The Weekly Rant: The Mixed Incentives of MLB's International Spending Limits

During the last CBA negotiations, MLB owners had to find areas in which they could restrain spending.  The league's ever-increasing revenues were directed not only into free agent salaries, but also into bonuses for amateur players from both North America and around the world.

While the Players Association resisted changes that would limit big league salaries (excepting the disastrous Qualifying Offer/Draft Pick Compensation scheme), they were certainly willing to budge on amateur spending.  Spending in the First-Year Player Draft (in which amateurs from the United States, Canada, and Puerto Rico participate) had increased dramatically as teams recognized the value in acquiring cost-controllable, young talent.

Similarly, amateurs from the rest of the world (mostly Latin America and Asia) saw their signing bonuses grow richer and richer in an unrestrained market place.  International amateurs could negotiate with any team, meaning they could receive more than equally talented U.S. players, who could only negotiate with the team that drafted them.

A "hard-slotting" system was agreed upon for the draft, which significantly limited what teams could spend on each pick (and the draft as a whole).  The new rules were a significant achievement for Major League Baseball, in that the spending pattern was not only stunted, but reversed.  Harsh penalties, including loss of future high-round draft picks as well as 100% taxes on overspending, have been effective as disincentives; draft spending decreased by over 11% the year after the new rules went into effect.

The clubs weren't as successful in crafting a new policy for international spending.  Many felt that an international draft would be the next logical step to contain spending and also to allocate talent more equitably across the league.  But a laundry list of possible difficulties caused the two sides to table the idea until after the CBA was negotiated*.

*In fact, an international draft may be a long ways off.  Sources I've talked to have said that neither side is really that unhappy with the current arrangement, and it may be more trouble than it's worth to implement a full international draft.

Instead, teams have "bonus pools" for international spending, just as they do in the draft. Players are still free to negotiate with all 30 teams, but some teams have more bonus pool money available (the amounts are determined using reverse-order standings of the previous season). In theory, this system should work just as effectively as hard-slotting in the draft.  But in reality, spending did not decrease, and may actually increase in coming seasons.

Unlike in the draft, the penalties for overspending are just not harsh enough in the international market.  Teams do face escalating taxes on overspending, along with reductions on spending during the next year.  But these disincentives did not deter the Cubs or Rangers from spending millions more than their allotted bonus poll during the most recent signing period.

While those two teams spent more than $8 MM each, the Yankees are prepared to make a mockery of the system.  Some reports estimate the New York club will spend upwards of $18 MM on prospects, which would result in over $12 MM in penalties.  They would be very restricted in the next season's international class, but there is just too much incentive to break the rules.

The return on investment for amateur talent by all lines of thinking is really quite high. Landing just one star player can result in tens of millions of surplus value during pre-arbitration and arbitration seasons. And while money isn't everything in scouting and signing top prospects, it certainly helps.  Some teams obviously feel that there is more to be gained by spending a great deal in one season to land a bunch of top prospects (and basically sitting it out the next year), than by signing one or two highly touted players each July 2.

This will be a perfect storm once the Yankees really get involved.  First, there are the diminishing marginal costs (once you go over by a little bit, it makes sense to go over by a lot).  Then you have a team that has seen its spending in other areas slowed by tougher penalties. The competitive balance tax curtails the free agent market. Hard-slotting restricts draft spending.  The Yankees are severely limited on ways they can spend money efficiently.

Additionally, the Yankees have struggled to add impact talent through the draft (as a result of both their later draft positions and general under-performance in scouting, signing, and developing talent).  It's easy to see why they are prepared to go crazy on this coming year's crop of international amateurs.

Obviously this isn't what Bud Selig envisioned when the new system was drawn up; big market teams like the Cubs, Rangers, and Yankees buying up the top rated prospects from around the world while small market teams fight for the scraps.  One way to change this would be through the previously discussed international draft.

In absence of that possibility, harsher restrictions are needed.  More severe taxes would be the easiest and least intrusive penalty to implement. I would favor more severe and effective disincentives, such as the loss of draft picks for anything worse than minor overspending.  That penalty has worked thus far for hard-slotting, and I think it could be employed similarly in the international market.


Feature Image courtesy of MLB.com.

Alumni Spotlight: Rivalry Wear Co-Founder Dan Hershberg '06

Recently, we highlighted Rivalry Wear, an emerging sports apparel vendor. In case you missed it, the company was founded by two Cornell Alumni, Dan Hershberg '06 and Jorge Lee '07.  We were able to hear from Dan about Rivalry Wear, Cornell, and much, much more.

1. Could you tell us a little about your background, including your time at Cornell?

I’m originally from Philadelphia, where my father has been a Professor at Penn for 40+ years. Despite his best arguments, I chose to enroll at Cornell in 2002. While on campus, I played three years of club soccer for Mundial, spent countless hours with the Lynah Faithful and in between that, somehow managed to get my degree in American Studies. I also made a point to eat at every dining hall on campus and can confirm that Cornell food is second to none.

2. What was your path from Cornell to your current endeavors, particularly Rivalry Wear?

After graduating in 2006, I took a job with ESPN as a production assistant at their Bristol, CT studios. At ESPN I produced and edited montages, as well as other creative pieces that aired nightly on the 11pm and 1am SportsCenter. My work was featured in--and responsible for—the creation of the SportsCenter “Encore” segment, a creative revisit of an important game or series from that night.

In the fall of 2008, I felt a pull towards entrepreneurship and moved home to Philadelphia where I started Philly Phaithful, a business specializing in originally designed Philadelphia sports apparel. Over the last five years, our company has been featured in ESPN the Magazine and Sports Illustrated, as well as on many local networks like Comcast SportsNet and WIP Sports Radio.

During that time, I focused on learning everything I could about the day-to-day operations of running a small business, with the long-term goal of growing the basic concept into a brand with a more widespread appeal.

