SportsProf

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Saturday, November 14, 2009

Free Agency: Charlie Finley's Suggestion May Take Root

Do you remember Charlie Finley? Charles O. Finley, the insurance magnate who owned the Oakland A's. Do you remember the Oakland A's of the early 1970's? They wore mustaches, garish combinations of green and gold, and they won three straight World Series, from 1972-1974. Among the players on the A's were Hall of Famers Reggie Jackson and Jim "Catfish" Hunter. Those teams defended well, pitched awesome, hit solidly, and generally beat the stuffing out the their opponents when they weren't picking on each other.

This, of course, was the same Finley who tried to sell his stars to the Yankees and the Red Sox a few seasons later, only to have Commissioner of Baseball Bowie Kuhn void the transactions under the "best interests of baseball clause." Kuhn's moves prompted Finley to dub Kuhn "the village idiot."

When Marvin Miller became head of the players' union, he helped transform the players' bargaining power and the sport. Put simply, the Major League Baseball Players Association is the most successful union in the history of organized labor. I won't go into the details here, but the average player's salary has gone up dramatically over the past three decades.

One of the things that players battled for (among them, Curt Flood and Andy Messersmith) was free agency. They hated the "reserve clause", which, until free agency came about, meant that once a player was in a team's organization the team had the right to keep that player forever. Put differently, the team had all of the leverage over a player who's contract was up -- it was either sign or hold out and then try to work something out; the player couldn't offer his services to another team. Miller and the players changed all that.

Naturally, most owners were horrified at the concept of free agency. I don't know whether any predicted that without a salary cap the wealthiest teams would end up signing the best free agents, but to a degree today that's what's happened, and the numbers show that it's hard to make the playoffs unless your team is in the top third of payroll. In any event, Finley had a much different take on free agency. It didn't scare him at all. In fact, he was ready to give in -- totally.

Said Finley: "Let Them All Become Free Agents." What Finley proposed was that after each season every player would become a free agent, free to sign with whatever team wanted his services.

Think about that. Talk about a dynamic market reflective of a player's previous performance. Talk about "pay for performance." Talk about not crippling your payroll with a long-term contract for a player who would be likely not to perform well at the end of the contract (the Mets suffered three such fates with four-year deals for Pedro Martinez, Tommy Glavine and Billy Wagner) or who just wouldn't perform well (Exhibit A: Barry Zito). Talk about giving a good raise, though, to the 22 year-old rookie who hit .325 with 25 home runs and 100 RBIs (here Pablo Sandoval would be making about $5 million now instead of the hundreds of thousands he'll earn because of his youth and lack of Major League service). So, year to year, players would get what the market will bear.

The possibilities are mind-boggling. How much would Cliff Lee earn after his wonderful performance with the Philadelphia Phillies? Certainly more than the $9 million he's scheduled to earn; Lee would probably be making about $17 million this season. In stark contrast, Jamie Moyer, who is scheduled to earn about $8 million this season because of incentives he achieved in his 2009 contract, but who after mid-season struggled mightily, might only be making $750,000.

It's hard to say how competitiveness would be affected, but my guess is that the competitive landscape wouldn't be a lot different -- the teams with the money would still excel, and it could be the case that the teams without money would get worse. The smaller-market and poorer teams would lose the right to keep a young player through his first year of eligibility for free agency; they probably would lose him after his first good season. Finley probably didn't care -- he probably worked on commissions, and how well he and his businesses did had to depend on how well they performed and not necessarily locking in long-term deals for themselves.

Why is Finley relevant now? Because for baseball players what might well be an unintended consequence of their very successful efforts at collective bargaining will take roost by December 12. Click on this link for a list of players who are arbitration eligible. It's a long list, and if teams don't offer their players arbitration they will become free agents. The bet here is that most of these players won't be offered arbitration, which means that there will be a glut of free agents on the market.

And that's bad for baseball players.

Here's why. Attendance was down 7% this past season. Many teams are not doing well. Unemployment lingers at 10.2%, so fans who might have stretched to hold onto their tickets for 2009 might not be able to afford the luxury in 2010. But much more important than that, arbitration has served as a way to get more money for players year after year. Arbitration meant that there was a floor under whatever the player was making, and if a team opted not to sign him to a long-term deal and keep him in arbitration-eligible mode the likelihood is that he would continue to get raises (usually double-digit) until he became eligible for free agency (where, assuming good performance, he could get a much bigger increase and a longer-term deal). Most people get 0-3% raises; baseball players, because of their unique talent and their collective bargaining agreement, get much higher ones on average.

But without arbitration, the player who made $1.5 million in 2009 (Chad Durbin) and had a decent year but is in his early 30's and was on the DL in 2009 might find himself in a cattle call of other middle relievers. Some baseball observers believe that betting on middle relievers for consistent long-term performance is an iffy proposition because if they're overused in a season they might not be able to perform at the same level the next season. At any rate, the bet here is that no one will offer Durbin a multi-year deal and that he and others like him will take significant pay cuts. The bet here is that if Durbin returns to the Phillies or signs elsewhere, it's perhaps for $1 million with a club option for the following season.

Back to Charlie Finley. This "let them all become free agents" mentality will not take over baseball but will find a test lab in the subset of arbitration-eligible players. And, rather than help equalize the potential of all Major League teams, the best-financed ones will be able to find bargains to populate slots #17-#25 on their Major League rosters, making them even tougher to beat. Why? Because the best will get caught up in small bidding wars that will get them what they want, and the good ones, even if they take less, will still get more from a New York, Boston or Philadelphia than they will from a Pittsburgh or Kansas City.

And then the rub continues -- the elite teams will remain as popular as ever, while the worst ones will continue to wilt. And then all of baseball -- owners and players alike -- will have to ask themselves this question: will baseball be able to continue without a salary cap if the marginal teams have little chance of winning a World Series and, as a result, continue to see their attendance and merchandise sales dwindle? How many teams will be able to remain if only 8-12 of them will be able to contend meaningfully for the World Series year after year?

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