MLB’s (Ice Cold) Hot Stove 2018: Why It’s Happening, and How To Fix It

This year’s off-season of free agency has been stalled to a block of ice in MLB.  And there is a number of working theories concerning what is happening.

However, a few weeks back several MLB execs took some time to explain what was occurring, very publicly, without their names being attached.

Their insight was likely very accurate, because what they pointed out supported many of the working theories dancing in the general public.

However, reading between the lines tells us there’s even more involved, from MLB’s past, and present, than we’re giving credit for.

First, the execs that were surveyed brought up money……A LOT!

They are looking at the history of the big contracts involving players who are at the end of their 20’s, or early 30’s, and that their performance has not measured up to their contract value.

Secondly, they brought up the fact that franchise price tags are expensive, and the Miami Marlins recent valuation, acquisition, and subsequent cast-off of every talented player they had spoke volumes of what ALL MLB owners now feel, in terms of balance sheets.  The old school multi-millionaires that would hedge money from their productive business holdings into their player payroll are now gone.

And third among the financial belly-aching, they cited that MLB across all it’s affiliates has a ton of debt that needs to be off-set, and it may as well be now that they start.

That’s all well and good, I think being fiscally responsible is everyone’s responsibility.

The problem is that everyone seems to be forgetting that the MLB, in their long-standing financial feuds with the MLBPA negotiated this thing called an MLB Rookie Contract.

It creates a situation where a player is indebted, on paper at least, to an MLB team for seven years.  In these contracts, players have fewer rights, and the first four seasons, they have no rights, such as arbitration, to command higher salaries.  What this means is, MLB teams are empowered to pay players who are on their rosters league minimum salaries, during the time that they are, according the logic of these MLB execs, their “most productive.”

As an example, let’s say a Right Fielder, Johnny Longball, comes out of high school, and is highly touted, and he ends up getting drafted in the early portion of the 2nd Round in the MLB Amateur Draft.  At 20, Longball has reached the Double AA level of the Avarus Sues farm system, and is dominating the game.  This means he’s had two years in the minors, likely playing mostly for performance bonuses, that are directly tied to his promotions, not his actual performance, and then his team decides he needs to come up to the big league for a stint in Mid-May, to give their outfield a break.  Longball comes up, he plays 15 games, hits .224, hits three home runs (very hard on analysis!), and drives in 12 runs, will having an overall outfield efficiency of .994.  Obviously, the most basic analysis is that he’s not hitting for average, and that would be typical of nearly any prospect’s first run in the majors.

Since MLB execs and owners want to look at history, let’s point out something very steadfast, historically at least, about the majors:  While many teams have touted having excellent five-tool prospects, their collective training staffs have managed to convert these claims a whooping four percent of the time, every ten years.

Longball’s rookie contract years gets extended because his 15 games doesn’t qualify as significant playing time in the majors, and thus, he heads back to AA for re-tooling, blasts through to AAA, where he finishes 80 games as a starter, going .297, hitting 22 home runs, knocking in 71 runs, and his outfield efficiency jumps to .996—for the casual reader, a defensive efficiency improvement of .002, comparatively speaking, is the difference between catching a routine fly ball 10 times out of 12, rather than 8 out of 12, and that can make a HUGE difference game to game.

They claim these players don’t pan out all the time.  I would argue, these training, scouting, and development staffs don’t know what they’re talking about, and certainly their historical track record suggests they don’t have a complete grasp on what each individual player needs to succeed at the next level.

Oh sure, they’ve gotten things right before:  A broken clock is right at least twice a day.  Is that the kind of odds you want to put your millions of dollars in payroll on?  But I’m a little from the topic at hand: finances.

