The contraction drums are beating. Just recently, you may have seen this
Contraction would begin to reverse the damage done by two dumb and dumber
expansions that cost nearsighted owners many times more than the relatively
few pennies they pocketed.
— Peter Gammons, Oct. 26, 2001.
This is really a two-part statement, so let’s look at it in those two parts.
- The two most recent rounds of expansion, adding Tampa Bay, Colorado,
Florida, and Arizona, were a bad idea.
- Contraction will be a step towards fixing the problems created by the
most recent expansions.
Let’s evaluate statement #1 first.
The two most recent rounds of expansion, adding Tampa Bay, Colorado,
Florida, and Arizona, were a bad idea.
The two most recent expansions were fairly complicated. There were some
negotiated ambiguities about which leagues the new teams would play in and
delays in terms of sharing in the broadcast revenues available as part of
the national broadcasting contracts. The result has been some well-broadcast
financial difficulties for two of the clubs, Arizona and Tampa Bay, at least
if you listen to the party line. The actual expenses that led to some of
these financial difficulties are a bit murky, at best.
Tampa Bay has had an external chief operating officer imposed upon them,
basically to straighten out the franchise and make sure everything is on
sound financial and operational ground. Arizona’s woes may be overstated;
Jerry Colangelo, you may recall, abruptly ended an interview with a reporter
from HBO’s "Real Sports" when the reporter brought up a couple of
expenses which amount to nothing more than extraction of cash (reportedly an
eight-figure sum) from the Diamondbacks franchise. I contacted the Arizona
front office about this issue, and have not yet heard back. (You think I
should keep the phone line clear?)
So, what good has come from expansion?
- The Florida Marlins got a ring, built a solid farm system, and might
well be the favorites in the NL East going into 2002. But they didn’t get
the Florida taxpayers to build a shiny new stadium for them.
- The Colorado Rockies built a baseball palace, packed it, have visited
the postseason, and have one of the most promising front-office talent bases
in baseball. The talent evaluation side will eventually come around, and
they’ve already figured out how to market the club.
- The Tampa Bay Devil Rays have been a disaster, playing lousy baseball
under lousy management on a lousy ballfield. They’ve been an object lesson
in the potential value of external validation of management. The
"baseball men" they hired to build and run the franchise have been
violently, obscenely inept, and when they did manage to find a truffle, the
D-Rays were colossally unlucky, with unheralded starting pitcher and Good
Guy Tony Saunders hit by a very unfortunate and career-ending humerus
- The Arizona Diamondbacks have visited the postseason twice already, and
lead the defending champion New York Yankees 2-0 in the World Series.
I don’t see what was bad about these two expansions. There’s nothing here
that we don’t see in Pittsburgh, Baltimore, Montreal, Los Angeles, Anaheim,
or Chicago, at the very least. Then again, statement #1 isn’t really the
Statement #2 is much more problematic.
Contraction will be a step towards fixing the problems created by the
most recent expansions.
This is either Pythonesque, or so cynical as to make Scott "with cherry
and nuts, please" Morris appear as Pollyanna.
The real secret to this statement is in its vagueness. It’s a Rorschach test
for people inside and outside of baseball. You see in it what you want to
see in it. Think revenue disparities are destroying competitive balance?
Games are too long? Offense is inflated because of diluted pitching? Too
much Youppi? (Not to be confused with too much Whoopi, which, alas, won’t be
fixed any time soon.) Not to worry! Contraction is the clear first step to
curing what ails you!
Sounds a little like Snake Oil, no?
The common scenario being bandied about is an abolition of the Montreal and
Florida franchises, with the Loria ownership group then receiving ownership
of the Tampa Bay club, and a dispersal draft taking place to redistribute
the talent on the disbanded clubs. This would result in an approximate 7%
increase in shared national broadcast revenue for each of the remaining
teams, and would have a yet-to-be-determined, but not-all-that-enormous,
effect on the shared revenue from local broadcasts. It doesn’t look like a
big impact from here. You can always fall back on the bedrock-solid argument
that Montreal doesn’t deserve a club because they’re (a) Canadian and (b)
Francophiles, I guess. It’s hard to argue with that.
