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October 17, 2011 Future ShockThe Epstein Holdup
You like chickens? You like counting them before they hatch? Well welcome to Chicago, where such endeavors have turned a public relations boon into a potential nightmare. Throughout much of September, the Cubs search for a new general manager following the dismissal of Jim Hendry was a story for what a non-story it was. The Cubs new owner, Tom Ricketts, promised a stealth search and certainly honored that by simply not talking to anyone. It forced many questions about Ricketts and the influence of team president Crane Kenney, but in retrospect, the club was simply waiting for their top target to become available. The Cubs reportedly covered their bases by talking to potential candidates such as Dan Evans and Josh Byrnes, but when the Red Sox gave Ricketts the gift of a September collapse, the Cubs pounced, getting a deal done by the end of the first round of the playoffs. Epstein surprised much of the industry by agreeing to terms with the Cubs, much of it because of what he'd be leaving: a franchise that has finished third in each of the last two years and seems to be reacting to it with an unprecedented scorched earth policy. “I was just surprised to see him want to go out like that,” said one insider. This is where things get complicated, as while the Cubs may have a deal done with Epstein, that's not the only deal to be made. With one year remaining on his contract, Epstein can't move to the Midwest without the two teams working out a compensation arrangement. Basically, the Red Sox need to trade Epstein to the Cubs in order for him to become the team's next general manager. So now, nearly a week since news of a deal became public, there's been no official press release, no press conference, no confirmation that it really was Theo at the Starbucks in Lincoln Park. Multiple reports have compensation talks between the two organizations at a standstill, but what is being missed is the reason why. This isn't over what the Red Sox get back in compensation for Theo going as much as it's over the organization getting compensated for their anger while getting the last word in. Make no mistake, the Red Sox have the leverage here simply by holding the most desirable asset in the negotiation. That's business 101. Adding to the difficulty for the Cubs is that Ricketts has now wasted more than a week with the promise of a new savior of a general manager, yet in reality, he doesn't have him in the fold. Theo is a wonderfully talented general manager, but the Red Sox lose little here. Ben Cherington, one of the brightest candidates for the role in all of baseball, is set to become the new general manager with the Red Sox, and the people and processes there are still in place. The Cubs are the team with no general manager and a World Series about to start, during which time they cannot announce a hiring. The Cubs are twisting in the wind here while the Red Sox have already all but moved on. Of course they still want Epstein as their general manager, but they're also resigned to the fact that it's just not in the cards, while knowing that the Cubs have put all of their eggs in this particular basket without looking at the bill. Making things more difficult for the Cubs is who Ricketts is staring down across the virtual table. Red Sox team president Larry Luchino is, to put it kindly, an intense individual, and his clashes with Theo are generally seen in the industry as one of Epstein's primary reasons for bolting. With the Red Sox blowing a playoff slot, this negotiation is his World Series, and he's not exactly known for blinking. This is going to get done. Compensation will get figured out, press conferences will take place, and Cubs fans will get excited about their future. I keep saying that, but with each day that we wait, my confidence wanes. Not on any extreme level but at least to the point where instead of acting like this is a sure thing, it simply seems highly probable. Negotiations last week were one thing; negotiations with 48 hours to go before the Cubs have to wait another week for an announcement? Something entirely different, especially with one source close to talks on Sunday classifying Boston requests as “ridiculous combinations.” With both League Championship Series ending at six games, these talks suddenly gain a little more of the spotlight until Wednesday, which could end with even more confusion in a series of events that seem more choreographed by the Marx Brothers than experienced baseball executives.
Kevin Goldstein is an author of Baseball Prospectus.
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I don't see how the Red Sox have leverage.
What are they going to do, bring Epstein back, demote Cherrington and have a terribly awkward season with all parties acting like nothing happened, especially between Lucchino and Epstein? Or if the awkwardness is too much to bear, are the Red Sox going to pay Epstein $8M (or whatever it is) to hang out on a beach for the next year?
There just seems to be too many bridges burned for the Red Sox to clearly have leverage.
Epstein isn't coming back as anything more than a clubbie at this point - don't think anyone would contest that.
But yes, the Red Sox have the option of simply paying Epstein's salary while he hangs out on a beach somewhere. Not ideal, but a few million to the Red Sox is almost nothing compared to the Cubs position if they can't get their superstar GM.
The Red Sox might not have all the leverage, but in the short term, they certainly have most of it.
I'll take a guy that can do 90-95% as good of a job and not give up top prospects to get him. That's my leverage if I'm the Cubs.
Also, regardless of Red Sox riches, $8M is a lot to eat on a GM.
Sure, but that's exactly how the Sox have leverage: they have the asset so they can name the price, and the Cubs can either capitulate or get something that's not quite as good, or at least isn't the thing they wanted most.
Regarding burned bridges, I agree it's highly unlikely but it's not practically impossible (in the sense that they literally have the contract) that they'd keep Epstein and have him just collect paychecks while other people run the show. It's also worth remembering that they had a similar awkward situation a few years ago, when Epstein quit for a few months then came back.
Doesn't an asset lose value value for the owner when it is no longer useful?
So let's say I retool a factory and have a piece of equipment that while now useless to me, can be very useful in another factory, so I put it on the market for sale.
Can I really try to charge a steep price for it if that asset will otherwise remain unused and take up valuable space in my factory (eg Epstein's salary that can be used elsewhere)?
I guess that's how I see it.
Mike Brown says hello.
Theo may not have much value to the Red Sox, but he is clearly very valuable to the Cubs. Hence Red Sox having him gives them the upper hand and ability to press the Cubs hard on what he is really worth to them.
The difference between the Epstein situation and your example is that the factory equipment doesn't have a contract that runs out next year.
And the Red Sox have shown a willingness to let Theo walk previously. Remember the gorilla suit incident? Cherington and Hoyer were co-GMs for a bit and then Theo came back to the Sox after wandering around Beantown. If I'm the Red Sox, that's my response to the Cubs.
Ricketts: Yea, well, you won't keep him around so why don't you just make the deal?
Lucchino: Remember, we did this once before so feel free to call our bluff.
Ricketts: ----
What if was a (near) unique piece of equipment that could help make another company a lot of money?
well...does a guy who can do 90-95% of the job theo can truly exist on the market?
Yes they are lots. Lets not act like Theo is this god of a GM all the sudden.
The problem is that the Cubs already appear to have hired Theo. Getting anyone else will be a PR disaster.
PR doesn't matter to the Cubs. Rickets could hire Bozo the Clown as a GM who pitches every 5th day and Wrigley will still sell out.
I'm pretty sure the Red Sox don't owe Theo Epstein $8 million for one more year of his contract. If he was making that much, why is his new deal in Chicago for less than half that amount?
Rumor is he'll make $3MM in 2012 plus a $5MM parachute if they don't extend him.
Who is this GM that can do 90-95% of Theo's job?
It's somewhere around 7 million, and to stress, I STILL VERY MUCH THINK THIS WILL GET DONE, I wouldn't put letting Theo twist in the wind past Boston.
The Red Sox pay Theo Epstein $7 million per year? And he's signed a 5 year deal for under $20 million total to go to Chicago? I have no inside information, but that doesn't sound right.
Epstein earns out a $3.5 million balloon payment at the end of his current contract. There are also some other bonuses that earn out.
Ah. That makes more sense. Thanks for the clarification, Kevin.
Question, do you know if any part of the negotiations are the Red Sox attempting to get out from under that financial obligation either by passing it on to the Cubs or by forefitting it entirely?