Pat Burrell, Philanthropist

I’m not referring to the portion of Pat Burrell‘s new two-year $16-million contract that will be going to the Rays Baseball Foundation. When I first read the headlines, I inadvertently believed the deal was worth $16 million per season, which is close to what I anticipated he would get. For two years, I have him valued at approximately $30 million. This contract is also considerably less than the $31.5 million that Burrell’s former Phillies will pay Raul Ibanez over the next three seasons.

I can only guess what motivated Burrell to sign this contract. Here are a few potential explanations.

  1. The down economy has reduced revenue expectations, decreasing teams’ willingness to pay for free agents.
  2. There is a glut of free-agent outfielders on the market, forcing competition between players, and thus depressing salaries.
  3. Burrell wanted to take less to play in a comfortable environment that the Rays provide.

I don’t think the economy explains much of the discount. The inferior-but-similar Ibanez received a far superior contract in the same market conditions. Ryan Dempster and A.J. Burnett both received big contracts that I believe exceed their expected values. Furthermore, I believe the potential damage to MLB from the recession has been exaggerated by management, who want to convince players to sign for less. Though baseball will suffer, I think the damage will not be that large and short-lived. I’ve been following the economic impact stories closely, and baseball—like other major sports—seems to be somewhat resistant to recessions. Fans love their sports teams, and following sports is a relatively cheap form of entertainment. In any event, the economic downturn cannot explain the magnitude of Burrell’s discount—a short-term deal for nearly half of his potential revenue generation.

The second potential explanation is an argument that I see frequently in discussions of the free-agent market. However, the common intuition regarding the number of free agents on the market affecting the competitiveness of the market is wrong. The relative scarcity of talent doesn’t change when a player signs with a team or when there are many players on the market. For every free agent signing, there is one less buyer on the market, and for every free-agent player there is an additional open roster spot. Braves fans are well aware the available slots for outfielders.

This leaves me with the final explanation: Burrell was willing to accept less to play in Tampa. If Burrell was a financial mercenary, I think that he would’ve waited longer to sign a deal like this. Burrell went to college in Florida, so maybe he likes it there. Playing in front of fans who boo you for your big salary even when you are a productive player has to be frustrating. In Tampa, if the team stinks the fans just don’t go to the game. He’s earned a total of $54 million over the course of his playing career, so he’s probably willing to sacrifice some additional wealth for comfort.

We’ll soon see how the rest of the market shakes it. If other deals are vastly below expectations, then I think it’s a sign that the economy is having a dramatic effect on the players market.

25 Responses “Pat Burrell, Philanthropist”

  1. Ron E. says:

    In Tampa, if the team stinks the fans just don’t go to the game.

    And when the team goes from worst to first and beats out the Yanks and Sawx… the fans just don’t go to the game. Maybe Burrell just hates playing in full stadiums?

  2. Marc Schneider says:

    If Burrell sacrificed some dollars in exchange for comfort, then I applaud him.  He is very wealthy man, after all, and I have never understood the need for these players to go to places where they don’t fit in order to get extra dollars that they will never be able to spend anyway (although I guess if you were Michael Vick, you could spend it all).  If it was me, I would probably be willing to pay to get the hell out of Philadelphia, especially having won a championship.

  3. Ken Houghton says:

    Additional data point: unless Charlie Crist has changed it recently, FL has no state income tax, which does give Burrell some advantage.  (Not enough, unless neither he nor his agent can do math, but some.)

  4. Dan says:

    One thought which might make sense of all of the Burrell dealings.  Maybe there’s something going on with him health wise that we don’t know about.  That would explain why the Phillies were unwilling to give him a third year, and why they signed a player not better than him, and older by a ways.  It would explain why Burrell hasn’t been generating much free agent buzz.  It would explain his willingness to sign this deal (it’s likely the last big money deal he’ll ever sign).   It would even explain why the Phillies didn’t even offer him arbitration.  It would really explain everything.

    I guess we’ll see over the next year or so.

  5. Jazzy Jef says:

    In addition to sacrifice some wealth for comfort, he also doesn’t lose as much of his contract dollars due to no state property taxes.

  6. Jazzy Jef says:

    So sorry Ken, Florida definitely has an income tax. I’m sure that you meant property taxes

  7. JayZ says:

    $30M?  Pat Burrell is nothing but a problem. .250 hitter who hits meaningless homers, unless it’s against he Mets.  $8M is just right, he’s been overpaid for years.  Tampa will benefit by him never playing the field or as it is in practice, just standing there watching.  We need a way to value what it really takes to be a great baseball player, ability to run the bases, field, where to throw the ball, situational hitting, all those things that make “smart” players.  hitting 30 a year is merely dave kingman.

