Archive for November, 2007

Fisking Bob Raissman

In today’s New York Daily News, Bob Raissman takes Scott Boras to task for arguing that his client Alex Rodriguez will improve the value of the SportsNet New York, the regional sports television network partially owned by the New York Mets. I don’t think he succeeded. Time for a Fisking.

Just as it was with the Yankees, there is a prevailing opinion, presented as fact in the media, that it will benefit the Mets to overpay Alex Rodriguez because his presence would increase the value – and significantly enhance the ratings – of SportsNet New York.

First, economists don’t like statements justifying reasons to “overpay”. If A-Rod’s presence on the NY Mets does increase revenues to the network, then his value goes up along with his salary. The higher salary isn’t an overpayment, it reflects the additional value he provides to the team.

This is baloney. Actually, it’s a lie. The original premise suggesting Rodriguez could help produce a financial windfall for a team-owned TV network like SNY (Fred Wilpon owns a big chunk of the network with partners Time Warner and Comcast) was concocted by A-Rod’s agent, Scott Boras. It is one of the selling points Boras is using to help establish his client’s market value.

Here’s a news flash: No one baseball player, whether it be A-Rod or Nim-Rod, is a factor when it comes to valuing a network. And no one baseball player is ever going to be responsible for significantly impacting a network’s ratings.

A player who helps a team win induces fans to watch more games, yet this has no impact on the revenue stream of a television network? I’m not following.

The financial structure of SNY – or the Yankees Entertainment & Sports Network, for that matter – is not hard to figure out. Its very nature proves why Rodriguez, as a singular entity, would be just a blip on SNY’s bottom line.

SNY basically has two revenue streams. One is carriage fees (the amount a cable company pays SNY per month per subscriber), which usually account for about 80% of a regional sports network’s revenue. The other is advertising revenue.

OK, now we are getting somewhere.

The carriage fee contracts SNY has with cable operators are locked in for a few more years. Rodriguez coming to the Mets could not change that. It’s not like SNY suits could call up Cablevision and say: “Hey, A-Rod is coming to the Mets,. so we are going to increase your carriage fee from $1.85 to $2.50 per month per subscriber.”

SNY is a new network, and according to its website, it’s not on some area cable systems, especially outside of New York. And many of the carriers that do offer the channel are not picking up the HD feed. It seems to me that there are significant gains to be made in getting on cable networks. It might make him even more valuable to the Mets than other teams that have less opportunities for expanding their RSNs.

I also wonder how long the current contracts are locked in. My guess is that most of the carriage contracts are shorter than any deal that A-Rod will sign.

As for advertising revenue, well, SNY’s sales force is already out selling for the 2008 season. SNY’s ad rates for 2008 are based on the Mets’ 2007 ratings. So, even if the Mets signed Rodriguez, he would have little impact on advertising sales in the short run.

If there is a bump in revenue from adding Rodriguez, the Mets could capture this quickly. Even if they previously sold air time at lower rates, they can buy it back and sell it at a higher price. Executives do not naively assume that 2008 ratings will be identical to 2007. If A-Rod increases ratings, advertising rates will rise. Furthermore, this isn’t going to be a one-year contract. He’ll be around to increase advertising revenue for years to come.

Rodriguez alone would not be a one-man ratings gang in the long run, either. According to Sports Business Journal, Yankees ratings on YES were up 47% since A-Rod landed in the Bronx, from a 3.2 in 2003 (the year before he came to the Yankees) to a 4.7 last season.

Even Boras, under the influence of truth serum, would have to admit the Yankees’ consistent winning – along with the Bombers’ other marquee players – produced those ratings. Rodriguez was just one of the contributors.

A-Rod was not 100% responsible for the growth in Yankees ratings. But, he most certainly did contribute to it by helping the team win, and he ought to expect compensation for his exceptionally large contribution. While Boras is wrong to suggest his client is responsible for all of the gains, it is equally wrong to say he contributed nothing. How much he contributes is a negotiating point about which both the Mets and A-Rod will understate and overstate until a contract is signed.

