Baseball for the Thinking Fan

Login | Register | Feedback

btf_logo
You are here > Home > Baseball Newsstand > Baseball Primer Newsblog > Discussion
Baseball Primer Newsblog
— The Best News Links from the Baseball Newsstand

Sunday, May 25, 2014

Players union keeping watchful eye on Cubs’ spending

Sources said the union is concerned about how the Cubs’ business practices are affecting player markets. At least one agent met with Cubs chairman Tom Ricketts this year, according to sources, to make the case for investing in the major-league team even as the club overhauls the scouting and player development system.

But don’t worry-Theo and Jud have a plan! Its not that the Ricketts family is leveraged to the hilt and has no money.

SteveM. Posted: May 25, 2014 at 12:02 AM | 33 comment(s) Login to Bookmark
  Tags: broke ass, chicago cubs

Reader Comments and Retorts

Go to end of page

Statements posted here are those of our readers and do not represent the BaseballThinkFactory. Names are provided by the poster and are not verified. We ask that posters follow our submission policy. Please report any inappropriate comments.

   1. Walt Davis Posted: May 25, 2014 at 02:31 AM (#4713048)
They'll need a microscope to see it!
   2. RickG Posted: May 25, 2014 at 06:41 AM (#4713062)
I don't know exactly where I stand on the Ricketts/Rooftop discussions, but I thought there was an awful lot of manure being shoveled in the video attached to this story.
   3. Scott Lange Posted: May 25, 2014 at 07:51 AM (#4713067)
Last month, Selig went so far as to say he had just looked over the Cubs’ finances and determined they aren’t in violation of MLB’s debt-ratio rules — although they appear to be, according to those rules as outlined in attachments to the Basic Agreement.

And even if they are in violation, MLB and the union dispute whether those rules are subject to collective bargaining, and by extension whether the union has any grounds to use those rules in a potential grievance.


I don't mean to drink the Koolaid, but I don't understand the argument. How would spending more money on players reduce the Cubs' debt-to-earnings ratio? To expect that to be the case, you'd have to expect an extra $X million player to immediately increase revenues by substantially more than $X million, right? Would signing Brian McCann (say) have boosted revenue by substantially more than $17M? Would Rickey Nolasco have boosted revenues by substantially more than $12M? It seems unlikely to me (which happens to be the simplest explanation for why the team wouldn't do it.
   4. Scott Lange Posted: May 25, 2014 at 07:53 AM (#4713069)
Actually, I guess I'm wrong about that. If you spend $20M and doing so earns you $20M back, then your debt stays the same while your earnings go up, so I guess breaking even on a signing does decrease your debt-to-earnings ratio. Of course, so would spending $20M to get $19M back, which seems like bad business, which makes me question the reasoning in having a debt-to-earnings ratio rule, but I guess that's not the union's problem.
   5. bobm Posted: May 25, 2014 at 10:01 AM (#4713085)
The union would rather have the Cubs spend on players, or make competitive offers for free agents to bid things up, than spend the money on debt service. Obviously that's why Drew was forced to re-sign with the Red Sox.

FTFA:
Whether the most powerful players union in American sports can do anything about the high-revenue team’s years-long trend of spending cuts and roster purges is tricky. It might depend in part on how much longer it lasts and if the union can find grounds for action in Major League Baseball’s debt-ratio rules for clubs.

The only precedent for such action involved forcing Miami Marlins owner Jeffrey Loria into a three-year spending agreement on the grounds he violated the intent of revenue sharing by pocketing the money he received from big-revenue clubs instead of spending it on players.

Ironically, that might be how the Cubs sidestep potential union action: They’re one of the big-revenue teams paying into the system to help small-market teams such as the Kansas City Royals and first-place Milwaukee Brewers spend more on players to compete.
   6. Scott Lange Posted: May 25, 2014 at 11:18 AM (#4713095)
But that's what I'm questioning: why would the "debt-ratio rules" provide "grounds for action" to get the Cubs to spend more on players? You add to debt by spending more on players, so a rule that limits your debt-to-revenue ratio would limit what you spend on players, not force you to spend more. As I said above, I guess arguably spending more could increase your revenue without increasing your debt if the player generates more revenue than he costs, but 1) that seems awfully speculative and 2) if they thought it was true, presumably they would already be doing it (unless they are so cash-strapped they literally don't have another $20M for any reason, which seems unlikely).
   7. snapper (history's 42nd greatest monster) Posted: May 25, 2014 at 11:28 AM (#4713097)
Actually, I guess I'm wrong about that. If you spend $20M and doing so earns you $20M back, then your debt stays the same while your earnings go up, so I guess breaking even on a signing does decrease your debt-to-earnings ratio. Of course, so would spending $20M to get $19M back, which seems like bad business, which makes me question the reasoning in having a debt-to-earnings ratio rule, but I guess that's not the union's problem.

