THE BLOG
12/19/2008 05:12 am ET | Updated May 25, 2011

Opening Day: Baseball Business Begins Again

While most fans look forward with anticipation to the first pitch of the baseball season in April, there are some of us (not many, thank goodness) who enjoy what most folks consider baseball's "off-season." The first pitch of the free agency season was thrown out last Friday when the Yankees made an astounding offer for free-agent pitcher C.C. Sabathia. (BTW, there was another famous "C.C." in sports business history -- C.C. Pyle, who was Red Grange's manager in the 1920s, obtaining lucrative contracts for his performances for the Chicago Bears. The "C.C.," it was said, stood for "Cash-and-Carry.")

The Yankees have reportedly offered Sabathia almost $140 million over six years to pitch for the pinstripers. This would make the left-hander the highest paid pitcher ever, and, in the process, make the Yankees contenders once again as they open their new Yankee Stadium in the Bronx. Apparently, no one has informed the Yankees that the country is in a financial crisis, heading downward into a deep recession. With Sabathia inked to a Yankees' contract, it would be "Happy Days Are Here Again!" or so the Yankees' brass hopes.

Whether the Yankees land their zaftig hurler or not, the offer marks the beginning of what used to be called the "Hot Stove League." Would-be contenders will have many choices in the marketplace, although none with the appeal of the former Cy Young winner. Many owners seem oblivious to the fact that the Tampa Bay Rays played brilliantly all season with the second lowest payroll in Major League baseball. Their $43,423,000 total payroll is millions of dollars less than the combined salaries of just Alex Rodriquez and Derek Jeter. Obviously, the thing to do is spend more money!

Many folks ask me, as a former baseball salary arbitrator, whether I think the ballplayers deserve these salaries. I tell them frankly that I don't know what the players are worth other than what the market allows them to obtain. Obviously, some owners think they are worth that amount of money, and those owners have the money to sign their checks.

Baseball free agency -- unlike our national economy, as we have discovered -- operates successfully within a free market model with only modest regulation. A club can pay its players whatever it wishes, as long as it is willing to pay a tax if its total team salary exceeds limits set forth in the Basic Agreement between the club owners and the union. At a time when most people are retrenching in anticipation of that feared layoff notice, a few club owners are trying to strengthen their squads even if it makes little economic sense. Note that the Red Sox, with almost unlimited demand in the market for their tickets, have decided not to raise ticket prices, a fine gesture duly noted. Both the Yankees and Mets will open new stadiums this coming year which should increase their potential income assuming someone out there can afford to purchase those new luxury suites.

The baseball off-season ends with a bang in February with salary arbitration for those players with from three to six years of Major League service. At one time, salary arbitration was our "national sport" in February -- after the final Super Bowl advertisement has run and before March Madness begins. Now, regrettably for fans of the non-baseball baseball season only a very few cases actually go to hearing. Most disputes are settled, because clubs and agents have a fairly good idea what players are worth and most want to avoid the corrosive effect of the actual hearing on the relationship between the players and their clubs. I miss the good old days when the New York Post could fill its back page with cartoons lampooning salary arbitrators for dramatically overpaying or underpaying the players. The Post apparently didn't realize that the arbitrators were required either to overpay (by selecting the player's position) or underpay (by siding with the club).

So while sports fans fill their days with football, basketball and hockey, the aficionados of the business of sports will keep an eye on the real game, the game in the boardrooms and at the negotiating tables. Remember, the deals made this December may actually affect who is playing in the Fall Classic next October.