CHANGING ECONOMICS

MLB PLAYERS CONCERNED OVER DELAYED SIGNINGS (ESPN)

The continued free agency of Bryce Harper, Manny Machado, and other big name players concerns many other MLB stars. Spring training is around the corner, where contracts are typically settled well before. As teams set aside traditional thinking in free agency, players having to wait until near spring training may become the norm.

The concerns raised are understandable. Harper, Machado, and Kimbrel are free agents that can make big impacts on teams. Especially Harper and Machado, who are still heading into their prime, can contribute to teams for the next decade. Players work hard to earn their payday, once they are eligible for free agency. The lack of teams interested, able, or willing to pay the salary requests constricts their ability to obtain their dream contract.

Players in all sports complain about metrics used to change the way teams and their fans view player performance. Largely starting in baseball, the use of advanced metrics help provide a better picture of how players contribute to wins, beyond traditional stats that may help player profiles but not the team’s win total. The advanced statistics change the way teams play the game and alter their free agent needs. A team that believes it can win games without the cost of power hitters will no longer enter the markets for certain players.

In any unionized environment, workers will defend each other regardless of the economic factors driving change. In the case of sports, the economic factors driving the greater use of advanced statistics and reluctance to pay bloated contracts is the clear lack of value these contracts traditionally provide over the life. Many decade long contracts create buyers remorse for owners, general managers, and the fan, who pay the gate revenue and create the market for advertising revenue.

There are numerous examples of players who did not live up to the size of their dream contracts. For instance, Albert Pujols never reached his iconic level of play with the Angels as he did during his time with Cardinals. Miguel Cabrera played well during the first years of his contract, but injuries and age appear to negatively impact his overall contributions. Alex Rodriguez will be remembered for his controversies and scandals, more than the contributions he gave during his bloated contract.

The right player can positively impact a team’s bottom line and its connection to the city’s fan base. Many players like Jim Thome more than offset their salary expense through connections with fans that increase revenue through higher attendance, merchandise, and advertising. When he came to the Phillies, Thome changed the culture and connected with the greatest fan base in all of sports. Teams will look to avoid the failed examples and find the Thome situation instead.

The fact of the matter is that most baseball teams do not have the financial resources to devote a significant cut of the team’s annual payroll to one player. Many teams do not have the gate revenue or television contracts to make such a commitment. Instead, these teams rely heavily on advanced metrics to attain value players for building a team that can compete with the big spenders.

No matter the industry, organizations will find new methods to measure success and attain value, especially when there are notable risks, like big contracts that deliver neither victory nor value. Data analytics brings greater insight on the risks and rewards of individual players and the team as whole. Agents and players will need to adjust their dogma on contracts and negotiations periods. Big contracts will take longer to negotiate with the additional complexity.

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