Of course, if you get down and actually take a look at the claims being made
about the woes affecting baseball, most of them don’t hold up. Contraction
is a cynical and fatuous solution in search of a problem. The Yankees are
winning World Series repeatedly because of some great homegrown talent and
some all-time postseason performances, not because John Henry can’t sign
Elian Gonzalez to endorse a publicly-financed stadium. The D-Rays suck
because they had management that really thought that, at the start of the
2000 season, bringing together Fred McGriff, Vinny
Castilla, Greg Vaughn, and Jose Canseco would result in an
unstoppable juggernaut of offensive turgidity.
This is a Ricky Jay move. Distraction with one hand, purposeful motion with
Contraction serves one purpose and one purpose only: it creates negotiating
leverage for the owners against the MLB Players Association and any
potential municipalities they may be sitting across the table from in the
next few years. Let’s look at this from a traditional valuation perspective.
The value of a company is equal to the discounted value of that company’s
future earnings. The two biggest expenses that baseball clubs have, or think
they have, are player salaries and stadia. Owners believe that in order to
compete in the marketplace, they need fancy new ballparks–and they well
might. Fancy new ballparks cost a carload of money. Baseball owners are not
dumb, and would prefer to reap the benefits of HAVING a new ballpark without
actually PAYING for a new ballpark. Peter Magowan loves Pacific Bell Park.
He’d love it more if the hundreds of millions spent on its construction had
come from someone else’s pockets.
With contraction, MLB owners can make a credible threat of folding future
franchises, such as Kansas City, Minnesota, Oakland, etc. by saying
"Gosh, we’d hate to have happen here what happened in Florida." If
a new park can increase revenue by 50%, almost all at the margin, the value
of a franchise can absolutely freaking skyrocket. It’s not unlike hitting a
gold mine of a stock while trading on margin.
How about the MLBPA? Well, the owners still want one thing–a salary
cap–and they’re always going to try to get it. It’s not a complicated
thing. Grow your revenues, cap your expenses, and you have the same scenario
as you do with the new stadium issue. Lots of revenue at the margin, and
yummy new profits, leading to a dramatic increase in franchise value very
Contraction is a great idea for the owners, at least in the short term. They
get a shiny bargaining chip or two at the very least. For the fans in the
affected markets, it’s a catastrophe of unparalleled dimensions. I can’t
imagine the void in my life that would be created if the Oakland A’s were
folded. It would probably turn me off of baseball forever, at least the MLB
flavor. There are literally millions of fans who probably feel that way
about even the Expos and Marlins.
But don’t believe that contraction is going to solve some problems. Bud
Selig will talk about "financial problems" without ever going into
specifics. Before you believe Selig or any talking head about this issue,
including me, ask yourself the basic questions of business and politics:
(1) Who benefits?
(2) Who pays?
It’s really pretty simple.
The Commissioner’s Office has not earned my trust, only my skepticism. Bud
Selig appeared before Congress several years ago and testified that multiple
clubs would go bankrupt unless the current financial system was dramatically
He was either wrong or lying.
In November of 2000, he appeared again before the Senate, and claimed
"At the start of spring training, there no longer exists hope and faith
for the fans of more than half our 30 clubs."
He was either wrong or lying.
Now, as we’re about to enter a time when a sizable Fog of War rolls in on
several areas around baseball, Selig is making the claim that no decision
has been made on contraction, but it is an option worthy of consideration to
address the financial problems surrounding the game.
Do you think he’s wrong or lying?
Maybe it’s neither, but I can’t say I have much hope and faith at this
point. And if the behavior of the hardliners in management is enough to make
a junkie like me consider just writing off the whole enterprise, imagine
what the more casual fan thinks.
Then again, worrying about that is apparently not what’s being done in the
PR department at MLB. We’re in the middle of the World Series, and the
baseball news has Contraction as a major theme? Someone should look into the
marketing of this game.
Gary Huckabay is an author of Baseball Prospectus. You can contact him by
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