Tipping Pitches: Fixing Baseball: The Salary Cap Alternatives


Monday, April 5, 2010

Fixing Baseball: The Salary Cap Alternatives

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I've spent an awful lot of time and energy dissecting Major League Baseball's financial disparities and pushing for a salary cap. A conversation with my son today made me wonder: Have my priorities been poorly ordered all along?

As you may know, my son's third grade projects are my source of many a baseball research inspiration. It's because of a project I designed for him that I am in the process of ranking baseball's greatest players. Today, he told me of a presentation that he will be giving on baseball (of course). He will be answering 15 "questions" about the game.

11. How many rules have been added, taken away, and changed over the past 15 years?

Trying to lead him to one of these rules, I asked him why it is that teams like the Brewers are no longer able to keep their star players.

"Because of money?" he asked.

"Well, not really. Something comes before the money." Of course, I was speaking of free agency.

The Yankees are the target. The easy target. They spend the most money. They would seem to be the problem. With a salary cap, they could not spend so much money.

Well, sure, this is true. Partially. But it's only because of free agency that they're able to spend that money on any player they want. If a player wasn't a free agent in the first place, they'd have to focus their spending power on their own players.

Now, I'm not suggesting that baseball scrap free agency. But I think it's important to recognize that the initial problem isn't the Yankees or that there isn't a salary cap. The true problem is free agency -- free agency in its current form.

There are two surface issues with free agency (in addition to many more below the surface):

1) Small market teams rarely keep the star players they develop;
2) Flawed compensation structure for losing star players.

In many ways, these two are interrelated. Small market teams know they have little chance of signing a player if he goes to free agency. And if they lose said player to free agency, they will get a draft pick or two in return. The MLB Draft is an inexact science, so it's not much of a reward. So, rather than lose a player to free agency, teams choose instead to trade him while the return is still formidable. Waiting too long to trade a player will limit the return.

In other words, small market teams that develop a superstar are pressured to trade a player prior to his final year under their control, while he still has the most value. As a result, the "six years of control" would be a bit of a mirage. Sure, teams have the rights to a player for six years. But as you want to sell a stock before the value drops, teams often prefer to trade early rather than give their player away for the unknown quantity of a couple of picks.

So while teams have six years of control, it's often five. And while teams often have five years of control, those players are often at peak "star" level for only three of them.

Here are a few salary cap-free ideas that could help make free agency a better system:

1) Guarantee draft pick compensation.As the current system works, a team signing a Class A free agent will give up a first round pick (or their top available non-compensatory pick). If this team signs multiple Class A free agents, the signing of the lower rated free agent results in a loss of a second round pick. Great for the signing team, bad for the team losing the player. The solution would be to only allow the signing team access to the player if they have the corresponding pick to lose.

To make this work, I'd suggest loosening the rules on which picks are free game. Currently, compensation is limited to losing the picks they were scheduled to own before free agent compensation. However, I suggest that if a team loses a Class A free agent (thus giving them two first round picks), they would be allowed to sign two similar free agents (assuming they also have the second round picks to lose). In the case of signing two Class A free agents, highest pick would go for signing the higher rated player.

2) Improve draft pick compensation. The top available hitter and pitcher should each require the signing team's first and second round picks in addition to a sandwich pick between the first and second rounds.

Each of the first two adjustments would do two things: 1) With the compensation guaranteed, teams will not be stuck with a second round pick when they should have received a first round pick (see when the Brewers lost CC Sabathia to the Yankees, who also signed Mark Texeira the same off-season); 2) With compensation improved, the signing team has to think twice about giving up two high picks; and 3) With compensation improved, the player's former team has more motivation to hold onto their player through the entire six years.

3a) Increase team control to seven years before a player becomes a free agent. I'd love to say eight years, but I realize that seven would be a battle in itself. In addition to the increased draft pick compensation, home grown players would go from five years with the original team to seven, a noticeable improvement.

Note that such a change could also alter the amount of money he will command on the open market (though a more detailed study would need to be performed to confirm this). Assuming an average rookie age of 23, players would then go on the market at 30 -- instead of on the market at 29 or acquired via trade at 28. This may seem like a minor adjustment, but you may see shorter contracts and less money being thrown around to free agents as a result, thus getting free agent spending under control.

Now, getting that extra year may be a challenge. So, there could be a viable alternative...

2b) Team with a home grown player given the option after the sixth season to either "Franchise" that player or allow him to become a free agent. Let me explain. Using the rating system that classifies free agents, a team could put a Franchise tag on a Class A free agent, assuming it is a home grown player following their sixth year. In such a case, the player would be guaranteed a one year salary that is the average of the top 10 among hitters or pitchers (depending on the player). Additionally, Class B free agents could be given the average of the next 40, Class C the following 50. Of course, this amount could be tweaked.

The team could decide that such a player was not worth that kind of money and grant him free agency. If they do tag the player, they get him for at least one more year. Of course, if a player changes teams prior to their six year window expires, this does not apply. All players who are not home grown would not be subjected to such a tag.

Again, if a Class A player then becomes a free agent, he may be less likely to sign for huge money with another team because of the increased compensation and likelihood that he would be a year or two older than he would otherwise be on the open market. This could also help teams keep their home grown players, even when they become free agents.

Obvious Roadblocks
Of course, getting any of these proposals -- or even a variation thereof -- would be a chore. But in my opinion, they are more likely than the implementation of a salary cap to happen.

I've all but given up on a salary cap. The league is too far gone. When a team like the Yankees has a payroll that is four times that of some other teams, you can't penalize them going forward for something that occurred in the past. You can't set would would seem to be a reasonable salary cap of $100 Million when one team nearly doubles that now.

But while a salary cap is as likely as snow in Mexico, I realize that my proposals would get their share of objections as well. My goal is clear: 1) Keep players on their original teams longer (if those teams choose), and 2) Deter big spenders from signing all of the best players. Additionally, if the average age of free agents increases, the length and amount of the average contract would likely drop (less committed to players who are expected to decline sooner). As a result, the Players Association would have a difficult time with it.

Still, there may be a carrot somewhere that could make it happen. But discontent is growing. The financial gap between the Yankees and everyone else is widening. While a salary cap may not be possible, there are other ways to control what has become a very flawed and unfair system.


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