Thursday, November 20, 2003
A Storm Brewing
What’s behind the brew-ha-ha with the Brewers? It could well be a portent of coming trouble that may bring Major League Baseball to its knees in the next couple years. If you haven’t heard, the Brewers are cutting their budget $30 million for 2004, much to the chagrin of the good people of Milwaukee, the Journal-Sentinel newspaper and elected officials.
Folks are pretty angry because the Brewers promised that if they paid for Miller Park, that the team could support a payroll to compete in the National League for years to come. They see the cut in budget as slap in the face (and pocketbook—residents of five surrounding counties will continue to pay 0.1% sales tax through 2014 to pay for the stadium construction and upkeep) from the Brewers.
But the Brewers may have no choice in the matter. Richard Justice of the Houston Chronicle writes that during the last labor agreement, the players agreed to allow the Commissioner's Office to enforce the debt-equity rule that has been on the books for quite a while, but hadn't been strictly enforced. Basically starting in 2005, a team can't spend beyond the total value of the franchise, which is calculated by including the revenues and market value of the franchise against the amount of debt a team carries.
And the Brewers have debt…lots of it. There are reports of that the franchise, along with the Arizona Diamondbacks, are about $100 million in the hole. So what does this mean? No more big money contracts multi-year contracts, and dumping of larger contracts by mid-to-small market teams (which is why Brew Crew’s Richie Sexson and Geoff Jenkins are both on the market this year).
Teams that have more money in the bank, high valuations, huge local media deals and have spent prudently will be in excellent shape to pick up quality players on the cheap (think the Cubs, Mariners, Red Sox, Braves, Phillies, Cardinals, and Dodgers). Teams that are mortgaged big like the Brewers and Diamondbacks and the Giants (who owe $200 million for PacBell Park) could be in tough shape. And small market teams? Same as it ever was: no capital in, no capital out.
Although spending within your means is always a good thing, the implications of all this are bad for the owners, because they’ve been telling bald-faced lies to their fans, players and each other. Baseball owners for years have been using accounting tricks to hide revenue and cheapen the value of their franchises.
Every year Forbes magazine estimates the value of profit margin for every team. And every year, the number that they come up with and what teams claim are about 50 percent different.
So while teams are busy hiding their revenues, they continue to beg for public handouts, raise ticket prices, and demand that players submit to salary curbs. It was all good for a while. But last summer, a couple teams had problems making payroll and Bud Selig is concerned that a team is going to go plumb broke during the season. Which is why he’s now enforcing the debt rule.
But the players won’t see it that way. They’ll see it as a sneaky way to enforce salary caps on them. Teams will claim they have no choice--they have to stay within what MLB says they can spend. And as we’ve starting to see, communities don't like it either. When the greater Milwaukee area throws down tall dollars to field a competitive team, they damn well expect to see that team on the field.
My guess is that the following will occur:
1) Small market teams and teams in debt cut their payrolls drastically by 2005.
2) Contract values and lengths continue to plummet.
3) A team will have to submit to a full budget if they want to play in their state or locally financed ballpark. My guess is the Brewers will be the test case. The team will fight this as far as they can, and hide behind the anti-trust exemption. But in the end, the Senate will repeal anti-trust exemption and they’ll have to submit to an audit.
4) The results will not be pretty for baseball owners, as it’ll expose auditing tricks that will make Hollywood movie auditors look like amateurs.
5) Expect a long strike when the Collect Bargaining Agreement (CBA) expires after 2006. Players were skeptical that the luxury tax payments to small market teams would be put back into payroll. Now that small market teams are cutting rather than expanding, you can imagine that the players will believe like they’ve been suckered.
6) Forget any future team currently residing in a city getting a new stadium, unless the team pays a huge portion of the costs. This bodes poorly for the A’s and the Marlins, two teams that really need new stadiums if they want to stay in their cities.
7) Several small market teams will move in the coming years. If a prosperous city will pay for a new stadium, someone will go there. Portland, Charlotte, Washington, New Jersey, Las Vegas and who the hell knows where else are potential new candidates.
What’s behind the brew-ha-ha with the Brewers? It could well be a portent of coming trouble that may bring Major League Baseball to its knees in the next couple years. If you haven’t heard, the Brewers are cutting their budget $30 million for 2004, much to the chagrin of the good people of Milwaukee, the Journal-Sentinel newspaper and elected officials.
Folks are pretty angry because the Brewers promised that if they paid for Miller Park, that the team could support a payroll to compete in the National League for years to come. They see the cut in budget as slap in the face (and pocketbook—residents of five surrounding counties will continue to pay 0.1% sales tax through 2014 to pay for the stadium construction and upkeep) from the Brewers.
But the Brewers may have no choice in the matter. Richard Justice of the Houston Chronicle writes that during the last labor agreement, the players agreed to allow the Commissioner's Office to enforce the debt-equity rule that has been on the books for quite a while, but hadn't been strictly enforced. Basically starting in 2005, a team can't spend beyond the total value of the franchise, which is calculated by including the revenues and market value of the franchise against the amount of debt a team carries.
And the Brewers have debt…lots of it. There are reports of that the franchise, along with the Arizona Diamondbacks, are about $100 million in the hole. So what does this mean? No more big money contracts multi-year contracts, and dumping of larger contracts by mid-to-small market teams (which is why Brew Crew’s Richie Sexson and Geoff Jenkins are both on the market this year).