Even with the launch of Rivalry Wear in November 2013, I still run Philly Phaithful as well as our sister company, Broad Street Broad, a Philadelphia female sports apparel brand started by my girlfriend Christine Blechman, before she moved back into the full-time sector.

3. Why Rivalry Wear? What compelled you to get into the sports apparel industry, and why was this the model you chose?

Rivalry Wear is the result of what I’ve learned running Philly Phaithful. Along with my business partner Jorge Lee (HE ’07), the business model we developed over the last year and a half was designed to address the variety of obstacles I faced while operating Philly Phaithful. As a small business owner, you face a myriad of daily challenges, from customer service and fulfillment to cash flow and marketing on a shoestring budget.

From a customer-facing standpoint, the Rivalry Wear model gives us a platform to provide our customers with a unique opportunity to control the final purchase price of their item through social media interaction, as well as the chance to purchase timely, relevant products.

From a business-facing standpoint, we’ve been able to largely eliminate the sunken cost of inventory, minimize the amount of advertising dollars necessary to promote our brand, and create an advanced schedule that streamlines the production process.

4. How do you envision Rivalry Wear growing? Where are the opportunities for expansion?

While we’re still in the infancy of our business model, we’re quite bullish about the growth potential. Currently, we feature six cities (Boston, Chicago, LA, New York, Philadelphia and the Bay Area) plus a national section, but we’d like to expand into other markets once we’ve laid a solid foundation and worked out any kinks that might develop over the first 6-12 months. There’s also been internal discussion about expanding into college apparel, although that’s probably a little ways down the line.

 5. Where do the ideas for your shirts come from? Some of the designs are very entertaining. 

Currently, all of our concepts originate in-house, although we do have plans to push our “Submit Your Own Design” page for a bit more crowd-soured material in the future. The designs themselves are a team effort, most stemming from brainstorming sessions that focus on current events in the sports world, relevant pop culture themes and often times, random ideas that seem like fun.

6. Could you think of an experience at Cornell that had the largest impact in shaping your professional life?

While it might only seem tangentially related to the path I chose, taking Introduction to Wines my senior year most definitely had the largest impact in my decisions to start my own businesses. Up until my senior year, I never looked at my course selection with a pre-professional eye. That is, I took what was required of me to graduate and didn’t focus on classes where I was completely engaged and enjoying the subject matter.

Taking the class opened my eyes to the fact that a finding a career didn’t have to be solely about work, in the traditional sense. I was fascinated with wine and many people were making a living in the industry, from growing grapes and creating product to selling and marketing a brand. Seeing as how sports had always been my passion, this experience allowed me to think about ways that I could channel that passion into a career and more specifically, the variety of paths I could take to achieve my goals.

7. Do you have any advice for entrepreneurial students interested in sports?

It’s important for students to decide if they want to turn their passion/hobby into their profession. That might seem like a natural progression but in reality it’s not always feasible or even desirable to merge the two.

For instance, I couldn’t have been more excited to take the job at ESPN, but after two years of working there I couldn’t have been more excited to leave. Working 6p-3a, weekends and holidays will do that to you. If being a fan above all else—attending/watching games—is what matters most, I wouldn’t recommend working for a team or sports media.

Often times, it’s more important to know what you don’t want to do, even though it’s usually easier to focus on what you do want. My experience at ESPN didn’t end up in a 20-year career, but it got me to think outside the box about how to pursue a career in sports without sacrificing everything I love about being a fan. In a nutshell, that’s what entrepreneurship is all about: identifying a problem, clearly determining a goal, and then executing a plan to find a solution.

Along those lines, the single biggest piece of tangible advice I ever received is to write things down. From short term to-do lists, to intermediate plans to long-term goals, it’s incredibly helpful to keep everything right in front of you. Having clearly defined goals provides a semblance of structure that a non-entrepreneur might have provided for them.

We would like to thank Dan for taking the time to answer our questions. Don't forget to check back next week for an exclusive interview with Jorge Lee, Dan's co-founder at Rivalry Wear. And while your at it be sure to check out the website if you haven't already. Rivalry Wear Company Website

Batting Leadoff: Extensions As A Market Efficiency

This post originally appeared on Batting Leadoff. Batting Leadoff is a website dedicated to providing readers with premium baseball content. Posts from the site will appear regularly on the Sports Business Society Blog (view the information in the sidebar for updated information).

We all know that teams are loaded with cash right now. Thanks to a large and steady stream of revenue due to new TV deals, teams have been ready to spend big at free agency. That was obvious this offseason: Robinson Cano, Shin-Soo Choo, Jacoby Ellsbury, and Brian McCann can all call themselves very rich men after their contracts were inked. But not all teams can afford that kind of commitment, and even teams that can, can’t make that the order of the day.

The two teams that are shining examples of this are the Atlanta Braves and Los Angeles Dodgers. The Braves are stuck with a horrid TV deal and poor stadium (that they are leaving), and the Dodgers are the opposite; they’re rolling in dough and are willing to pay a premium for any quality player out there. Despite their financial differences, both have decided to utilize contract extensions as a key feature of their payroll allocation.

They together have extended Julio Teheran, Freddie Freeman, Craig Kimbrel, and Clayton Kershaw, and have locked up their stars for quite a number of years. But how much did they save as opposed to market value and arbitration? Let’s take a look.

To examine this, we’ll look at some basic projections for these players against what market value and projected arbitration salaries would be. For argument’s sake, I’ll use the player’s projected arbitration salary as the projected salary for 2014, and approximately then using an approximate 40/60/80 rule (thanks for the tip, Max Fogle) to figure out an estimate of their salaries going forward.