Longball finally makes it through spring training, at age 21 (now three years of his rookie contract have been extended….), and he’s on the opening day roster.  He’s not a true starter, he’s platooning (meaning he swaps starts, and subs heavily at specific position, in this case right field), with an ‘aging’ right fielder who is being publicly mentioned as the next person to get cut from the Avarus Sues roster, because his numbers have slumped (a career BA of .284, but his last two seasons average .271).  Longball rises to occasion, and over the course 124 appearances, with 319 At-Bats, he goes .267, hits 19 home runs, drives in 58, and his defensive efficiency is at .997.  His stats make the case that he’s ready to stay on the team’s 25 man roster, the Avarus Sues get to drop the other guy, and his now ‘inflated’ contract, and Longball his the talk of his hometown, Sunny Cornfield, Iowa, where the community has been decimated by every young, able-bodied person leaving for work in places like St. Louis, because farming is inconvenient.  And everyone thinks Longball is living the dream.  The problem is, Longball is now stuck in a contract that ensures he’s stuck on the Avarus Sues roster until he’s 28, and he won’t get any rights to negotiate pay raises for his performance until he’s 25……Longball goes on to dominate every pitcher in his division for the next four years, before having shoulder surgery, because he’s swung so hard, on so many hard pitches, that his body, specifically his joints, are starting to deteriorate at a rate most of us won’t be able to understand.  Meanwhile, he’s only making the league minimum of $507,500, which is certainly a nice sum.  When you take out the taxes ($120,529.75 off the top, plus 39.6 percent of everything ABOVE $415,051.00 ($36,609.80 for this salary) equals $157,139.55), then factor in that these players have to find a place to live in the city they play in, and will likely pay a hefty sum for “transitional housing” since they won’t stay there year round, rookies are getting ripped off by MLB, and the IRS, period.

This rookie rip-off, errr, contract that the MLB instilled was promoted as a fair way for MLB teams to be able to “evaluate” guys like Longball, before they commit to paying them gobs of money, and then they don’t perform, and then the team is locked into paying someone who doesn’t advance their team.  It’s a fair point being made in this context.  However, the back end of a seven year contract, for a 20 year old who’s making the cut, is just as unfair for him, as it is for the team.

Looking at this logically, and from a historical standpoint, do MLB teams REALLY need seven years to ‘evaluate someone’s talent?’  Or was this just an attempt to control the market, from a labor perspective, for as long as possible?

Here’s something about capitalism that a lot of people don’t understand, no matter what side of it you’re own:  capitalism is not about the control of labor.  It is about being able to control FIXED costs.  Labor is never fixed.  In fact, if labor is fixed, it’s because of a monopoly, which is illegal.  Adam Smith, the godfather of free capitalism, spoke of the unethical pursuit of controlling labor, and said that businesses were far better off controlling their capital (i.e. goods), rather than trying to control labor.

Players are the labor.  And players deserve appropriately set contracts.  The reason MLBPA agreed to these seven-year long, subject to change, rookie rip-offs, is because the agreement was that players who performed beyond the constraints of these contracts, were likely impact players, who deserve appropriate compensation for their performance, and that while their originating team may not value them the same as other teams, the competition of other teams knocking, allow for that player to finally be compensated properly, for all the years they have performed.

Now MLB execs want to cry foul, about money.  It’s laughable.  Maybe their spending habits do need to change.  Maybe MLB owners want to see a better bottom line on their team’s balance sheets.  These concerns are valid, and should be addressed.

But trying to corner labor to do it is immoral, unethical, and if our government would do the right thing, see that what is happening is illegal.

Players deserve to be paid for their performance, irregardless.  Rookie contracts should not last seven years, and they certainly should not have caveats on time.  MLB owners and execs are simply trying to use the current system to corner labor, and it’s completely stupid.  One that quoted these execs said they were getting smarter.  No, they’re getting unethical, and it needs to be addressed.

The solution to this is quite simple: rookie contracts reduce to three years in length. Players don’t get arbitration, but the teams don’t get to extend years either.  Teams have to commit to providing appropriate living quarters for players, without including it as compensation, and any promotional material that players participate in is not mandatory, and is covered in separate compensation from any playing contract.

If MLB teams want to cry foul over player contracts, so be it, some of these contracts for older free agents do tend to be exorbitant.  However, they are based on this concept of compensation for the ‘whole player’ and what they’ve done, that they weren’t compensated for in the past.  MLB needs to be honest about the broken contract system, not just pick at the parts that they find troublesome.

While everyone is fixated on the fact that teams aren’t signing free agents like they used to, what this contract and financial griping is doing is leading to another player strike.  My only hope is that everyone see’s what is happening, and start holding MLB teams accountable.  Sure, we can agree that 22 million a year for some players is ridiculous, and that perhaps there should be some stipulations concerning performance.

But the rookie contract system in place is a farce, and prevents players from ever receiving true compensation for their efforts, if this off-season is an indication of what’s to come.

 

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