Benefitting from a bad economy

Open Thread: Rasner hits the Pacific League
LeBron on CC: 'We're gonna get him'

Over and over again, this week, we’ve heard how the Yankees are going to benefit from a bad economy. The team is flush with money. They have some high-priced contracts coming off the books; attendance remains at record-setting highs; and with a new stadium set to open, the Yanks’ coffers will be full for years to come.

For Yankee fans hoping for a return to dominance, that is, of course, good news. Few teams can afford CC Sabathia, and as the Yanks illustrated on Friday, they’re willing to outbid themselves to show just how willing they are to use their position of economic strength.

Similarly, not many teams are in a position to make offers to Mark Teixeira or A.J. Burnett that will be in line with what these players want. It’s almost as if they’re the Yanks’ — or Angels’ or Dodgers’ — for the taking. The rich will emerge from this Hot Stove League richer.

On the flip side of this economic argument are posts such as this one from Buster Olney. Somewhat spuriously, Olney, playing off of a column by Richard Griffin, claims that this off-season will prove the popularity of the hidden gem or the free-agent bargain. “All of the baseball world is looking for a bargain, so Penny, Johnson and Pettitte could have a wide range of choices,” he writes.

For his part, Griffin parlays the story of Randy Johnson’s inability to come to terms with the Diamondbacks as a sign that third- or fourth-tier free agents may have a tough time finding homes. For once, I’m inclined to believe that it’s not the economy, stupid.

What Olney fails to recognize is that Major League teams are always looking for bargains. That, in fact, is the real message of Moneyball. How do you put together a cost-efficient team with a lot of flexibility and the chance to win? By signing the Brad Penny’s of the world to one- or two-year contracts. Similarly, in Griffin’s case, Randy Johnson isn’t getting a deal that he wants because of his age. How many teams would be willing to give a 45-year-old with a recent history of back problems an $8 million deal, even for one season?

The real story of this baseball economy isn’t personnel based. It’s market based. As the Yankees, Mets, Phillies, Dodgers, Cubs, White Sox, Red Sox, Angels and a few other teams can weather this financial storm with ease, baseball’s middle- and small-market teams are in trouble. In Detroit, for example, the U.S. auto industry is in danger of collapsing. In other markets that don’t enjoy the benefit of a large population, attendance will suffer, and teams’ financial bottom lines may not emerge from 2009 unscathed.

Every year, the free agent bargains get the phone calls, but not every year do the stock markets collapse. How Major League Baseball handles the disparities in wealth that are sure to be magnified this year will be a real testament to Bud Selig’s legacy. Brad Penny? He’ll be fine no matter what.

Open Thread: Rasner hits the Pacific League
LeBron on CC: 'We're gonna get him'
  • Ivan

    Wow, George Bush was so bad he fucked up his fav sport.

    In all seriousness, this is about the yanks being true big time ballers here. Despite the economic problems, the yankees are producing money more than ever and have tons save over. It’s a hude benefit when your going after guys like CC and Tex.

  • christopher

    I dont know if i am in the minority here, but i have always felt that, despite all the money they spend, the yankees have held back on free agents so as not to be seen as big bad bullies buying all the players they can get. Beltran was a perfect example of this

    they spend a lot but do not want to go too far ahead of the 2nd highest team and as such follow self-imposed salary caps.

    I can only hope that they throw this out the window this off season and go on a spending spree. the conditions are right as the economy is hurting other clubs, a new ball park is being built to increase revenues, and this is one of the better FA classes that we have seen in a while and will see for a while.

    here’s hoping for cash to give the other GMs the finger and sign CC (when all is said and done it will be 6/150 or 7/175)

    give Burnett/Lowe and imo Sheets (but it seems they dont like him much) offers that blow away other team or trade for Peavy without including hughes or ajax. If that can be done than great. If the Pads insist on either of those two then we walk away

    Must improve th offense
    Adam Dunn: a player who i think is extremely undervalued. defenitly the most underated player in this years class is Mr Dunn who if he signs w/ the yanks will have the opportunity to mash jp riccardi and prove just how good he is. He should be looked at in comparison to Ryan Howard. How much is Howard going to get in free agency? – probably a contract near that of Tex. Dunn can be had for 1/2 years and 1/2 the price. Are those to players that much different? So look at it as if we are just buying numbers and you see that signing dunn is like walking in a 1/2 price store

    Even with the addition of Dunn, the yanks still need a huge bat in that lineup to make this team right. Aquiring Swisher tells me that the yanks have now put Manny on their list ahead of Tex. We have our firstbaseman and despite his shannigans, manny is actually a better defender than Abreu. There are few hitters in this game who’s presence makes the team better. he can and will do that for AROD.