You'd need revenue to increase by >$20M to get an earnings increase.
   8. Scott Lange Posted: May 25, 2014 at 11:43 AM (#4713100)
You'd need revenue to increase by >$20M to get an earnings increase.


You're correct, but that was just me using the wrong term, right? The rule in question requires a certain debt-to-revenue ratio, right? Not a certain debt-to-earnings ratio? If it was the latter, then any team that lost money would automatically violate the rule. But I don't know, so please correct me if I'm wrong.
   9. Scott Lange Posted: May 25, 2014 at 11:48 AM (#4713101)
Nope, looks like I'm wrong again. Page 208 of the Basic Agreement seems to specify that total debt may not be more than 8 times EBITDA. So I'm back to my first objection in #3 above: spending money on a player only increases earnings (and decreases debt) if paying the player brings in more revenue than he costs. Why would anybody assume that to be true? It seems incredibly speculative to argue that the Cubs need to spend more to get in compliance with the debt-to-EBITDA rule. Maybe they need to spend less! Maybe they need to spend the same, but smarter. How would anybody know for sure?
   10. cardsfanboy Posted: May 25, 2014 at 12:56 PM (#4713117)
All is fixed now.... The Cubs have signed a high profile free agent.

   11. snapper (history's 42nd greatest monster) Posted: May 25, 2014 at 03:06 PM (#4713143)
Nope, looks like I'm wrong again. Page 208 of the Basic Agreement seems to specify that total debt may not be more than 8 times EBITDA. So I'm back to my first objection in #3 above: spending money on a player only increases earnings (and decreases debt) if paying the player brings in more revenue than he costs. Why would anybody assume that to be true? It seems incredibly speculative to argue that the Cubs need to spend more to get in compliance with the debt-to-EBITDA rule. Maybe they need to spend less! Maybe they need to spend the same, but smarter. How would anybody know for sure?

It could be that the MLBPA is just using the Debt violation as leverage. If the League is willing to look the other way on excess debt, the players could still use it as a bargaining chip. i.e. "Don't cut payroll anymore or we'll force you into compliance with the debt-covenant you are in breach of".
   12. The Yankee Clapper Posted: May 25, 2014 at 03:14 PM (#4713147)
Further evidence that the Cubs are broke, cheap or only interested in taking profits (maybe all 3) - their farewell gift to Derek Jeter was a #2 scoreboard tile. No mention of a gift to Jeter's foundation in the articles I saw. I bet they don't even chip in for Selig's gold watch.
   13. Greg Pope thinks the Cubs are reeking havoc Posted: May 25, 2014 at 03:59 PM (#4713162)
I don't know exactly where I stand on the Ricketts/Rooftop discussions

I do. Screw the rooftop owners. Back when the people on the rooftops were people who actually lived in the buildings (or friends, etc.), it was neat. Then the corporations took over. Screw 'em.
   14. Pops Freshenmeyer Posted: May 25, 2014 at 05:36 PM (#4713193)
It could be that the MLBPA is just using the Debt violation as leverage. If the League is willing to look the other way on excess debt, the players could still use it as a bargaining chip. i.e. "Don't cut payroll anymore or we'll force you into compliance with the debt-covenant you are in breach of".

Perhaps the threat is to block the Cubs from taking on more debt through things like stadium renovations?

The article might be off on its analysis though. The Cubs always have the option of slashing payroll further and arguing it's someone else's fault and they want to spend more. Sounds like the MLBPA may end up cutting off their nose to spite their face on this one.
   15. Walt Davis Posted: May 26, 2014 at 12:14 AM (#4713320)
Well, who knows how current accounting works but for the Trib years the Cubs parked revenue on the WGN side of the books. Now with various sports channel set-ups, who knows where the revenue is being parked. Any Ricketts-owned companies getting Wrigley reno contracts?
   16. Ron J2 Posted: May 26, 2014 at 09:11 AM (#4713363)
#9 When Zimbalist did his study he found that more than free agents cost ~ 1/3 more than they were objectively worth in terms of marginal revenue. And that more than half were money losers.

