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The Company You Keep February 06, 2006   
by Wilbur Miller

Baseball America recently posted an online article by Jim Callis — in the subscribers’ area — entitled “Royals’ Latest Plan Won’t Work Either.” What’s most striking about the article is that, if you substitute a few names, it could just as easily have been about the Pirates.


Callis points out that the Royals were a model franchise for many years, but under “the cynical business approach” of former Wal-Mart executive David Glass, they’ve become “a complete laughingstock.” Their situation largely parallels that of the Pirates, a once-proud franchise that now owns the longest losing streak in sports. If baseball awarded the title “laughingstock” to a single franchise, it’d probably be the Royals. After all, as Callis notes, they’ve tied or set franchise records for losses in five of the last seven seasons, culminating in last year’s 106-loss nightmare. The Pirates, on the other hand, enjoyed a period of relative “success,” with three consecutive 72- to 75-win seasons from 2002-04. The margin between the two franchises is razor-thin, however, being based almost entirely on two factors. One, the Pirates traded their superstar, Brian Giles, in the middle of a below-market contract and thus got significant value. Without Jason Bay, they’d have been as bad as the Royals last year. The Royals, on the other hand, traded their superstar, Carlos Beltran, during his walk year and realized a more modest return. Two, the Pirates had a brief interlude of good drafting under the previous GM, which is benefiting them now. The Royals’ drafting, by contrast, has arguably been the most inept in baseball for many years. It’s only these factors that relegate the Pirates to Assistant Laughingstock status.

The parallels continued this off-season. After years of refusing to spend significant money on free agents, the Royals acquired the following:

Elmer Dessens, 2 years, $3.4M.
Scott Elarton, 2 years, $8M.
Mark Grudzielanek, 1 year, $4M.
Doug Mientkiewicz, 1 year, $1.85M.
Paul Bako, 1 year, $700K.
Reggie Sanders, 2 years, $10M.
Joe Mays, 1 year, $1M.
Mark Redman (trade), 1 year, $4.5M.

The Pirates, for their part, acquired:
Sean Casey (trade), 1 year, $7.5M (not including Reds paying $1M).
Jeromy Burnitz, 1 year, $6.7M.
Joe Randa, 1 year, $4M.
Roberto Hernandez, 1 year, $2.75M.

If you focus on the quality of the players, there’s little difference in these lists. The principle one is that the Pirates didn’t need as many players as the Royals, thanks to that brief interlude of good drafting. Otherwise, it’s largely a tossup, although if I had to choose I’d give a slight edge to the Royals. Sanders is much better than Burnitz, but is more of an injury risk. Grudzielanek is arguably better than Randa and only slightly younger. Casey and Redman are both below average players at their positions who serve a sort of perverse purpose for their new teams. Casey is a local boy who’s badly overrated by casual fans due to his winning personality and the tendency of many fans to place too much emphasis on batting average. Redman, due to his ability to eat innings, is desperately needed by a team that literally has had trouble in recent seasons finding enough pitchers to stagger through 162 games. Elarton, Dessens and Hernandez all figure to do a decent job in their respective roles.

Callis’ assessment of the Royals’ acquisitions provides a sharp contrast to the reception that the Pirates’ acquisitions have gotten from many people in Pittsburgh:

“Signing third-tier free-agent leftovers may make the Royals better than if they went with the players already on hand, but only marginally so. Just as a pig in a dress is still a pig, a last-place club with Elarton and Grudzielanek is still a last-place club.”

Try substituting “Pirates,” “Randa” and “Burnitz” for “Royals,” “Elarton” and “Grudzielanek.” I fail to see any difference. And lest anybody think Callis is just being snarky, bear in mind that BA does not engage in the sort of hypercritical flamethrowing that Baseball Prospectus is known for. BA takes primarily an insider viewpoint and is almost never harshly critical of teams’ management.

So what does Callis think the Royals should have done in lieu of their spending spree? “Instead of throwing money at Dessens and Sanders, they should be pouring it into the draft and international signings.” Callis contends, for instance, that the Royals should forget MLB’s slotting system and take chances on first-round talents who’ve fallen to later rounds, and pay them first-round money. In his view, “aggressively trying to get better, even if it results in some spectacular flameouts, is preferable to dying a slow, miserable death.” Which is exactly where the Pirates are headed.

What Callis doesn’t examine is the reason for the Royals’ sudden spree. What are the odds that MLB’s two most downtrodden franchises, excluding the more recent expansion team in Tampa, would suddenly and coincidentally decide in the same year to “go wild” in the free agent market? Could there be some related reasons for the Pirates’ and Royals’ decision to open their wallets this year?

Sure. The spending sprees were funded by two sources: revenue sharing receipts, and receipts from MLB’s central fund, which have skyrocketed with the success of MLB Advanced Media. The Pirates’ share of these two sources of revenue has been estimated at $45M, just $2M less than their projected 2006 payroll. In other words, far from opening their wallets, the team’s owners have their major league payroll funded before the first fan comes through the turnstiles. Relative to their revenue, the Pirates are probably actually CUTTING their payroll this year. I’m not familiar with the Royals’ financial situation, but their portion of the revenue sharing funds should have been a little larger than the Pirates’, and their cut from the central fund should have been more or less the same, so their payroll “increase” is probably an illusion as well.

So why run out and spend money in a way that, as Callis contends, won’t really help the team? There’s a simple answer. Callis’ approach will take several years before the benefit becomes apparent. These two teams needed to show people now that they were willing to spend money. The expenditures were painless due to the flood of new revenues, a factor that nobody seems to have noticed. The Pirates, for example, have publicly patted themselves on the back for their sound fiscal management, which was not in fact where the money came from. It didn’t even cut into their profits.

And who is the intended audience for the Royals’ and Pirates’ largesse? Certainly, restive and shrinking fan bases were a part of it. But there’s more. MLB is about to embark on new labor negotiations. Two items might become thorns in those negotiations. One is the revenue sharing money, which is required by the current agreement to be expended in improving the team on the field. The Pirates plainly have not done that, as their payroll is lower than it was before they started receiving the increased revenue sharing. Whether the union will make an issue out of the failure of teams like the Royals and Pirates to adhere to the CBA is unknown, but it might. The other factor is the unexpected explosion of income from MLBAM. At least some observers believe that the players may want a bigger slice of the online pie. MLB’s position in the negotiations would be stronger if it could claim that the revenue was being pumped back into payroll. So I ask again, what are the chances that MLB’s two most poorly run teams (other than Tampa Bay), after years of rock bottom payrolls, suddenly decided at the same time that they could afford, albeit in a VERY limited way, to venture into the market for moderately expensive players, in a year that happened to see a sharp increase in outside revenues and also happened to be the last year of the current CBA? That’s too much of a coincidence for me.

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