When A-Rod went it alone, with maximum fanfare and hype, he did not move the ratings needle. When the eyes of Texas – and the entire baseball world – were upon him, he did not deliver as a TV “star.” In 2001, his first season with the Rangers, Texas’ ratings on Fox Sports Net Southwest were down 15%, from a 2.0 in 2000 to a 1.7 in 2001.

The teammates get the benefit when the team wins in New York but A-Rod gets the blame when his team loses in Texas. I don’t think anyone believes that A-Rod can win games all by himself. The question is, what would these teams’ ratings have been had A-Rod not been there? I suspect they would have been worse in Texas and New York. In both cases is marginal contribution was almost certainly positive.

This is why SNY boss Steve Raab likely did not go to either Fred or Jeff Wilpon and encourage them, for the good of the network, to make a strong play for Rodriguez. If anything, he probably – if asked – told them the acquisition of A-Rod would not significantly impact SNY.

Winning will. The Mets could have a team full of A-Rods, but if they are not consistent winners, viewers will bail and the TV ratings will tank. This is really not a revelation. Still, with Boras’ negotiating spin being treated as gospel by a segment of the media, it’s worth emphasizing what should be obvious to anyone who actually can spell the word “Mets.”

I don’t understand the disconnect here between A-Rod’s presence and winning. That is the main mechanism through which A-Rod will help any team he plays for. I’ve estimated that impact to be around $35 million per year. Rodriguez is the best offensive player in baseball. If he joins the team, it will win more. If the team wins more, its ratings will go up, which will generate more revenue for the team.

But what if the Mets had a team of A-Rods but didn’t win? This idea reduces itself to absurdity without comment.

What Will a Stimulant Cost Mike Cameron?

Last week, MLB announced that Mike Cameron tested positive for a banned stimulant. This was a second offense, which means he is suspended for the first 25 games of the 2008 season. This is interesting because Cameron is a free agent, and any team that signs him will get him for 25 fewer games. I have been wondering how the market will treat Cameron. Will he earn a salary commensurate with his projected full-season value minus the 25 games, or will there be further penalty for his misbehavior?

Let’s keep this simple by using his 2007 performance and playing time. I’ll also make a rough adjustment for defense. Given his batting performance for a center fielder, Cameron’s 2007 was worth approximately $12.63 million. When I take away those 25 games, what he produced was worth $10.35 million; therefore, the suspension time alone ought to generate a loss of about $2.28 million. That is a pretty steep fine, but he still as another $10 million that he can use to dab away the tears.

The question is: how much less (if any) will he get beyond this amount? I acknowledge that these are just estimates, and differences between an actual and projected contract may be a product of mis-estimation. However, if he doesn’t get much less than this, then I think it’s pretty safe to say that fan indignation towards PEDs is more talk than substance. I look forward to seeing what he gets.

Cleveland Picks Up Its Pitchers

Yesterday, the Cleveland Indians picked up one-year options on three of their pitchers: Paul Byrd, Joe Borowski, and Aaron Fultz. Here is a list of their option prices and my estimates of their 2007 performances.

Pitcher		Option		2007 Value
Paul Byrd 	$7.5 million	$8.9 million
Joe Borowski 	$4.0 million	$3.4 million
Aaron Fultz 	$1.5 million	$2.0 million

It is no surprise that the Indians picked them up. Will the HGH issues be a problem with Byrd? I doubt there is much risk since anything he did—no matter what is true motives—was not against league rules. If he is suspended, the Indians would not have to pay his salary for the missed time; however, they might miss out on signing a substitute starting pitcher.

Addendum: Also, Indians GM Mark Shapiro was named baseball Executive of the Year. I’ve been a big fan of what the Indians are doing, and I found them to be the best-managed organization in the American League in my book.

Valuing Maddux

ESPN’s Buster Olney is reporting that the San Diego Padres and Greg Maddux have agreed to a one-year $10 million deal. This is a good signing for the Padres, so good in fact that I believe Maddux is giving the Pads a small discount. It sounds like Muddux really likes pitching in San Diego.

