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Daily coverage of the Mariners during the season and all year long.

January 11, 2012 at 12:28 AM

How the myth that cost-effectiveness means something in baseball helps all teams get richer on other people’s cash

Just the other day, my wife and I were watching a Restaurant Impossible cooking show in which some poor widow restaurant owner had already sunk $350,000 of her own money into a sub-standard business and had to keep throwing in more in order for it to have a chance at succeeding.
Got me to thinking about how that would never happen in Major League Baseball.
After all, there are sub-standard teams that have been operating in mediocre fashion for years in MLB and yet the fan customers they serve — and their supposed watchdogs in the media and blogging community — keep demanding more mediocrity.
Call it the post-Moneyball era. Call it La-La Land. Just don’t call it logical. Because there is nothing logical about the climate of debate surrounding baseball teams and their ability to spend.
I see too many fans twisting themselves in knots worrying about whether the latest billionaire owner is going to go bankrupt spending other people’s money. See these extensive debates about which teams are getting the most WAR (Wins Above Replacement Level) bang for their buck in a sport that offers no rewards for such things. I see a game where the owners of all 30 teams just ratified a new Collective Bargaining Agreement (CBA) where there is still no salary cap in baseball and a team can compete with a $200-million payroll in the same division where another team spends $40 million.
The sad part of Moneyball, which really was an entertaining book, is that it seems to have convinced a generation of fans that being cost-effective actually means something in a sport where nobody is competing on an even economic footing. I mean, look at the Mariners, who just signed pitcher Hisashi Iwakuma to a $1.5-million deal with incentives. Plenty of fans and bloggers in Mariners-land were downright giddy over the cost-saving and supposed bargain.
But so what? Isn’t it the talent level they should be concerned about? What if the Yankees had decided Iwakuma was their missing piece and guaranteed him $5 million? Would it matter? Not to them. They’d be getting the same pitcher with the same level of talent. But they’d be filling their own need at the price it took to get him there. And that’s the point about baseball. Teams spend what they need to in order to get where they need to go. MLB is not the NFL, where teams are competing on an equal economic footing with the same spending limits.
In baseball, calculating the dollar WAR value of players is pretty much useless if your rival can afford to spend two or three times what your team did.
But baseball likes this little arrangement, where fans and pundits are focused on the micro aspect of cost-savings for millionaire and billionaire owners rather than the macro view of what’s really going on. By keeping fans distracted on minor issues like cost-effectiveness and self-imposed payroll limits, they ignore the bigger picture that super-wealthy owners are doing little more than spending other people’s money. And while they are spending your cash, they aren’t risking any of their own and are almost always getting even wealthier in the process, good baseball team or bad.
For good teams, this doesn’t matter. Why spend more money if the product wins on the field and makes money off it? But for the bad teams, or those stuck in neutral going on a decade or more? Or who keep watching homegrown players leave for other markets, leaving them just short of where they need to be on the field? Where is it carved in stone that budgets only have to be about spending other people’s money while not risking any of your own?
I spoke about this last week in a meeting with the Rotary Club of Redmond, WA, which was filmed in a video broken into three 10-minute segments. Here is Part 1, then Part II, then Part III.
Watch it if you have time. Or don’t. But if you want to know what’s really happening in baseball, it’s time to start thinking outside the narrow box of the past nine years, where this unusual obsession with cost-effectiveness has dominated the conversation.
We can keep obsessing over the jobs done by Billy Beane, Andrew Friedman, Alex Anthopoulos, Mark Shapiro and other general managers past and present who have saved their wealthy owners tons of money. Or, we can start asking what it all means.
Friedman has done an outstanding job for his uber-rich Wall Street investment banker owner in Tampa Bay. Beane used to be Friedman-like, but lately has not fared as well for his ultra-wealthy real estate magnate owner in Oakland.
What do A’s owner Lew Wolff and Rays owner Stuart Sternberg have in common? They are both funding their teams in the lowest echelons of baseball while they wait for the day when they can score a brand new, taxpayer-financed ballpark that can give them tons of other people’s money to spend.
Both men have a pile of their own cash and plenty of wealthy friends to go in on a stadium with them, or build a new one right where their teams currently reside. But they don’t want to do that. It’s not the baseball way. So, they keep funding their teams at the lowest levels of the game, spending little more than their paltry revenues coming in, so that franchise value can be maintained. All in the hopes that they’ll hit the taxpayer-funded jackpot like the majority of teams in baseball.
And fans, bloggers, some mainstream media, the Moneyball book and movie, and anyone not really paying attention keeps letting them get away with it. Keep allowing these smokescreen GMs to keep people gasping over their cost-effectiveness while ignoring the fact their team owners are wealthy enough to spend a whole lot more than they currently are.
Whether it’s Mariners fans arguing the team can’t afford Prince Fielder, or others preaching the wisdom of five-and-seven-year-rebuilding plans by teams that can afford to turn over in half the time, too many people citing the cost-effectiveness mantra are making it far too easy for wealthy owners to take few risks while their franchise value grows.
Photo Credit: AP

