Follow the Money

You’ve Got Baseball Questions. We’ve Got Answers.

Take away the John Rocker jokes, and this year's baseball winter meetings sounded more like a meeting of the G7 nations. Revenue streams. Budget gaps. Economic inequality. And the Yankees wade into that morass and emerge with a team that seems ready to win four more World Series. No wonder they hate us.

Here are some FAQs about baseball economics, Bronx-style.

Did Jason Giambi fleece the Yankees? Take a look at the three stat lines below:

hr rbi avg obp slg
43 137 .333 .476 .647
38 120 .342 .477 .660
32 139 .334 .424 .605

Not all that much to pick and choose between 'em, eh? The first two lines are Jason Giambi's last two seasons. The third is Lou Gehrig's 1933 season, when he was 30 years old, the same age as Giambi. Good company. Giambi may also be the most patient hitter in baseball. Seeing the results of this kind of plate discipline day in and day out should help both impatient puppies like Alfonso Soriano and overly aggressive vets like Derek Jeter, in much the same way that Wade Boggs molded the mid-'90s Yankees in his own image. And contract-wise, Giambi signed a market value deal. His contract matches Carlos Delgado's $17 million deal and slots in a little below the $20 million deal the Red Sox gave Manny Ramirez, players of comparable talents and lesser accomplishments.

Is the Yankee payroll really $150 million? Baseball contracts are more complicated than Winona Ryder. With signing bonuses, incentive clauses, option years, and salary escalators, there are as many different ways of calculating a payroll as there are accountants. By some yardsticks, the Yankee budget might approach $150 million, but by the same measure there are plenty of other teams well over $100 million. Basically, the Yankees shed about $30 million in salary and picked up about $40 million, for a net increase of about $10 million over last year. By the conservative tally done by the commissioner's office, the Yankees rank slightly behind the Dodgers and just ahead of the Red Sox.

Did the Yankees overpay for their other free agents? Well, yeah. Brian Cashman spent some mad money on Steve Karsay at $5 million per. But it's understandable, because the Yankees were one setup guy away from winning the World Series last year. On the other hand, their other major signee, Rondell White, could have made as much or more by playing for the Cubs or Mariners.

How can small-market teams compete? Not by signing Chuck Knoblauch. Yes, it's "only" a $2 million contract, but isn't there someone in the Royals farm system more deserving of playing time than an aging .250 hitter with no power who's a defensive liability at two positions?

So the Yankees have all but clinched the AL East, and the big market teams will once again rule the earth. No so fast, pal. The three largest media markets as defined by Nielsen—New York, Los Angeles, and Chicago—represent six teams. Care to guess, aside from the Yankees, how many division titles those teams have won since 1996? One, the White Sox in 2000. Cast the net a little wider, and you'll find that Nielsen's top 10 markets account for 14 teams. How many of them made the playoffs last year? Three. The Yankees. The "small market" A's in the fourth-ranked Bay Area. And the Astros in 10th-ranked Houston. As the Dodgers prove year in and year out, it takes more than just money to win in this game.

But I keep hearing that the game is being destroyed by competitive imbalance, right? No, baseball isn't the NFL, where every season's as random as a coin flip. But if baseball's got a problem, it's been a long-term problem. Between 1961 and 1971, there were 20 teams that lost 100 or more games. Between 1991 and 2001? Only five. The number of really good teams—those that won 100 or more—hasn't changed much either; there were 12 during the '60s and 15 during the '90s. And among the big winners were small-market and mid-market teams like Seattle, Montreal, Oakland, Houston, Arizona, Cleveland, and San Francisco.

Teams are losing money, right? Sure they are. I would never suggest that Bud Selig perjured himself when he told Congress that over the past five years only three teams were profitable. But let's also remember the words of Paul Beeston, the CEO of Major League Baseball: "Under generally accepted accounting principles, I can turn a $4 million profit into a $2 million loss, and I could get every national accounting firm to agree with me." It's a piece of cake for an organization to assign its expenses directly to the team and funnel the revenue—like parking, concessions, and licensing—to some other set of books. And of course, teams that are owned by media companies can make below-market deals for TV contracts. That's why Selig spent so much time telling Congress that he won't open baseball's books.

So what's all the hubbub, Bub? If the owners are really so concerned about competitive balance, they can fix this broken system by instituting meaningful revenue sharing. By teams' own definitions, that vote should go 24-6, and with a few concessions, they could get the players to rubber stamp it. But the owners aren't really interested in that. They are what they've always been: a bunch of rich guys who want their employees to work for less money. Selig's sea of red ink and threats of contractions are just part of a propaganda campaign that precedes a lockout, or the strike-provoking demand for a salary cap in the upcoming collective-bargaining negotiations. Come to think of it, the other owners may just be onto something: The best way to keep these Yankees from winning is to not let them play.

 
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