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December 28, 2008

The price of free agent pitching

Driveline Mechanics looks at the past two years' free agent pitcher signings, using the new salary calculations available from Fangraphs. I don't know enough about Fangraphs' calculations to say whether this analysis is legitimate, but pitchers have been paid relatively more than position players ever since we first started tracking salaries at THT. As the Sabathia signing shows, this isn't going to change anytime soon.
Posted by: Dave Studeman

December 11, 2008

Opt out clauses are a bad idea

Jay Jaffe responds to Keith Law's opinion about opt-out clauses, saying that he doesn't think they're a bad idea. Let's be clear about this: opt-out clauses increase the cost of a contract to a club. Depending on the player, they could cost a lot.

Let's take CC Sabathia, who can reportedly opt out of his new seven-year Yankee deal after three years. Two basic things can happen: Sabathia can go downhill and decide to continue playing under the contract because he's overpaid compared to the "market" (bad for the Yankees) or he can continue to pitch well and the market for free agent pitchers can become even more expensive than it is now. In that case, he'll opt out of the contract and the Yankees will have to replace him at the now-higher free agent rate (bad for Yankees).

Opt-out clauses impact the value of options in the financial market and the impact the value of contracts in baseball. For CC, that impact is positive. For the Yankees, it's definitely negative.
Posted by: Dave Studeman

December 04, 2008

Why did salaries increase so slowly last year?

As noted by others, Major League Baseball issued a press release today, announcing that salaries only increased 3.6% last year. But here's the thing to keep in mind: there was a major shift toward young players last year. In fact, as I wrote in the THT Annual, it was the biggest downward change in major league history.

Why is that important? Because most players under 28 years of age haven't hit their free agent years yet, so they're more affordable. Think of the NL Cy Young winner (Lincecum) or the AL MVP (Pedroia). Baseball got young last year, and young players are cheap. Fiscal discipline had nothing to do with it.
Posted by: Dave Studeman

The baseball bear market

Squawking Baseball's Shawn Hoffman has penned a nice guest piece for Baseball Analysts, listing the reasons why baseball's economics may not be so strong next year. Some revenue sources, like media contracts, are stable, while others, like ticket sales and consumer merchandise, um, aren't. Despite Scott Boras' protestations, this is having an impact on player salaries, the free agent market and even the non-playing team personnel.
Posted by: Dave Studeman

November 20, 2008

CC’s choices

Brew Crew Ball has posted a spreadsheet comparing CC's two offers. I hope this is the sort of thing agents are doing for their players. The upshot is that $140 million isn't necessarily $40 million more than $100 million, at least not when you account for contracts of different lengths, different costs of living and the present value of money.
Posted by: Dave Studeman


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