Tuesday, May 16, 2006

Revolution, Revisited (Part 2)

[Note: This is part 2 of a 4-part blog post. Part 1 can be found here.]

In his 1988 essay Revolution, Bill James describes the transformation of the minor leagues over the course of the 20th Century. He explains how the "minor" leagues went from being independent competitors to the American and National Leagues in the early part of the century to their status as wholly dependent organs for player development for the "major" leagues. For example, in the early 20th Century, the Baltimore minor league club started recruiting quality players and retaining them, thinking they might be able to compete with the likes of the St. Louis Browns. To respond to this competition, the major leagues entered into deals with minor league clubs restricting their sales of players, and standardizing the terms of such contracts. James notes that this change did not take place overnight, but gradually, the result of series of transactions with the major leagues that provided short-term benefit for the minor league clubs (usually cash and more certainty about their finances), in exchange for less and less control over their players and affairs in the long term.

He laments this change, because it fundamentally alters the incentives of the minor league clubs away from trying to win baseball games. He retells an amusing story from Earl Weaver, who, while managing in the minor leagues, was asked by the big league club to move a player from 1B to 3B. Weaver, knowing that the guy could never play 3B and trying to win the pennant, kept the guy at 1B but submitted false reports and boxscores back to the big league club showing him playing at 3B. Similarly, a few weeks ago XM radio interviewed the general manager of the Nats AAA club, the New Orleans Zephyrs. He explained that a AAA GM's duties have very little to do with player personnel decisions (those are made by the big club); he spends his time thinking up things like the Dizzy Bat Race and getting Al's Pizza and Pasta to pay for a sign in the left-field gap. I think I knew this, but it stands out as a clear example of James' point about the "point" of minor league teams.

So what does James think should be done? He recommends that the ties between major and minor league clubs be severed (essentially via antitrust law), so that the minor league clubs become free to develop and acquire players on their own, and regain the incentive to try to win their league. In other words, no longer would their be 30 MLB clubs, but potentially many more -- James thinks about 60 will be the right number, with another 150 in other independent leagues.

More recent work fleshes out this "open league" concept -- this article by Stephen Ross and Stefan Szymanski is a good introduction to the issues. It is also discussed in Andrew Zimbalist's "May the Best Team Win" and Zimbalist's and Szymanski's "National Pastime". These authors add to James's concept the idea of promotion and relegation, which would help put some order to the new open league system, and also provide incentives for teams to succeed on the field. Promotion and relegation, which is common in professional club soccer in Europe and elsewhere in the world, requires that the best teams in the lower divisions of clubs replace the worst teams in the next highest division, so that even the composition of the "major" or "Premier" leagues is not set but open to those clubs demonstrating success on the field. Szymanski and Zimbalist, in particular, make direct comparison of the economics of European soccer using promotion/relegation and the current MLB closed system.

So what would an "open" major league baseball system look like? Probably a lot like the system we have today, but with some fundamental underlying differences. You could keep the existing MLB, AAA, AA, A leagues in place, but just permit movement of clubs between the leagues. For example, the bottom team in each division could be replaced with the top six teams from AAA, probably with a geographic and regional classification (e.g. Pacific Coast League teams move into the West divisions) to minimize travel burdens. (Promotion and relegation work well in English soccer in part because all of the teams live in a region that is not much bigger than Virginia and North Carolina combined). Goodbye Kansas City, Hello Charlotte. Similar trade-offs would be made between AAA and AA and A.

Another change that I think would work nicely is to have the AL and NL realign into 2 divisions each, with 8 teams in each division (you could add two more teams to the AL, or have two 7-team divisons). The top 2 teams in each division make the playoffs, and the bottom team in each division (4 total) are relegated. For example, based on 2005 standings, Colorado and Pittsburgh would have been relegated in the NL, and Tampa Bay and Kansas City in the AL. You would fill these slots from the four best teams in the AAA minors (2 "western" teams and 2 "eastern" teams).

While the existing exclusive dealing arrangements that prohibit franchise sale and relocation without approval and minor league affiliates would be gone, baseball would be allowed to agree on how the league competition operates, namely how promotion and relegation would work in practice. The key point would be that new clubs could be formed (after meeting some initial criteria) and start participating in the system, probably at the lowest ranks.

What are the benefits of such a system? That will be discussed in Part 3.


At 1:31 AM, Anonymous Will said...

Okay, a few thoughts
Developing young players - how is this going to happen? We can't look to European soccer clubs for the solution here. This would seem to be a huge problem with any scheme that proposes replaces dependent minor leagues with lower leagues whose teams would actually be competing with higher teams. I don't know how this worked before affiliated minor leagues, but players seemed to need a lot less preparation and development back then, so it was probably less of a concern.
Stadiums - Most AAA clubs seem to have parks with capacity ~12,000 fans. Presumably if these teams become independent and can compete for something more meaningful, they might expand or build a bigger stadium, but that would take some time and some probably might not even have the demand to expand. Even if we aren't concerned with stuffing the pockets of MLB, I don't think a small stadium at the premier level benefits anybody.

At 9:21 AM, Anonymous Anonymous said...

I had my own ideas the last time a strike or lockout was threatened in August 2002. Click here and scroll down to August 20.


At 9:28 AM, Blogger DM said...

Part 3 will explain the player development aspect, but there are lots of options. Generally any team could develop academies and youth programs to sign players, similar to what teams are currently doing in the Carribbean, and to what Premier league clubs do. David Beckham was singed by ManU when he was 12. Also, players can be loaned to lower division clubs for playing time, which helps with development.

The amateur draft will have to go, but that is just an artifice of a monopoly trying to provide the competitive balance that the free market typically provides.

