offer arbitration to Damon or Matsui, because they both would have been awarded around $15M, and it seems like they’ll get Damon for much less than that and possibly let Matsui walk (and, if he gets a contract, it’ll be for much less money).

    2) I agree that one of the (if not THE) biggest effect of PEDs was extending a career. But I hesitate to assign too much of this to PEDs, because I don’t want to paint with too broad a brush of accusation, given how angry people get about the idea that these guys were “cheating” or something. But for the individual players, the option breaks down like this: “I can refuse to use these drugs and be unable to play baseball. Or I can take them, like many of my peers are doing, and play the game I love for another 4+ years and make another $50M+ along the way.” Why are they considered to be monsters?

    But yes, I do think you’re right that after this is all said and done, the 1995-2005 will end up having the longest average (and peak) careers over other modern eras. Hopefully that will be the legacy of the steroid era, rather than all the hate-filled hypocrisy that’s currently flying around.

  10. Ragstoriches December 4th, 2009 10:04 am

    “Revenues this year were the second highest in the history of baseball and were down only a couple percent from the previous year’s peak.”

    Gee, down a couple percent…what possibly could that mean? Why were revenues down? Certainly not any sort of economic troubles, right? A “couple percent”, by the way, given total revenues, is in the tens of millions of dollars. So yeah, I’d say baseball has been affected by the economy.

    Also – and don’t get too confused by this – our economy has this tricky little thing called inflation. So of course revenues increase most every year. Admittedly, baseball revenue growth has in the last few decades outpaced inflation by a couple percent, but come on. That’s like saying “players today make more than players in the 50s.” Thanks, Captain Obvious. Great point.

    You are certainly entitled to your opinion. I just happen to disagree with most of them, because they do not reflect any objectivity whatsoever. You mold things to fit your pre-existing opinions rather than do any real analysis on anything. And that’s fine, that’s the beauty of having your own blog. I just like to open up the discourse a bit.

  11. Alan December 4th, 2009 10:11 am

    Do you people not have jobs?

  12. MarkW December 4th, 2009 10:16 am

    I believe sirsean said the recession that America is facing has not “significantly” effected Baseball… 2 percent decline in revenue is not very significant. Most companies faced 40-60% decline in revenue, fired thousands, froze credit, and even shut their doors. I don’t believe baseball has done any of this.

    If you want to contest that some didn’t spend thousands on season tickets and few less didn’t come through the gates, then fine… that’s probably what caused the decline…

    but again, Sirsean has at least backed up his “opinions” with some evidence as to where the money is currently being spent.

  13. sirsean December 4th, 2009 10:17 am

    Ironic, because your entire method of discourse is to close it down and discredit all facts not spoken by you as mere opinions.

    You’re saying that payroll is clearly plummeting because the entire league has “tens of millions of dollars” less that they can play with? This being the league making SEVEN BILLION DOLLARS a year in revenue? At the same time that payroll is not declining? Up or down a couple percent is in the range of standard year-to-year fluctuation, and is absolutely not indicative of “being adversely effected by recession,” or any such thing.

    Are you really trying to say that the only reason salaries are higher now is because of inflation? I don’t think that’s what you’re saying. That can’t be what you’re saying. Have you heard of the advent of free agency? Was this part of some argument or point you were trying to make, or were you just using it to set up a lame insult as part of “opening up the discourse?”

    I’d say I’m being pretty objective about this. That’s the point of the analysis, after all: to be more objective. If there was any indication that “using advanced statistics to evaluate players” led to spending more money to put together a worse team, well, it’d be a pretty shitty method of analysis and I’d be against it. For what it’s worth, that’s the exact reason I’m against the old method of “this guy is a clutch player and looks like a star and I have a hunch, so pay him whatever his agent says he’s worth, I don’t care! Look at the RBIs!”

    So … in the interest of “opening up the discourse,” do you have anything productive to say, or a point to make, or are you just going to come back and throw insults and stick with your “change is bad and new ideas are wrong” stance?

  14. sirsean December 4th, 2009 10:18 am

    I guess typing that took too long.

  15. MarkW December 4th, 2009 10:20 am

    Alan: Do you? And what do you mean by “you people”? Bloggers? People who post on blogs?

    I’m offended.

    Sirsean: Ragstoriches might have gone from riches back to rags during this “recession”, maybe he’s bitter.

  16. sirsean December 4th, 2009 10:21 am

    Bam! That’s what a blog comment is supposed to be!