Those are the hardest to estimate because of inflation and the fact that this rule isn’t perfect in estimation, but I just made an estimation using that rule and my only interpretation of their value. And for free agency, I’ll assume that the market value is $5.5 million per WAR with a 5% inflation rate each year.

Clayton Kershaw:

Year	Projected WAR	Arbitration/Market Value (in millions)	Actual Salary (in millions)
2014	5.8	$18.25	$4
2015	5.8	$33.5	$30
2016	5.3	$32.1	$32
2017	5.3	$33.7	$33
2018	5.3	$35.4	$33
Total	27.5	$152.95	$132

Amount of money saved: $20.95 million, worth about 3.13 WAR in 2018.

Freddie Freeman:

Year	Projected WAR	Arbitration/Market Value (in millions)	Actual Salary (in millions)
2014	4.5	$4.9	$5.1
2015	4.5	$8	$8.5
2016	5.0	$11	$12
2017	5.0	$33.4	$17
2018	5.0	$35.1	$21
2019	4.5	$33.1	$21
2020	4.0	$30.9	$22
2021	3.5	$28.4	$22
Total	36	$184.8	$135

Amount of money saved: $49.8 million, worth about 6.15 WAR in 2021.

Julio Teheran:

Year	Projected WAR	Arbitration/Market Value (in millions)	Actual Salary (in millions)
2014	3.0	$.49	$0.8
2015	3.5	$.49	$1
2016	4.0	$4.6	$5.3
2017	4.5	$6.9	$6.3
2018	4.5	$9.2	$8
2019	4.5	$33.2	$11
Total	24	$54.9	32.4

Amount of money saved: $22.5 mil, worth about 2.2 WAR in 2019.

Craig Kimbrel:

Year	Projected WAR	Arbitration/Market Value (in millions)	Actual Salary (in millions)
2014	2.0	$7.3	$7
2015	2.0	$8.5	$9
2016	2.0	$10.5	$11
2017	2.0	$13.4	$13
Total	8	$39.7	$42

Amount of money saved: -$2.3 mil, worth about 0.36 WAR in 2017

As you can see… the Dodgers and Braves will save a lot of money, unless a tragedy were to strike one of these players. My projections are pretty simplistic–just based off of the basic aging curve and estimations of arbitration–but they make a valid point. Free agency is expensive, and teams should not always have to resort to that, especially when it’s their own player.

Teams have the ability to have sole bargaining rights and players often are forced to take a “hometown discount” because–who knows if they’ll still be good by the time they hit free agency! Teams also will save the most money with starting pitchers and position players–it’s much harder to bargain down an excellent reliever. And granted, I split projections on Kimbrel due to the unpredictability of relievers, so although it is a loss, it will more likely be closer to a split-even.

It’s pretty obvious what the conclusion is. Teams are able to structure extensions in such a manner that they can: still pay the same amount during arbitration, avoid a bidding war for their prized players, and likely underpay what will be the market value by that current year. They then can take that extra capital and reinvest it into other areas of the team. It’s all part of how a team can diversify the ways in which they invest in their own team; extensions can be a nice middle ground between the draft and free agency.

Teams like the Dodgers who can afford big contracts can still avoid them, and teams that can’t afford free agency can find a way to provide some stability and retain their homegrown talent–it’s no wonder the Braves have been so good for so long. I fully expect teams to continue to implement this strategy, especially with players of elite quality.

Matthew Provenzano is a sophomore at Cornell University. Matthew is a featured blogger at Batting Leadoff, a contributor for PinstripeAlley.com, and covers Cornell Baseball for Cornell At Bat. Contact Matt at mjp294@cornell.edu or follow him on twitter at @mpro6294.

This post originally appeared on Batting Leadoff. Batting Leadoff is a website dedicated to providing readers with premium baseball content. Posts from the site will appear regularly on the Sports Business Society Blog (view the information in the sidebar for updated information).

Teams on the Rise Trilogy - Part 1: St. Louis Rams (NFL)

Seahawks’ fans can spend the offseason smiling, just as supporters of the Red Sox and Heat have been for months now. With that, though, leaves just about everyone else wondering if their team’s time is near. For many teams in the MLB, NBA, or NFL, it’s obvious that they will be in the heat of things down the stretch in their respective leagues.

For others, recent memories of failure may have them questioning if a trend is being set or if they can turn it around soon. Taking into account the present state of every team in the three aforementioned leagues, and the positions they have put themselves in moving forward, I’ve concluded which organizations in each league have the brightest futures ahead. This is Part 1 of a trilogy of blogs on this topic, and considering the heightened interest in the NFL, following the Super Bowl, let’s start there.

NFL: St. Louis Rams (Last Winning Season: 2003)

The “Greatest Show on Turf” turned from a thriller into a comedy not long after their dramatic Super Bowl XXXIV win over the Titans in 2000. Six head coaches, an overthrow of players, and 129 losses later, they’ve climbed their way back to the middle-tier in the NFL, but this stop is merely a temporary one.

The Rams are on their way to becoming one of those teams you don’t want to see on your schedule. Already, they’ve established a defensive core with MLB James Laurinaitis, LOLB Alec Ogletree, DE Chris Long, and the young stud DE Robert Quinn--who finished half a sack away from leading the NFL in that category.

Offensively, Zac Stacy went from being a back-up to a top-notch running back as a rookie, so you could only expect this Maurice Jones Drew-type back to continue to improve. WR Tavon Austin also broke out later in the season as a rookie offensive star, who contributed in the running game as well through end-arounds and other unique plays drawn up by the improved coaching staff led by Jeff Fisher. If they can succeed as a run-first team, which it looks like they can, Sam Bradford will be more comfortable in his return from a season-ending ACL injury.

