David Murphy: Assessing impact of new TV deals on spending in baseball

Posted: November 08, 2012

INDIAN WELLS, Calif. - Want to make a general manager uncomfortable? Mention the new national television contracts Major League Baseball finalized in October, which will net the sport nearly 70 percent more in annual revenue than the previous batch of deals.

Though the contracts do not begin until 2014, they represent a significant wild card for this year's free-agent signing period as teams decide how much money to allocate to multiyear contracts. And that could work to the detriment of a team like the Phillies.

The topic is clearly a delicate one for baseball's decision makers, as evidenced by the reactions of those who were asked about the potential impact of the new television money. In fact, Ruben Amaro Jr. did not even have to be asked, using an unrelated question to play down the perception that owners are suddenly awash in cash to spend on new payroll.

"What's a little disconcerting is all this talk out there about how flush Major League Baseball is with cash," the Phillies general manager said Wednesday at the GM meetings. "I think it's getting a little overblown. Some of the projected numbers, and I don't really know them, but some of the projected numbers that are out there I know are extremely high."

The new television deals will pay Major League Baseball an average of $1.55 billion over 8 years. To put that in perspective, consider an earlier Reuters report in which analysts estimated that MLB was in line for a 10 percent raise from the $900 million in annual rights fees it was receiving under the old deals. If the numbers are accurate, the new deal ended up being a 67 percent increase, or an extra $650 million each year that is distributed evenly to the league's 30 clubs. That would equate to more than $20 million in additional revenue per team each season.

The potential ramifications are obvious, particularly when you consider the increased spending power that could be wielded by small-to-mid-market teams on a pool of available labor that is underwhelming at a number of positions.

Asked if he thought the new TV money would have any effect on the market, Yankees general manager Brian Cashman replied, "I don't think I'm allowed to say."

"I don't really care what other clubs do with whatever they have, whether it is a lot or a little," he continued. "I can only control what we're doing."

But supply and demand suggests that an influx of new money in the marketplace could serve to inflate player values.

"Hey, listen, if the market is high or low, I've overpaid and I've underpaid," Cashman said. "I'm going to go into the marketplace with what I think somebody is worth."

Of course, worth is relative. And while big market teams like the Yankees and Phillies whose payrolls are already close to or in excess of the luxury-tax threshold might not have the flexibility to deviate from their current valuations, the same might not be true for general managers who are not already burdened with significant future commitments.

Not that those GMs are willing to tip their hand.

"Do we have more money than we did last year? We do, but our payroll was the lowest in the game," said Oakland GM Billy Beane, who declined to speculate on the potential impact of the TV deals on this year's market. "Exactly how much I have, I couldn't tell you."

The early days of free agency are always something of a prisoner's dilemma, with collective restraint the optimal strategy from a utilitarian perspective. If player salaries remain stagnant, every team benefits. Inevitably, though, market forces take over.

The great unknown is how much of a force the new television money will prove to be. Amaro disputed the notion that every team will see its spending power increase, pointing out variables like pre-existing contracts and stadium debt. In a way, though, that underscores the potential impact the new money could have on a team like the Phillies, which faces significant obligations in both categories. The teams who do have increased spending power could drive up values on players who might have been in Amaro's price range in previous offseasons.

At this point, it is too early to tell how things will shake out for the Phillies. Amaro said that current asking prices are high, but that is always the case in the early days of free agency. He acknowledged that he has had trade discussions with other clubs. Third base is a position that could be filled via that route. For now, though, it is very much a waiting game.


Contact David Murphy at dmurphy@phillynews.com. Follow him on Twitter @HighCheese. For Phillies coverage and opinion, read his blog at philly.com/HighCheese.

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