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Pete Toms Article Archive
Written by Pete Toms   
Tuesday, 07 September 2010 00:00

Last Week in Bizball by Pete Toms

This week in “Last Week in BizBall”, the “leaked financials”, too much hype?, are the Tampa Yankees moving to Orlando?, more record spending ahead in next year’s Rule 4 draft? and some miscellaneous TV ratings.

THE LEAKED MLB FINANCIALS: TOO MUCH HYPE?

You are no doubt up to date on the recent reporting surrounding the leaked financial statements of six MLB franchises. While MLB, the MLBPA and individual owners have said little to nothing publicly, the baseball punditry has been in full roar. Some anticipate the leaked statements will significantly hamper future attempts by MLB owners, particularly in smaller markets, to acquire future public subsidies. More widely speculated has been the notion that the confirmation that revenue sharing payees are earning tidy profits will result in a showdown between large revenue and small revenue markets. In other words, Kohler Part II. However, not all the baseball biz pundits foresee another imminent internecine battle over revenue sharing. LWIB, Brian Borawski wrote at The Hardball Times.

….there have been a lot of talks on how this is going to affect revenue sharing in the next set of collective bargaining agreement negotiations in 2011. The general consensus is that the big market teams are going to be mad at these smaller market teams and this is going to set things up for an “owners versus owners” battle. Keep in mind this is my opinion, but I think that by the time the negotiations really begin, that this issue is going to be a minor one. I’m a little more cynical and it wouldn’t surprise me if the big market teams already knew this was going on (remember, they now how all of this stuff works too). Second, the negotiations aren't going to really heat for another year or so and time heals a lot of wounds. Finally, Bud Selig has been keeping the owners in line for years now so my guess is with him still at the helm that everything will be smoothed over.

And last month, Shawn Hoffman wrote at Baseball Prospectus that the revelation that “payees” are profitable is actually good news for everybody, payors included.

There is not a single revenue sharing payee listed (i.e. a team that received money from other clubs) that would have been profitable without the program.

A lot of people have suggested that payees should be banned from taking profits. This totally misses the point. MLB teams are "for-profit" companies, meaning that being profitable is a good thing.

Repeat: Being profitable is a good thing.

The fact that the Marlins and Pirates have been profitable, even in down years, should be considered a positive outcome for MLB, and it would have been impossible without revenue sharing. Yes, the Marlins obviously abused the system. But that’s old news, and it’s already been remedied—the union forced them to raise their payroll last winter, and they’re pretty much back in line with “normal” small market teams.

TAMPA YANKEES ON THE MOVE?

LWIB a press conference was held to announce the possibility of the Tampa Yankees of the Florida State League moving to Orlando for the 2013 season. Representatives of the New York Yankees (the Steinbrenner family owns the franchise) were present at the press conference to confirm that they are negotiating a “partial sale” of the franchise to an Orlando group spearheaded by businessman Armando Gutierrez. Orange County Mayor Richard Crotty was also in attendance. If the move transpires the franchise could play out of Tinker Field or a new stadium could be constructed (Mayor Crotty confirmed the possibility of the County providing land for a new ballpark). The New York Yankees were quick to announce that the negotiations concerning a “partial sale” of their FSL franchise would in no way impact upon Yankees spring training in Tampa. Fifteen years remain on the Yankees lease of Steinbrenner Field, owned by Hillsborough County.

The situation is puzzling. On one hand, the Yankees were quick to downplay the possibility of their FSL franchise moving but on the other hand, why are they at the press conference announcing the possibility of a move? NYU assistant professor Lee Igel speculated at the Forbes SportsMoney blog that the Yankees interest in selling their FSL franchise could signal the beginning of the end of the Steinbrenner family’s ownership of the Yankees.

The Orange County, Fla.-based investors could move the minor league club to Orlando. Relocating the team, though only a little more than an hour’s drive up the I-4 highway, would reduce the Yankees’ presence in Tampa to Spring Training, rookie league, and scouting operations. The biggest spillover concern for Tampa is that the Yankees would eventually find a way to get out of the 15 years left on their lease agreement with the city for Steinbrenner Field, where the team’s Spring Training games are played. This is not likely to happen, at least in the near-term, seeing as the Steinbrenner family resides in the Tampa Bay area and the city offers the right mix for a Spring Training site.