To put things into perspective, this team went 7-9 with a back-up quarterback, a young defense that proved its tenacity, and two offensive rookies who are on their way to becoming stars. In case that isn’t enough to get the attention of the high-standard fans of their NFC West rival Seattle Seahawks and San Francisco 49ers, however, wait until May. Can you can guess who’s sitting pretty with two early first-round draft picks this year, including the 2nd pick in the entire draft?

 Hopefully you can, because this entire article is about them. If you need help, though, it’s those ____ Rams. I didn’t leave their location blank so you can finish it off for me. I did it because their owner Stan Kroenke bought 60 acres of land in Los Angeles, right as talks of moving an NFL team to LA are rising to the surface. The franchise has a fan base there already, as they played in the Greater Los Angeles Area for just under a century up until 1994. That, though, is a topic for another day. I only mentioned it because it adds a little bit more excitement to this franchise, does it not? Nevertheless, back to the draft.

Their offense still certainly needs help, and they can find what they need on draft day. They can do a lot at number two. My advice would be to go for Jake Matthews, an O-lineman out of Texas A&M, as their O-Line went from bad to dreadful with Jake Long’s season ending ACL injury this past season. They’ll get him back, but he can’t stop 11 guys on his own. Next they should probably look for either another OL or a WR. Tavon Austin is great, but he’s a slot receiver, and they need a true number one WR with some size.

If they can get Sammy Watkins out of Clemson, I will become a Rams fan, as I’d expect that to push them over the top, but they’re more likely to catch guys like Mike Evans--also from Texas A&M--or Marqise Lee out of USC with the 13th pick.

The NFC West is already scary, but I guarantee that it will become scarier in the upcoming seasons. This team can get away with being good without strong play out of Sam Bradford. If Bradford can live up to his potential, though, with the help of the offensive weapons currently developing in their system and the one’s they will acquire in this year’s draft, this team is going to find themselves back where they were in the turn of the millennium with Kurt Warner and Marshall Faulk’s “Greatest Show on Turf.”

That concludes part one of the trilogy. Thank you for reading, comment on whether or not you agree or what other teams you think will rise up in the upcoming seasons, and expect part two to come out in two weeks.

The Weekly Rant: Orioles, Blue Jays, and Red Sox Monopolizing Knuckleballers

"There are two theories on catching the knuckleball... unfortunately, neither of the theories work."          -Charlie Lau

I have always found the knuckleball fascinating, in more than just a gimmicky way.  I think having a one or two knuckleballers in the majors is great, because upper 90's fastballs can get boring when everyone has one.

There's currently one "established" Major League knuckleballer, Cy Young winner and Toronto Blue Jay R.A. Dickey.  There's also a scattering of minor league knuckleballers, that range from fringe major leaguers to basically out-of-baseball hanger-ons. 

I tried to find a list of all active professional knuckleballers, and through an assortment of internet pages I was able to scrap together 12 names.  So here it is, (I hope) a list of all the knuckleballers in American professional baseball, with their 2014 organization and 2013 highest level in parenthesis:

Eddie Gamboa (Orioles, AAA)
Zach Clark (Orioles, MLB)
Zach Staniewicz (Orioles, Rk)
Tomo Ohka (Blue Jays, Ohka received an invitation to Spring Training after pitching in an independent league in Japan last season.)
Josh Banks (Blue Jays, Banks hasn't pitched professionally since 2011.  He also received an invitation to Spring Training.)
R.A. Dickey (Blue Jays, MLB)
Steven Wright (Red Sox, MLB)
Charlie Haeger (Red Sox, AAA)
Eddie Bonine (Padres, AAA)
Blaine Sims (Braves, A+)
Joe Zeller (Unknown, Ind)
Joe Gannon (Unknown, Ind)

The thing you may notice is that the Baltimore Orioles, Toronto Blue Jays, and Boston Red Sox all have multiple knuckleball pitchers in their organizations. This is probably nothing, but it seems noteworthy enough to at least examine.

It's a little odd that these teams are all in the same division.  But when you consider that the Red Sox and Blue Jays have also employed the only successful pitchers to have thrown the flutterball this millennium, it's not so weird.

Indeed, the Blue Jays surplus of knucklers really isn't extraordinary at all. We all know about R.A. Dickey.  Banks seems like just a spring training invite that will help the Jays new catching core practice receiving the pitch.  Ohka probably is there for the same reason, although his pedigree and initial success could make him a little less of a long shot.

The Red Sox may be in a similar situation.  Steven Wright may or not make it as a big leaguer, but as long as he's around, it won't hurt to have another veteran knuckleballer in Charlie Haeger.  The fact that Tim Wakefield is still relatively fresh in everyone's minds probably has something to do with it as well.

Really, the only interesting club is the Orioles.  Perhaps after being dazzled by Wakefield and Dickey for so long, they thought they would like their own version.  They even went out and got Hall of Fame knuckleball specialist Phil Neikro to work with their stable of inexperienced knucklers.

Gamboa and Clark are both recent converts who stalled out after climbing up the organizational ladder throwing traditional stuff.  Stainiewicz, meanwhile, used to pitch in Indy ball, but more recently was a member of the Air Force Reserve, pitching for All-Star teams in the armed services.

Really, the odds are stacked against any of these pitchers being effective in the Majors (besides Dickey, obviously).  But it's worth keeping your eye on teams who stockpile certain types of pitchers.  Knuckleballers just happen to stand out.  Also, it would be difficult for more than a couple teams to employ this strategy.  There are a limited number of ex-knuckleballers willing to teach, current pitchers willing and capable of giving it a try, and expendable rotation spots in the high minors.

But just for the sake of variety, I hope some of these guys can break out. Who knows, maybe there will be an organization that becomes the next "Knuckleball U".