I did a followup study and from what I could tell, any given free agent signing only makes financial sense if the player is the difference between making and missing the playoffs. Given that the Cubs are not close to playoff contention, it's hard to see any signing that makes objective financial sense.

   17. SouthSideRyan Posted: May 26, 2014 at 10:13 AM (#4713375)
That sounds like a great way to never make the playoffs
   18. Ron J2 Posted: May 26, 2014 at 10:46 AM (#4713385)
#17 You need to have a sufficiently talented core before any signing makes objective financial sense.

In practice this type of thinking wouldn't affect free agent signings a great deal because most GMs are sort of required to assume a best case scenario that puts their team in contention. A GM that tells ownership that they won't be a contender for the foreseeable future is very likely to be shopping for a new job.
   19. cardsfanboy Posted: May 26, 2014 at 11:34 AM (#4713401)
#17 You need to have a sufficiently talented core before any signing makes objective financial sense.

In practice this type of thinking wouldn't affect free agent signings a great deal because most GMs are sort of required to assume a best case scenario that puts their team in contention. A GM that tells ownership that they won't be a contender for the foreseeable future is very likely to be shopping for a new job.


That is just nuts. The whole concept of "don't sign a free agent unless you are a contender" is just whacked out. It's like someone who is doing the study doesn't seem to understand human nature. 1. baseball relies on word of mouth, press and local support more than the inferior sports. If you don't signal your fan base you are trying, you run the risk of losing even hard core fans. Fans will accept bad years, they won't accept constant years what appears as if the front office has given up.(see recent tv ratings for the Astros) 2. Free agents are established level of talent and even if they have an off year they are more likely to be more consistent than trying to hope that a B level prospect develops into a major league player. 3. Free agents are signed to multi-year deals. In theory every team should believe that they are moving up in the success cycle, so at some point in a free agent signing, the team should consider itself a contender. 4. Assuming a young developing team, a veteran presence is absolutely a positive influence.

That sounds like a great way to never make the playoffs


Have to agree. And a great way to lower attendance, TV ratings and fan support to boot.

   20. McCoy Posted: May 26, 2014 at 11:57 AM (#4713403)
Yeah, I don't really buy it either. I mean I can agree with it up to a point. For instance it would be rather pointless to sign a Pat Meares or Kevin Young to a contract when you're winning 60 games a year but everybody on the planet should be trying to sign a young ARod or Manny or Derek Jeter. Those are the types of FA that you can project to be good to great for years to come.
   21. cardsfanboy Posted: May 26, 2014 at 12:09 PM (#4713406)
Yeah, I don't really buy it either. I mean I can agree with it up to a point. For instance it would be rather pointless to sign a Pat Meares or Kevin Young to a contract when you're winning 60 games a year but everybody on the planet should be trying to sign a young ARod or Manny or Derek Jeter. Those are the types of FA that you can project to be good to great for years to come.


I'm not even sure I agree with that up to a point. The only way I can see agreeing to that theory is if I was not a fan of the team, and didn't care if they won 70 or 60 games. But as a fan of a team there is nothing wrong with signing a 4th starter innings eater type to a two year contract even if you aren't going to be competitive for those two years. Or a slightly below average 3rd baseman who has a history of being healthy assuming you aren't blocking anyone coming up. You have to field a team. You have a salary limit set by the owners and everyone knows that no team saves their salary limit from one season to the next, so it's like working for a government agency/corporate bureaucracy, where if you don't spend your allocated budget it just goes back to the front office. You might as well make the investment.

   22. KT's Pot Arb Posted: May 26, 2014 at 12:39 PM (#4713419)
#9 When Zimbalist did his study he found that more than free agents cost ~ 1/3 more than they were objectively worth in terms of marginal revenue. And that more than half were money losers.


The great thing about being lousy is that you don't have to buy the most overpriced free agents, you can buy reasonably priced free agents to fill out your core, and flip them if they become redundant.
   23. Tom Nawrocki Posted: May 26, 2014 at 01:15 PM (#4713434)
#17 You need to have a sufficiently talented core before any signing makes objective financial sense.


