The Fire Sale: Strategic Planning for Baseball

The term fire sale derives from the 1800s. When most everything was made of wood, fires often swept through business districts quickly.

Boston Red Sox General Manager Ben Cherington

Supposedly damaged goods were placed on sale to acquire monies needed to repair the damage caused by the fire. In baseball terms, the past thirty years has seen an uptick in the fortuitous nature of such deals. Teams often use July and August to assess their chances of reaching the post season. According to Baseball Reference, a fire sale happens when,

“a team dumps payroll by trading away many or all of its expensive players in return for marginal players or prospects. This is usually done when a team feels that it is in a financial crunch, or that it has gone as far as it can with the current group of players and wants to start over with cheaper younger players.”

This year, the Cubs, Astros, and just today, the Boston Red Sox, emptied their rosters of higher priced veterans and began rebuilding their rosters with prospects and a few veterans.

For the Red Sox, their trade of Josh Beckett, Carl Crawford, Adrian Gonzalez, $12 million, and Nick Punto to the Dodgers for Allen Webster, Ivan DeJesus, Jr., Jerry Sands, James Loney, and Rubby De La Rosa is a staggering megalithic trade. For one, the Red Sox traded players that are still owed $261 million over the life of their future contracts; almost $60 million per year the next two years.

Player 2013 2014 2015 2016 2017 2018
Gonzalez $21.00 $21.00 $21.00 $21.00 $21.50 $21.50
Crawford $20.00 $20.25 $20.50 $20.75 $21.00 Free Agent
Beckett $15.75 $15.75 Free Agent
Subtotal $56.75 $57.00 $41.50 $41.75 $42.50 $21.50
Dodgers existing $135.51 $76.66 $48.46 $46.96 $47.46 $29.00
Total $192.26 $133.66 $89.96 $88.71 $89.96 $50.50

All dollars in millions
Chart: http://www.baseballprospectus.com/compensation/cots/

If the Dodgers make the playoffs and/or win the series, this will be the turning point. Or, it could do the exact opposite to the franchise. For the Red Sox, they shed half their payroll, rid the clubhouse of possible personality problems, and they can begin rebuilding their pitching staff.

Fire sales are nothing new. The most famous fire sale was back in early 1920 when Boston Red Sox owner Harry Frazee sold the rights to pitcher/outfielder Babe Ruth to raise money for one of his several Broadway productions. Ruth would go on to be the foundation for the Yankees for the next fifteen years, and, arguably, become the greatest player in baseball history.

Starting in the 1970s, fire sales became more prevalent because of three factors.
1. Divisional play increased the number of teams in the playoffs. Eventually the wild card was introduced and even more fire sales took place as teams went in and out of contention quickly.
2. Free agency increased player movement. Originally it was thought the free agent market would balance the competition. Instead, large market teams threw their money around and began buying up talent.
3. Expansion into Seattle and Toronto, and later Arizona, Florida, Tampa Bay, and Colorado, has flooded the market with teams and changed the talent pool. Teams now scour the four corners of the Earth to find players.

In the 1970s, Charlie Finley attempted to sell off his Oakland A’s players after free agency began. The A’s had won three World Series Championships in a row in the early 70s. When Jim Catfish Hunter went to the Yankees in free agency, Finley knew he couldn’t keep all his players. So, he tried to sell them. Commissioner Bowie Kuhn stepped in forbid the direct sale of players. Finley sued. The Circuit Court ruled the following:

“The Commissioner has the authority to determine whether any act, transaction, or practice is not within the best interest of baseball, and upon such determination, to take whatever preventative or remedial action he deems appropriate, whether or not the act, transaction, or practice complies with the Major league Rules or involves moral turpitude.”

Finley proceeded to trade his players one by one. By 1978, the A’s were broken up, and by 1981, Finley was out as owner.

One of my favorite baseball cards as a kid

In the mid 1980s, the Cincinnati Reds would go through a dismantling, and the San Diego Padres would do the same in the early 1990s. In the 1990s, after expansion, fire sales became the modus operandi for the Montreal Expos. A declining fan base following the 1994 strike meant that the Expos would not be able to keep some of their young stars including a young Pedro Martinez. The Expos then built teams around young players and would trade players for prospects as they neared free agency .

In 1997, General manager Ron Schueler and the White Sox made one of the most famous fire sale trades ever with the “White Flag Trade.” The trade stunned the baseball world as the White Sox were only 3.5 games out of first place when the trade took place on July 31. It staggered the fan base and baseball as Schueler and owner Jerry Reinsdorf felt the team was not going to contend that August and September. It was if they gave up. The San Francisco Giants received pitchers Wilson Alvarez, Danny Darwin, and Roberto Hernández. In return the White Sox acquired Keith Foulke, Bob Howry, Lorenzo Barceló, Ken Vining, Mike Caruso, and Brian Manning. The Giants made the playoffs but lost to the eventual champion Marlins in the playoffs. The White Sox would not contend again until 2000 when they won the Central Division with Foulke and Howry anchoring the bullpen.

Ironically, the Marlins would win the World Series in 1997. That winter they jettisoned the free agent players used to win the World Series. Six years later, the Marlins would win the championship again only to hold a second fire sale. In recent years, Moneyball has changed the game. Beginning with the A’s, and later the Tampa Bay Rays, developing talent and emphasizing sabermetrical analysis has changed the way teams are built. Late in the 2011 season, Theo Epstein took over as President of Baseball Operations for the Chicago Cubs. Over the course of the last year, Epstein, and General Manager Jed Hoyer, have pared the payroll of the Cubs down from $135 million to under $54 million for 2013, with $18 million going to Alfonso Soriano.

Again, ironically, Boston Red Sox General Manager Ben Cherington has done the same to the Red Sox today. The players were all acquired by Epstein when he was the General Manager in Boston. I don’t think fire sales are done. As teams age quickly along with payroll, fire sales may happen more frequently in hopes that teams can reload quickly. In these last two cases, the shocking aspect is that both teams are large market teams.

Further Reading

http://athletics.scout.com/2/655697.html

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2 comments

  1. Love the baseball cards — I have many Topps from 73 and 74 — when I was 8 and 9 years old 🙂 perhaps I am sitting on a fortune!
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