“I am angered that numerous baseball executives have blatantly and intentionally violated our collective bargaining agreement by offering to ESPN comments about free agent values of Stephen Drew and Kendrys Morales. These statements undermine the free agent rights of the players and depress the market values.”
–Tony Clark, Executive Director of the MLB Players’ Association
I’ve read a couple of interesting articles lately about player compensation in the MLB. A debate on the topic started this winter when draft-pick compensation rules were limiting free-agency spending, and the discussion has become much more aggressive this last week.
A slew of articles, particularly this one by Jon Heyman, caught my attention. They cover the feud between Scott Boras, the MLBPA, and big media and the MLB. An interesting twist, Heyman’s includes a direct response to Buster Olney’s controversial April 9th piece on the MLB market’s puzzling lack of employment for household-known, free-agent players.
This discussion is a complicated one. The battle they’re discussing maybe new, but the labor war in Major League baseball is not. It had just temporarily fallen off the front page, but it seems like it’s ready to return.
The words between Olney and Boras are nothing new, and this latest feud follows the same controversy we saw erupt from the Prince Fielder anonymous comments Olney released to the world.
For the most part, coverage on MLB labor relations has been lighter over the past few years. There hasn’t been much fruitful to talk about aside from drug testing, as the sport has enjoyed such wild growth. There’s not much to argue about when both sides are fat and happy.
But, as we’ve seen in the past, media coverage will spike on this silent battle during certain periods. Sometimes it’s topics like drug testing, player safety or expansion that attracts the spike in media coverage. But more often in this sport, it’s antitrust and anti-competitive practices that are the spark.
Scott Boras’ clients Kendrys Morales and Stephen Drew are unemployed. And many of his other clients (Edwin Jackson, Kyle Lohse) have reeled in much less wealth than they expected based on spoils comparable players took home in past years. Because they’re well-known players, that are worth millions of dollars on the open market, there’s already something fishy in the air. No doubt, the draft-pick ties to players that turn-down qualifying offers has a significant effect. But is this keeping Morales and Drew unemployed? How? Even Nelson Cruz, whose image was crippled by PED use and his price tag plummeted due to draft-pick compensation inked a one-year $8 million contract.
There’s already some tinder here for a smoldering fire. Buster Olney’s article though, provided enough gasoline to illicit a loud response from an already-fired-up Scott Boras and representatives of the MLBPA. Now, there’s more serious courtroom talk than usual.
Let’s go in order.
Scott Boras strongly dislikes Buster Olney, and believes he has been burned a lot lately by the negative publicity Olney points at his clients.
Numerous articles have been published this winter and spring about the obvious effect draft-pick compensation has had on free-agent player salaries. The league is going younger, as players effective ages are increased with every new injury, physical talent is at its peak during the early/mid 20′s, and poorer young players have much more incentive to play harder than older free agents that have already accumulated a $100 million worth of comfort.
Last week, Olney proposed the already well-known theory that the MLB’s labor rules are favoring owners/investors/derivative holders relative to players/agents (also other investors and other derivative holders).
Olney observed that brand-name free agents like Kendrys Morales and Stephen Drew weren’t signed this offseason, despite displaying the characteristics that would earn them hefty amounts of open-market money in past winters. For instance, they both have above-average wOBA figures for their positions.
To answer the question why? And, to see if the answer supported the theory on the table, Olney interviewed a number of powerful executives and team officials with insider information.
What Olney failed to adequately illustrate to his sea of readers, is that he offered only a one-sided account of a two-sided war. And because that one-side he offered had insider information, and because one of this conflicts WMD’s is media airwaves, he got shelled.
Boras and the MLBPA fired back at Olney, ESPN, and big media’s marriage with big leagues.
Did Olney’s Article Undervalue Morales and Drew?
He also happens to be the agent of Kendrys Morales and Stephen Drew, two players that Olney specifically involved in his article appraising their value, that only included interviews from an opposite side of a business deal.
Last year, Stephen Drew and Kendrys Morales were both approximately three-win players in terms of Baseball Reference’s rWAR methodology. However, there was a range in their values based on other calculations. They were within 1.6 of that mark according to the algorithms by Fangraphs (fWAR) and Baseball Prospectus (WARP).
Cleveland Indians intern Lewie Pollis calculates that the open market pays about $7 million for each win (adding 1.0 rWAR). We’re talking about $/WAR, which is an effective representation of the value of a player’s marginal product of labor/performance. And what Pollis found is that team’s pay about $7 million dollars for each win they buy on the open free agent market, in the current baseball economy.
Tom Tango’s projection algorithm doesn’t estimate what free-agent players will get like Pollis’ does, it instead estimates what they should get based on their adjusted predicted performance. Essentially, Tango finds that players who sign free-agent contracts, consistently perform below standards. It’s worth noting that this behavior is consistent with economist Edward P. Lazear’s theories on long-term-contracted workers shirking/slacking once they have guaranteed money, and are being paid closer/above the value of their marginal product of labor. In fact, the MLB labor economy so closely fits his model that steeper earnings paths are generated by service-time-based, and players peak in performance in years 2-4 in service as predicted.