  8. dan says:

    Isn’t it at least possible that he didn’t receive a better offer?

  9. JayZ says:

    Baseball reference compares Burrell to Jesse Barfield. Would you pay Jesse Barfield $16 million a year?  and he could field!

  10. Sean says:

    At my site, baseballprojection.com, I have Burrell worth about what he received, considering he’s a below average defender who will be used as a DH.

    JC, I noticed you also had Ibanez as worth much more than he actually signed for.  I think either your value estimation is just way higher than mine, or else we differ on the relative worth of these two players.

    How much do you see a player like Ramirez or Teixiera being worth?

  11. Redbird says:

    It appears to me that there is a growing chasm between the  large market teams (meaning the greatest revenue potential) including 2 in New York, 2 in LA, Boston and Cubs; and everyone else.  I could be that Burrell took a look around and saw no potential for a salary commiserate with JC’s so-called market which is based on what the big revenue markets pay, and accepted a fabulous salary in the “everyone else” market at a personally desirable location.  Just because the big revenue teams will pay more for a hitter/left fielder with Burrell’s numbers does not mean “everyone else” will.  It will be interesting to see what happens with the glut of available power hitters this spring.

  12. Sean says:

    I’ve looked at some of your other postings and the value FAQ.  Generally your values are on the high side – it looks to me like you are estimating how much revenue a player will make for a team.  But a team is going to want to take some profits here too.

  13. Marc Schneider says:

    It’s really not fair to criticize the Rays fans yet for not coming out.  Usually, teams see the big upsurge in attendence after a turnaround the next year I think.  Given the cost and time involved in going to games, I think it’s something people have to budget for.  It’s much harder to just decide on the spur of the moment to go to the game.  Let’s see how the attendence is this year.

  14. JC says:

    Sean,

    The use of revenue is based on microeconomic theory. In a competitive market, salary ought to equal net marginal revenue product, thereby eliminating any profit. If any profit exist when hiring a player, other teams have the incentive increase their bid until the wage is equal to the added revenue. This is basic labor economics and is not controversial.

    My estimates may be high for a few reasons:
    1)  My estimates are gross (non net) MRP estimates, and therefore assume non-salary costs to be zero. This is a simplifying assumption.
    2)  Teams still have some monopsony  (single buyer) power in purchasing baseball talent, and has access to an available pool of talent to generate substitutes.
    3) The Forbes estimates of revenues are biased upwards.
    4) I do not use the replacement baseline of assuming marginal talent is paid the league minimum. While I believe MLB’s monoposony power dampens the wages of marginal talent more than it dampens high-level talent, marginal talent is more valuable then league minimum.
    5) My estimates are simply wrong.

    I’m a market efficiency guy, and I tend to think decision-makers make intelligent decisions.  I wish I nailed every contract out there, but all I can do is offer my best estimate based on a method that has sound theoretical backing.  My estimates frequently miss low as well. I have been critical of the signing of Burnett and Dempter for overpaying.  Believe me, I do pay attention when my model misses, and I am constantly looking for ways to improve my model when I identify defficiencies.

    I would also like to add that I know it can be frustrating for readers when  I don’t spill my entire case on this issue in a blog post. Instead, I’m writing it up in book form. The earliest version of my model is detailed in The Baseball Economist, and the revised model will be explained in my next book.

  15. Edward says:

    Phillies fans didn’t boo Burrell for his big salary.  They booed him for routinely staring at called third-strike fastballs with runners in scoring position.  The only differences, besides handedness, between Burrell and Dunn are that Dunn guesses correctly more often (career OPS is 48 points higher) and has a quicker bat.  On the rarer occasions when Burrell did strike out swinging, he did so nearly stumbling over his front foot.

  16. JC says:

    In fairness to Phillies fans, they boo everyone for no apparent reason. 

    And maybe those weren’t boos. They were saying “Buuuuuu-rrell!”

  17. Don says:

    JC, I will love to see if you still think that baseball is resistant to recession by the end of 2009.
    Mark my words, there are going to be a ton of empty seats this year.
    In the real world there is a huge economic downturn. You must live somewhere else.
    BTW Rob Neyer thinks the Burrell contract is about right.