As for ballparks, give AAA clubs a share of the MLB TV revenues and they would have the funds to expand. But I'm not sure having smaller parks in the big leagues is so terrible -- it might make the Marlins sell out. ;) Also, the other major benefit of this system is that ballparks are built according to the need/demand, not according to extortion from a monopoly. Public subsidies for ballparks will be radically reduced.

Thanks for the questions. I'll try to provide more answers in later posts.

At 9:30 AM, Blogger DM said...

Thanks, Brick. I'll take a look.

At 9:45 AM, Blogger Brian said...

You're doing this to make my life more difficult ... right? ;)

At 9:48 AM, Blogger DM said...

No, Brian. I'm doing this so you can get a job in baseball. ;)

At 1:02 PM, Anonymous Will said...

I understand the player development model in English soccer (I think) and although it may work fine for soccer, it seems like it would be horribly inadequate for a baseball team. There is a reason why baseball players don't get signed at 12 years old (besides the fact that it's not allowed). The best 12 year-old baseball players very rarely become the best MLB players, or even adequate MLB players. How many kids who play in the Little League World Series end up in MLB (according to the LLWS website 25 out of thousands and thousands)? This brings us to why this development model is inadequate. Too many prospects fail. Forget about 12 year-olds and look at 21-year olds. A little more than half the college players drafted in the first round make it to the big leagues. The number is less than half for high schoolers in the first round and presumably much less for players drafted in later rounds and also for non-US players signed at 16 or 17. When this many of your prospects are going to fail you can't just get by with a youth team or academy and loaning out your players. This is exactly what the current minor leagues exist for. There's a reason teams have 6 minor league affiliates instead of just one. There needs to a place for both the prospects that will reach the majors and the much greater number of prospects that will fail, since we don't know which are which. No other sport has such a high rate of prospect failure, which is why no other sport has such a comprehensive farm system. Maybe I'm missing an obvious solution (or maybe I should wait for Part 3 of this series), but I don't see how an adequate modern player development system could exist with a promotion and relegation system which would necessarily include the elimination of dependent minor leagues.

In the article you linked, the authors propose a situation in which the current league arrangement is found to violate anti-trust law and leagues are left with several alternatives. They present the promotion and relegation scheme as the most likely to be implemented of these and the most attractive. While it might be most attractive for the NBA or the NFL (although they certainly would have their own problems implementing it, mostly the lack of existing minor league teams and their stadiums and fanbases), I don't see how it's a good solution for MLB since the minors play such an important role for the MLB clubs. The first solution they propose to comply with anti-trust laws, splitting MLB in two, looks much more appealing. I'm not saying that it would solve all the same problems that a open promotion and relegation scheme would, but it seems to make a lot more sense for the owners, because I think preservation of affiliated minor leagues would be very important for them.

At 1:16 PM, Blogger DM said...


Really good response, thank you. I think I agree that whether a prospect hits or misses is more uncertain in baseball than in other sports, and I can certainly agree for purposes of this discussion.

That being the case, where there is uncertainy about picking winners and losers among players, I think it is better to have more than 30 entities taking a chance on players. An open system would spread the risk of missing on players among hundreds of teams, not just 30.

I think this is better for both player and teams. In fact, it is probably less risky for a rich team like the Yankees (who will likely remain rich for some time) to let a minor league club assume all the risk in developing a player independently, then purchase them when they are ready for the big leagues. The competition between the Yankees and Red Sox and Mets for such prospects will give the minor league club a pretty good incentive to develop the guy and show he is a solid player.

The affiliated minor league system exists because baseball wants to maintain exclusivity over all baseball in the U.S., not necessarily because it does a better job of developing players. Bill James's essay takes a particular delight in pointing out that this has ultimately hurt the owners (like a king murdered in his bed by his subjects, he says) because they've suffocated any competition in the labor market that they could use against the union (unlike football, where replacement players were used successfully by owners). I'm not sure I entirely agree with James there, but in general I think the current system has less to do with player development that you give it credit for.

Again, thanks for the great comments. I hope you keep them coming.

At 1:57 PM, Anonymous Will said...

Okay, I think I'm starting to see how this works. Unlike today, the vast majority of amateur (college/high school/foreign/whatever) players wouldn't be signed by teams in the premier league. The few that were signed by major-league teams would be the almost major-league ready (like Mark Prior or Ryan Zimmerman) or the spectacularly talented (18 year-old A-Rod). Teams would have a mechanism for owning or protecting only a few players not on the active roster (like the 40-man roster, but it could be a bit bigger). These extraordinary players would get whatever development they need by loaning out to the appropriate level, but the vast majority of player development would occur in players owned by the lower teams. And then when a player on a lower team gets too good, they are sold to a higher team. Is this generally what you are thinking? This makes some sense, but I think is quite different from the English football leagues even though we incorporate their concept of promotion and relegation. It could also present problems if a minor league team wants to hold on to a player who clearly has the talent to be playing at a higher level (bad for the player himself and bad for the other teams in the league). I guess an easy solution to this problem would just be for young players to insist on one-year contracts at the lower levels.

At 3:58 PM, Blogger DM said...

I should probably confess at this point that most of my knowledge of English soccer economics comes from playing Championship Manager (or whatever it's called these days). But I always played in the third division, for the challenge.

One reality of the English system is that most clubs in the lower ranks really have no real shot at reaching the Premiership. (Though there are exceptions -- Fulham was in the 3rd division in the early 90s and are now a mainstay in the EPL). So many clubs at that level focus on developing or showcasing talent for sale to EPL clubs. So in practice you might actually replicate the current MiLB system, where clubs are more focused on player development than winning their league.

But the important thing is that is their choice, not something dictated by a select few. Plus they run the risk of turning off fans that way, and undermining the whole operations. These kinds of tensions are good for fans and for organizations, and are missing from the closed system today.


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