The Evil Empire: Evaluating the 2014 New York Yankees Offseason

Those "Damn Yankees" are at it again. Last season, the Yanks failed to make the postseason for just the 2nd time in the last 19 years, and the first time since the 2008 season. We all remember what took place in the '09 offseason, as the Bombers went all out to sign the top three free agents on the market - Mark Teixeira, A.J. Burnett, and CC Sabathia.

The team proceeded to win the World Series the following year, with each of the big acquisitions playing key roles; the Steinbrenners certainly hope to replicate those results as seen by the team's trademark free-spending ways thus far this offseason. There were rumbling that management and ownership were supposedly going to make a concerted effort to get under the $189 million luxury tax threshold, but this was laughable from the get-go.

Sure it would have been nice to get under this mark to avoid paying yet another massive tax bill, but it's the Yankees we're talking about. Without further adieu here's an assessment of the Yankees offseason:

Signings
- Joe Girardi (4 year, $16 million): Somehow managed to guide the injury-plagued Yanks to 85 wins. Girardi absolutely deserves to be the 2nd highest manager in the game now, and his 4th place finish in the AL Manager of the Year race displays the respect he garnered after last season.
- Brian McCann (5 year, $85 million): The team got no production whatsoever from the catcher position last year so making a splash right away by signing the 7x All-Star was no surprise.
- Jacoby Ellsbury (7 year, $153 million): The 2x World Series champ got paid like a perennial All-Star despite never making an appearance in the "Midsummer Classic". If Ellsbury can manage to stay healthy though he could definitely take advantage of the short porch in right field for years to come.
- Carlos Beltran (3 year, $45 million): After getting shunned by the Bombers as a free agent in 2005, the veteran finally has the chance to play in the Bronx. Beltran has a lot left in the tank and can still field the position very well.
- Masahiro Tanaka (7 year, $155 million): The Japanese sensation has extremely high expectations to live up to after signing the 5th highest paid contract of all time for pitcher. The Yanks have failed miserably in the past with Japanese pitchers such as Kei Igawa and Hideki Irabu so they better hope Tanaka pans out to be more than just a consistent, third starter.

Departures 
- Robinson Cano (10 year, $240 million to Mariners): Even though he's clearly the best second baseman in the game it was definitely the right move on the Yankees part. No player is worth that kind of contract, and Robbie may struggle to put up the same numbers in the pitcher-friendly confines of Safeco Field.
- Curtis Granderson (4 year, $60 million to Mets): The Yanks felt like it was time to let Grandy walk following a last season due to injuries. Like Cano, Granderson might struggle a bit playing across town in Citi Field these next few years.
- Alex Rodriguez (suspended for 2014 season): Management let out a huge sigh of relief when his suspension was upheld. While the team still owes A-Rod nearly $61 million, not having to worry about the circus he attracts is all the Yankees could have asked for at this point.

Future
- Bullpen/Rotation - Losing the greatest reliever of all time in Mariano Rivera will certainly sting, and it remains to be seen if David Robertson is ready for the challenge. Major question marks surround the starting rotation as well. CC Sabathia is looking to rebound following a forgettable season, Hiroki Kuroda is back after imploding late last year, and the fifth spot is up for grabs with Michael Pineda possibly being a dark horse after not pitching since 2011.
- Outfield/Infield - The outfield is very crowded now with the acquisitions of Ellsbury and Beltran. Between Ichiro and Brett Gardner one of them might have to go; Gardner would certainly attract better pieces at this point in their respective careers. It's definitely going to tough to replace the production they've gotten out of the second and third base positions over the last few years, but Brian Roberts and Kelly Johnson were two cheap, solid signings for the Yanks.

Read more »

Blogger Roundtable: Must-Watch Winter Olympic Sport

What is the most intriguing, must-watch Winter Olympics event and why? Here are our thoughts, now share yours. Be sure to vote in the poll above and comment below to let us know your opinion.

With the 2014 Winter Olympic Games getting underway in Sochi, Russia feelings of nationalism, patriotism, and pride in our country reach peak levels. As the most talented athletes from across the globe step into the national spotlight we will get to view some of the most classic along with some of the most strange events on a daily basis. All of the events are unique in their own sense, but some are clearly more captivating than others.

The little nuances about each sport are what makes each competition so fascinating. Figure skating and snowboarding are critiqued down to every little movement by the participants, luge, skeleton, and speed skating are all about, and bobsled and hockey are all about a team first mentality. It is a challenge to pick one favorite event, so we asked our bloggers to help you out.

What is the most intriguing, must-watch Winter Olympics event and why?

Here's a look at what our bloggers had to say:Matthew Hakimian, Featured Blogger- Men's Hockey

There's no doubt that hockey is the most intriguing event at the Winter Olympics. People might say curling or skeleton just because we only watch these sports once every four years, but lets be real here - there is no sport in the Olympics more thrilling than hockey. Unlike basketball, professional hockey stars rarely have the opportunity to represent their nations. When they have the opportunity to do so in Sochi these next couple weeks, it will absolutely be must-watch TV.

Stephen Rosen, Assistant Editor- Curling

Curling. Its a once every four years event. Unlike hockey, snowboarding or even figure skating which get coverage even in non-Olympic years, Curling is only televised during these weeks. For those who don't totally understand curling take a break and watch some of the action on CNBC or USA throughout the week. It is amazing how something that looks so simple can be so difficult. Maybe we should call it the Flappy Bird of Olympic sports. I am excited to continue this once every four year tradition and get totally wrapped in this Olympic's curling events.
Stephen Dreznick, Blog Contributor- Men's Hockey

The most intriguing sport in the Winter Olympics is men's hockey. There is violence, action and suspense all involved. Many of the other sports, such as skiing and figure skating, can be boring to watch at times. Last Olympics, the gold medal game in hockey ended on an overtime goal, in which Canada defeated the United States. The bottom line is that men's hockey is very captivating to watch and is the most intriguing sport in this year's Olympics.
Max Fogle. Editor-in-Chief-Curling

It's curling and it's not even close.  Ten ends of gut wrenching action you can't see anywhere else.  Curlers practice in underwhelming facilities for decades, all without a single paycheck, waiting for their chance at representing their country.  No precision game (darts, archery, bowling, etc.) requires the strategy of curling. And perhaps no other Olympic sport better captures the spirit of amateurism like curling.