  17. Ragstoriches December 4th, 2009 10:35 am

    Objective? It took me 2 minutes to find this article:

    http://sportsillustrated.cnn.com/2009/writers/jon_heyman/11/12/gm.meetings/index.html

    in which a GM (not an assistant GM) says, regarding Soriano’s absurd contract, “That was in a much better economy.” But you choose not to recognize this article or anything like it, I’m guessing because Heyman isn’t a stat maven like you. Again, that’s perfectly fine. That’s your opinion. My opinion, after reading your posts, some of Heyman’s posts, etc., differs. I don’t think the use of advanced statistics has led to a widespread decline in veteran free agent contracts. I happen to think there are larger issues at play. I apologize that my opinion differs from yours.

  18. sirsean December 4th, 2009 10:46 am

    The Soriano contract did happen in a better economy. On the other hand, the Soriano contract is also a great example of a horrible idea, even at the time. He had value as a second baseman at his peak … and for some reason the Cubs locked him up through his entire 30s, to play LF. Huh?

    The reason more players like Soriano aren’t getting deals like Soriano did isn’t because of “the economy.” It’s because other teams saw that deal, and how it’s turning out, and are thinking “boy, I’m glad that’s not us … we should make sure that never happens to us.”

    Also, I suppose you don’t care that Heyman is wrong most of the time. Why would you care? He’s a mythical sportswriter, the only type of person allowed to have an original opinion, and everyone else can either repeat it or shut their stupid face and then go back to their parents’ basement.

    Finally … what do you expect GMs to say about why they’re not offering big contracts?

    “Boy, we used to be stupid!” That’s a good way to not get fired.

    “We don’t think this new player is as good as the contract he’s demanding.” Good way to get that player to want to come play for you.

    “It’s the economy!” Everyone will believe you and you can keep on going, regardless of whether that was your real opinion.

    Or … did you think GMs are always totally honest and open when they talk to the media?

  19. Ragstoriches December 4th, 2009 10:59 am

    Well it appears my assumption regarding your view of Heyman was correct. Mythical sportswriter? According to whom? I doubt the majority of baseball fans have even heard of him. He’s one of many, many baseball writers out there. You choose to acknowledge only a select few who align with your viewpoints.

    Just like you acknowledge the assistant GM who likes advanced stats, but dismiss the GM who mentions the economy. Apparently GMs are “totally honest and open when they talk to the media” only when saying something you agree with.

  20. sirsean December 4th, 2009 11:02 am

    Digging up an article by Heyman which supports only your viewpoint and doesn’t address any others really proves your point about me.

    No, wait. About you.

  21. FunBobby December 4th, 2009 11:02 am

    heyman is the head baseball writer for a little publication called Sports Illustrated and appears often on MLB network. I doubt very few baseball fans have heard of him.

  22. Alan December 4th, 2009 11:05 am

    MarkW: I was only wondering if the people who were arguing about the economy on a baseball blog for four hours on a Friday morning were working. Didn’t mean to offend. I’m a workin man myself

  23. sirsean December 4th, 2009 11:08 am

    Hey, why do you think the economy’s struggling like this? Because everyone’s “working really hard?”

  24. sirsean December 4th, 2009 11:12 am

    Oh … yeah, I want to address this:

    in which a GM (not an assistant GM)

    I don’t know how it works in that particular front office, and front offices may do things differently, but it’s worth pointing out that in the Twins’ front office, the assistant GM is the one in charge of placing a dollar value on players and negotiating the contracts.

    Maybe that’s worth considering, in a discussion about “player evaluation” and “contract size” which was sparked by the words of an assistant GM.

    Or are these facts simply unacceptable?

  25. Ragstoriches December 4th, 2009 11:13 am

    Sirsean, ha. As I said, it took me 2 minutes to find that article. My point is that you don’t take the 2 minutes to seek other viewpoints and it’s very easy to jump on the bandwagon of something that conforms to your pre-existing opinions. You have unwittingly illustrated my point.

    I read Heyman’s article, but I also read your post. That’s one viewpoint too many for you.

  26. Ragstoriches December 4th, 2009 11:18 am

    Of course the assistant GM’s comment is worth considering. Just like the GM’s comment about the economy is worth considering. Why can’t we consider both?

  27. sirsean December 4th, 2009 11:18 am

    I’m going to repeat my contention that your ability to quickly find an article that agrees with your opinion is not proof that I do not seek out and read opinions different from my own.

  28. Ragstoriches December 4th, 2009 11:20 am

    You didn’t think that article was worth mentioning in a discussion about the free agent market?

  29. sirsean December 4th, 2009 11:26 am

    You mean the three week old “rumors of the moment” article about a bunch of deals that still haven’t gone down (or gotten any closer), which simply rehashes the same old yarns about “the economy” once again?

    No, articles like that are the reason I find news that some teams are moving in a different direction interesting in the first place.

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