Money can’t buy you love (or championships)…

The business side of baseball has always fascinated me. In fact, following the offseason trades and contract negotiations is as interesting to me as watching the games during the spring and summer. Although the business of baseball remained relatively stagnant for over 100 years, Curt Flood’s challenge of the “reserve clause” in 1969 brought about a sea change in the acquisition, retention, and compensation of baseball players.

Before free agency, players had no control over their compensation or where they would play. Owners traded players and established the salaries. After the 1969 season, Curt Flood had the audacity to refuse a trade from the St. Louis Cardinals to the Philadelphia Phillies. Although Flood lost his legal challenge, arguing that he should be entitled to determine where he played, he paved the way for others who followed. Four years later, Andy Messersmith and Dave McNally were declared free agents after they played a season without contracts. The reserve clause enabled owners to reserve the rights to a player who was under contract, but after Messersmith and McNally played a season without contracts, the reserve clause no longer applied. Their successful challenge to the rules that had governed baseball for a hundred years ushered a new era in the management of baseball teams.

Once free agency arrived, players demanded higher salaries and had a right to choose where they would play. MLB realized that it needed a new system and negotiations with the Players Association resulted in a complicated set of rules that governs the movement and compensation of players. Before free agency, there was little risk that owners and general managers would make colossal financial mistakes. Owners controlled players and salaries, and the only risk was making a lopsided trade with another team (think Babe Ruth). However, after free agency, the business of baseball became much more complicated and dynamic.

Forty years after free agency began, the gap between the financial resources of big-market and small-market teams has never been greater. While fans of small-market teams often complain that the big name free agents are attracted to large media markets and teams with resources, those resources make the big-market teams more susceptible to colossal mistakes.

Recent examples abound. Just before the start of the 2012 season, the Detroit Tigers lost Victor Martinez to a season-ending injury. Super agent Scott Boras pounced on the opportunity and soon had his prize free agent, Prince Fielder, Jr., signed to a 9-year, $168 million contract. Two years and two unproductive postseasons later, the Tigers dumped Fielder’s bloated salary and excess weight on the Texas Rangers and acquired All-Star Ian Kinsler in return. Fielder was injured and missed the 2014 season in Texas, though he continued to receive his $24 million annual salary.

In July of 2012, the Boston Red Sox realized that they erred in signing Josh Beckett and Carl Crawford to huge free agent contracts. They engineered a 9-player trade that sent Beckett, Crawford, and Adrian Gonzalez to the Dodgers, along with $288 million in salary commitments. For some unknown reason, the new Dodgers ownership group, flush with cash and eager to make an impression with fans, agreed to a trade that involved a quarter of a billion dollars in payroll commitments. Although Gonzalez continues to play at a star level, Beckett’s contract was excessive given his deteriorating skill set, and Crawford has never lived up to the hype that preceded his $154 million deal with the Red Sox.

This season, things got even stranger. Back in 2012, Angels owner Artie Moreno made headlines when he signed 32-year old Albert Pujols to a 10-year, $240 million contract. The next year, the Angels signed 32-year old Josh Hamilton to a 5-year, $116 million contract. After a disappointing season in 2013 and an season-ending injury early in 2014, Hamilton had a relapse in his battle against alcohol. The Angels attempted to have Hamilton suspended so they would not have to pay his contract. The case proceeded to arbitration and the arbitrator ruled in favor of Josh Hamilton. Artie Moreno, who was committed to preventing Hamilton from playing for the Angels, traded Hamilton back to the Texas Rangers and agreed to pay almost all of his remaining salary. In essence, the Angels dumped the player and kept the salary! For the next three seasons, the Angels will be paying Hamilton to compete for a division rival. Now, there is an owner with more money than common sense!

The inability of small-market teams to compete for high-end free agents insulates them from the colossal financial mistakes that have become commonplace among big market teams. Teams like St. Louis, Kansas City, Tampa, and Oakland understand how to compete with modest budgets that force them to exercise greater discipline than big-market teams. The results are impressive as small-market and mid-market teams have appeared in the World Series 13 times in the 20 years. In contrast, the Yankees have sported a $200 million payroll in recent years, but only have one World Series appearance during the past 11 seasons, proving that money can’t buy you love, or championships.

“Time is our side….”

It is Derby Day and that means that we have seen enough games to take an early look at the baseball standings. Of course, there is always a reason to take a look at the baseball standings, but Derby Day means that we have completed the first month of the baseball season. The biggest surprise this spring has been the play of the Houston Astros who started with a 16-7 record. The Astros are led by 25 year old 2B Jose Altuve who has established himself as one of the best players in the game. Because he plays in Houston, however, he has not yet received much national attention.

Last year, Altuve led Major League Baseball in batting average (.341) and hits (225), and finished second in stolen bases (56). Altuve is off to a great start again this season, batting .376 and stealing 9 bases in his first 23 games. If the Astros continue to play well, Altuve should gain national prominence by the time former Astros 2B Craig Biggio is inducted into the HOF later this summer.

At the other end of the spectrum, the Milwaukee Brewers are already 11.5 games behind the St. Louis Cardinals in the NL Central Division. The sharks are circling and rumors of a June fire sale have begun. While it is a bit early to throw in the towel, the prospects for a winning season in Milwaukee are bleak. It is a good thing that the fans have not grown tired of brats and beer….

Cleveland has also started very slowly, but with their young talent, manager Terry Francona, and the eventual return of star catcher Yan Gomes, the Indians should improve as the season progresses. Unfortunately, the same cannot be said for the Texas Rangers and Philadelphia Phillies. Both teams were expected to struggle this season and both suffer from a few aging players who are tremendously overpaid for their services. Although it would be helpful to shed some of those older players, finding teams willing to accept large contracts at the trade deadline will be difficult. The good news is that these teams may be in line for a great player in next year’s draft.