    Yes, we may have to suffer a year of poor defending in this scenario, but in a year that gets better as AJax replaces Damon in center. Fortunatly the below staff will keep a lot of balls out of play because of their strikeouts

    Add: CC, Peavy(if it gets done w/out Hughes & AJAX)/Sheets/Burnett/,Wang, Joba, Moose (sorry and, i want to see moose win number 300 and I am even more curious to see if he can continually pitch well as a righty Moyer. if he cant then Hughes gets his shot. I know i am one of the few that prefers Mussina and i can understand it. There has never been a free agent pitcher coming off a 20 win season that was less sought after.

  • Januz

    I think that too much is made about the economy, and the financial conditions of baseball teams. During the Great Depression, how many teams went out of business? The answer is none, and conditions were far worse than today.
    The thing that helps baseball, are the new stadiums, and their revenue streams. Even a small market team like the Twins will be ok, because of the new stadium coming in 2010. The only teams in real trouble are Oakland and the Florida teams. The sports in trouble are the NHL (See the Islanders as exhibit A), NBA, and the PGA Tour, not baseball, College Football, College Basketball,or the NFL.

    • Lanny

      No one is going out of business but there will be many teams scaling back and not spending as much as they would on players etc.

      The yanks picked a great time to build a new stadium. Same with the Mets.

      They also picked a good time to have 90 mill come off the books.

      But the bad econ will effect plenty of teams. Baseball and football may skate but it will certainly knock around the NBA and NHL. I def agree with you.

  • mustang

    Wow didn’t see this coming the old ” Yankees buy everything” cry with a little different spin because of the economy. I’m tired of Yankees being villains because they are the Yankees.

  • JeffG

    Well the fact that we don’t stop spending and if FA salaries do in fact go down the teams that benefit from revenue sharing just might be able to grab some nice pickups. Trickle down baseball economics. Thank Mo and Regan – although the latter not so much.

  • Lanny

    Thankfully this bad economy is good for something.

    The Yankees.

    I think I’ll take it even though I work in finance.

    It won’t get better with the new Prez elect either. The liberal Congress won’t let him.

    Don’t pay your mortgages. You will get bailed out soon anyway.

  • Lanny

    The Yanks have also been planning for this off season for 4 yrs.

    Knowing all this $ was coming off the books and all these premium FA’s would be available that would only cost $ and not prospects. Plus a new stadium that brings in mucho revenue.

    Comes out to a perfect storm for the Yankees. Obv they didn’t know the econ would be terrible and teams would be cutting back.

    They get their pick of whatever they want.

    I just hope one is the guy they really need. the in his prime 1b.

  • mustang

    The funny part is that the Yankees can sign 2 or 3 of the top free agents and recoup some if not all of the drafts picks they lose with the guys coming of the books. That’s not even counting picks from the guys who didn’t sign last year.
    If that’s not saying fuck you to the system I don’t know what is.

    • mustang

      Oh! I forgot they also get to subtract part of the cost of building the new stadium from the luxury tax. It must be hard for MLB to sit down.

      • Mike P

        That’s the crucial part. They won’t pay luxury tax (unless their payroll is truly massive) because the debt repayments are subtracted from it. So if the Yanks thought the current payroll was sustainable, with something like $30 million in luxury tax, they have the capacity to raise salary by one CC Sabathia even with the same revenues. If you then triple your corporate box revenue, you really get an idea of just how loaded the Yanks will be for years to come. I’m guessing MLB come up with some alternative luxury tax- because otherwise the Yanks’ll be able to have almost double the payroll of the second highest spending team for years to come.

        • Steve

          Estimates are that the Yanks will go from 450 mil in gross revenues in the current digs to 750 mil in the new stadium. Even with added financing costs of around 100 mil per year, they should still see their profitability double in the new place.

          • Steve

            Check that. Doing a little quick math and guess-timating their profitability will go up by a factor of 5 in the new ballpark. In a bad economy, maybe only quadruple.

      • Ron

        Do they subtract it from the luxury tax? I thought it was subtracted from the revenue sharing, which would serve to further screw the small market teams – no subsidy in ’09 from the Yanks.

  • Steve

    To be fair, I don’t think the Yanks or Mets would have been immune from the bad economy had they not been moving into new ballparks next year.

    If the Yanks were still playing in the old stadium and the Mets playing in Shea, they would likely see their attendance fall like everyone else. But with the new ballparks, even out of towners who aren’t Yankee fans will want to check out the new digs. I’ve sat next to many of them last year saying goodbye to the old place, and I expect to do the same this year with the new place.

  • kenthadley

    I think CC will do a Beltran….offer his services to other teams (west) for less money…..but, with the economy, it will be difficult, except for maybe LAD if they dont sign Manny…..they have a history for signing pitchers to long term contracts……still think he will end up in NY…..question: has AJ had TJ surgery already? if so, it makes him a better risk….

    • Steve

      Yeah, he had it in 03 (I think). But he’s had it already.

