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Wednesday, June 22, 2016

Baseball’s financial disparity issue goes beyond just team payrolls | FOX Sports

Owners pay more money for high-revenue clubs. High-revenue clubs also generate more money for low-revenue clubs in national broadcast packages. They also send money via luxury taxes and penalties for exceeding the international bonus pool. How much more help do they need to give low-revenue teams?

Low-revenue clubs, in particular, continue to express frustration that high-revenue clubs use their financial might to exploit the international market, as well as the major-league talent pool. The Dodgers also paid a record $43.6 million luxury tax on their record $291 million payroll last season.

Jim Furtado Posted: June 22, 2016 at 09:19 AM | 27 comment(s)
  Beats: economics

The Sultan of Swag: Babe Ruth as a Financial Investment | Society for American Baseball Research

Interesting stuff.

Over the course of his career, the total return earned by the Yankees on their investment in Babe Ruth was 1254 percent. Because of its volatility, the stock market returned a net gain of only 17 percent during the period. Bonds did much better at 205 percent, but still fell far short of Ruth. It turns out that Babe Ruth was indeed a wise investment for the Yankees. It would have been difficult for Jacob Ruppert to find any other investment that could have done nearly as well.

Despite the riches the Yankees were earning from Ruth, Yankees general manager Ed Barrow wasn’t particularly appreciative of the Babe in the waning years of his career. In a letter addressed to sportswriter F.C. Lane in March of 1933, Barrow complained that Ruth “is greatly overpaid.” Adding that he hoped “the Colonel will stand pat on his offer of $50,000 and call the big fellow’s bluff about retiring.” The Colonel did not stand pat, eventually offering Ruth $52,000 plus 25 percent of the net receipts from exhibition games, though ultimately only paying him $42,000. It was not one of the Babe’s better years, though he did return a nice profit of about $45,000 for the Colonel’s investment. This was certainly better than Ruppert could have done by investing in the stock market, which lost 17 percent that year. The 45 percent return also outperformed the bond market that year by a substantial amount.

The return on Ruth fell the next year, his final season in New York, to its second lowest, returning the team just over $32,000 in net profits. This was at a much reduced salary of $35,000, however. The Yankees, because they were able to reduce Ruth’s salary toward the end of his career, were able to ride him for a couple of final years of profitable employment before finally shipping him off.

When he was ingloriously dispatched to the Braves in time for the 1935 season the Yankees received nothing in return. Their records indicate that he was sold to the Braves without monetary consideration. It was indeed a quiet ending to the most famous financial investment in Yankees history.

Jim Furtado Posted: June 22, 2016 at 08:42 AM | 2 comment(s)
  Beats: economics, history, sabr

Monday, June 13, 2016

10 Degrees: MLB’s economic disparity and why its top bargains are so valuable - Yahoo Sports

This overestimates Clayton’s value. Teams don’t pay $8 million per win. They pay $8 million per win on the free agent market.

Clayton Kershaw, even at $32 million, is a giant bargain. And this goes well beyond the raw amazement he generates, though any opportunity to showcase Kershaw’s line is one gladly taken. Look at this. It’s like fine art sketched out in number form: 100 2/3 IP, 59 H, 18 R, 17 ER, 6 BB, 122 K, 1.52 ERA. That belongs in the MoMA.

So, how does that translate to a bargain? Well, we need to use the concept of marginal wins above replacement. While I’ve spat on WAR in the past, it comes in handy for an exercise like this, because free agency gives us a decent sense of what teams are willing to pay for a win above replacement, as calculated by FanGraphs or Baseball-Reference.com. And that cost, these days, is in the neighborhood of $8 million.

Currently, FanGraphs has Kershaw at 4.6 WAR on the season and Baseball-Reference at 4.1. That means Kershaw has generated somewhere between $33 million-$37 million already for the Dodgers this season. Meaning everything Clayton Kershaw does from this point forth is surplus value. And considering he’s got 20 starts left, that’s a lot of surplus and a lot of value. In the end, it may not quite stack up to the …

Jim Furtado Posted: June 13, 2016 at 09:57 AM | 3 comment(s)
  Beats: economics

Friday, May 27, 2016

Baseball Prospectus | Tools of Ignorance: The Team-Mandated Player Opt-Out

Sign a player with an opt-out and hope he gets stupid? Oy.

Jim Furtado Posted: May 27, 2016 at 10:14 AM | 8 comment(s)
  Beats: economics

Wednesday, May 18, 2016

Free Agent Compensation Must Die – The Hardball Times

Ahh, because teams are part of the process. Free agency is collectively bargained and is not some inherent right for players.

My question is this: Why should teams that lose players to free agency receive any sort of compensation whatsoever?