Anyway, I used both of these methodologies to calculate what we should expect Morales and Drew to be paid on the free agent market. And then, I compared my findings with the salary estimates stated by the eight baseball officials in Olney’s April 9th interview.
My findings are in the following three tables. The first two tables provide estimations for what we can expect Morales and Drew to earn based on Tom Tango and Lewie Pollis’ methods. The third compares the mean salary estimations for each player with the average figure that the interviewed executives provided in his article.
Methodology 1 (Approximate Based on Observed $/Win)
|Player||fWAR||Estimated Total $alary||WARP||E$||rWAR||E$|
|K. Morales||1.2||$8.4 (millions)||2.0||$14.0||2.8||$19.6|
Methodology 2 (Based on Predicted Player Performance)
|Player||fWAR|| Estimated Total $alary
|K. Morales||1.2||$4.9 (millions)||2.0||$8.2||2.8||$11.5|
Sketchy Business? Estimated $alary Market vs. Olney Article
|Player||Mean Estimated $alary||Olney Mean $alary||Difference|
|K. Morales||$11.1 (millions)||$6.9 (millions)||$4.2|
On the surface, Boras’ accusations/assertions are justified. And when we did deeper, they’re still justified, just less so.
We now see that the interviews were vastly more favorable for the team’s side of the deal than the free-agent player side. Not only were the commenters anonymous, their views were unchallenged by equally bullish estimates, and this elementary analysis shows that they followed their predicated behavior (bearish wage estimates).
In the ESPN article, Morales was appraised at $4.2 million below what he was worth in predicted salary, and Drew was appraised at a whopping $9.5 million below. Now, because there are only 8 observations, each person interviewed was anonymous, we can’t be too confident and weighting effectively is impossible. But these numbers do paint a picture. They clearly indicate that the article strongly devalued the two players. In Morales’ case, the highest estimate was $9 million, and the median was $7.25 million, which are both still significantly below his $11.1 million estimated salary.
In Drew’s case, he was even more drastically undervalued–over $9.5 million below what he’s projected to produce in 2014. His median was $7.5 million and most team officials suggested $7-7.5 million.
Of course, draft-pick compensation plays a huge part in player compensation as well. Here, both players turned down qualifying offers, tying them to first-round picks for 2/3 of the team that would bid for their services. So, signing them is essentially trading a draft pick as well, and picks in this range are generally worth between 0.5 to 1.8 fWAR over a six-year span.
Accounting for these issues helps explain Morales’ unemployment, and makes Boras’ argument less visible in this case. However, Drew’s nearly $10 million difference is hard to buy on those factors alone. And, as both players are still unemployed, there’s even a strong possibility that both players are seeing a much stronger effect from the negative media coverage.
Numbers aside though, the article even reads negatively regarding both players. For instance, Buster’s second interview question:
Would the fact that they haven’t had a spring training and would need time to get game-ready factor into your offer?
It’s just one sentence but if you read the entire article, you’ll see that there’s few positives that support the case to sign Drew or Morales.
To me, either free agent has plenty of enticing qualities if I’m trying to put together a winning team. Neither is my cup of tea, but I see enough skills and low enough cost to take a chance if I’m in GM shoes. Again, that’s what’s so puzzling now that they’re salary demands are so reduced.
Morales, though not a premium hitter, boats plenty of valuable skills in todays game. Having to spend his home games in the league’s two toughest parks on hitters during his MLB career hasn’t stopped him from posting a .207 ISO at home. And last year, while playing for a terrible lineup without protection, the switch hitter put together a .277/.336/.449 line. That kind of pop would translate nicely to Camden Yards or US Cellular for instance. And while his injury history is troubling, I wouldn’t be all too worried on a short-term deal. He played 134 games in 2012 and 156 last year.
As for Drew, I would pretty much discount the player he was up until 2011 when he fractured his ankle and tore multiple ligaments in a nasty injury. And judging by his short stays in Oakland and Boston, and the way he left Arizona, it doesn’t seem to be a sure thing that he’s good in the clubhouse. However, on paper, the player he is now is very useful. He plays positions up the middle with shallow talent pools, and he offers solid average or better defense all over the infield. He gets on base at a solid clip (.333 in 2013, .326 with the A’s in 2012) and he’s one of the relatively few available middle infielders that can give you a .150-.200 ISO while playing reliable defense.
Why? It’s Business.
Olney’s article was one-sided. After all, he did solely interview executives and team officials despite the topic being the market value of players. Obviously, as Econ 101 teaches, price is largely determined by supply and demand.
The interviewed executives had a clear, obvious incentive to provide low-ball salary predictions and estimates. It’s part of their job. They represent the teams that bid on these free-agent players, and are those directly involved in the deal. If they sign a player for less, they are rewarded for a job well done by their own employers:
Congrats Brian, my wonderful GM! You saved me a ton of money by signing Edwin Encarnacion well below the value of his performance.