But all that could change should the Steinbrenner family decide to sell the New York Yankees. A family-run enterprise tends to become more about “investment” than “ownership” as it is transferred through successive generations and family members pursue diversifying financial and personal interests. Thus, the question is whether the partial sale of a Yankees’ minor league affiliate signals the sale of the entire franchise sometime in the not-too-distant future.

SELECT READ MORE TO SEE DETAILS ON THE RULE 4 MARKET AND MLB TV RATINGS

THE RULE 4 MARKET

LWIB, player agent Darren Heitner wrote about the record amount of money spent in the 2010 Rule 4 draft. Mr. Heitner attributes the record spending to the looming introduction of “mandatory slotting” for the 2012 draft. As such, he argues (as do others) that next year’s draft will see more of the same as it will be the last opportunity for clubs to gain advantage over their competitors by awarding “over slot” bonuses to draftees.

Last month, Jim Callis of Baseball America reported on the spending in the 2010 Rule 4. Mr. Callis informed us that Commissioner Selig’s efforts to enforce “recommended slots” (primarily delaying the approval of “over slot” deals) met with mixed results. Clubs spent a record $194.8 million ($200.9 million if guaranteed major league salaries awarded three draftees is included) this draft, up from a then record $189.3 million last year. Four franchises, the Nationals, Pirates, Blue Jays and Red Sox, each spent in excess of $10 million, “matching the combined total from 45 previous drafts.” Only the Braves and Twins did not go “over slot” for at least one player (the Jays exceeded “slotting” in thirteen signings). Commissioner Selig’s efforts to enforce “slotting” might be responsible for a 9% decrease in 1st round bonuses, which were their lowest since 2007. Looking forward, Mr. Callis wrote.

…Bringing draft expenses more under control was a main topic at the owners' meetings the week before the deadline, and will be a focal point of negotiations for a new collective bargaining agreement. The current deal expires in December 2011.

The owners will push for hard slotting, which could drive high school players to college baseball or other sports each year. While it remains to be seen if mandated bonuses will be part of the 2012 draft, teams are preparing as if they will be.

"If you thought we were aggressive this year, wait until you see next year," an American League scouting director said. "It may be our last chance to sign a lot of the high school players, and we're going to take advantage. A lot of other teams will, too."

If that's the case, draft spending will surge further upward in 2011.

If the introduction of “mandatory slotting” is a foregone conclusion, as most pundits believe, the debate around reforming the draft will shift to whether or not the changes will result in greater competitive balance (the end of “signability”, guaranteeing the weakest on field performers acquire the best amateur prospects). Some, including Mr. Callis, argue that “mandatory slotting” will not end the practice of player agents manipulating the draft to ensure their client is drafted by the club willing to pay the greatest sum of money. Last month, Michael McCann broached the subject at the Sports Law Blog (thanks to the aforementioned Darren Heitner for bringing it to my attention).

If a slotting system is adopted in MLB effective for the 2012 draft, we could see some big spending from MLB teams in this year's and next year's drafts. This will be their swan song for using non-top draft picks to draft top players with big signing demands.

Also, beginning in 2012, the work of baseball agents (or in some cases a relative or "family friend" acting as a de facto agent) would seem poised to change.

While baseball agents presumably want their clients to get drafted as high as possible even in today's draft system, I suspect seeing a client "fall" to a team like the Yankees or Red Sox might actually be preferred over seeing that client taken earlier by the Pirates or Marlins or a similar small market team. That would change, though, in a draft where salaries are predetermined, regardless of a drafting team's resources. In that setting, the goal of the agent would clearly be to have his or her player drafted as high as possible. So agents could still play a role -- they could tell teams that unless a represented player who has remaining college eligibility is drafted in the first round (or by whatever threshold), teams would be better off drafting other players since the represented player will attend college or in some cases continue to play college baseball. The slotted money has to be good enough to turn pro.

TV RATINGS

All links courtesy of the Sports Media Watch blog. Boffo TV ratings for both the Rangers (scroll down) and Reds. Lowest ratings for MLB on Fox so far this season.


Pete Toms is senior writer for the Business of Sports Network, most notably, The Biz of Baseball. He looks forward to your comments and can be contacted through The Biz of Baseball.

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