MLB and The Economy: Is Baseball Already Dealing With Economic Trouble?

C KSenior Analyst IDecember 16, 2008

Welcome baseball fans! Christian Karcole and Scott Eisenlohr are back to debate their next topic.

The topic up for debate this week is: Have recession woes hit Major League Baseball?

Scott's answers will be in regular text, while Christian's rebuttals will be in italics. Enjoy, and remember to tune in again next week.

Well, the New York Yankees finally started the 2008-09 off-season free agent signings with a record seven-year, $161 million deal with C.C. Sabathia during the recently completed winter baseball meetings in Arizona.

The Yankees have always been the exception in baseball. A huge television contract, coupled with incredible revenue and tax shelters, usually make them one of the highest spending teams in the sport. This, however, does not mean they are always the best team. They were last in the World Series in 2003 and last won in 2000.

But this story is not about the Yankees championships. It is about the money they, and other teams in baseball, spend focusing on free agency.

The national recession has hit Major League Baseball. (What? Ok, not the Yankees.)

And even as a Philadelphia Phillies fan, I have to admit it was great to see the Tampa Bay Rays make the World Series with a team payroll a year ago less than that of Yankees’ third baseman Alex Rodriguez.

Madonna would have to date 40 Rays players to match what she did with A-Rod. But that is another story for another day.

Here is my reasoning for thinking the recession is starting to affect Major League Baseball:

1. Money spent on big-name free agents and players currently under salary.

A day before Sabathia signed his huge deal; the New York Mets signed free-agent closer Francisco Rodriguez to a three-year, $37 million deal.

Sound like good money, but now when you compare it to the contact extension the Phillies gave to their closer, Brad Lidge in July.

The Phils, not known for spending big dollars, gave Lidge a three-year, $37.5 million dollar contract—same money as K-Rod. K-Rod had 62 saves, while Lidge was only a quarter-way to his perfect 41-for-41 save season, and coming off a couple of bad seasons. Some experts thought Lidge left money on the table.

Another hot stove rumor: A three-or-four team deal involving Padres pitcher Jake Peavy, Cubs utility infielder Mark DeRosa and players from the Phillies, most likely pitcher J.A. Happ.

The hold up? According to Jon Heyman of Sports Illustrated, a significant hurdle for the Cubs was clearing out some existing salary—namely Jason Marquis, who made almost $10 million last year.

Expect more mid-season fire sales next season, maybe some as early as Memorial Day.

I’ll first go to your point on K-Rod and Lidge. In the mind of a baseball fan, K-Rod is the superior pitcher. In the mind of many people in the baseball world, Lidge is right up there with him. Ever since he started hot this season, people in the game have been all over him.

Why? Because they know he’s back.

They see what they used to see in him. For those two years he struggledhe wasn’t the old Lidge. He wasn’t mentally stable and wasn’t performing his pitches right. Now, it’s all different.

You can see that he is very confident; you can see that he is learning to choose his pitches better, but most importantly, his slider is working again. He’s not letting the batter see when he is throwing the slider like he did those two years, and when you mix that into how good the pitch is, he’s becoming an amazing pitcher again.

When people in the game look at K-Rod, they look at a very solid closer. They do consider him one of the best, but he’s not way above Lidge. That’s why they got equal money, not the economy.

Onto the Cubs' trade rumor: Not having room because of Marquis is not unusual. This happens all the time, even outside of economic troubles like this. It’s just a case of a team not having enough cap space and looking to clear that space. This isn’t economic based at all in my mind.

2. The lengths of contracts are narrowing.

Manny Ramirez will likely be the next free agent to sign. The Dodgers reportedly have offered him $25 million-a-year, but for two, possibly three years. Ramirez, acquired from Boston on July 31, is coming off a $160 million, eight-year contract he signed with the Red Sox before the 2001 season.

Two players from the Phillies were involved in the free agent market: Outfielder Pat Burrell and left-handed pitcher Jamie Moyer. Burrell, coming off a six-year contract, wanted three years and the Phillies, who ultimately have chosen not to resign him, reportedly talked to his agent about a two-year deal at the beginning of the 2008 season.

Moyer is a more curious case. He was the Phillies most winning pitcher, notching a 16-7 mark at the age of 45. He wanted two years, but many teams would not want to go there. The Phillies must have realized his value to their team and last week gave him an incentive-laden two-year deal.

Who gives four-year contracts anymore besides the Yankees and their pitchers? You see the Mets gave K-Rod just three years.

Wonder why Billy Wagner cried at the press conference when he disclosed he would miss the rest of 2008 and likely 2009? He knew then that his career is likely over—at least with the Mets and likely not as a closer period.

Way back, the Phillies offered Wagner three years. The Mets gave him four. Now, they will have to eat the last year of his salary. Teams just aren't willing and able to take that risk anymore.

The reason Manny isn’t going to sign a long deal is because of his age. The same goes for Moyer and Burrell. These guys are older guys who will start to break down, so teams don’t want to invest in them for long.

Sure, I’ll admit, all contracts are narrowing. But it’s not because of the economy. It’s because of the value of these players.

Now that the MLB has become one of the largest businesses in the country, these players are gold to the teams. If a player is paid $10 million-a-year, they hope to make more than $10 million from that player. If they don’t, it’s a bad investment.

So, with all this money floating around in the league now-a-days, they try to limit their investments. A two-year investment is safer than a five-year investment. It saves them money, and gives them a better chance of making money than losing money.

3. Second-tier players.

Certainly Adam Dunn, Milton Bradley and Pat Burrell will have to wait for Ramirez to sign for them to move.

But I heard Pat Burrell be called a second-tier player on Philadelphia TV.

Excuse me? Out of the above mentioned, Bradley is the only Type-B free agent.

The rest, including Burrell, are Type-A free agents, which makes the signing team give up two draft choices, or a first-round pick if the player was offered arbitration.

Also, Burrell is considered a defensive liability in the National League—bad time to become free agents, Pat and Jamie (Moyer). Don’t expect teams to come knocking down your doors.

Watch, K-Rod, Sabathia, then Ramirez and possibly Mark Teixeira. The Phillies also just signed Raul Ibanez for moderate money—three years at $30 million. Other free agents might not sign until after the New Year.

The reason people won’t be knocking on their doors is not because of the economy, it’s because they aren’t amazing free agents.

Adam Dunn is a strike-out nut who can only hit for power.

Pat Burrell his a power hitting player, but he doesn’t hit for average.

Milton Bradley is a little more rounded player, but he’s had a questionable attitude history.

Plus, all three of these guys are really only AL quality players. They are best served being DH’s, which lowers their value.

Conclusion: Forget the big time, big money players, tickets prices and a sorry revenue sharing plan that someday won’t bail out a pitiful Pittsburgh Pirate team with a beautiful stadium and teams like the Florida Marlins and the Detroit Tigers or Minnesota Twins, if they fall out of contention. The Mets for one—sorry guys—have to be glad for this.

The days of big money for washed up players like Mo Vaughn are gone. This year’s crop of free agents are going to sit on the lot like those big SUVs collecting dust and rust on the car dealers' lots.

Expect the Yankees to bail out baseball? Not a chance.

I agree. The times of big money players will fade a bit, ticket prices will fade, and revenues should shrink a bit as well.

And it will be tough for teams like the Pirates. I wish them the best.

But the Tigers? Nah, they have a good fan base. You just never know in Detroit, where the Red Wings can’t even sell out anymore.


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