What is the most intriguing, must-watch Winter Olympics event and why? Here are our thoughts, now share yours. Be sure to vote in the poll above and comment below to let us know your opinion.

Casual Fan's MLB Offseason Roundup

I think of myself as a decent fan of Major League Baseball. Yet, every spring I embarrassingly find myself puzzled as to how I could miss a fairly notable veteran has changed teams. Maybe I focus too much on other sports (Football, Basketball), but whatever the cause is, I'm here to help others avoid this feeling. Let's take a look at a few noteworthy offseason moves you may have missed.

Let's start off with a couple of acquisitions made by the Arizona Diamondbacks. They acquired Mark Trumbo back in December, via a three-team trade. Despite Trumbo's mediocre average (.250 for his career), the move makes sense for Arizona because of the pop he can offer their lineup. In his three full MLB seasons, Trumbo has averaged over 30 HRs per year, with a low mark of 29. The Diamondbacks had one player hit 15 or more last season.

They also signed veteran pitcher Bronson Arroyo to a fairly sizeable two-year, $23.5 million dollar contract just a few days ago. Arroyo provides veteran leadership, and durability (never once placed on the DL in the bigs) for the D-Backs. This is a move I'm betting most people missed as it didn't get much national attention. Likely because outlets like ESPN have so many other stories on their dockets (Super Bowl fallout, Winter Olympics, a weekend full of basketball, etc.).

Sticking with the theme of veteran pitchers coming to the NL West, a move that may have been overlooked was the Giants signing three-time All-Star pitcher Tim Hudson. San Francisco has us hoping he can recover from the ankle injury that sidelined him at the end of last season. Hudson has never posted an ERA at or above 4 and has won over 15 games in each of his last three full seasons. He's a good signing by the Giants, because there is almost no way he produces less than Barry Zito, the guy he's replacing.

This past offseason Rafael Furcal quietly signed a one-year deal with the Miami Marlins after missing all of 2013. A do-it-all type of middle infielder Furcal has done one thing consistently his whole career, and that's win. He's reached the playoffs in 9 of his first 13 MLB seasons. He could provide a young Marlins team (as if there exists any other kind) with some much needed leadership in the clubhouse.

Heath Bell, formerly known as a stout closer for the Padres and the guy who slid at the 2011 All-Star game. The Rays acquired the veteran reliever through a three-team trade. Although he likely won't close for them, he could be a very useful 7th or 8th inning guy. Bell did have over 40 saves three consecutive years in San Diego, so the talent is there, or at least it was.

Lastly, there's Dexter Fowler, who was traded to Houston this winter. Still fairly young (27), but a veteran in my book seeing as how he's been a fixture in Colorado's outfield since Obama's inauguration. Fowler seems to be forever trapped as someone known for his potential because of modest numbers and freakish athleticism. He's still a solid offensive contributor and covers a ton of ground in the outfield. The biggest reason for this trade flying under the radar, however, is because one of the teams involved is the Astros. Houston over the past three seasons has accrued over 320 loses, and in the process have become completely irrelevant sans the occasional joke at their expense.

This is not to say that these are the only offseason transactions of note. Clearly, the Cano's of the world matter, but most everyone who has had internet access over the past three months is aware of his change in address. These are the guys whose offseason headlines failed to garner headlines outside their local news markets. Hopefully this post helps some people avoid being negatively judged by their baseball-loving fans for not keeping up with hot-stove news this winter.

The Weekly Rant: Starting Pitching Market Trends

 

The offseason is finally winding down, with just a few significant free agents still out there. The highest upside players available are mostly starting pitchers.  While Kendrys Morales, Stephen Drew, and Nelson Cruz are still unemployed, the real impact players left are Ubaldo Jimenez, Ervin Santana, and AJ Burnett.

Some may have anticipated the sluggers waiting on the market, but the high quality starting pitching for hire is surprising.  Burnett has always been in control of his market, so the choosy 36-year-old looking for the perfect one-year deal isn't really an indicator of the market.  But youngish, goodish, durable guys like Jimenez and Santana should have signed their lucrative deals by now, right?

I mean these were pitchers who were close to the top on most people's free agent rankings.  Among the 18 domestic pitchers in MLBTR's Top 50 Free Agent rankings, Santana and Jimenez were ranked No. 1 and No. 5 respectively.  And with older hurlers Kuroda and Burnett ahead of him, the up-and-down Jimenez was actually in-line for the third largest contract among free agent pitchers.

There's a couple reasons why they are still out there.  The obvious reason is they haven't received a contract offer they like.  The big reason why they haven't gotten that kind of offer yet (or why they never will) is because of the Masahiro Tanaka sweepstakes.  Tanaka split the market for starting pitchers into two segments. You either signed before he got posted, or you signed after he did.  No major league deals with starters went through while the Tanaka drama was unfolding. Check out the flurry of activity and then the long gap:

Dec. 3:  Ricky Nolasco signs with the Twins.
Dec. 4:  Scott Kazmir signs with the A's.
Dec: 5:  Phil Hughes signs with the Twins.
Dec. 6:  Scott Feldman signs with the Astros.
Dec. 7:  Hiroki Kuroda signs with the Yankees.
Dec. 14: Bartolo Colon signs with the Mets.
Dec. 16: Posting System Agreement is reached.
Dec. 26: Masahiro Tanaka is posted.
Jan. 22:  Tanaka signs with the Yankees.
Jan. 26:  Matt Garza signs with Brewers.

