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December 10, 2003

Prospectus Roundtable

The New Landscape

by Baseball Prospectus

Sunday's deadline to tender arbitration offers to free agents triggered a lot of surprise moves and non-moves. BP authors kicked around some of the biggies.

David Cameron: The Mariners offered arbitration to one free agent. Not Mike Cameron. Not Arthur Rhodes. Pat Borders.

Dayn Perry: The Braves didn't offer arbitration to Sheffield. Why? He has a deal in place with the Yankees. Is there really a meaningful chance he'd walk away from three years, $38 million to accept the Braves' offer of arbitration?

Jonah Keri: Javy Lopez wasn't offered arbitration either. Perception means everything in baseball. Schuerholz didn't want to risk looking stupid again for fear his players accept and he's "forced" to do something stupid to compensate, so he took the easy road, since the mainstream media don't care about compensatory draft picks.

Joe Sheehan: For the first time, I'm starting to think we might be seeing some form of collusion. I didn't think so up until yesterday, but one reason you might see so many teams not offering arbitration is that they're reasonably sure that accepting arbitration is going to be a better deal for the player than the market.

Derek Zumsteg: So you're arguing that the Mariners, for instance, looked at Rhodes and said: "He'll make $6 million in arbitration and we know there aren't any offers that high out there?"

It seems more likely that they looked at him and said: "We can find a adequate replacement for less than we'd pay him in arbitration."

Joe: That probably should be the null hypothesis, but it involves seeing a level of competence that I don't think is there. Am I to grant that the people who signed Raul Ibanez came to that conclusion?

Derek: Well, that was just an example. I don't think the Mariners have enough brain power to light a bulb, much less think through the intricacies of market dynamics.

Joe: The market is not working in an unimpeded manner. In a normal competitive environment, all of these very good baseball players would find teams willing to pay for their services, and the competition between those teams would lead to offers that made accepting arbitration a clear error for those players.

It appears that "winning" has been supplanted, as an end goal of about 20-25 franchises, by "lowering payroll." The latter doesn't seem to be an additional goal, or something that would be nice, or even on par with success. The sole goal of about 2/3 of the franchises in the game seems to be to spend less money on baseball players, and *then* to worry about what that means on the field.

Derek: You're right. The Yankees are still shopping for free agents, but they're not interested in the second-tier guys at all, and neither are the Red Sox. The guys who could get big money a couple of years ago are now faced not only with a market better versed in scarcity but one where there's no market at all with money to spend on good-but-not-great free agents who want three to six million a year. This hugely intensifies the destruction of baseball's middle class.

Joe: It hugely intensifies the destruction of baseball.

Susan Graham: The best argument for collusion is that the reduced number of players offered arbitration systematically reduces the overall salaries of players. When players have more options, the competition increases their salaries. How many players do you think were reading the paper in horror this morning? Derek is right on.

Jonah: Marvin Miller warned us...

Mark Armour: If I ran a team in this market I could see the argument to never, under any circumstances, go to arbitration. What the Yankees and Red Sox have hit upon (as analysts have been suggesting for decades) is the notion that virtually everyone is easily replaceable. If the market changes, well, that's different. But as long as guys like Ibanez can get contracts like that, I wouldn't take the chance. Any comparable player can argue to the arbiter that they deserve Ibanez money, or Ausmus money, or David Bell money, etc.

Joe: I'm not arguing that it doesn't make sense for these teams not to have offered arbitration. I'm saying that the circumstances may not just be 30 teams acting in their own interest, individually, but some kind of collective action. It may not be as explicit or total as the 1980s situation, but maybe you don't need everyone on board, and an external mechanism, to make it work.

The news comes in: Bartolo Colon has agreed to a four-year, $48 million deal with the Angels.

Jonah: Wonder what that works out to per pound.

Nate Silver: I honestly thought that when Colon turned down 3/$36 million from the White Sox, he'd wind up regretting it. Guess not. I'm not as alarmed about Colon's weight or his declining strikeout rate as some are, but this is too much money, and too many years, for any pitcher not named Pedro.

This is a pretty good data point for the anti-collusion side of things.

Adam Katz: I don't think it's active collusion; teams are just independently figuring out the obvious. Maybe I'm giving them too much credit, but once you realize that the smart move is to not offer arbitration to many players, then you're also going to realize that if every other team is doing it, it's even smarter, because the guy you just let go is more replaceable.

Nate: MLB leadership has succeeded in creating an organizational culture in which teams are likely to be thinking payroll first, even if that isn't how they'd behave as rational, independent actors. Peter Ueberroth explicitly tried to create such a culture in 1985, which served both as a drag on salaries on its own and as a precursor to collusion proper.

It's pretty easy to set up one of those little game theory matrices and see where I'm going with this. In the past, the Giants would sign a marquee free agent because they're sure that the Dodgers are going to sign a marquee free agent, and vice versa, even if this results in a decrease in their aggregate utility, since W-L records are a zero-sum game but finances aren't. If you're able to change those expectations, then you can find your way out of the prisoner's dilemma and encourage cooperative (e.g. cartel) behavior. That the Red Sox and Yankees, who are in a very real sense competing with one another, are behaving so differently than everyone else, is the exception that proves the rule.

