Baseball

Major League Baseball Free Agency and the Economy

With the economy the way it is right now, a lot of people are wondering what it means for Major League Baseball and the free agent season. Are teams going to be reluctant to spend a lot of money with some uncertainty as to what next year’s attendance will be? Will the be willing to overpay for a much needed player? Will the marquee free agents be getting huge contracts?

There is no simple answer to this, but the likely answer is that teams will save some money on the middle of the road players, and the small and medium markets may be hurt, but the big name players and the major markets will be dealing with large numbers still.

CNBC Sports Biz writer Darren Rovell talked to author Vince Gennaro, who said:

“We are already seeing the impact in how teams are setting pricing for next season’s tickets. Many clubs are being extremely conservative, meaning they are taking very small increases, or even holding last year’s pricing. So, if the economy were the only new development, I would expect the free agent market to soften somewhat.”

So if ticket prices aren’t going up, what about salaries? The key to understanding baseball economics is that there is no league standard. Each team has their own economic model that they work off of. So teams like the Mets and Yankees, who are getting new stadiums and will be financially fine through the economic downturn, will continue to pay exorbitant salaries. Teams like Arizona or Oakland, who don’t have the new stadiums or never-ending cash flow, may be a bit stingier than their New York counterparts.

Gennaro also said that aside from the Mets and Yankees, teams like the Cubs and Red Sox have freedom from the economic pressures, allowing them to continue to sign top free agents, due to their huge season ticket bases and incredibly strong brands.

So in the long run, this year’s free agency market will balance itself out in an odd way.

“So, in what could be viewed as somewhat of a paradox, I feel these teams will help prop up the top end of the free market this year, despite the economy. I see Sabathia getting top dollar, I see Manny, Teixeira, K-Rod and a handful of others getting more than they would have gotten last year. But, the middle of the free agent market–the place where mid-market teams usually dabble–could potentially be soft. Lesser know guys like Nick Punto or Mark Grudzielanek may get less than they would have gotten one year ago. In other words, the top quality free agent will get top dollar and the rest of them may be disappointed.”

What that means is that there is a chance that you see a great deal of unevenness in the free agent signings, with all of the top players going to the cash heavy teams, while the small and medium markets fight over the scraps, all the while low balling the typically overpaid average players.

After what happened with Alex Rodriguez last year, don’t be surprised if some of these huge free agents end up with less than they would have gotten a few years ago. Teams seem more reluctant to sign enormous contracts right now. At this time last year, everybody thought A-Rod would be signing a $350 million deal somewhere, but when he filed for free agency, his phone was remarkably quiet. It wasn’t until he took his agent out of the loop that he was able to sign a deal with the Yankees for a mere 10 years and $275 million. A nice salary, but far less than Scott Boras thought he would get, and a raise of just $23 million from the last 10 year deal he signed.

This year, there are quite a few big name free agents, including Mark Teixeira, Manny Ramirez, Francisco Rodriguez and CC Sabathia. That’s a lot of money in those four names alone. They can’t all end up in New York, can they? If they all go to New York, Boston, Chicago or Los Anaheim, will any of those teams have the money to fill out the rest of the roster with quality signings?

Perhaps there are four to six teams that are virtually immune to the economic crisis. That leaves about 25 teams that may struggle. Sports have always been strong in tough economic times, but this may be the first time that we’ve had an economy like this and ridiculous ticket prices. Don’t be surprised if you see quite a few empty stadiums next season, as the cost of taking a family to a game might just be too much.

Not to mention, in 25 cities, you might have a roster of low balled, average baseball players.

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