You heard this a lot when the 2004 Tigers, coming off a 43-119 season, signed Ivan Rodriguez and then, a year later, Magglio Ordonez.
   24. Bring Me the Head of Alfredo Griffin (Vlad) Posted: May 26, 2014 at 02:11 PM (#4713461)
Fans will accept bad years, they won't accept constant years what appears as if the front office has given up.


You realize that we're talking about the Cubs, right?
   25. Rusty Priske Posted: May 26, 2014 at 02:48 PM (#4713483)
I don't think Ron was claiming teams shouldn't sign free agents. He was saying that on a pure bottom line, financial discussion, the monetary return isn't enough if you aren't under specific circumstances.

Are there long term reasons to still sign free agents? Absolutely. But if you are listening to someone claim that signing free agents would reduce your debt ratio, that is straight up not true, unless that player can increase your revenue by more than the marginal cost of his contract... and that is pretty unlikely unless (as Ron pointed out) that player can give you the revenue boost from being a playoff team.
   26. SouthSideRyan Posted: May 26, 2014 at 03:49 PM (#4713511)
Yes, Vlad the Cubs franchise that has hemmhoraged 1M+ fans in yearly paid attendance in the span of 6 years
   27. Walt Davis Posted: May 26, 2014 at 07:20 PM (#4713651)
You realize that we're talking about the Cubs, right?

As pathetic as the Cubs history is they have generally not super-sucked.

They did not lose 100 games between 1966 and 2012. They failed to win 70 only 7 times. Of those 7 times, 3 times they made the playoffs the following year and another time they won 88 games. Their longest streak of losing seasons was 78-83 and that started with 79 and 80 win seasons. They rather famously were often "in the race" in June/July before falling apart.

And, importantly, they almost always had one big-time start player. The doldrums were again that late 70s early 80s period. But from the stars of the 60s to Madlock's batting titles (when we cared about such things) to Sandberg to Dawson to Sosa, there was always somebody the fans could really get behind.

Now the Cubs are a laughingstock and the biggest story is how Samardzija can't get a win. They're on pace for 100 losses again (although pythag gives us hope) and are in an exciting race with the DBacks and Astros to get the #1 pick.

I've been at this Cub fan thing for over 40 years and even in my jaded, sabermetric adulthood I've never been this hopeless. And a good team is still years away. The ML roster is not particularly young and Samardzija is one year from FA and probably on the trading block come July and certainly this offeseon. Hammell probably also goes on the block this July. I wouldn't be surprised to see Travis Wood traded this offseason (FA after 2016).

And this season ... imagine if they'd actually tried. Castillo, Rizzo and Castro have all been above-average. Castro's showing power so maybe some of those early Yount comparisons weren't too far off -- and his old school comps still feature guys like Fregosi, Alomar and Reyes. Junior Lake is starting to look like a young Soriano without the steals -- annoying but useful. The pitching staff is getting it done well enough.

Maybe if we'd filled obvious holes at 2B, 3B, CF, RF, bench with actual decent-good players, we'd at least not be embarrassing ourselves ... and we'd still have Baez, Bryant, Soler, etc. on the way.

It's kind of amazing. Do Theo/Hoyer have no clue how to find bench players? In a mere 72 PA, Baker and Coghlan have already combined for -1 WAR. Add Barney, Kalish (100 PA on this guy?), Olt, Ruggiano, Nate and Sweeney and that's -3.5 WAR in 667 PA.

Omar Infante signed with KC so don't give me crap about how he wouldn't have signed with the Cubs. He signed for 4/$30 which is likely too much but also only requires him to have one average starting season and a couple of decent bench seasons to break even. He's already got .9 WAR this year, coming off 7.4 WAR (2 WAA) the previous three seasons.

That would be a 3-win improvement on this season right there.

