6-4-3: Don Fehr’s Adam Smith Nightmare

John Burkett‘s agent, Tommy Tanzer, announced that his client has
accepted a two-year contract from the Boston Red Sox worth $5.5 million
annually. In and of itself, this isn’t particularly interesting. What is
interesting is the fashion in which events transpired.

Player representatives and attorneys are nervous about the state of the
market for free agents, and well they should be. The market for free agents
outside of baseball here in the San Francisco Bay Area has basically
cratered. Eighteen months ago, recent college graduates with no experience
and very little to offer to the workplace in the short term were bringing in
$60,000 a year. Potential employees would be coy in terms of negotiation,
getting three, four, or five offer letters in a matter of days, and would
dodge phone calls from recruiters looking for a firm and final commitment.

Now, those same people are scrambling for any work they can get, and they’re
finding opportunities increasingly scarce. Salaries have dropped
dramatically, as have perks like the free BMWs, $25,000 signing bonuses for
technical managers, and weekly massages. I do miss the massages…

The free market giveth, and the free market taketh away.

We’re now starting to see the beginning of a similar crash in player
salaries. The numbers are still very high, and haven’t moved much as of yet,
so it’s hard to really take it all in, but the peripherals all point to a
pretty hard landing. (Note: This is speculation on my part, and there’s
simply not enough data to know for sure yet whether I’m right. I think it
will be interesting to watch it all unfold either way, so I want to cover it
now.) Let’s take a look at how things occurred, according to the Associated
Press:

Tommy Tanzer: "Hello, world. We hereby accept the offer of $11 million
over two years made by the Boston Red Sox to my client this weekend. John's
excited to go there and play for Joe Kerrigan, and to be part of the Boston
Red Sox family. Kerrigan played a major part in the discussions, and he and
John got along great."

Kevin Shea, Red Sox spokesman: "Actually, Dan's left the door open to
more pitching, but we're not prepared to make an announcement at this
time."

Tanzer: "It's a deal. We've got a deal. I'm not worried, ahem, about
the delay in them getting back to us, but it is unusual, because no other
people in the whole wide world do things like this. We told them it was a
deal on Sunday."

This looks remarkably like one of two things:

• President Kennedy accepting Premier Khruschchev’s backchannel
  communications and proffers during the Cuban Missile Crisis,

  or

• Someone trying desperately to keep a company from backing away from a
  non-binding discussion of compensation and employment.

Either way, if the deal is for real, it’s a good one for Burkett.

A few reports from the winter meetings bounced around the term
"collusion," and more than one writer suggested that any attempt
to keep costs under control would be attacked by the MLBPA as collusion.
Both ideas are BS. Collusion, which is forbidden in the CBA at the
insistence of ownership, only occurs when either owners or players
explicitly communicate with each other in an attempt to depress or tighten
the market. Sanity isn’t collusion, and not offering John Burkett a deal
longer than two years fits neatly into that category. (Not offering him a
deal at all might fit more snugly.)

I spoke with a sports attorney at some length about this, and he had an
interesting perspective on the current market for free agents:

"It's not good. And it's not just a temporary thing due to the economy,
pessimism, or the threat of contraction. Some of the people in front offices
are finally beginning to listen to the numbers people. And the numbers are
really the enemy if you're a middle-market talent. If you're a middle-market
guy, you may not like it, but you are replaceable at a very low cost,
without taking much of a performance hit. Alex Rodriguez and Manny
Ramirez are still going to get paid, but guys that have seven or eight
years in the league as a mediocre closer or borderline starting outfielder
are going to get offered the league minimum, instead of $3-4 million. Why
pay Derek Bell or Raul Mondesi when you can take a chance on
Billy McMillon or Eric Hinske, and put the money somewhere
else?

"It's not going to get better, either. A few players will jump on
arbitration this year, and use the inflated contracts of the last three
years to keep up their salaries. But arbitration might be gone soon. And
you've got players going without competent representation. Any agent who
would have advised Andruw Jones to sign that deal with the Braves
would have lost everyone else they represented. By circumventing his
representation team, he probably left $25 million on the table, and cost
other players four times that.

"Front offices are learning more about how replaceable most players
are, and they're going to pay less for them. That means a distribution of
salaries with more at the very bottom, a few more at the very top, and a
huge drop in the middle salary range. That means that the interests of the
different groups of players are going to get further apart, and the union's
going to have its hands full maintaining unity. Time and education are both
on the owners' side. The free market they're so afraid of is going to end up
making them a lot of money in the future. The statheads and minor-league
veterans are turning out to be Marvin Miller's worst nightmare. As you and
your readers begin to fill out baseball's front offices, salaries as a
proportion of revenues are going to decline, and that trend's not likely to
change much in the long term with a weaker union."

It’ll be interesting to see how things shake down.

This is the last 6-4-3 of a very long year. It’s been a rotten year for a
huge number of people, so I just want to take this opportunity on behalf of
everyone at the Prospectus to say thanks for reading, and may you have a
healthy, happy, and generous 2002. It has been a privilege to have had this
space to talk with all of you again this year.

Thanks, everybody.

Gary Huckabay is an author of Baseball Prospectus. You can contact him by
clicking here.