Baseball Prospectus - Chat with Doug Pappas

Chat: Doug Pappas

Welcome to Baseball Prospectus' Monday October 06, 2003 8:00 PM ET chat session with Doug Pappas.

Doug Pappas is an author of Baseball Prospectus.

Doug Pappas: Hi! Glad you could come. Let's get going before the game starts...

Chip (Cincinnati): Doug, thanks for chatting. Do you think that the Cubs' success in the playoffs would have an effect on Judge Hall's ruling in the Cubs' ticket scalping case? If, for example, they made or even won the World Series would she be under pressure to rule in favor of the Cubs?

Doug Pappas: I don't see why it should have any effect. If the Cubs want to charge premium prices for their tickets, they can raise prices directly, without setting up scam corporations.

David (Burnaby, BC): A little off topic but what do you make of all the gloom & doom in the NHL? Do you think the players will cave like they did in baseball?

Doug Pappas: I see the NHL situation as comparable to MLB in 1994, with the owners demanding changes that would immediately reduce player salaries by a double-digit amount.

The players didn't "cave" in the last MLB negotiations. They accepted a revenue sharing formula that didn't bother them, and a luxury tax that will only be paid by one club -- a club that has made clear it won't be deterred from spending.

Suraj (New York): Which of these last-place teams has the best chance of getting back into contention and why: Tampa Bay, Texas, or Milwaukee?

Doug Pappas: Probably Texas. All they have to do is spend smarter. Milwaukee has an easier division in which to contend, but is saddled by tens of millions in debt thanks to the Selig family's mismanagement. Tampa Bay will need a ton of good young players and a little luck, too, since they're in the same division as the Yankees and Red Sox.

Justin (NY): What do the Braves have to do to win in October? I'm suffering.

Doug Pappas: All they need is a little more luck. There's no magic secret for playoff success.

wmcdonal56 (South Bend IN): So how long until the Red Sox start their own version of "Premium Ticket Services"... following the Cubs lead??? Ohh how lovable are those Cubbies!!!!

Doug Pappas: The Red Sox took the smarter (and fairer) approach. They don't need a "premium ticket service" -- they just charge premium prices. This year the average Red Sox ticket cost $42.34, according to Team Marketing Report -- that's SEVENTY percent higher than the #2 Yankees.

Brad Harris (Springfield, Missouri): What happened to the Marlins this year? Has Loria/Samson turned a new leaf or did the team get lucky? Can we expect the '04 Marlins to look more like the Expos teams Loria presided over, or did he just need the right set of circumstances in which to run a successful club?

Doug Pappas: I think the team got lucky AND it gave Loria the right circumstances in which to run a successful club. Any team that develops a nucleus of good, young, cheap players can afford to keep them around for a few years.

The Marlins' biggest obstacle is their stadium. Pro Player is huge, but it's basically a football stadium, it's not near anything, and the lease is controlled by former owner Wayne Huizenga. There's an article in today's South Florida Sun-Sentinel which quotes Marlins president David Samson as saying that Florida would make only about half as much as other clubs from reaching the 7th game of the World Series -- Huizenga would get the rest.

Tom Gisriel (Baltimore): How likely is it that several Orioles players who had seasons above their expectations (@90%on PECOTA) can duplicate that performance next season. I'm referring to Mora, Matos, Bigbie, Hairston and Roberts?

Doug Pappas: Any player who exceeds his 90% level on PECOTA is a good bet to regress in the following season. That's especially true for players like Mora and Hairston, whose track records are long enough for PECOTA's predictions to be more reliable.

Chris Hand (Montreal): Howdy! I steadfastly continue to believe that the Expos will remain in Montreal for pretty much all of eternity. Most of my faith is based on the "local yokel's" RICO lawsuit, where I believe that the logical outcome is a settlement with them assuming ownership of the Expos. Without getting into details (due to the nature of Chat) do you think this a viable possibility? Thanks Tons! and Play Ball!

Doug Pappas: From everything I've heard, MLB has refused even to discuss settling that suit.

In any event, the locals' claim is much stronger against Loria, who may well have misled them when he bought control of the club, than against MLB. I don't see Selig conspiring with Loria to move the Expos -- if anything, MLB was concerned that Loria not reap a windfall by running the Expos into the ground in Montreal, then moving them to a new stadium somewhere else.

Patrick W (Indy): When I first read the Expos to Vegas rumor, it sounded to me like an April Fools article (Steve Stone?). How credible is this scenario compared to DC, Portland, etc.? Please tell me they're not waiting out the CBA for contraction.

