Exploiting inefficiencies in the agent business: one agency lowers its commissions

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This is interesting. Darren Heitner of Forbes is reporting that one agency which represents a lot of baseball players — Performance Baseball – is cutting its commission fees from the typical 5% to 1.5%:

”We saw a fiercely competitive landscape where everybody looked the same.  The agents basically offer the same services, pretty much the same fee structure whether it is 4% or 5%, and I could literally hear the sound in my ear from a meeting a couple of years ago where a guy was saying ‘you guys are all really the same.’  My partner and I said let’s focus on what we do best and what we really enjoy doing.”

The article notes that, in reality, not all agents are the same, as some provide different services to their clients. Scott Boras, for example, famously has an entire operation of training, personal business management and general hand-holding professionals on staff to be one-stop shopping for clients. Others, like the guys at Performance, are more about doing the deals and that’s it. Yet, for some reason, all still charged the same basic commissions.

Interesting to see some agents go to the budget model (though I doubt they’d call it that). Maybe it will help disrupt the pattern in which some agents do a ton of work for a player between the ages of 18 and 25 or something and then get tossed aside for someone else just before the player hits free agency.

Red Sox employees “livid” over team pay cut plan

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Even Drellich of The Athletic reports that the Boston Red Sox are cutting the pay of team employees. Those cuts, which began to be communicated last night, apply to all employees making $50,000 or more. They are tiered cuts, with people making $50-99,000 seeing salary cut by 20%, those making $100k-$499,000 seeing $25% cuts and those making $500,000 or more getting 30% cuts.

Drellich reported that a Red Sox employee told him that “people are livid” over the fact that those making $100K are being treated the same way as those making $500K. And, yes, that does seem to be a pretty wide spread for similar pay cuts. One would think that a team with as many analytically-oriented people on staff could perhaps break things down a bit more granularly.

Notable in all of this that the same folks who own the Red Sox — Fenway Sports Group — own Liverpool FC of the English Premier League, and that just last month Liverpool’s pay cut/employee furlough policies proved so unpopular that they led to a backlash and a subsequent reversal by the club. That came after intense criticism from Liverpool fan groups and local politicians. Sox owner John Henry must be confident that no such backlash will happen in Boston.

As we noted yesterday, The Kansas City Royals, who are not as financially successful as the Boston Red Sox, have not furloughed employees or cut pay as a result of baseball’s shutdown in the wake of the COVID-19 pandemic. Perhaps someone in Boston could call the Royals and ask them how they managed that.