Baseball Salary Cap

The annual season to play regular athletes more than 99.99% more than any other person in the world has begun with baseballs free agency.

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There is no doubt that free agency in general is good for players. Until Curt Flood challenged the baseball establishment in 1969, players were treated more like property that were lucky the owners paid them anything then as valuable commodities who could earn their own salaries based on performance and hard work. It was the result of a “reserve clause” that said a player was the owner of said team forever. Flood was part of a trade and he not only did not accept the trade – he sued MLB over it. All of this stemmed from an old 1921 MLB Anti-Trust case decided by Commissioner Judge Kennessaw Mountain Landis, the year after said Commissioner banished Joe Jackson and 7 others from baseball for life after they were found not-guilty of conspiring to fix the 1919 World Series. Back to 1970 though and Flood lost his court case in a 5-3 decision. It was ruled that yes, Flood and players had the right to choose their team but because MLB was exempt from Anti-Trust laws it would have to be overthrown by the Supreme Court. In 1976, it finally was. Salaries skyrocketed henceforth.

Yet, as we look at some of the salaries that are being handed out today, it has to make you wonder if it has gone too far. Pitchers who pitch in 70 innings a year and often not even that well get paid MILLION$ of dollar$ a year. Fransisco Rodriguez of the Milwaukee Brewers made $2M last year. By contrast, in eight years George W. Bush made $3.2M! Of course if president’s were paid on market value and performance that would REALLY make things interesting.

The question I really want to ask though that always comes up in regards to the money is if MLB should have a salary cap similar to the NBA and the NFL? In the NBA, each team is allowed $63M for their team. In the NFL the number is $133M. Baseball does have a luxury tax line of $189M (see the joke there?), with the irony being that to the teams that have that much money anyway the “fine” they pay doesn’t even matter to them. Last year the top 3 salaries were the Dodgers at $235M, Yankees at nearly $204M, and the Phillies at $180M. The three lowest were the Astros at $44M, Marlins at $47M, and Rays at $77M. So the disparity between the top team and bottom team was $191M! However, the difference in the standings was 24 games.

For some business comparisons, in 2013 XEROX did $23M in Revenue. GE did $146M. So less than the Phillies payroll!

From a competitive advantage standpoint, it is really hard to argue against having a salary cap. In the last 5 years, the World Series Champions were #7 Giants($154M), #4 Red Sox ($151M), #8 Giants ($117M), #11 Cardinals ($105M ), and the 2010 Giants who ranked 10th with a ($98M payroll. This years World Series featured the #7 Giants and #19 Royals which finished in a tight 7 game series. In other words, while it’s “cute” when the Royals and their $92M make the playoffs, when the 2010 Padres contend down to the last day of the season at $38M, the perpetually moneyball-minded A’s and their 2014 Payroll of $83M, does it matter in the end? The last team to win a World Series under $100M was the 2010 Giants, and before that you have to go back to the 2008 Phillies who topped out at $98M and were ranked 12th in payroll standings. Based on the numbers above, it is easy to say that you simply have to spend $100 or more to actually win the World Series. Is that really the case though?

Right now MLB is still in a financial bonanza, largely in part to new TV contracts that are going sky high as advertisers realize that in our DVR/Netflix world LIVE SPORTS still holds the viewers. With those contracts the Angels were able to sign two of the most sought-after free agents for several seasons in a row and able to win a World Championship. Not quite. The Dodgers, infused with new ownership and a TV contract doled out an astonishing $235 in 2014 and steamrolled into the World Series as well? Or maybe not. Maybe there is more than just buying the best free agents on the market and burning through money until you get to your goal. Yet there is no argument the importance of simply having the resources and that certain markets will always have more than others. Where does it stop and can the little guys ever actually win?

I argue that not having a salary cap is NOT bad for baseball. The A’s and their Moneyball madness, the Rays and their Friedmanomics and the Royals with a solid plan and sticking to it have made mediocre payrolls into contenders and heightened the importance of farm teams and smart trades.

This year there are some high-priced free agents on the market. Max Scherzer and Jon Lester lead the bunch, with Scherzer likely to break the bank after turning down a huge deal last off-season. David Price looms after 2015. The Dodgers took a Rays trick and signed ace Clayton Kershaw to a 7 year deal before last season as he was to be a free agent after 2014. They gave him a $215 deal over 7 years. Guarantee victory? I think not. Baseball is 162 games long, and more than any other spot one or two studs cannot predict or guarantee victory. I do think we will see multi-year contracts go down as players start to show more natural, gradual declines in the post-steroid era but the money? It could be just beginning of a new way of thinking.