Edit: Link fixed. Sorry, Jim.

Jim Furtado Posted: May 18, 2016 at 08:19 AM | 6 comment(s)
  Beats: economics, free agent compensation

Wednesday, April 20, 2016

How to Value Opt-Outs – The Hardball Times

So, having a better idea on how well a player will perform in the future will make projections of value better?

Ahh, thanks for the insight.

Most of the assumptions tended to have relatively limited effect on the approximate value of the opt-out. The key parameter is the standard deviation of forecasted WAR, which affects that last term reflecting the expected value post-opt-out conditional on not opting out. Further research into how projections change over time as the year in question gets closer could shine more light on that term, but I believe 0.7 WAR for these types of players is probably a pretty good estimate. Individual players’ opt-out values also varied based on initial WAR forecast, time until opt-out.

This shows the importance of the variance around a player’s projection—players’ talent levels are not their mean projections. As contracts get more sophisticated, the concept of players’ talent levels consisting of a variance (in addition to just their mean projection) is essential to pricing. Furthermore, using more proper pricing methods than simple dollars per WAR analysis becomes very important as well. These opt-outs are the latest stage in baseball player contracts, but knowing how to measure variance and price options is likely to be essential for many of these deals.

Jim Furtado Posted: April 20, 2016 at 09:33 AM | 0 comment(s)
  Beats: economics, opt-outs

Wednesday, March 16, 2016

The Teams With the Most Dead Money in MLB | FanGraphs Baseball

Money is dead.

Jim Furtado Posted: March 16, 2016 at 08:38 AM | 0 comment(s)
  Beats: economics

Wednesday, March 02, 2016


Monday, February 15, 2016

Not every baseball team that’s rebuilding should be accused of tanking | FOX Sports

Two changes could help this issue: 1) allow teams to trade picks (and decide how much of the pool money to include), and 2) equalize the amount of money given to the team with the highest draft pool with everybody else by increasing the luxury tax threshold for the other teams to match the difference.

The union historically has opposed the concept of a payroll “floor,” believing teams should be free to go up or down. The problem now is that the weighted bonus pools in the current CBA created an even greater motivation for teams to seek the highest draft position.

Jim Furtado Posted: February 15, 2016 at 07:06 AM | 24 comment(s)
  Beats: cba, economics

Thursday, February 04, 2016

Scott Boras, other baseball minds propose anti-tanking measures - Buster Olney Blog- ($Insider$)

How do these changes actually help bad teams return to contention?

In no particular order, here are some of the suggestions mentioned by evaluators and agents:

1. Prevent teams from picking at or near the top of the draft in successive seasons:
(snip)

2. Reduce the difference in draft dollars attached to the highest picks under the current system:
(snip)

3. Have a draft lottery:
(snip)

4. The E system: Agent Scott Boras presented a multifaceted idea that would allow the worst teams to extract proper value from their picks in the years in which elite talents (like Stephen Strasburg and Bryce Harper) are available in the draft, but also would push the worst teams to compete to the best of their ability.
Call it the E system. As in “Elite.”

Boras spoke with admiration about how the science of scouting has developed, how much more precise the evaluators and their evaluations have become, and his suggestion places a lot of power in the hands of scouts.

Some years, no special talents like a Ken Griffey Jr. or a Joe Mauer or a Harper emerge in the draft. But when they do, those players can be undervalued under the current system. If Harper had been available in last year’s draft, by rule he could not have gotten more than what the Diamondbacks had available in draft dollars, without substantial penalty to the team.

So Boras proposes a special E draft. Ask teams to submit a list of possible E talents, players they deem to be worth more than the dollars allotted to the top slot in the draft. Any player listed by 15 or more teams as being one of those elite talents would become eligible for a special E draft. “You let the industry decide who those players are in a given year,” Boras said.

Griffey, Harper and Strasburg certainly would’ve been in that category. Some years, there might be four or five, Boras explained, some years there might be only one or two. For as many players who are selected for the E draft, there would be a matching number of teams eligible to participate, according to which clubs finished at the bottom of the standings.

Here’s the catch: Under Boras’ proposed system, in order for a team to participate in the special E draft, it would have to win at least 68 games, a threshold that, according to Boras, distinguishes teams that are simply bad from those that are tanking and trying to lose. This would provide incentive to bad teams to do as much as possible to win down the stretch, and eliminate a lot of the incentive for teams to tank seasons.

For example, let’s say there were four players deemed worthy of the special E draft in 2016. The four teams participating could bid openly on those four players, with the option of trading their picks, selling their picks, etc., to ensure they would receive proper value. Each of the teams participating in the E draft would be assured of one player, either to sign or trade or sell.