Obviously teams weren't going to keeps signing players at the rate they did leading up to the winter meetings (or else everybody would have been signed in 45 minutes), but there's no denying it held everybody up. Besides the actual process surrounding Tanaka, the uncertainty of his availability (along with Burnett's more recent drama) also had an effect on the market.

Now I can't prove that the presence of Tanaka will actually reduce the money other starters receive (I think it will a little, especially for a guy like Santana, who the Yankees may have been in on.).  But it definitely pushed the market back about a month.

I decided to take a look at the contracts starting pitchers were projected to sign, compared to the contracts they actually did sign.  I used the previously mentioned Top 50 Free Agent list from MLBTR, and used the predictions from their various free agent profiles of starting pitchers.  I left off Tanaka, Suk-Min yoon, Jason Hammel, and Roy Halladay. These are predictions made by industry experts, and while they are not perfect, they are pretty good.

Rank	Name	Projected		Actual
		Years	Total $	Years	Total $	Date
1	Santana	5	75
2	Garza	4	64	4	50	26-Jan
3	Kuroda	1	16	1	16	7-Dec
4	Burnett	1	12
5	Jimenez	3	39
6	Kazmir	2	16	2	22	4-Dec
7	Nolasco	3	36	4	49	3-Dec
8	Colon	1	10	2	20	14-Dec
9	Arroyo	2	24	2	23.5	10-Feb
10	Feldman	2	17	3	30	6-Dec
11	Johnson	1	8	1	8	20-Nov
12	Hudson	1	9	2	23	18-Nov
13	Haren	1	10	1	10	25-Nov
14	Vargas	3	28.5	4	32	21-Nov
15	Hughes	1	8	3	24	5-Dec
16	Maholm	1	7	1	1.5	8-Feb

You can see there are some notable discrepancies.  There are also a few that are right on.  Remember, some of these deals have important non-guaranteed elements, such as vesting options (Garza or Haren) or incentives (Maholm). Draft pick compensation will also be important to consider when Jimenez and Santana sign.  But there is still a lot going on in this data.

I decided to look at the date the contracts were signed.  This graph has the difference between the total value of the actual contracts and the total value of the projected contracts for each player on the y axis, and the date each player signed on the x axis (It's recorded as "days after Nov. 1", so that January 1= 61 days.)

Overall, the predictions were low (the new TV contracts likely resulted in double digit salary inflation). But the graph really looks like two sets of data when organized like this.  It's pretty clear where the Tanaka sweepstakes took place.  But the difference between the early and late contracts is pretty striking.

At the beginning of the offseason players were getting the same or more in average annual value or years, or both, than they were expected to.  The three domestic starting pitchers to sign in 2014 have all gotten the same or less in all of those categories.  Now this might change a little. If Burnett is really testing the market, he will likely get more than $12 MM.  And, Jimenez should still be able to land north of $39 MM. 

But Santana will probably come in at way under $75 MM.  And you could add another data point in the early signers column if we included Tim Lincecum.  His 2-year, $35 MM contract certainly blew away expectations, and may have been what set the bar so high, at least early in the offseason.

Overall, it seems this year that if pitchers signed early in the offseason, they earned more than expected. For guys signing later in the offseason, (It's only three guys so far), things don't seem so good.  Looking at it from the team perspective, adding your rotation help early didn't generally result in any savings.  It has certainly been an interesting free agent period for starting pitching, and it's not over yet.

Weekly Blog Recap

Here's a rundown on all of the content on the blog this week:

(2/2) Why the Bulls-Cavaliers Trade Means More than You Think 
Incoming freshman Mitchell Myers makes his blog debut with this NBA trade analysis. This in-depth look at what Luol Deng means for the Cavs, and what Andrew Bynum and draft picks meant for the Bulls.

(2/3) Letter to 49er Fans
Featured Blogger Thomas Kroner pens this open letter following the San Francisco's disappointing playoff finish. This unabashedly biased piece comes off like an obituary, and a must-read for Bay Area fanatics.

(2/4) The Weekly Rant: Arbitration and Bullpen Construction
Max Fogle ponders if teams are acquiring veteran relief pitchers in order to keep the arbitration prices of their current bullpen low.  He reaches the conclusion that "proven closers" may actually represent relative bargains in the long run.

(2/5) Blogger Roundtable: Foreign Invasion- International Sports in the U.S.
Assistant Editor Adam Malz rounds up the bloggers for the weekly roundtable. This week's question? Which internationally popular sport has the most potential in the U.S.?  We all chime in without any understanding of how cricket is actually played,

(2/6)  Rivalry Wear Changing the Model
The blog profiles Rivalry Wear, an emerging sports apparel start-up with a unique e-commerce model.  It's innovative founders are two recent Cornell grads, so it's more than worth a read.

(2/7) Event Recap: NHLPA's Alex Dagg and Mathieu Schneider
We finally got around to posting Jon Levitan's recap from this awesome event last semester.  NHLPA officials Alex Dagg (Director of Operations) and Mathieu Schneider (Special Assistant) spoke to SBS members about labor relations in hockey, among a host of topics.  Schneider, a former All-Star and Stanley Cup winner discussed his playing career through a series of work stoppages.

(2/8) Batting Leadoff: Marginal Win Value and Dollars Per Win
Our partners at Batting Leadoff deliver premium baseball content, and this piece is no exception. See what factors need to be considered in evaluating baseball transactions.

Also, check out our Contributors Page to get to know our staff.  Contact information, career plans, and their sporting interests are all there. 

Batting Leadoff: Marginal Win Value and Dollars Per Win

This post originally appeared on Batting Leadoff. Batting Leadoff is a website dedicated to providing readers with premium baseball content. Posts from the site will appear regularly on the Sports Business Society Blog (view the information in the sidebar for updated information).

