Salary caps make poorer teams worse off

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Practically speaking, the idea of a salary cap in baseball is dead. Deader than vaudeville. It blew up the game in 1994-95, and the owners and Selig blinked rather than try it again in 2002.  Since then the money has been flowing, competitive balance has been better than most people will admit, and the owners seem to have very little desire to fight that fight again.  It’s not going to happen.

But that won’t stop some people from calling out for it.  Every time the Yankees sign someone people scream salary cap. Every time a homegrown star leaves a small market team they do the same.  I can assure you, I get at least one comment or email a week from someone that contains a sentiment akin to “. . . this will continue to be a problem until baseball has a salary cap.” Otherwise smart people claim to shun baseball based on it not having one. From what I can gather, the thought process goes “Football popular. Football have salary cap. Baseball have salary cap too or me no like baseball.”

But guess what: the salary cap doesn’t help. To the contrary, they have made matters worse. That according to Matt Ozanian of Forbes, who has studied the matter and reports that salary caps have “served to make high-revenue teams enormously profitable and low-revenue teams unprofitable, or marginally so, relative to their rivals. The growing distortion in profitability has resulted in a bigger gap in team values.”  The rich get richer?  Wasn’t that supposed to be the problem salary caps designed to solve, not the outcome they sought to promote?

But even they weren’t bad ideas economically speaking — which they certainly are — they’re awful from an aesthetic perspective as well. They insert unsightly, unwieldy, and downright complicated concepts like “franchise tags” and “expiring contracts” into the sporting discourse. Sure, that stuff is comprehensible — every team can hire a cap guru if they felt the need and most of us could get our heads around caponomics if we had to — but it’s just depressing business.  One team trading its dead weight to another team is simply dreary. I mean, we hate it now when some teams make great efforts to acquire all the best players. How would we feel about it if they spent a lot of time trying to get the worst, most overpaid ones? Blah.

Anyway, I know some of you have been brainwashed into thinking that salary caps = fairness and parity. If you have, please take a closer look at the linked article and the NFL, NBA and NHL as a whole and ask yourself if their systems really make things better than baseball’s admittedly imperfect system.

Must-Click Link: Do the players even care about money anymore?

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Yesterday I wrote about how the union has come to find itself in the extraordinarily weak position it’s in. The upshot: their leadership and their membership, happily wealthy by virtue of gains realized in the 1970s-1990s, has chosen to focus on small, day-to-day, quality of life issues rather than big-picture financial issues. As a result, ownership has cleaned their clock in the past few Collective Bargaining Agreements. If the union is to ever get back the considerable amount of ground it has lost over the past 15 years, it’ll require a ton of hard work and perhaps drastic measures.

A few hours later, Yahoo’s Jeff Passan dropped an absolute must-read that expands on that topic. Through weeks of interviews with league officials, agents and players, he explains why the free agent market is as bad as it is for players right now and why so many of them and so many fans seem not to understand just how bad a spot the players are in, business wise.

Passan keys on the media’s credulousness regarding teams’ stated rationales for not spending in free agency. About how, with even a little bit of scrutiny, the “[Team] wants to get below the luxury tax” argument makes no sense. About how the claim that this is a weak free agent class, however true that may be, does not explain why so few players are being signed.  About how so few teams seem interested in actually competing and how fans, somehow, seem totally OK with it.

Passan makes a compelling argument, backed by multiple sources, that, even if there is a lot of money flowing around, the fundamental financial model of the game is broken. The young players are the most valuable but are paid pennies while players with 6-10 years service time are the least valuable yet are the ones, theoretically anyway, positioned to make the most money. The owners have figured it out. The union has dropped the ball as it has worried about, well, whatever the heck it is worried about. The killer passage on all of this is damning in this regard:

During the negotiations leading to the 2016 basic agreement that governs baseball, officials at MLB left bargaining stupefied almost on a daily basis. Something had changed at the MLBPA, and the league couldn’t help but beam at its good fortune: The core principle that for decades guided the union no longer seemed a priority.

“It was like they didn’t care about money anymore,” one league official said.

Personally, I don’t believe that they don’t care about money anymore. I think the union has simply dropped the ball on educating its membership about the business structure of the game and the stakes involved with any given rule in the CBA. I think that they either so not understand the financial implications of that to which they have agreed or are indifferent to them because they do not understand their scope and long term impact.

It’s a union’s job to educate its membership about the big issues that may escape any one member’s notice — like the long term effects of a decision about the luxury tax or amateur and international salary caps — and convince them that it’s worth fighting for. Does the MLBPA do that? Does it even try? If it hasn’t tried for the past couple of cycles and it suddenly starts to now, will there be a player civil war, with some not caring to jeopardize their short term well-being for the long term gain of the players who follow them?

If you care at all about the business and financial aspects of the game, Passan’s article is essential.