“From my talks with Greg this year, he had as much fun this year as any other time in his career,” Padres manager Bud Black said Monday night. “It’s no surprise to us that he wants to continue. He loves to compete.”

Maddux’s ERA wasn’t up to his usual standards (4.14) especially considering his home park (ERA+ 98). Basically, he looked to be a league-average pitcher. However, Maddux pitched in a way that is more consistent with a lower ERA with a strikeout-to-walk ratio greater than four and 0.64 HR/9IP for 198 innings.

I’ve finished my dollar valuations for 2007 and I have Greg Maddux’s performance valued at about $12 million. And for the the amount of innings he pitched he provided $4 million more than an average pitcher would have generated. Mad Dog still has it.

Now compare this to Curt Schilling, who is rumored to be signing a one-year extension with the Boston Red Sox for around $13 million (we’ll see). In 2007, I estimate Schilling’s performance was worth $8.3 million. His strikeout-to-walk ratio was similar to Maddux’s, but he gave up more home runs (1.25/9IP). His value is that much lower than Maddux’s mainly due to the fact that he pitched nearly 25% fewer innings.

This is going to be another fun offseason.

UPDATE: Schilling has apparently reached a deal with the Red Sox for $8 million guaranteed, with $2 million in physical conditioning incentives, and $3 million in performance incentives. So, the $13 million numbers occurs only if pitches well and stays healthy, but he gets $8 million if he repeats his 2007.

Yankees, A-Rod, and Game Theory

In this Sunday’s NY Times, Jeffrey Gordon pens a Keeping Score column on the bargaining game played by the NY Yankees and Alex Rodriguez. Gordon argues that the Yankees stated refusal to sign Alex Rodriguez upon opting out of his contract is not credible.

Conventional wisdom is that Rodriguez willfully ignored the Yankees’ repeated public assertions that they could not rationally pursue him in free agency because they would lose $30 million from the Texas Rangers when they took over his contract. But the Yankees’ assertion is simply a bargaining gambit.

Assume some other team, call them the Dodgers, were to offer Rodriguez $32 million a year for eight years. Remember that the Dodgers are receiving no part of the Rangers’ booty. Is it really the Yankees’ position that Rodriguez is worth more to the Dodgers than to the Yankees? If the Dodgers can afford to pay the $32 million a year, can the Yankees — the richest franchise in sports — plead poverty?

The Yankees’ earlier protestation about the Rangers’ money was to make it appear their hands were tied, so that they could land Rodriguez at a lower cost. But that bluff has been called. The lost Rangers money merely puts them on the same ground as other teams. How far will the Yankees go with cries of wounded pride?

He’s right on this point. If Rodriguez is worth more to the Yankees than any other team, then the rational choice would be for the Yankees to sign him, even though the Rangers are no longer helping out the Yankees. However, there is more than pride involved. This isn’t a one-shot game, and there is more at stake than one free agent.

The Yankees were in a nice position, their signing of A-Rod would have been partially subsidized by the Texas Rangers. All parties knew that if Rodriguez opted out, the Yankees would lose that money. Both the Yankees and A-Rod’s agent (Scott Boras) have decent estimates of what his services are worth. In ten days they easily could have reached a deal approximating the free agent market outcome, which would have allowed A-Rod to get his money and keep the Rangers on the hook for the rest of the salary. This is why the Yankee’s drew a line in the sand, and Rodriguez knew not to step over if he wanted to stay in New York.

A-Rod won’t wear the pinstripes again. I am certain that the Yankee’s are out of the bidding, even though the Yankees might still value his services more than any team in baseball. What is at stake here is not a single player’s contract, but the organization’s long-run credibility at keeping its word. If the Yankees cave, the repercussions will echo into the future. Why would any player ever not opt out of his deal in the future if he knows the Yankees will give in? Not following up on your threats is bad for your reputation as a tough guy.

