Bowie Kuhn

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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Curt Flood and Free Agency – The End of the Reserve Clause

When Derek Jeter reaches 3,000 hits in May or June of 2011, it will be something we, as a viewing public, might not see again in our lifetime. Today, one rarely sees a player play their entire professional sports career with one team. Player movement has been brisk since the mid 1970s.  And, most likely, it will continue to be in the future. Although the 1969 court case of Curt Flood failed to win him his own freedom, Flood began a three year journey to escape from a contract that never set him free. The case, however, would pave the way for others to take their talents to the highest bidder.

Curt Flood in his heyday

Curt Flood signed with the Cincinnati Reds at the age of 18 in 1956. Two other players from his high school team would make it to the majors; Frank Robinson and Vada Pinson. In those days, every player was a free agent to start their career. There was no amateur draft in 1956. Flood saw little action in the majors his first few years. In 1958, Flood was traded to the St. Louis Cardinals. He was only 20 years old. The next few years saw Flood develop into a top flight defensive center fielder for the Cardinals. From 1963-1969, Flood won seven straight gold gloves for his defensive prowess and appeared in three all-star games. His hitting improved from year to year although he never did display much power in an era dominated by pitching.

1969 was a pivotal year for Flood. Flood was traded that winter to the Philadelphia Phillies. Flood did want to report to the Phillies. Flood began to explore his options. Feeling like a slave tied to a contract that had expired, he felt he was free to go wherever he could ply his trade. Unfortunately, the Reserve Clause forbid it. The reserve clause, standard in sports contracts, stated upon the expiration of a contract the player had two choices:
1. Negotiate a contract for the same team
2. Ask to be released or traded
The Phillies did not wish to trade or release Flood. Instead, Flood wrote Baseball Commissioner Bowie Kuhn the following letter:

December 24, 1969

After twelve years in the major leagues, I do not feel I am a piece of property to be bought and sold irrespective of my wishes. I believe that any system which produces that result violates my basic rights as a citizen and is inconsistent with the laws of the United States and of the several States.

It is my desire to play baseball in 1970, and I am capable of playing. I have received a contract offer from the Philadelphia club, but I believe I have the right to consider offers from other clubs before making any decision. I, therefore, request that you make known to all Major League clubs my feelings in this matter, and advise them of my availability for the 1970 season.

Kuhn said no to Flood’s request. Flood sued Kuhn for his freedom. The case lasted three years. In 1970, Flood did not play for anyone. In 1971, Flood played his final season for the Washington Senators following a trade there. It was not a good one. The court case continued to its way through the court system. At the heart of the matter, Flood just wanted to do what average Americans could. Any employee could apply with another employer and find a new job elsewhere to improve wages, working conditions, or improve conditions for his/her family. The reserve clause prevented such freedom for athletes.

In 1972, the case made it to the Supreme Court. The Supreme Court ruled in favor of Baseball and the commissioner. The court sided with the league’s anti-trust exemption. In a 5-3 vote, Flood was financially devastated. The case had taken most of his finances. He would struggle to make ends meet the rest of his life.

Flood and Union Chief Marvin Miller

Despite Flood not gaining his own contractual freedom, he paved the way for many others. In 1975, less than three years later, a federal judge ruled that since two players, Andy Messersmith and Dave McNally, played without a contract for one year, they were free agents. And the era of free agency officially began. Flood’s case may have not benefited himself financially, but today’s athletes owe their millions to Curt Flood.

In 1998, President Bill Clinton and Congress passed the Curt Flood Act of 1998.  Its purpose was to state that “major league baseball players are covered under the antitrust laws.” Clinton stated:

October 27, 1998

Today I am pleased to have signed into law S. 53, the “Curt Flood Act of 1998.” This legislation is the successful culmination of bipartisan efforts to treat employment matters with respect to Major League Baseball players under the antitrust laws in the same way such matters are treated for athletes in other professional sports.

It is especially fitting that this legislation honors a courageous baseball player and individual, the late Curt Flood, whose enormous talents on the baseball diamond were matched by his courage off the field. It was 29 years ago this month that Curt Flood refused a trade from the St. Louis Cardinals to the Philadelphia Phillies. His bold stand set in motion the events that culminate in the bill I have signed into law.

The Act appropriately limits baseball’s special judicially created antitrust exemption by expressly applying the antitrust laws to certain conduct of Major League Baseball; the applicability of the antitrust laws with respect to all other conduct is unchanged. The Act in no way codifies or extends the baseball exemption and would not affect the applicability of those laws to certain matters that, it has been argued, the exemption would legitimately protect (including franchise relocation rules and the minor leagues).

The Act does not in any way limit the standing of the United States to bring an antitrust action. The antitrust laws protect the public’s interest in the efficient operation of the free market system, thereby protecting consumers, and the United States has standing to sue to enjoin all violations.

It is sound policy to treat the employment matters of Major League Baseball players under the antitrust laws in the same way such matters are treated for athletes in other professional sports.

William J. Clinton The White House, October 27, 1998

Resources

Books

Alex Belth: STepping Up

Robert M. Goldman: One Man Out: Curt Flood versus Baseball

Brad Snyder: A Well-Paid Slave: Curt Flood’s Fight for Free Agency in Professional Sports

Newspapers

NO CHANGES NECESSARY, SAYS KUHN
Chicago Tribune; May 29, 1970

Supreme Court to Hear Flood’s Suit
GLEN ELSASSER
Chicago Tribune; Oct 20, 1971

FLOOD TO SUE FOR RESERVE CLAUSE TEST
Chicago Tribune; Dec 30, 1969

U.S. Delays Decision in Flood Suit
Chicago Tribune ; Feb 4, 1970

Court Denies Flood’s Injunction Request
Chicago Tribune; Mar 5, 1970

U. S. Judge Rules Against Curt Flood
Chicago Tribune; Aug 13, 1970

Flood Case in Court
Chicago Tribune; Mar 21, 1972

Journal Articles

http://scholarship.law.marquette.edu/cgi/viewcontent.cgi?article=1428&context=sportslaw

Reconsidering Flood v. Kuhn; Ross, Stephen F.

http://www.gpo.gov/fdsys/pkg/WCPD-1998-11-02/pdf/WCPD-1998-11-02-Pg2150.pdf

Websites
http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=US&vol=407&invol=258

http://www.pbs.org/newshour/bb/law/supreme_court/blackmun/blackmun_opinions.html

http://espn.go.com/classic/biography/s/flood_curt.html

http://money.cnn.com/2006/11/20/commentary/sportsbiz/

http://www.nytimes.com/2011/07/13/sports/baseball/the-curious-case-of-curt-flood-revisits-a-suit-against-baseball.html?_r=0

http://congressionalresearch.com/98-820/document.php?study=Curt+Flood+Act+of+1998+Application+of+Federal+Antitrust+Laws+to+Major+League+Baseball+Players

http://clinton6.nara.gov/1998/10/1998-10-27-statement-by-the-president-on-curt-flood-act-of.html