So, all of you fans of "lose 100 for as long as necessary to build a good young team" theorists ... do the Cubs start trying again this offseason? Do we wait until 2016-17 when some of the kids might be rounding into shape? Most of the crew here claim Bryant shouldn't/won't see the majors until sometime after the start of 2016 to keep his arb clock from starting so are we really talking about the 2017-18 offseason and then only if enough of Baez, Bryant, Soler, etc. are doing well?
   28. McCoy Posted: May 26, 2014 at 07:30 PM (#4713658)
2016 for Bryant has to be a mistype. I don't see how you can keep Bryant down for another full season after this one. If he keeps hitting he'll come up partway through the 2015 season.
   29. SouthSideRyan Posted: May 26, 2014 at 07:46 PM (#4713663)
Yeah, as much as I think Ricketts is Frank McCourt lite (Less evil, but dumber), there's no way they'll keep Baez or Bryant down in 2015.
   30. SteveM. Posted: May 26, 2014 at 09:23 PM (#4713703)
Frankly I think Bryant should be called up in September. I am tired of hearing about the future while we get the K-Mart All-Stars at Wrigley.
   31. Brian C Posted: May 27, 2014 at 12:46 AM (#4713762)
Most of the crew here claim Bryant shouldn't/won't see the majors until sometime after the start of 2016 to keep his arb clock from starting...

Who in the hell around here said that Bryant "shouldn't" see the majors until 2016? And as far as I recall, the only people who said he "won't" are the anti-Ricketts hysterics.
   32. Pops Freshenmeyer Posted: May 27, 2014 at 08:20 AM (#4713789)
Who in the hell around here said that Bryant "shouldn't" see the majors until 2016? And as far as I recall, the only people who said he "won't" are the anti-Ricketts hysterics.

If y'all are talking about me, my argument was that he would be kept in the minors into 2015 not for the duration. And no, I don't think he *should* be kept down that long; it's how I think it will play out.
   33. Walt Davis Posted: May 27, 2014 at 06:46 PM (#4714188)
OK, I misremembered the Baez thread. Most of you copped to Bryan coming up sometime in 2015, 2016 as his first full year.

You must be Registered and Logged In to post comments.

 

 

<< Back to main

BBTF Partner

Support BBTF

donate

Thanks to
Guts
for his generous support.

Bookmarks

You must be logged in to view your Bookmarks.

Hot Topics

NewsblogTony Oliva turns 76; Gardenhire: 'He should be in hall of fame'
(42 - 7:41pm, Jul 22)
Last: Walt Davis

NewsblogOMNICHATTER 7-22-14
(4 - 7:41pm, Jul 22)
Last: CFBF Is A Golden Spider Duck

NewsblogThree Moves The Red Sox Should Make - Tony Massarotti - Boston.com
(28 - 7:39pm, Jul 22)
Last: Dale Sams

NewsblogChase Headley traded to New York Yankees from San Diego Padres - ESPN New York
(76 - 7:36pm, Jul 22)
Last: Dale Sams

NewsblogCowboy Monkey Rodeo taking the Minors by storm
(2 - 7:35pm, Jul 22)
Last: Randy Jones

Hall of MeritMost Meritorious Player: 1956 Ballot
(6 - 7:33pm, Jul 22)
Last: Chris Fluit

Hall of MeritMost Meritorious Player: 1956 Discussion
(33 - 7:31pm, Jul 22)
Last: Chris Fluit

NewsblogAs shifts suppress offense, time has come to consider a rule change
(9 - 7:28pm, Jul 22)
Last: Into the Void

NewsblogMLB: Astros telecasts catching on to advanced metrics
(9 - 7:26pm, Jul 22)
Last: JE (Jason Epstein)

NewsblogPrimer Dugout (and link of the day) 7-22-2014
(16 - 7:16pm, Jul 22)
Last: Eric J can SABER all he wants to

NewsblogOTP - July 2014: Republicans Lose To Democrats For Sixth Straight Year In Congressional Baseball Game
(2711 - 7:16pm, Jul 22)
Last: The Id of SugarBear Blanks

NewsblogRangers' Yu Darvish Pushes for a Six-Man Pitching Rotation - NYTimes.com
(11 - 7:07pm, Jul 22)
Last: Srul Itza

NewsblogOT: Monthly NBA Thread- July 2014
(815 - 7:04pm, Jul 22)
Last: andrewberg

NewsblogFSAZ: D-backs cut off McCarthy’s cutter controversy
(25 - 6:59pm, Jul 22)
Last: Walt Davis

NewsblogMisremembering Mantle's Final Season
(46 - 6:53pm, Jul 22)
Last: Jolly Old St. Nick Still Gags in October

Page rendered in 0.4545 seconds
55 querie(s) executed