This is a game that I play with my daughter all the time—except the stakes are a little different—”if you wake your sister up from her nap, then you won’t get to go to the birthday party.” My life will certainly be more difficult if I had to stay home with two crying girls than if I took one to the party (especially if they serve beer) and left the baby at home with my wife. So, my daughter thinks I won’t keep my word, and she pulls out her tambourine to lead the princess doll parade. What would happen to my reputation if I took her to the party anyway? Any future threats lose their credibility as my daughter realizes their emptiness and her behavior worsens. Preventing a long-run pattern of disobedience is worth well more than any short-term benefits I gain from giving in.

This is the problem the Yankees face. The long run consequences of reneging in this business are high. Between league rules, tax laws, and big egos a lot of deals get done in this business without ink and paper. This can breed friendships as well as keep potential enemies in check. In this case, the Yankees must stand firm.

The Fielding Bible Plus/Minus, 2007

The 2007 defensive Plus/Minus Leaders and Trailers are out. I consider the Plus/Minus system to be the best defensive measurement system out there. Although, the numbers will not be released for all players until after the 2008 season, seeing the top and bottom is useful.

In particular, I wondered how Andruw Jones would fare. In a series of posts this summer, Jayson Stark and I debated Andruw’s defensive ability. Stark argued that scouts and Zone Rating said Jones was on the decline. I countered that Zone Rating was flawed and that I preferred the Plus/Minus system, which showed Jones was still among the best center fielders in the game. Though Andruw’s performance fell off quite a bit at the plate this year, I wondered how his defense looked.

Plus/Minus rates Jones as the second-best fielding center fielder in baseball in 2007, making 24 more plays than the average center fielder. That is one less than Carlos Beltran. Over the past three seasons, Plus/Minus rates Jones as the best, making 63 more plays than average. So, it looks like even if Jones has lost a step, he’s still near one of the best defenders in the game.

And The Fielding Bible Awards, determined by a group of voters, gives Jones the nod over Beltran—probably because of his superior throwing arm, which the Plus/Minus system does not measure.

Center Field – Andruw Jones, Atlanta
Last year Carlos Beltran won the award with Andruw Jones coming in second. This year Jones returned the favor, tipping the scales at 86 points to 80 for Beltran. Jones and Beltran both have great range, but it was probably Jones’ intimidating throwing arm that swayed the voters. It’s interesting that just a year ago Jones seemed to be slipping slightly from the consensus best center fielder he was a few years before. Perhaps we should also crown him “Comeback Fielder of the Year.”

It’s also interesting to note that all of the Braves outfielders score well. Willie Harris and Matt Diaz are +21 and +12 in left field, and Jeff Francoeur is +10 in right field. It will be interesting to see how Andruw Jones does away from the Braves next year, and how the Braves outfield changes without Andruw Jones in the lineup.

Fisking Terence Moore

Terence Moore wants the Braves to get Ken Griffey, Jr. If only it were that simple…and ten years ago. But, let’s walk through the argument.

Let’s try this again. After all, we’ve typed these words before, but never have they made more sense.

I’m not sure this it is true that “these words” have ever “made more sense”.

This is a low standard for rating an argument.

The Braves need a center fielder until their youngsters are ready, and veteran Ken Griffey Jr. loves Bobby Cox, the accomplished Braves manager, and Griffey’s Cincinnati Reds aren’t going anywhere soon.

I think Kenny Lofton, Tim Spooneybarger, and Bob Wickman are the only players in baseball who don’t like Bobby Cox.

The Reds did just sign Dusty Baker to a hefty multi-year deal, and pick up Adam Dunn’s option, so I don’t think the plan is dump veterans and rebuild.

Griffey is baseball’s cheapest superstar with a highly workable contract.

Griffey was a superstar. Now he is a good player with a propensity for getting injured. There is no time machine involved in this transaction.

I’m not sure what “workable” means, but I don’t see much much positive about Griffey’s current deal. He has one guaranteed year at $12.5 million and an option year of $16.5 million that can be bought out for $4 million. Supposedly, Griffey’s deal has a lot of deferred money, which further complicates the transaction.

He also lives maybe a seven-minute drive from the Braves’ spring complex in Orlando, which would suit the homebody Griffey just fine.

I don’t think there is an issue of Griffey wanting to play for Atlanta.