The system also would ensure that the very best players eligible for the amateur draft would be paid like the players from Cuba and other countries are paid, with offers that reflected their actual value to clubs. Boras believes that this would help attract the best athletes in the U.S. and Canada who might otherwise play other sports.

After the players were selected in the E draft, the remaining players would be eligible for the standard draft process, with the worst teams picking first.

Jim Furtado Posted: February 04, 2016 at 10:07 AM | 71 comment(s)
  Beats: economics, scott boras

MLB’s qualifying-offer system is stacked against low-revenue clubs | FOX Sports

Sorry, I don’t even know where to start on this article. I really like Ken Rosenthal and generally enjoy his stuff but this piece is a mess.

Jim Furtado Posted: February 04, 2016 at 08:03 AM | 10 comment(s)
  Beats: draft, economics, qualifying offers

Tuesday, February 02, 2016

Owners are worried about tanking. Which is something they themselves created. – HardballTalk

Tanking as an issue is much ado about nothing. Teams already pay a price for tanking. Attendance and ratings drop.

Now, however, there is a lockstep relationship between losing and the draft. If you’re not going to make the playoffs, it’s clearly better to lose 105 games than 95. at a certain point it’s in a club’s best interest to simply wave the white flag and position itself for three years from now. Unless and until that relationship is reduced in strength, that incentive will persist.

If, as Olney says, owners are angry about taking, which one of them is going to propose that they chuck draft slotting and bonus pools first? And if mid-range veteran free agents are going to be miffed that they’re still unsigned in February — or if they’re going to be upset with how an allegedly tanking team goes about its business — which union representatives are going to go back to what Michael Weiner thought about the topic back in 2009 and go back to the business of opposing salary caps in all forms?

Gentlemen: start your negotiating.

As Buster Olney noted in his column , “Some of the concerned teams link the question of tanking to the ongoing conversation about revenue-sharing, according to sources. Owners of large-market teams believe small-market teams should allocate funds provided to them to improving their on-field product. Instead, in some cases, those dollars have been used for debt and for partner and executive payments. Some small-market owners believe they should be able to use the revenue-sharing funds as they see fit.

The possibility that some teams which get revenue-sharing dollars might be taking the money and still structuring their rosters to lose rather than spending it to improve has inflamed the ire of some big-market clubs.”

So, the issue isn’t really about tanking or the draft, it’s about money big market teams give to small market teams.

Jim Furtado Posted: February 02, 2016 at 09:58 AM | 42 comment(s)
  Beats: draft, draft pick compensation, economics

Monday, January 25, 2016

Milwaukee - Baseball Prospectus

And it happens over and over and over again.

If the billionaire Pohlads had been willing to take a short-term loss, they could have made their way out of the Metronome years earlier without taking the public for such a ride. Instead, Pohlad and Selig played games with the public to service their own greed. The threats of contracting the Twins were never about Minneapolis’s “growth potential” or any of Selig’s typical economic concerns. Those threats were about bullying the people of Minneapolis and creating a culture of fear outside of the untouchable cities like New York, Los Angeles and Chicago. And in that sense, even though the contraction plan never went through, the gambit worked perfectly.

Jim Furtado Posted: January 25, 2016 at 03:29 PM | 20 comment(s)
  Beats: economics, twins

Thursday, January 14, 2016

Toronto Blue Jays would prefer to keep spring training in Dunedin but require new ‘state-of-the-art’ facility, team president says

Talks have dragged on for years in a bid to improve and expand the facilities, but to date have been fruitless.

“The plan would be this: to articulate what our needs are (and) to do everything humanly possible to work a deal out with Dunedin, because I think that’s still in our best interests,” Shapiro said. “I think if you look geographically in the state of Florida, that’s still the best place to be.”

Shapiro said he and Matthew Shuber, the Jays’ vice-president of business affairs and in-house legal counsel, have met with Dunedin officials in Florida. Meanwhile, the Jays are preparing a detailed outline of their requirements.

Presumably, Dunedin taxpayers would be expected to cover part of the costs, although Shapiro did not address that issue in his radio interview.

RoyalsRetro (AG#1F) Posted: January 14, 2016 at 12:01 PM | 34 comment(s)
  Beats: blue jays, dunedin, economics, spring training, subsidies, taxpayers

Tuesday, January 12, 2016

Lawyer: More than 1,100 current and former minor-leaguers have signed onto lawsuit - Sports - providencejournal.com - Providence, RI

I can’t see how these players will win this suit. Would any of our lawyers like to comment?

Jim Furtado Posted: January 12, 2016 at 09:07 AM | 36 comment(s)
  Beats: economics, minors

 

 

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