It appears imminent that the Marlins for example – who in 2014 had the lowest payroll – are ready to lock in outfielder Giancarlo Stanton for over $300M for 12 years. While this is a TON of money of course, it also shows their future comittment to payroll and spending more money, because to protect their Stanton investment they NEED to invest in others around him to make him productive and keep him happy. It all goes together! A salary cap would hinder teams being able to make such long-term commitments.

MLB has always evolved, and I think with the higher salaries it will only continue to evolve. The deal for Kershaw makes sense, because he is young. The Angels will surely re-think some of their contract ideas after signing Albert Pujols to a 10 year deal at age 30, then two years later signing Josh Hamilton to a five year deal. Both players – particularly Hamilton, have not exactly lived up to expectations so far. And with the list of free agents above what may not be obvious is the teams that drafted those players and traded them before having to spend the big bucks! The Royals traded for Rays draftee James Shields to help get to the World Series this year.

I also argue that sometimes free agency contracts aren’t all about the money. How can this be? Sometimes you need a big contract to make a statement:

– When Arte Moreno signed up Pujols for his contract, he offered over $40M than St. Louis, plus a separate marketing deal contract AND a 10 year personal services deal for $1M annually following Pujols playing career. His statement was that we are taking care of this guy because we really want Albert Pujols the player and person – not just a big bashing baseball player.

– The Washington Nationals were perennial losers when they doled out a 7 year, $126M contract to Jayson Werth who most people had barely heard of in December 2010 fresh off a last-place finish. Then in 2011 he hit .232 with 20 homers and the Nationals won the NL East. Not because of him obviously, and fans were worried about the rest. However, he started hitting better and the contract showed the Nationals were serious about winning and committing to their team. They were able to spend more money on #1 draft picks Stephen Strasburg and Bryce Harper, sign Adam LaRoche, and even make real trades for major league talent like Gio Gonzalez.

The other strategy is one that the Atlanta Braves are taking to Hart. John Hart that is. Hart was the GM of the mid-90′s Indians who with limited resources made it to the World Series in ’95 and ’97 though unable to win either. This past off-season when Hart was a special assistant to now departed GM Frank Wren the Braves locked up core players SS Andrelton Simmons, 1B Freddie Freeman, CL Craig Kimbrel, SP Julio Teheran, and RF Jason Heyward to multi-year deals as all are under 24, All-Stars or Gold Glovers, and several years before they would go to arbitration or free agency.

Of course now Hart was named the Braves President of Baseball Operations. This allows teams to lock up young talented players before they hit the open market and theoretically leaves more flexibility to modify their team with a better idea of what they will paying their core for several years. Of course, the Braves learned how this can backfire quickly when two starters Brandon Beachy and Kris Medlen had to go under Tommy John Surgery in Spring Training. The $9M they had saved for their flex fund they had to spend right away and spent it on free agent Ervin Santana who was good for them – but needing him they had no payroll flexibility to make any additional moves throughout the year as their offense floundered. That problem of course blamed largely on free agency BUSTS B.J. Upton and now released Dan Uggla.

Which brings it all back to my main point: Salary cap or not, you have to spend your money wisely! To me having a salary cap wouldn’t actually change much about how the teams play and who gets who except how much they would be getting paid. I don’t believe that players “quit” once they sign their big contract, or that they try extra hard during a contract year. More importantly I think even by spending over $200M you are just as likely to lose to a team with only $85M to spend. You have to invest in your farm system and sometimes just hope you guess right that you are signing Masahiro Tanaka and not Hideki Irabu. Payrolls will keep going up as the market dictates, but the really resourceful teams will keep finding ways to win with less.

Lastly, for all the talk of salary caps, does it really change who wins? In the past 20 years since 1995, the NBA has had 8 different teams win the championship. The NFL has had 13. MLB has had 10. In the end, getting to the playoffs in my mind is all that the salaries can really control. Once you get there, it’s anyone’s guess. No one expected the speedy Royals to bust out their power sticks in the playoffs. Remember when the Diamondbacks beat closer Mariano Rivera to win Game 7 of the World Series in 2001? That is what makes baseball amazing, because even with the most expensive players on your roster, in the 162 game season someone else always steps up and ends up changing the game. So let the players get paid, let the teams that have the money spend it, and let the rest be settled on the field.

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Should There Be a Salary Cap in Baseball?

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