These enablers of the super-rich feel that they are being intelligent and prudent with their pleas for cost-effectiveness. In reality, they have no idea what they’re talking about. So, when Albert Pujols signs a 10-year, $250-million deal, the usual suspects worry about how much WAR he’ll have to produce for his contract to be cost-effective.
But those in-the-know will tell you it doesn’t matter. That Pujols is the centerpiece of a $3-billion television deal upcoming in Anaheim. If the Pujols signing was worth, say, another billion to that deal, what does $250 million matter? It doesn’t.
Predictions the Angels will bankrupt themselves? Wishful thinking. Just like it was when they took on Vernon Wells and his contract.
Here’s a hint. No baseball owner is going bankrupt because of their baseball business.
Jeffrey Loria of the Marlins cried poor for years and got politicians in South Florida to build him a new stadium by paying for three quarters of it with public funds. But, oops. Deadspin got hold of some documents in 2010 that showed the Marlins were actually making money every year by spending cash that belonged to other people and stuffing their pockets with handouts from other teams. Not spending their own money to make more of it. That’s not how MLB works. All of a sudden, the feds are waking up and some politicians in Miami are running scared because they may not have actually checked to see whether Loria’s cries of poverty were true.
But hey, the Marlins have their new stadium and what are they doing? Spending like Richie Rich. Using other people’s money. Just like the A’s will be doing in 2015 if they get their new ballpark in San Jose. They sure won’t be playing Moneyball anymore. Ask the Minnesota Twins. That Moneyball game is for the teams who don’t yet have access to someone else’s cash flow. The cost-effectiveness battle? For folks who just don’t know, or don’t want to know. The Twins had one of the richest owners in the game for years but didn’t have the stadium to give them other people’s cash. That problem’s been fixed and now the Twins are proud members of baseball’s $100-million payroll club.
One look at this Prince Fielder debacle should tell you all you need to know about how much money teams really have.
Folks wondered how the Washington Nationals could possibly survive after their so-called crippling Jayson Werth contract. Well, surprise, surprise. They’re now in on Fielder. Small wonder, considering MLB moved them out of Montreal — a city that wouldn’t give them a new ballpark — to Washington, D.C., which promptly coughed up that cash cow. Oh, yeah, the Nationals have a billionaire owner and are about to renegotiate a local TV deal which should bring about $30 million more in annual revenue to the team. Meaning the billionaire could likely keep Werth and Fielder without dipping into his own deep pockets.
Folks, this is the game of baseball.
The owners aren’t evil. They’re simply doing what they can get away with. What fans let them get away with.
Look at the Mariners. I hear fans taking every day about whether the Mariners might ruin themselves by bringing Fielder on board. How so? They currently earn about $45 million per year from their local TV deal and we’ve heard talk they can expand it to $90 million and higher through a 2015 opt-out clause and by bringing in Fielder as their Pujols-type centerpiece.
So, um, where are they getting ruined? Because Fielder might decline in four years? Who cares? The TV money, once a deal is signed, is gua.ran.teed people. Wake up. The only danger the Mariners now face financially is that they won’t do enough the next year or two to keep fans interested, boost television ratings and max out on new TV money once they can opt out of their current deal with ROOT Sports in 2015.
Going bankrupt? How? Their owner is a billionaire. The ownership group hasn’t put in new money in over a decade, other than letting the team stockpile operating surpluses.
And yet, the myth continues. The myth that teams can’t afford these players. The truth has been so distorted the past decade that we actually have fans cheering for every dime saved by a billionaire owner on back-end starting pitchers or backup catchers. We have fans actually pleading with teams not to spend big on free agents, while arguing those teams should take twice as long to develop through youth.
Don’t take my word for it. Look around. Show me team owners in financial trouble because of their ballclubs. I see one team that played footsie with Bernie Madoff a bit too much, another whose owner had a terrible divorce. Oh yeah, you think former Texas Rangers owner Tom Hicks was taken down because of A-Rod? Do some research, folks. He went out and bought one of the biggest soccer teams in the world long after that deal and leveraged himself to the hilt in other dealings outside of baseball. A-Rod makes for a great scapegoat, but not this time. Any entry-level business student could tell you that.
Folks, baseball owners are not in any danger of going broke because they don’t spend their own money. They spend the money new stadiums built by taxpayers bring them, or new money their TV deals on top of those ballparks bring in. And if they don’t have them, they spend as little as they have to in order to break even and keep franchise value steady until some politician gives them what they want.
Sorry to be cynical, but the truth hurts.
These owners have long been playing a game too many of us have missed out on. If you hadn’t noticed before now, take a look at the Pujols deal. At the teams trying to land Fielder. Take a look at where Moneyball now has the A’s. Ask yourself why Rays GM Friedman has to let any free agent walk when he has an owner Forbes magazine once said was worth $800 million.
That’s not speculation. That’s real.
Being cost-effective? That’s for chumps buying into the system. Ask the Pirates. Doormats for 20 years and raking in profits according to Deadspin.
The next time somebody tells you your team can’t afford a certain player, ask them why they believe that. And if they tell you a team shouldn’t have to spend more than the revenues they are taking in, ask them why that is since many of those revenues came off the backs of taxpayers and not owner risk.
Or, tell them to watch Restaurant Impossible. See whether that widow who sunk $350,000 into her bad restaurant had the option of waiting for other people’s cash to bail her out of a jam. Or a client base that would keep coming back no matter what slop she poured on their plates.
Nope. If the TV show didn’t rescue her, she’d have been forced to spend more of her own dough or die.
Not in baseball.
Actually, MLB doesn’t need a TV show to rescue its mediocre teams. They get plenty of help from the cost-effective, bang-for-the-buck crowd. From every fan that applauds mediocre, bang-for-the-buck signings, while imploring billionaire owners not to risk money — especially their own — on something bigger.
It’s why MLB just ratified another CBA without a salary cap. Why would it need one when all teams and players keep getting wealthier? The system works just perfect the way it is, unless you’re some fan following a team that hasn’t sniffed the playoffs in 10 or 20 years.
Here’s an idea. Keep fixating on WAR dollar values for marginal players and ignore what’s really going on. It might not cure all of your frustration. But before you know it, five, 10 and even 15 years will go by in the blink of an eye. If you’ve gotta suffer, might as well make it quick.

Comments | Topics: Hisashi Iwakuma


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