  18. Rich says:

    Good thing JayZ doesn’t own any baseball teams.  Learn something about baseball before you bring archaic stats like batting average and comparing someone with a career .367 obp to Dave Kingman.

    My theory for Burrell:  Aside from comfort, (as I don’t think fans booing him bothered him because even after they treated him like crap for a few years, he would still say how awesome it is to play in Philly) I think it’s a combination of 1) likes living in Florida 2) a chance to win again.  Everyone thinks the Rays are going to be good for a while so it’s probably the best fit.

  19. DNL says:

    Maybe the economy isn’t a factor, but you’re missing three factors:

    a) We have much better information than we do now — if a rumor is whispered, it makes MLB Trade Rumors and tons of other sites.  So Burrell can’t credibly claim that he has an offer or interest from Oakland when they’ve been linked to Giambi.

    b) Burrell’s defense is catastrophically bad, and he should be a DH.  That eliminates 16 teams from the demand side, and a few of AL teams who have DHs that can’t field (e.g. Red Sox). 

    c) There are at least two and probably more Burrell-types out there.  Dunn is the obvious alternative, but when you expand it, you also get Manny Ramirez and Jason Giambi in the picture, crowding him out.

    You’re Burrell’s agent. Make the case that there’s a lot of demand for him.  You really can’t.  

    Does that make Ibanez’s contract an outlier?  Maybe.  I think so, but I think it’s also because the alternatives are either disliked in a notoriously hostile fan environment (Burrell, Dunn); can’t play OF at all (Giambi), or are too high risk given the imagined price (Ramirez).

  20. Greg says:

    Burrell has a home and lives in Pinellas county where the Rays play. He has children. He is already rich. He is going to play for a team that is still young and getitng better. He doesn’t have to play defense so it will prolong his career healthwise. And Geez….$8 million ayear is enough to pay th ebillas and put a few bucks away for the grandkids. Sometimes being a father and a professional at the same time while making millions is THE goal.

  21. Sean says:

    JC,

    I’m quite familiar with economic theory, being an economist myself.  The theory does leave room for “normal” profits, whatever that percent may be, so the player is not going to get all the marginal revenue.  Maybe 1-5% less for non-salary related expenses, payroll tax, insurance, health benefits, and 10% less for investments. 

    Even with that, I don’t think baseball represents the ideal of a competitive market.  I don’t remember the exact figures but I’ve read in many places about how the player’s contracts, though increasing and very high, are not keeping up with the growth in revenue.  It’s not quite a monopsony but somewhere between that and a free market.

    You say you thought some of the pitchers were overpaid.  Maybe it balances out and your model is correct on the total money spent, but teams are overvaluing pitchers and spending inefficiently.

    Anyway, looking forward to the next book.

  22. H says:

    Due to his defensive limitations, it was pretty much assumed that the market for Burrell was limited to the AL teams after he chose free agency over the Phillies final offer.  Of the 14 AL teams, the three big spenders were out because the Yankees will fill the DH slot with one of their OF’s (Matsui, Damon, Swisher, Nady, Cabrera), the Red Sox have Big Papi and the Angels want to leave the DH slot open to rest Vlad’s legs a few times a week.  This did not leave much in the way of suitors for Burrell.

  23. Millsy says:

    Very good points, DNL.  I tend to think the Burrell may have sold lower than he could get, but at the same time, I’m not sure there was much on the table for him.  The big market teams were going for the big names and because of his defense, many NL teams may not have been interested.  I think the Rays took advantage of all this Manny and Tex talk.  Teams were looking to shell out big money.  The Rays fit a desperate need in a power guy, and now have a scary lineup with Crawford-Upton-Longoria-Pena-Burrell.  The Rays did a great job with this, and I think Pat Burrell will be happy.  It was a good deal for the team, exactly what they needed, and Pat Burrell gets $8 million a year.  Not sure he could spend all of that.  Basically it just comes back to the problem of who’s on the market for the player.  If teams don’t want a player, they’re not going to bid him up…maybe to a point to keep some surplus going to their competitors, but they also have a set roster size that won’t allow them to just make sure everything is fair…which may be one reason that JC’s model is high at times.  But, as he stated to me in previous posts, it is extremely difficult to incorporate this information into estimations.

  24. JC says:

    Sean,

    I did not realize that you are an economist. See Scully (AER, 1974) for the underpinnings of my model, and the justification for using MRP to value players.  The entire economic literature that focuses on the value of players is based on this assumption.