You signed Jaret Wright, Carl Pavano and Rafael Soriano for how much!? You’re fired!
John, you signed Manny Ramirez, Omar Vizquel and Sandy Alomar before arbitration eligibility. By taking some extra risk, we we will be vastly rewarded!
You get the point. The guys Olney interviewed have strong incentive to undervalue both Drew and Morales. Major League Baseball is a show, and a public relations powerhouse.
Image matters for everyone, but especially ball players. It’s hard to hand someone a big contract ignorant of what the future brings. So teams analyze players harder than anyone–as if they have tens of millions on the line. So, rumors aren’t harmless, and negative media certainly isn’t. Because public image is such a large part of the equation and there’s so much money on the table, articles like Olney’s on ESPN make the salary depression effect even more powerful.
Is it intentional? Most likely. It’s a poker game. There’s plenty of elbow-elbow, wink-wink, colluding going on. And there’s plenty of outright effort to beat the system. What would you do to make millions of dollars? Tens? Hundreds?
By gaining together, and using ESPN’s massive sounding boards to undervalue Drew and Morales as a group, downward pressure is placed on these player’s expected compensation–for the benefit of teams individually and also the owners as a whole.
If the contract values of players fall, the overall market price for their skills falls. This same effect is what makes the Yankees so dangerous in free agency, to not only small market teams but to themselves and the entire MLB. Because their pool of wealth is so much larger, if they bid $40 million higher than the next guy to get C.C. Sabathia, that pushes considerable upward forced on free agent prices for them and everyone else moving forward.
Obviously, to make it a more objective depiction, a neutral writer would provide a two-sided piece–or would at least explicitly acknowledge the bias.
And that’s what Boras, and the MLB Players Union has a problem with.
Is Buster Olney out to get Scott Boras and MLB players? Of course not. However, it is worth noting that the richer, more powerful side of the owners and players battle is the former. And if I’m a media organization that is vying for an even larger cut of my already dominant market share, who is it in my best interest to side with?
More than anything, it’s the system.
Commenters on free agency are protected by anonymity, which does have its pitfalls. It keeps reduces accountability, and while this is an essential part of free speech and press, it’s also very exploitable. The imperfect information in the deal between free-agent player and employer team is unbelievably expensive and risky–lots of guaranteed money. Allowing either side a forum to influence the deal’s outcome and providing anonymity is a recipe for dirty pool.
What They’re Saying
As players are regulated to adhere to the new Collective Bargaining Agreement rules on drug testing, and draft-pick-tying, Boras believes franchise owners should be equally accountable for breaking league rules by suggesting lower player values and depressing markets/wages for players with damaging publicity.
In Jon Heyman’s article, Boras said that he plans on pursuing a grievance against the league, evening discussing the use of subpoena power to unearth the identities of the anonymous sources that provide these comments.
“It’s a clear violation of the CBA. As many as five executives continue to use ESPN as a conduit to violate the collective bargaining agreement…The bell is rung…Kendrys Morales and Stephen Drew were damaged by these comments. The integrity of the game is challenged when players of this stature have yet to have a negotiation due to the system.”
Tony Clark and the MLBPA addressed the Commissioner’s Office as well, asking them to launch an investigation regarding the comments made in Olney’s article. Clark released this statement in a press release:
“I am angered that numerous, anonymous baseball executives have blatantly and intentionally violated our collective bargaining agreement by offering to ESPN comments about the free-agent values of Stephen Drew and Kendrys Morales. These statements undermine the free-agent rights of the players and depress their market value. Today, I have called upon the Commissioner’s Office to investigate immediately and thoroughly the sources of these statements and to take appropriate action to enforce our agreement.”
Boras supported Clark’s earlier statements by stating his belief that there needs to be a “remedy” for the two free agents, and changes to the system overall.
As mentioned before, Boras has been vocal on this topic for a long time, and he’s already had his share of words with Olney. In his July interview with Tom Haudricourt, he discussed the similarly negative and anonymous comments clouding Prince Fielder’s image Olney posted on his blog. Boras pointed out, that both sides of the story weren’t adequately portrayed, and he painted Fielder as a victim:
“This stuff about a ‘bad body’ is bull…[Fielder] may be a thick guy but he’s an athlete. He certainly is not the worst first baseman in the league like they say. It’s all hearsay. I’m tired of unnamed sources…Nobody mentioned that he just tied the club record for consecutive games played…They didn’t talk about that…People who know Prince know about his work ethic, what he’s like in the clubhouse and the attitude he takes out there every day, wanting to win. It has nothing to do with his body type. All of those things boost his value.”
Boras is no stranger to airing his gripes, even when they seem to be a stretch, or overly dramatic. In this case, he has a firm leg to stand on, but it’s a difficult matter that doesn’t have a clean solution on the table.