Get him. Well, the Braves should do so regarding the younger Griffey after they use some of the money they’ve saved from their Edgar Renteria trade to acquire a starting pitcher for a troubled rotation beyond John Smoltz and Tim Hudson.

If the money paid Edgar Renteria was enough to get a solid starting pitcher, then why did the Braves only get two prospects from the Tigers? And after that the Braves can trade Matt Diaz, Willy Aybar, and Jo-Jo Reyes for Joe Blanton and Danny Harren. Yes, I’m being sarcastic.

Wren is strikingly more personable than his predecessor, but they are similar in that they prefer not to discuss names in these situations. Even so, we can use Wren’s philosophies to narrow the Braves’ best option in center during the post-Andruw Jones era to Griffey… (emphasis added)

Mr. Wren, you just learned why John Schuerholz doesn’t talk to the media. If you don’t say what they want, some writers are so used to putting words in your mouth that they don’t even mind saying so in their columns.

…Griffey, the most legitimate slugger of his era with 593 career home runs and no hint of steroid issues.

What does “the most legitimate slugger of his era” mean? I thought he might have meant steroids, but he adds the steroids issue after the “and”. Sounds like being one of Britain’s loudest bands.

As to the “no hint of steroids” comment, why not? He hit a lot of home runs in the steroid era, that seems to be enough to condemn most players. Now, if Griffey is clean, then why can’t other players be assumed to be clean?

While that A-Rod guy, for instance, wants nothing less than $30 million a year from somewhere, Griffey is slated to make $12 million next season in the last year of his Reds contract.

I don’t think this is correct. At a minimum, he is guaranteed $16.5 million—$12.5 million plus $4 million buyout of 2009.

What does A-Rod have to do with this? He’s a far better player than Griffey, so why is it a surprise that he makes more money?

Plus, if Griffey is traded, the Reds would be required to pay approximately half of that amount.

I’m not sure if this is true. Even if it is, it does not make Griffey any cheaper to acquire. The Reds are quite aware that if they trade him, they will have to pay a huge chunk of his salary. This is going to raise their asking price. This means the Braves are going to have to give up more to get him. There is no free lunch here.

There also is every indication that he would defer a chunk of that amount to help his new employers strengthen other areas of their team.

How much more can he defer? Supposedly, he’s already stretched his payments until 2024.

Just like that, the Braves could have a Hall of Famer in waiting for virtually nothing.

I don’t think Griffey’s getting into the HOF for anything he does for the rest of his career, nor is he playing at his previous level. And it’s not like this is a secret.

“Virtually nothing”? Now it was pretty difficult to massage $16.5 million down to $6 million, but I don’t remember the part where $6 million approaches $0.

The Braves could have such a player for two years, maybe three, to help them on the field and at the box office. Then they could plug in one of their slew of rising choices. They have Brent Lillibridge, their Class AAA player of the year. They have Brandon Jones, owner of a collective 100 RBIs last season for two different teams in the minors. They have Jordan Schafer, 21, recently named the player of the week in the Arizona Fall League, and he is the league’s youngest player. They also have Gorkys Hernandez, a speedster just acquired as part of that Renteria deal with the Detroit Tigers.

My favorite part is how Griffey is going to be a stop-gap for two to three years before someone else is ready. This is the first we have heard in this column that Griffey is signed beyond next year (it’s hard to mention the option when you are trying to whittle down $16.5–29 million to “virtually nothing”). If Lillibridge was the Triple-A player of the year last year, why is he going to stick it out in the minor leagues for “two years, maybe three”? And since he’s not signed beyond 2009, I guess Moore anticipates signing Griffey to an additional year. Brandon Jones, didn’t he finish the year in Atlanta? What is he going to be doing for two-three years?

Again, Wren won’t discuss names, but would he grab an established veteran in this situation for the short term? “Sure. No question, no question,” Wren said. “Actually, that would be the ideal. In a perfect world, that would be the ideal.”

Just so you know, Wren grew up in southwestern Ohio cherishing the Big Red Machine.

His favorite player?

Ken Griffey Sr.

So, not only is this a good idea, but Frank Wren is probably going to do this.