MLB deal a dagger to small-market teams

BY Ken Rosenthal • November 22, 2011

The deal got done, and that fact overrides every other. As the NBA will learn, labor peace alone carries great value, helps a sport achieve continued growth.

Unfortunately for baseball, low-revenue teams got trampled in its new collective-bargaining agreement, trampled in a way that raises genuine concerns for their future.

“We are headed for massive problems in the next CBA,” one general manager said Tuesday night. “Competitive balance is going to get progressively worse.”

We’ve heard it all before, but the GM isn’t crying wolf, even though the addition of a wild-card team in each league will create greater opportunity for all.

The new restrictions on spending in both the amateur draft and international market are daggers to low-revenue clubs, robbing them of two of the few advantages they had.

Of course, if GMs are upset – and many of them are – they have only their owners to blame. The owners and commissioner Bud Selig wanted meaningful cost controls. Their goal of “hard slotting” for the draft - predetermined signing bonuses - would have been even more restrictive.

As one player agent pointed out, it’s a borderline miracle that a sport with such vast payroll disparity - $200 million at one extreme, $35 million at the other – can pull off a functional deal at all.

That’s the larger point, and it’s important for even the most disgruntled to remember. But if competitive balance is truly the goal, then this agreement is indeed a step backward.

Maybe baseball is OK with that. Maybe the dominance of the big markets – even with revenue sharing – makes the sport healthier overall. But tell that to all the clubs that now will face even more of an uphill fight, particularly as high-revenue teams secure one mammoth local TV deal after another.

The threatened clubs include the Rays, Pirates and Reds; Indians, Diamondbacks and Royals; Athletics and the Padres – at least eight of the 30. The Athletics could escape that group if, like the Marlins, they secure a new ballpark.

The draft had become a lifeblood for such teams, the one talent pool in which they could play catch-up. They cannot compete for established stars in the free-agent market, or even pay for top managers and coaches.

The Pirates, according to Baseball America, spent $17 million on the draft this year, the Nationals $15 million, the Royals $14 million, the D-backs $12 million. The Rays, Mariners, Padres and Blue Jays all spent $11 million.

Well, starting next year, each club will be assigned a signing bonus pool; a team can spend as much as it wants on an individual player, but will face penalties if it exceeds the aggregate threshold.

The range of the pool will be between $4.5 million and $11.5 million, depending upon how many picks a team has and where it stands in the draft order. The pools could grow in future years, but low-revenue clubs will lose their edge regardless; the Pirates spent $13 million this year on their first two picks alone.

The penalties, meanwhile, are stifling.

A team that exceeds the threshold by 0 to 5 percent must pay a 75 percent tax on the excess, a number that equates to $575,000 on $11.5 million.

A team that exceeds the threshold by 5 to 10 percent must pay an additional 75 percent tax and lose a first-round pick.

And it only gets worse from there.

The penalties are the same for low-revenue teams as they are for high-revenue teams, which is hardly fair; the picks are much more valuable to low-revenue clubs.

The new international rules also include a signing bonus pool and penalties. In ’12, the pool will be $2.9 million for each team. In ’13, it will range from $1.7 million to $4.5 million.

So much for that low-revenue advantage as well.

The Athletics in 2008 paid $4.25 million for 16-year-old right-hander Michael Ynoa. The Twins in ’09 paid $3.15 million for 16-year-old shortstop Miguel Sano. And don’t forget Reds lefty Aroldis Chapman, who in ’09 signed a six-year, $30 million deal.

Given the severity of the restrictions, the new “competitive-balance lottery” seems almost laughable, a meaningless bone that baseball is throwing to the disadvantaged clubs.

The 10 clubs with the lowest revenues and 10 in the small markets will enter a lottery for the six draft selections immediately following the completion of the first round. Those selections can be traded, subject to certain restrictions.

An extra pick between say, 31 and 36, is nice, but will make little difference. The biggest impact generally is in the top-six picks; a lottery for those six could be game-changing.

But no.

The union agreed to the new rules, but from the beginning had difficulty understanding why Selig and the owners were so obsessed with curbing draft spending, which this year amounted to $236 million in a $7 billion industry, according to Baseball America.

GMs say the new rules are short-sighted, and it’s easy to see their point.

A team that backs off drafting a potential star not only will lose his elite, cost-controlled performance, but also the bounty that player eventually could bring in a trade.

And if teams are restricted in the amount they can invest in amateur and international players, clubs will be left with little choice but to spend more on major leaguers – a development that also could work against low-revenue clubs.

One executive cautioned against drawing conclusions, saying, “I think any team can probably find an element of (the agreement) that may restrict or curtail a current strategy. We probably have to wait and see it in practice.”

Another exec, however, said the flaws of the deal are not yet evident, but will be over time. Low-revenue teams will be squeezed to an even greater extent, and even those that win will realize only a marginal – and unsustainable – benefit.

The deal got done, and little can diminish that achievement. But if competitive balance suffers, what exactly is the gain?

share story