FanDuel - WFBC

May 27, 2003

Are major league baseball players underpaid?:
A legal magazine tackles the issues of free-agency and arbitration and makes for a very interesting case that the non-star players are underpaid. While full of "legalese", it is still quite readable and explains the whole system very simply.
Linked from Batter's Box

posted by grum@work to baseball at 12:24 PM - 14 comments

Hey, anyone else find it ironic the the American national sport has such socialist policies? The draft, revenue sharing, restricted free agents, the tiers of pay. The article makes a good point: Soriano for 900k? Seriously, if any of us had that level of performance in our jobs, and competitors were paying similar workers 10, 20, 30 times more, we'd be gone in an instant. So why isn't the free market good for baseball? (Apart, of course, from the fact that the Yankees would win all the time. I mean, I hate the Yankees as much as anyone not from Boston can, but don't they deserve to win?)

posted by alex_reno at 01:29 PM on May 27

What was the article's author proposing as a solution? Universal free agency for all players? If that was done, the result would likely be increased pay for most (about 2/3, according to the author) players. That would inevitably result in increased prices of tickets, food, drinks, etc. No thanks, I'll pass.

posted by dusted at 01:34 PM on May 27

Um, it's been shown that player compensation has no effect on ticket prices. I don't have a link handy, but consider the NCAA.

posted by alex_reno at 01:56 PM on May 27

alex_reno: I'd be really interested in reading your source. It would go against everything I know about business (admittedly very little). consider the NCAA The NCAA doesn't pay its players, but how does that prove higher MLB salaries don't affect MLB ticket prices? The NCAA has a radically different economic situation.

posted by dusted at 02:29 PM on May 27

Then what does affect ticket prices? It has to be more than just cost of operations. Is it city/state taxes?

posted by jasonspaceman at 02:30 PM on May 27

dusted - I've heard this argument too and it actually does not go against everything you've heard. It's a simple supply and demand argument and an elasticity of demand argument. When prices go up, you might lose buyers. But do you lose so few that the loss in buyers is counteracted by the increase in revenue from those that STILL buy times the new inflated ticket price? If so, then it makes economic sense to raise prices. If you are not at capacity, you might be able to lower prices and make more money overall from increased sales. This would happen irrespective of salary. Supply and demand affects ticket prices primarily.

posted by vito90 at 02:49 PM on May 27

Supply and demand affect ticket prices. Here is a FAQ about ticket prices.

posted by grum@work at 02:50 PM on May 27

Interesting. I stand corrected.

posted by dusted at 03:05 PM on May 27

Thanks Grum.

posted by alex_reno at 03:07 PM on May 27

First, they ought to consider switching to football's model- football does it right, with pooled revenue and caps to ensure parity- and boy, does it ever! Football fans can honestly say their team has a good chance in any given year; baseball fans can't remotely make the same case. However, owners have no desire to do this- they've got a tidy little Enron-like scam going as is, what with revenue sharing and book-cooking of media contract (I'm looking at YOU, Chicago Cubs!). Not to mention, the same player volatility of free agency is used as part of the reason teams justify their bilking of local and state governments to get luxury stadiums and "stay competitive" while being built at zero cost to the business. I'm looking at YOU, Safeco Field!!! That said, I toyed with an idea in my head- speaking of Socialism!- of something like this: every team declares their expected payroll for the next 3 or 4 years or so. Perhaps an agreement is struck that payroll must be equal to 52% of the team's gross revenue (roughly; I think the NBA uses a value like this). The total money from all teams is pooled together and used as the gross player payroll value. Then, the Player's Association determines what percentage each player is worth based on whatever metric they, and the players alone, want to devise. For example, it's up to Derek Jeter and Alex Rodriguez and their peers to decide how much each player is worth- not the owners or the GM's. You might start by assigning every player an average of 50 points, so 895 players * 50 points is 44,500 total points. Now, the Player's Association can derive how many "points" an Alex Rodriguez or Barry Bonds is worthy out of those 895 players, how much John Halama is worth, how much Alfonso Soriano is worth, etc. The players themselves, and their agents, will have to be the ones saying to Derek Jeter "Dude, you may think you deserve 70 points, but A-Rod and Nomar are too much better than you are, and you suck at defense. 45 points, dude." Many fights will ensue, but at the end of it the players themselves have to be the ones to say to Mo Vaughn (if they can find him) he just ain't worth the dollars he's getting. This can be settled on an annual, bi-annual, or other basis. Then the owners, like a rotisserie league, can then offer contracts to players based on their known cost at the time of the contract. For newer players, or players in the middle of a contract, they could petition the Player's Association for a larger chunk of the pie, knowing it would come out of other player's pockets. This cost would be adjusted and evaluated during every winter, and an approved player petition for adjusted cost would allow the team to void or adjust any existing contract if desired, and seek alternative players from the pool. Likewise, teams could adjust their annual payroll beyond an allowed amount (such as inflation, etc), but there should be a penalty for doing so. Lastly, each team would have an additional yearly float, not to exceed more than 5-10% of their annual declared payroll, for things like emergency pick ups replacing for injuries, etc. They'd still be obliged to meet the contract of injured players that year, but wouldn't be hamstrung if players got injured. Players would all be unrestricted free agents no matter their years of experience, excepting when they signed a contract (the player cannot void the contract, nor can the team, excepting when the player's value has been adjusted by the Player's Association). It's a pretty rough idea, which I'd like to flesh out more to see what people think (would be a good SpoFi column, assuming I ever get the free time to write that Clemens one- I've been given a week reprieve!), but I see the benefits that player's get "fair" wages, and have to fight amongst themselves to get more or less of the pie- Mo Vaughn tying up nearly $20m all by himself is going to start rankling other players who feel they should be getting that Money since the big guy isn't even playing. The players would no longer be able to pit one team against another in a stupid bidding war, much as owners do to cities currently in trying to get new stadiums. Lastly, I think once the dust settled, we'd actually see more, not less, stability in teams. John Halama's value might go up modestly, but the Mariners wouldn't worry about that since another player's value (Jeff Cirillo, for example) would presumably go down to compensate for it. There are certainly many kinks and quirks, but I think it's an interesting idea. Thoughts?