Teams that have more money in the bank, high valuations, huge local media deals and have spent prudently will be in excellent shape to pick up quality players on the cheap (think the Cubs, Mariners, Red Sox, Braves, Phillies, Cardinals, and Dodgers). Teams that are mortgaged big like the Brewers and Diamondbacks and the Giants (who owe $200 million for PacBell Park) could be in tough shape. And small market teams? Same as it ever was: no capital in, no capital out.
Although spending within your means is always a good thing, the implications of all this are bad for the owners, because they’ve been telling bald-faced lies to their fans, players and each other. Baseball owners for years have been using accounting tricks to hide revenue and cheapen the value of their franchises.
Every year Forbes magazine estimates the value of profit margin for every team. And every year, the number that they come up with and what teams claim are about 50 percent different.
So while teams are busy hiding their revenues, they continue to beg for public handouts, raise ticket prices, and demand that players submit to salary curbs. It was all good for a while. But last summer, a couple teams had problems making payroll and Bud Selig is concerned that a team is going to go plumb broke during the season. Which is why he’s now enforcing the debt rule.
But the players won’t see it that way. They’ll see it as a sneaky way to enforce salary caps on them. Teams will claim they have no choice--they have to stay within what MLB says they can spend. And as we’ve starting to see, communities don't like it either. When the greater Milwaukee area throws down tall dollars to field a competitive team, they damn well expect to see that team on the field.
My guess is that the following will occur:
1) Small market teams and teams in debt cut their payrolls drastically by 2005.
2) Contract values and lengths continue to plummet.
3) A team will have to submit to a full budget if they want to play in their state or locally financed ballpark. My guess is the Brewers will be the test case. The team will fight this as far as they can, and hide behind the anti-trust exemption. But in the end, the Senate will repeal anti-trust exemption and they’ll have to submit to an audit.
4) The results will not be pretty for baseball owners, as it’ll expose auditing tricks that will make Hollywood movie auditors look like amateurs.
5) Expect a long strike when the Collect Bargaining Agreement (CBA) expires after 2006. Players were skeptical that the luxury tax payments to small market teams would be put back into payroll. Now that small market teams are cutting rather than expanding, you can imagine that the players will believe like they’ve been suckered.
6) Forget any future team currently residing in a city getting a new stadium, unless the team pays a huge portion of the costs. This bodes poorly for the A’s and the Marlins, two teams that really need new stadiums if they want to stay in their cities.
7) Several small market teams will move in the coming years. If a prosperous city will pay for a new stadium, someone will go there. Portland, Charlotte, Washington, New Jersey, Las Vegas and who the hell knows where else are potential new candidates.
Wednesday, November 19, 2003
See Ya Shinjo
Tsyhoshi Shinjo signed with the Nippon Ham Fighters of the Pacific League today, thus ending the Shinjo era in the big leagues, which mostly consisted of a stylish uniform that included orange undershirts and later orange wristbands.
On the field, the league adjusted to Shinjo with a vengance. His OPS went from a JT Snow-like .725 in 2001 for the Mets to a Neifi Perez-like .664 in 2002 for the "Orange October" Giants to a Mario Mendoza-like .483 (ugh) last season in his return to Metdom. One note of interest: the Fighters colors are blue and orange.
Have fun, Tsyhoshi.
Tsyhoshi Shinjo signed with the Nippon Ham Fighters of the Pacific League today, thus ending the Shinjo era in the big leagues, which mostly consisted of a stylish uniform that included orange undershirts and later orange wristbands.
On the field, the league adjusted to Shinjo with a vengance. His OPS went from a JT Snow-like .725 in 2001 for the Mets to a Neifi Perez-like .664 in 2002 for the "Orange October" Giants to a Mario Mendoza-like .483 (ugh) last season in his return to Metdom. One note of interest: the Fighters colors are blue and orange.
Have fun, Tsyhoshi.
Tuesday, November 18, 2003
Hello Tuesday....
Where is the A's catcher? Apparently in San Diego.
Billy Beane traded Ramon Hernandez and Terrance Long for Mark Kotsay today. It solves a couple problems for the team. 1: Gets rid of the worthless Long; 2: Solves the center field position.
Doesn't seem like they'll have any more flexibility with payroll. Kotsay ain't exactly cheap himself. As Christian over at the Transaction Guy points out, Kotsay will make $5.5m for the next three years. Long and Hernandez are due $6.6m next season, meaning the A's save about $1.1m next year. And at least Kotsay will play, which is more than you can say about Long. That is a huge hole behind the dish, however. I'm assuming that the A's are going to give Adam Melhuse a shot at the starting job, and hope that ties them over until Jeremy Brown is ready. Does this means the end of Chris Singleton and Jose Guillen for the A's?
But really the transaction of the day: Freddie Adu. Go Freddie go!
Where is the A's catcher? Apparently in San Diego.
Billy Beane traded Ramon Hernandez and Terrance Long for Mark Kotsay today. It solves a couple problems for the team. 1: Gets rid of the worthless Long; 2: Solves the center field position.
Doesn't seem like they'll have any more flexibility with payroll. Kotsay ain't exactly cheap himself. As Christian over at the Transaction Guy points out, Kotsay will make $5.5m for the next three years. Long and Hernandez are due $6.6m next season, meaning the A's save about $1.1m next year. And at least Kotsay will play, which is more than you can say about Long. That is a huge hole behind the dish, however. I'm assuming that the A's are going to give Adam Melhuse a shot at the starting job, and hope that ties them over until Jeremy Brown is ready. Does this means the end of Chris Singleton and Jose Guillen for the A's?
But really the transaction of the day: Freddie Adu. Go Freddie go!
