Sat, Feb 16, 2019 - Page 16 News List

Losing teams rewarded in baseball

Bloomberg Opinion

There is a heated debate about why this MLB season is beginning with so many players remaining unsigned. While one theory is that Moneyball-style analytics have led to a new equilibrium where teams have learned not to overpay for players, a simpler explanation might be that teams realized that losses could be more valuable than wins.

This sounds perverse. How could losses be undervalued? The goal in sports is to win, and winning typically means spending money on players, coaches, scouts and front-office brains tasked with assembling a winning team.

While this might be true, professional sports are a business, and the goal of business is to make money. Unfortunately for players and fans, in the MLB, losing games has never been more profitable.

It has taken a long time to get to the point where losing has become such an attractive strategy for teams, beginning about 15 years ago, when Michael Lewis wrote Moneyball about how the Oakland Athletics built a perennial winner for cheap by using analytics to find undervalued players.

In the early to mid-2000s, a big problem was the financial discrepancy between large-market teams such as the New York Yankees and small-market teams such as the Tampa Bay Rays.

In 2004, after acquiring Alex Rodriguez from the Texas Rangers, the Yankees had a payroll that was about six times that of the Rays, with Rodriguez earning almost as much as the entire Rays roster. How could small-market teams compete?

Over the ensuing 15 years, multiple changes have occurred to lower the on-field disparity between large and small-market teams.

The growth of national TV contracts have given all teams a steady source of shared revenue, even when large-market teams are on TV much more frequently than small-market teams.

The sale of BAMTech, the service the MLB created to stream games online, provided a one-time windfall to team owners. A luxury tax on payrolls penalized spending by large-market teams, which has restrained spending on players.

A bigger change might have been teams becoming thoughtful about what they are trying to accomplish in a given year.

Rather than trying to win as many games as possible, teams began by asking themselves: “Are we positioned to make the playoffs or win a championship this year?” If the answer was yes, they would be more willing to spend money on players to win, but if not, they realized they would be better off spending as little money as possible, even if that meant being one of the worst teams in the league.

Essentially, there is more value in being a team that wins 60 games rather than one that wins 75 games.

There is a good rationale for this. As in all US pro sports leagues, the worst teams are given the best draft picks in the following year’s draft.

Additionally, the salary structure allows teams to control the rights to their draft picks and young talent for years, meaning that draft picks who become good players are often paid significantly less than fair market value would dictate.

Teams also decided there is not much financial penalty to being epically bad rather than mediocre. A certain number of fans will want to go to games regardless of the quality of play. Parents take their kids to eat hot dogs in the sun. People go on dates. The product on the field becomes a sideshow to the main event, which might be the stadium food or amenities.

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