Doug Pappas: The Expos are NOT moving to Las Vegas. There's no stadium, no local ownership group and an insufficient population base compared to D.C., or even Portland.

I've heard whispers that some owners would like to wait out the CBA and them contract the Expos and someone else, but I can't see them enduring another three years of multimillion-dollar losses and publicity that will grow increasingly nasty if the DC/Virginia offers keep getting ignored. If MLB tries to contract without putting a team in DC, it's in for the most probing Congressional investigation since the 1950s.

Chester (San Jose CA): I went to the Pizza thing in Menlo Park and talked to Wolferton and Huckaby about this, but I want to ask you, too. What is a related party transaction? I don't really understand how it's relevant to baseball.

Doug Pappas: A related party transaction is one in which both of the contracting parties are commonly owned or controlled. For example, the Cubs are owned by the Tribune Company, which also owns WGN radio and TV. When the Cubs "negotiate" their radio and TV deals with WGN, one Tribune Company executive sits down with another to decide how to divide the money. The rights fee will be whatever is in the best interest of the Tribune Company, not the product of arms' length negotiations.

That will almost certainly lead to a lower price for radio/TV rights than would be negotiated with independent media companies. Tribune Company would much rather see WGN make the money -- stock analysts follow the TV stations but largely ignore the baseball team.
Moreover, with MLB's local revenues now subject to 34% revenue sharing, teams have even more incentive to hide money in related companies.

strong silence (heartbreak hotel): Are minority investors too influential in setting payroll budgets? Specifically, Seattle and Pittsurgh investors have been trying to recoup their investments in the last year or two and don't seem to want to go above their payroll budgets when the trade deadline approaches.

Doug Pappas: The power a minority investor has depends on the structure of his particular club's organization. (John McMullen famously said that nothing was more limited than being one of George Steinbrenner's limited partners with the Yankees.) It depends what the partnership agreement or other document says, and what percentage of the team he owns.

Seattle and Pittsburgh have also been in very different positions. When you've led your division most of the season for two years in a row, only to miss the wildcard by a couple of games, the way Seattle has, it's hard to imagine that a little more spending wouldn't have paid for itself. Pittsburgh needs a strategy to compete in the long term, which necessarily starts by dumping as many of Cam Bonifay's stupid contracts as possible.

harry (poughkeepsie): Is there any worth while reason to follow any players in the Arizona Fall League?

Doug Pappas: Sure. It's baseball. Isn't that enough?

Cris Whetstone (Redondo Beach): Doug, the Padres seem to be making big strides to field a strong lineup for their new digs in 2004. Is there a true financial benefit for teams beyond the normal attendance boost that comes with a new stadium in fielding a strong team? It seems to me they are cutting into their gains by increasing their payroll. Especially since barring injury their team would be fairly competitive next year even without the added players.

Doug Pappas: In the long run, nothing draws like a winning team. Recent experience in Milwaukee, Pittsburgh, Detroit and Cincinnati shows just how short the new-park honeymoon can be if the team stinks.

The year a team moves into a new park is the perfect time to spend money. The Padres can count on higher attendance and more luxury box money; their task is to invest this windfall wisely to keep the fans coming back in 2005 and beyond. They don't want to be "fairly competitive"; they want to win their division by 2005.

Cornholio (Beavis, UT): Doug: Do you realistically see any circumstances under which the players will be able to turn the tide of CBA negotiations in the foreseeable future, and not start the process fighting to minimize their givebacks?

Doug Pappas: For the past few negotiations, the players haven't had any "demands" beyond increases in the minimum salary and a few benefits such as guaranteed single rooms on the road. I don't see that changing.

Unfortunately, I also don't see the majority of sportswriters figuring this out. They'll keep churning out the same nonsense about the "outrageous demands" of the "greedy players," when all the players want is the status quo.

Peter (San Jose, CA): Any chance that scion of integrity, Spud Selig, will introduce equitable scheduling of the playoffs? Just wondering if I'll ever get to see a Giants post season game at a time of day compatible with a beer.

Doug Pappas: Sorry, but I don't see MLB starting more than one or two divisional-series games per year at 7:00 PM Pacific time or later. The lost viewership in the Eastern and Central Time Zones would far outweigh the gains in the West.

jschmeagol (carlisle, pa): Hey doug, interesting work on the marginal win/marginal dollar column. However it seems to me that the relationship of wins to dollars isnt' linear but more exponential. Every win over say 80 costs more than every win over 60. Saythe Yankees want to improve on their 100 wins next year, how much money do they have to spend to upgrade on aaron boone, or the RF situation? in other words unless you have a great minor league system like oakland's, the higher the number of wins the more you shoudl pay per win. I coudl be wrong but that makes a lot of sense to me. again great work, keep it up!

