Wednesday, June 13, 2012

The Death of Baseball's Middle Class

Major League Baseball remains the only professional US sports league that doesn't have a salary cap. Give credit to the players' union or Bud Selig's incompetence. It doesn't really matter. This isn't new information but it has become more important recently. The middle class of baseball will slowly but surely disappear. Teams are being divided into an upper class with huge markets or absurdly rich owners and a lower class with small markets hoping to suck enough until a Stephen Strasburg or David Price falls into their laps. The newest collective bargaining agreement severely limited the amount teams can spend on the draft and international signings, and put in strong punitive measures to force teams to comply. So the Pirates can't spend $15 million on the draft but the Yankees can spend $200 million on their team. Makes sense right?

Baseball has always been divided largely into large and small markets with corresponding payrolls but a new elite class is emerging thanks to television contracts. The Los Angeles Dodgers sold for nearly $3 billion because of their lucrative deal with Fox Sports LA. The Texas Rangers have increased their payroll from $55 million in 2010 to $120 million this season, with more to come after the likely 9 figure extension for star Josh Hamilton, thanks again to a new TV deal. Teams held hostage by long and antiquated TV deals do not have the financial flexibility that comes with piles of TV money. Another option to enter the upper class is having a super rich owner who doesn't care about money and just wants to win. This explains the Jayson Werth contract, the recent Andre Ethier extension, and Prince Fielder getting a nine year deal with the Tigers.

Here is baseball's upper class as I see it. Both New York teams, both Chicago teams, both LA teams, the Giants, the Phillies, the Tigers, the Nationals (their payroll is low now, but make no mistake: the Lerners have money to spend and they will), the Rangers, the Red Sox, the Cardinals, and the Marlins (thanks to a new stadium). All of these teams have given $100 million contracts with the exception of the White Sox.

These 14 teams have a dominant advantage at this moment. Either market size, owner not giving a fuck-ness, or TV contracts have given them the ability to eschew market rate for players and carry huge payrolls.

Baseball's lower class is also clearly defined. These are teams from small markets, with crappy locations for stadiums (the Rays), bad TV deals, and indifferent or cost effective owners. These teams have to hope for their top draft picks to provide a crop of stars that they can keep at pre-arbitration rates. These teams are Oakland, Pittsburgh, Tampa, Kansas City, San Diego, and Cleveland. Despite the varying degrees of success of these teams, they're always behind the eight ball.

This leaves 10 teams in baseball's middle class: the Brewers, Reds, Orioles, Blue Jays, Rockies, Diamondbacks, Braves, Astros, Mariners and Twins. These teams have handled their limited resources and options in different ways. The Brewers and Rockies have locked up young stars for huge contracts, taking up a huge percentage of their budgets, while hoping that they can sneak into the playoffs because of their weak divisions. The Reds are similar but have also taken financial gambles like giving Aroldis Chapman $25 million as a free agent from Cuba. The Orioles and Blue Jays are hoping to outwit the Yankees and Red Sox but haven't made the playoffs in the past 15 years. The Mariners and Astros don't really seem to have plans. The Twins went all in on their young stars and are on the hook for over $200 million more to Morneau and Mauer: a cautionary tale for teams like the Rockies and Brewers. The Braves have adopted the strategy of trying to outwit through the draft and make smart decisions when they do go after free agents.

Each of these teams has had some success, but realistically their chances of making the playoffs are slim and getting slimmer. When teams like the Dodgers give Andre Ethier, a 30 year old with no defensive or baserunning value, an $85 million deal, it means that teams like the Braves and Brewers cannot afford to keep Michael Borne or Corey Hart. When teams from this class do go to the free agent market, there is no margin for error. Derek Lowe's four-year $60 million deal crippled the Braves' financial abilities in a way it wouldn't have for the fourteen teams in baseball's upper class. This has largely always been the case, with teams outside of the upper class having to outsmart or outdraft their opponents. However, baseball is getting more and more efficient at recognizing value and talent. The days of Billy Beane or Andrew Friedman fleecing other GMs is quickly coming to an end. Baseball teams have embraced advanced stats and finding the extra 2% advantage they can get. Additionally, the new limits on draft spending also prevent shrewd teams from paying hard to sign players more than other teams are willing to give them.

What this all means is that teams stuck in the middle, unless circumstances drastically change in their favor, are going to slide into the lower class. Baseball is getting more efficient and crueler to teams trying to build through the draft and as a result it's on a slippery slope to becoming European soccer where only a few teams have any chance at all of winning a title. The salary cap is the obvious solution, but until the used car salesman Bud Selig gets out of power, nothing is going to change. Each year as teams get smarter and free agents get gobbled up by the upper class, baseball will become more and more of an oligarchy until there might as well be a second division for the middle and lower class teams.

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