Joe: Thanks, Nate. This may not be 28 owners sitting in a room and saying: "This is what we do now." It's more likely a culture change in which not competing for labor is the thing to do, and results in positive feedback.

The news comes in: The Giants purposely signed Michael Tucker to a two-year, $3.5 million contract before the deadline to tender arbitration offers to potential free agents, because they wanted to forfeit their first-round pick to avoid having to pay a signing bonus of around $1.5 million.

Jonah: Wow. This ain't your father's MLB. Or even your older brother's.

Doug Pappas: More like Crazy Uncle Henry's. Even if the Giants don't think the "going rate" for top draft picks is worth paying, nothing stops them from making "signability" picks.

Clay Davenport: Not really. If they have judged that they are likely to pay $1.5 mil, or $1 mil, or even $250,000 for someone who is never going to help them, than they are better off spending the money on Michael Tucker or someone else who can at least fill a role. Short-sighted? Sure.

I don't think the PR hit from losing the pick for signing Tucker is as bad as the PR hit from failing to sign a draft pick. The second is seen as a "wasted" pick, the first isn't.

Nate: Wow. That's f****** ridiculous.

Then again, these are the Giants, whose strength is not in their amateur scouting. I wouldn't want to pay $1.5 mil for the next Tony Torcato, either.

David: The Mariners have been doing this for years. The last time they signed a true #1 pick was 1999, when they picked Ryan Christianson. Since Pat Gillick took over and installed Frank Mattox as the scouting director, the Mariners gave away their first-round pick in 2000, 2001, 2003, and now 2004. The only time they kept their pick, they low-balled and failed to sign John Mayberry Jr. in 2002. The Bavasi/Fontaine era plans on continuing that trend.

Keith Woolner: Or why not pick a top-quality pick, even though you have no intention of signing him, just to keep him out of an opponent's farm system? Screws the player out of a year of development, of course, but is there any reason a team couldn't do this on purpose? Would the player have any legal recourse?

David: The Reds did this with Jeremy Sowers in 2001. He was considered a tough sign, asking for $2.7-$3 million, and the Reds offered him $1.3 million and then walked away from it. He predictably went to school, and most people assumed the Reds simply took a pass on their first-round pick to save money.

However, at some point, ethics have to be involved. A player doesn't just lose one year of development. They lose an opportunity to play professional baseball for three years (freshmen and 99% of sophomores are not eligible for the draft). Some kids simply won't make it in college, and forcing them to go that route, against their will, is just wrong. The player would have no legal recourse, other than yet-another-lawsuit challenging the draft, but morally, this is screwing with a human beings life for personal profit. If a kid wants to play pro ball out of high school, he shouldn't have that opportunity stripped from him so that Brian Sabean can sign Michael Tucker.

Doug: The legal principle which legitimizes the draft so long as it's collectively bargained with the MLBPA is shaky enough under normal circumstances. If a club used its draft rights just to screw some randomly selected prospect out of a year's development, I think a court would step in. More likely, the club would just lowball him and claim "we couldn't reach agreement," accomplishing the same thing through more acceptable means.

Mark: If a team honestly believes that #1 draft picks are not worth the bonuses that they demand (leaving aside whether you agree with this), a team should not be compelled to make a pick. I agree with Dave that what the Reds did was wrong, but the team ought to be able to just say "pass". I am sure there would be P.R. problems with this, but if you are confident in your opinions you ought to be able to stand up and explain them confidently.

The whole idea of the draft is ridiculous.

Chris Kahrl: (Couldn't the Giants simply keep their pick) for the following season or two? One of the Giants' basic problems is a shortage of goodies to offer to fix their problems in-season.

Will Carroll: Success cycle or not, I think we also have to look at the Giants as the ultimate win-now team with Bonds a one- or two-year proposition. While we can debate Tucker's contribution, it will certainly be more that a low first-round pick.

Jonah: Michael Tucker? You mean the same Michael Tucker who finished three runs above replacement level last year, right?

The forfeiting of the picks is questionable. Signing Michael Tucker to a two-year, $3.5 million contract in the first place is almost Neifi-riffic.

Will: Right, but using last year's pick (which went to Oakland and I think became Bryan Snyder), his MLEqA was .188. Tucker was a .253. In a very win-now mode, one can make a sliver of sense from this.

Jonah: There are better versions of Tucker that are now available and more to come once the non-tenders are complete, all of whom will cost the same or less than Tucker's two years, $3.5 mil. The Giants could have drafted Jonah Keri from Concordia University with their #1 pick and paid him $100 to fetch coffee if they deliberately wanted to lose the pick, then added a player who can help them more than Tucker. If their intent is to win now, they botched this...it was basically a compromise on talent for the sake of avoiding a payout.

Joe's right: baseball's getting suckier and suckier. At first revenue-sharing looked like the only disincentive for teams to do their best to make good decisions and win. Now the reasons to not try, or to deliberately suck, are increasing by the day.

Related Content:  The Who,  Money

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