Doug Pappas: I think the relationship of wins to dollars is more a function of the distribution of talent on the roster.
A team with one or two gaping holes can upgrade for much less than one on which everyone is more or less average, because it's cheaper to replace a player worth -2 wins with one worth 0 than to replace someone worth 0 with one worth 2.

And it's ALWAYS cheaper to promote your own minor leaguers than to sign free agents, even the relatively inexpensive ones.

Phil Raisor (Fayetteville, GA): There's rumors that Sandy Alderson might be interested in GMing again. What kind of blackmail will it take to get him to sign with the Reds?

Doug Pappas: Something damaging enough to get Carl Lindner to sell the team, for starters. Alderson wouldn't work for what the Reds want to pay their next GM.

Steve (NY): Doug, How much more 'related party' and other techniques to take revenue off the books are we going to see? Eventually won't this fail as a negotiating strategy? And doesn't this kind of practice have danger of Huizenga-ization, where an owner spins off all kind of profitable parts of the baseball operations and then departs, leaving the club financially handicapped and in long term sweetheart deals that handcuff the team?

Doug Pappas: We'll continue to see related-party shenanigans as long as MLB lets clubs get away with hiding revenue this way. If Bud Selig is serious about "competitive balance" as anything more than a slogan to justify driving down player salaries, MLB MUST do a better job of auditing clubs and revaluing related-party transactions at something closer to their true value.

Let's hope Huizenga remains the exception, not the rule. There aren't many owners in a position to do that, and those which are have been responsible. Disney didn't screw over the Angels, and from all reports Fox isn't planning to cripple the Dodgers, either.

strong silence (the end of lonely street): What do you know about whether owners who receive payroll taxes pocket that money or use it to increase their team's payroll? Which owners pocket this shared revenue and which owners use it for player salaries?

Doug Pappas: This is a tricky question, because for many clubs, a well-managed organization WOULDN'T put all the money back into major league player salaries. Nothing would be more self-defeating, in the long run, than forcing teams like Detroit or Tampa Bay to increase their major league payroll when even an immediate 20-win improvement won't make them contenders.

Under the old CBA, the Twins and Expos were widely seen as the biggest abusers. It's no coincidence they were contraction targets. Since that fiasco ended, the Twins have done just what they should have.

Glenn (Puget Sound, WA): Doug, which teams will be slashing payroll for next season? Which will be boosting? I mean over a 10% change in each case.

Doug Pappas: Wild-ass guesses, comparing Opening Day to Opening Day: Indians, Mets, Pirates, Rangers, Reds down, Royals, Marlins, Phillies, Cubs and Padres up.

SeattleSlew (New Jersey): Is baseball seeing signs of becoming the dominant sport it once was, and if not, what will it take for it to become so once again?

Doug Pappas: No sport will ever again dominate the way baseball did in the early part of the 20th century. The market's too fragmented.

Having said that, though, the minors are healthier than they've been in half a century, and the majors are in far better shape than MLB was willing to admit before the last CBA was signed.

Tom Nugent (DeKalb, IL): Are the Expos going to be profitable? The Forbes numbers for '01 and '02 suggest that they will have been this year. Also, what's the deal with Forbes ultra-slick, less revealing and somewhat gloomy report this april? Did backlash from the '02 report force them to play along with MLB>

Doug Pappas: I suspect the Expos won't be profitable. Their 2003 Opening Day payroll was $13 million higher than in 2002, and MLB has done everything possible to discourage long-term emotional involvement with the franchise.

As for Forbes, their 2003 report was prepared by Michael Ozanian, who wrote all the previous reports as well as the ones Financial World published before its demise. I suspect he was working from less information than he had in '02, immediately after the release of the Blue Ribbon Panel report. Forbes has no reason to fear MLB.

harry (poughkeepsie, ny): how many different sports pages, web sites and magazine publications does the staff of prospectus.com read everday .

Doug Pappas: Okay, just one more...it's been an hour and I hear a baseball game in the background.

We're scattered all over the country and root for different teams. Among us, I suspect we read 40-50 sites per day.

Thanks for all your questions -- sorry I couldn't get to the last few. Enjoy the Red Sox and Athletics, and I hope to do this again soon!

Doug Pappas: Thanks for all your questions. It's been fun...