It is quite natural to spawn opinions on offseason moves that eventually manifest into conclusions that the general manager of Team A is a moron for signing Player B to Contract X. No matter our qualifications or level of knowledge of baseball, there are multiple times per winter us fans are left with the notion that yes, we absolutely have to be smarter than the GM of Team A.

What we do not take into consideration is that within every front office in Major League Baseball, there are dozens of bright analytical and scouting minds who are far more conversant than us. Their scouts can see how one player’s bat speed may be diminishing. Their analytical department knows how a free agent’s skill set will fit in their ballpark far better than we do. Their doctors have medical reports on players that we could only dream of seeing.

The information accessible to these bright minds is far more than we can find on MLB.TV, Fangraphs, and Baseball-Reference. Essentially, front offices make educated decisions dependent on a wealth of knowledge that the public lacks.

There are a multitude of factors that drive every transaction. The Mariners did not invest $240 million dollars in Robinson Cano because they thought he was a pretty damn good second baseman. Inside that decision came scouting insight, statistical analysis, and economic evaluation that indicated it was sensible for the Mariners to blow every single team in the market out of the water.

Of course, there are rudimentary differences in each front office’s valuation of every player. If each team valued every player equally, the market would be far different. Some teams put more weight into the scouting aspect of evaluations, while others rely on regression models to project players forward. Another large factor that is not touched on nearly enough is the marginal value that each player provides his employer.

For a number of years, analysts have looked at the contracts signed by free agents, quantified the value of the free agent, then depicted how much money the market demanded for a single Win Above Replacement ($/WAR). This number has risen annually for the past decade for reasons such as inflation and an influx of TV money among others.

The number for this off-season’s contracts was generally pegged at $6 to $7 million dollars per win. That is to say that if a team is going to sign a player who has consistently posted 2 WAR seasons (league-average), the market values him at around $13 million per season. These numbers are pretty consistent with how the market has played out so far.

However, the money per win valuation has numerous caveats that must be considered. First of all, $/WAR is not a good way to project salaries among elite players. As godly as he is, it’s unlikely that the 10-WAR man Mike Trout would be paid $70 million per year if he were on the open market. Robinson Cano posted a 6 WAR season in 2013, meaning if the market always held true, he would have found a contract that paid him an AAV of around $40 million dollars.

The second caveat is that while WAR is an extremely useful and powerful tool to evaluate players, front offices look far beyond that metric while putting a dollar sign on the value of a player. Another caveat, one which I find most interesting, is that a win is worth a different amount to every team. This in a nutshell is marginal win value.

The basic concept of marginal win value goes like this: a team filled with AAA players wins about 47 or so games in the major leagues while costing around $12 million dollars. From 47 wins on, the team is buying wins in hopes of accruing more revenue from being good. However, if the team buys one win at the market rate of $7 million dollars, the revenue added from increasing their win total from 47 to 48 is worth far less than $7 million dollars. From 47 wins on, it takes marginal analysis to decide if buying more wins is profitable for the team.

A single win carries far different value for teams who are on opposite sides of the spectrum. Several extremely smart people such as Phil Birnbaum and Nate Silver have looked at the marginal win value curve, creating the following graph to depict its true worth.

(Click to enlarge)





This graph is from 2005, so it is fairly outdated. In 2005, Silver found a win to cost around $2 million on the open market. To adjust to inflated contracts and revenue, we would simply raise the graph’s Y value to equate it to today’s contracts, keeping the shape consistent. The graph shows that it is an inefficient allocation of money to keep buying wins from around 60-85. This makes sense because barring a team slipping in one of the wildcard slots, it’s unlikely a team makes the playoffs with 85 wins.

However, the theory states that at 86 wins, the value of the revenue a team makes from extra ticket sales or whatever revenues are driven by playoff excitement begins to exceed the money you are paying for a win. Looking at the graph, you can see that you acquire surplus value buying wins from 85-95 because the marginal value is higher than the $2 million dollar cost of a win in 2005. From 95 on, the value decreases due to the fact that you likely have the division title in the bag and spending money to win upwards of 100 games is rather gluttonous.

There are uncertainties when using marginal win value to dictate your offseason. It is extremely hard to project how many wins a player is worth, especially with the volatility of pitchers or injury-risk players. That, along with other possible variations, makes it extremely difficult for a team to forecast its win totals while entering a season.

The standard deviation between true talent and performance is about six wins in the best projection models, meaning that a team with the talent of an 81 win team could win anywhere from 75 to 87 games. That being said, marginal win value is absolutely something that front offices take into account when deciding if it is profitable to keep spending on their club.

In Part 2, I am going to take a look at some of the most questionable moves that were made this offseason, and try to find each front office’s motives behind the moves. While marginal win value is going to play a large role in this exercise, I’m also going to use a number of other explanations to decipher why these transactions were made.

A lot of this piece was made possible by the fantastic work of people such as Dave Cameron, Lewie Pollis, Phil Birnbaum, and Nate Silver. These articles are fantastic reads and quite informative. Special thanks to Matt Swartz for the correspondence and help in equating Silver’s 2005 graph to the inflated contracts of this offseason. 

This post originally appeared on Batting Leadoff. Batting Leadoff is a website dedicated to providing readers with premium baseball content. Posts from the site will appear regularly on the Sports Business Society Blog (view the information in the sidebar for updated information).

Daniel Schoenfeld is a senior in high school in Evanston, Illinois. He plans on studying business economics while pitching in college next year. He is interested in scouting and statistical analysis, and hopes to use Batting Leadoff as a platform to break into the industry. He’s currently working on a large scale project detailing the indicative factors involved in injury projection of pitchers and is always willing to learn and share. Contact him at dschon711@aol.com and follow him @DanielSchoe.