posted by hincandenza at 05:02 PM on May 27

A lovely idea Hal. A couple of problems: 1) There isn't a hope in the world that a player (or his agent) like Bonds or ARod would ever consider having their salary decided upon by (or tied to) some lowly player (or agent) like Joe Minorleaguer. 2) You can't balance out the player salaries properly. There is an unlimited maximum, but a set minimum (1). It would give unfair compensation to either the very best players or the very worst players. 3) There doesn't seem to be room for multiyear contracts in your setup. Won't this cause more player movement? Isn't that one of the "complaints" that fans have, that they can't root for their favourite players because they'll just go to another team that can pay them?

posted by grum@work at 06:02 PM on May 27

Hal, you have a well-though out idea, or at least the beginnings of one but my opinion goes in pretty much the exact opposite direction. This is America, not China or Cuba, and our free market, IMO, ought to rule in sports as well as other businesses. This applies to all paid sports, not just baseball. For example, I think the leagues should not be allowed to limit the number of teams or players per team. If GStein wants to spend $200M per year, let him, it's his money; if Eddie D. wants back into football, let him open a new store/franchise by paying the other teams the NPV of, say, the dilution of the TV contracts or some similar formula. All the normal business rules and laws--antitrust, monopoly, fraud, etc...--would apply.

posted by billsaysthis at 07:13 PM on May 27

You know, every time someone tells me they think baseball players are overpaid, I think two things: 1) Shut the hell up. If someone offered you three times what you were making, you'd quit your job and go there also, or you'd be awful damn loyal. Either way, you don't control what someone else wants to do. 2) Do you see movies? Do you bitch that Jim Carrey gets $20 million to make a piece of shit like "Dumb and Dumberer?" How about Sly Stallone and "Driven?" I don't hear people standing in line at the theater calling Jack Black a prick because he took the money for "Shallow Hal." The potential for return on investment drives player contracts, along with supply and demand and the desire of the owner to win (Helloooo, George!). As for Hal's idea, I like it because it's merit-based in the right way. You can't have a simple scale, i.e. $25K for a dong, $10K for a win, blah blah ... because baseball is a team game. Could you expect someone to forgo the cash for a homer when you needed a ground ball to the right side to get the run home? I'd love to see the players get together and bitchslap one another over salaries, though. Of course, it will never happen. Accept living in our society and enjoy the game. It's not going anywhere.

posted by wfrazerjr at 05:22 PM on May 28

While I still wish I could like the pro game for some reason I'm drawn more to watching the Minor league games (some parks are just great) and the NCAA's mostly because people are playing for the love of the game and the level is somewhat less. I like the mix of watching a bunch of high school kids play mixed with some degree of professionalism.

posted by ITLinebacker at 03:20 PM on May 29

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