December 19, 2001

6-4-3

Don Fehr's Adam Smith Nightmare

by Gary Huckabay

John Burkett's agent, Tommy Tanzer, announced that his client has accepted a two-year contract from the Boston Red Sox worth $5.5 million annually. In and of itself, this isn't particularly interesting. What is interesting is the fashion in which events transpired.

Player representatives and attorneys are nervous about the state of the market for free agents, and well they should be. The market for free agents outside of baseball here in the San Francisco Bay Area has basically cratered. Eighteen months ago, recent college graduates with no experience and very little to offer to the workplace in the short term were bringing in $60,000 a year. Potential employees would be coy in terms of negotiation, getting three, four, or five offer letters in a matter of days, and would dodge phone calls from recruiters looking for a firm and final commitment.

Now, those same people are scrambling for any work they can get, and they're finding opportunities increasingly scarce. Salaries have dropped dramatically, as have perks like the free BMWs, $25,000 signing bonuses for technical managers, and weekly massages. I do miss the massages...

The free market giveth, and the free market taketh away.

We're now starting to see the beginning of a similar crash in player salaries. The numbers are still very high, and haven't moved much as of yet, so it's hard to really take it all in, but the peripherals all point to a pretty hard landing. (Note: This is speculation on my part, and there's simply not enough data to know for sure yet whether I'm right. I think it will be interesting to watch it all unfold either way, so I want to cover it now.) Let's take a look at how things occurred, according to the Associated Press:

Tommy Tanzer: "Hello, world. We hereby accept the offer of $11 million over two years made by the Boston Red Sox to my client this weekend. John's excited to go there and play for Joe Kerrigan, and to be part of the Boston Red Sox family. Kerrigan played a major part in the discussions, and he and John got along great."

Kevin Shea, Red Sox spokesman: "Actually, Dan's left the door open to more pitching, but we're not prepared to make an announcement at this time."

Tanzer: "It's a deal. We've got a deal. I'm not worried, ahem, about the delay in them getting back to us, but it is unusual, because no other people in the whole wide world do things like this. We told them it was a deal on Sunday."

This looks remarkably like one of two things:

• President Kennedy accepting Premier Khruschchev's backchannel communications and proffers during the Cuban Missile Crisis,

  or

• Someone trying desperately to keep a company from backing away from a non-binding discussion of compensation and employment.

Either way, if the deal is for real, it's a good one for Burkett.

A few reports from the winter meetings bounced around the term "collusion," and more than one writer suggested that any attempt to keep costs under control would be attacked by the MLBPA as collusion. Both ideas are BS. Collusion, which is forbidden in the CBA at the insistence of ownership, only occurs when either owners or players explicitly communicate with each other in an attempt to depress or tighten the market. Sanity isn't collusion, and not offering John Burkett a deal longer than two years fits neatly into that category. (Not offering him a deal at all might fit more snugly.)

I spoke with a sports attorney at some length about this, and he had an interesting perspective on the current market for free agents:

"It's not good. And it's not just a temporary thing due to the economy, pessimism, or the threat of contraction. Some of the people in front offices are finally beginning to listen to the numbers people. And the numbers are really the enemy if you're a middle-market talent. If you're a middle-market guy, you may not like it, but you are replaceable at a very low cost, without taking much of a performance hit. Alex Rodriguez and Manny Ramirez are still going to get paid, but guys that have seven or eight years in the league as a mediocre closer or borderline starting outfielder are going to get offered the league minimum, instead of $3-4 million. Why pay Derek Bell or Raul Mondesi when you can take a chance on Billy McMillon or Eric Hinske, and put the money somewhere else?

"It's not going to get better, either. A few players will jump on arbitration this year, and use the inflated contracts of the last three years to keep up their salaries. But arbitration might be gone soon. And you've got players going without competent representation. Any agent who would have advised Andruw Jones to sign that deal with the Braves would have lost everyone else they represented. By circumventing his representation team, he probably left $25 million on the table, and cost other players four times that.

"Front offices are learning more about how replaceable most players are, and they're going to pay less for them. That means a distribution of salaries with more at the very bottom, a few more at the very top, and a huge drop in the middle salary range. That means that the interests of the different groups of players are going to get further apart, and the union's going to have its hands full maintaining unity. Time and education are both on the owners' side. The free market they're so afraid of is going to end up making them a lot of money in the future. The statheads and minor-league veterans are turning out to be Marvin Miller's worst nightmare. As you and your readers begin to fill out baseball's front offices, salaries as a proportion of revenues are going to decline, and that trend's not likely to change much in the long term with a weaker union."

It'll be interesting to see how things shake down.

This is the last 6-4-3 of a very long year. It's been a rotten year for a huge number of people, so I just want to take this opportunity on behalf of everyone at the Prospectus to say thanks for reading, and may you have a healthy, happy, and generous 2002. It has been a privilege to have had this space to talk with all of you again this year.

Thanks, everybody.

Gary Huckabay is an author of Baseball Prospectus. You can contact him by clicking here.

Gary Huckabay is an author of Baseball Prospectus. 
Click here to see Gary's other articles. You can contact Gary by clicking here