      Thats what scaring teams off Sheets, who is a better pitcher. He was running around telling people he had a torn elbow TENDON in September, then by the end of the year the story changed to a torn muscle.

      • kenthadley

        thanks, Steve…..that makes the AJ move more logical, and means stay away from Sheets….he’s a TJ timebomb…….

  • Brian

    The blip on Pettitte: hadn’t counted on him signing elsewhere, but those two picks (if we got some ridiculous trifecta of CC, Burnett, and Lowe) I will indeed tolerate.

    • Steve

      Houston is 20th.

      Nice pick, but I’d still rather have Andy.

  • Januz

    There is no doubt that new stadiums will help the Yankees and Mets, and as a fan, I say thank God for them. As for the Yankees, the profitability of the new stadium in a bad economy will actually be greater than 5 times the factor of being without one. The reason being, you have to factor the projected decline in income without it. Another factor involved in this, is the projected net worth of the team, which according to Forbes, is $1.3b (Second only to the Dallas Cowboys, at $1.6b (Interestingly enough, another team with a new stadium opening up in 2009)). You are seeing how economics, and stadium issues are coming into play in Chicago, with Sam Zell’s difficulty in selling the Cubs. The Cubs are one of baseball’s six trophy franchises (Yankees, Mets, Red Sox, Cardinals, and Dodgers being the others), yet because of the age of Wrigley, he will likely be unable to sell the team until 2010. One thing to keep your eye on will be the prospect of the Olympics coming to Chicago. If it is chosen, you can expect a renovation of the White Sox stadium (Perhaps it can serve as the Olympic Stadium), and then the replacement of Wrigley Field can finally occur, which will really make the Cubs a more valuable and more importantly, a winning team, instead of “Lovable Losers” (Although you can count on the same anti-Yankee Stadium, anti-Atlantic Yards, anti-improvement, and anti-corporate folks to raise their ugly heads and scream “No Corporate Welfare” “No Land Grab”, “No Gentrification” and every ugly charge possible to stop it).
    The new Stadium and Citi Field for that matter, will serve as not only the Yankees and Mets, but will offer tangible economic benefits for the City as well. (I am sure most SANE people will be happy to see the Willets Point “Iron Triangle go, and to see the former Bronx Terminal Market, as a functioning entitity, providing needed tax dollars to the city?).

  • Old Ranger

    Also, the loss of rev.sharing (from NYY) will hurt some of the lesser $$$$ teams. Teams such as Tampa won’t get money from the Yanks, there for thay will not have the money to pay for the players they have, let alone FAs.

    • Steve

      . . . and FLA beat us in 2003, Tampa was in the WS this year, MIN had a play-in game and the Rockies and Padres had one in 2007. We’ve had 200 mil+ payrolls for the past 4 years and haven’t made it past the first round in any of them.

      I’m sure all the Yankee haters will start their belly aching and whining after the Yanks sign CC and whoever else, but the fact of the matter is the competitive balance of Baseball is more diverse now than it’s been in years.

      If there’s an Evil Empire right now, its the Red Sox, not us.

  • ortforshort

    Bud Selig’s legacy was that he was in the right place at the right time. He and Donald Fehr did their best to destroy baseball in 1994 with the lockout/strike. Selig’s position was that unless baseball went to individual team socialism like the NFL or the NBA, it would perish. He was wrong, obviously. A number of factors that Selig had nothing to do with made baseball the money making machine that it has become – even for the weaker economic teams. Retro ballparks, the proliferation of corporate season tickets for perks, the re-emergence of the Yankees as a sort-of dynasty, the McGuire-Sosa steroid home run battles, the extremely balanced competition that emerged without socialism all contributed to the unprecedented popularity of baseball despite Selig’s efforts, not because of them. Moving forward, I agree with the statement that the tough economic times will hit the low income clubs much harder than the high income ones. It did during the previous depression in the Thirties as baseball split into extreme economic haves and have nots with several clubs on the brink of bankruptcy. In a lot of ways, teams like the Yankees and Red Sox look like they’ll be relatively immune to the economic times. You can see people saving a buck to forego going to a Pirates game – its hardly an escape, where I can see fans clinging to the Yankees or Red Sox even more – because it is an escape.

  • jibs

    Your blurb about the Diamondbacks and Randy Johnson seems to be misinformed. The Diamondbacks laid off 10 percent of their front office last week due to budget issues. Johnson offered to take a 50% pay cut in order to remain with the Diamondbacks ($6.5 million for 2009) since he simply wants to stay in Phoenix, but the D-Backs can’t afford it.

    $6.5 million dollars is a bargain for a guy coming off the season the Unit just had. Considering they just gutted their farm system a year ago for Haren, you’d think they’d spend that much for a year of Randy to see if he can reproduce his 2008 performance and “win now”. Johnson is going to get that amount (or more) on the free agent market, bad back or not.