November 16, 2018

A SURPRISING NEW DEAL

I am more surprised than the average fan.

MLBTR reports that MLB signed a huge deal with Fox.

MLB reached a new seven-year, multiplatform agreement with FOX Sports spanning the 2022-28 seasons. Eric Fisher of Sports Business Journal reports that the contract’s rough value is a staggering $5.1 billion — a near-50 percent increase over the total value of the existing agreement between MLB and FOX. Bloomberg reports a similar total figure and notes that on an annual basis, the agreement represents a 36 percent increase over the prior contract.

Major League Baseball owners approved a three-year, $300MM streaming rights deal with DAZN, wherein DAZN will offer a weeknight show whose coverage bounces from game to game throughout the league — “similar to NFL RedZone.”

Under the terms of the television agreement, FOX Sports and FOX Deportes will retain exclusive rights to airing the World Series, one of the two annual League Championship Series and two of the four annual Division Series and the All-Star Game. FOX will also continue to air a pair of games each Saturday, with today’s release indicating that the number of regular season and postseason games aired on FOX will begin to increase in 2022. FOX also secures expanded streaming, social media and highlight rights, per the announcement.

It’s an enormous windfall for the league and one that further places a spotlight on the ever-increasing revenue available to Major League teams in today’s game — even as league-wide attendance dips and World Series ratings fell dramatically. The financial specifics of each team (or of any team) remain unknown as such information (including revenue sharing figures) is not made publicly available.

But in a general sense, each team will benefit by $170 million or around $24 million/team/year starting in 2022.

From a media standpoint, this is not based on the traditional Nielsen TV ratings book. The rights purchase includes multiplatforms, which would include mobile, streaming, on demand, or the next viewing technology platform (such as the next Facebook). Fox is trying to capture those distribution channels, but it is unclear if this Fox deal hampers the growth of MLB's own internet game applications and subscription based streams.

One thing is certain: the news of this huge extension will be on the minds of the superstar free agents who will not take any idea that the owners are poor or hitting a rough revenue patch.

November 15, 2018

HITTING THE IVY PADDED WALL

The happy family facade at Clark and Addison is beginning to crack.

The national media is confused by how the Cubs front office is acting this off-season. Even local writers have woken up to the prospect that the Cubs may not be the Midwest, free spending, big market Yankees.

It began when Theo Epstein post season autopsy, er, press conference left a lasting impression that Theo was not happy. He stressed the fact that the team has to focus in on performance and not talent. It means highly prized prospects have to perform better in order to keep their spot. But on the flip side, the Cubs brass have always been enamored with "their guys."  They will keep their guys well past their trade value. And now, Epstein admits, that the 2019 roster improvement will have to come via trades.

It is stunning reversal for the genius baseball gods. The plan was to draft the best bats available and solve pitching via free agency. Young position players are cheap and controllable up to six years. Veteran reliable pitching, though expensive, is less likely to be busts.  Well, until this year.

The Cubs spent more than $185 million on Yu Darvish, Tyler Chatwood and Brandon Morrow. The next consensus is that the three star pitchers flamed out badly. Darvish had injury problems from the start. Morrow had a long injury history. And Chatwood was plain bad.

The Cubs have drafted 147 pitchers in the past seven years and they have not developed one quality starting pitcher. Last season, Theo-Jed's farm system produced less than 20 innings of home grown pitching talent. It is a disaster. It has crippled the organization.

The quick promotions of Bryant, Schwarber and Happ have created a prospect vacuum in the minors. The best prospects are now at low A, four or five years away from the majors. Triple A is filled with AAA players with little chance to catch on even in a bench role. The minor league system has little trading chips. And the major league roster has very few "marketable" players to other teams because Russell, Schwarber and Happ are now solid .240 hitters which are a dime a dozen nowadays.

What struck the baseball nation odd was the story that in order for the Cubs to exercise the $20 million option on Cole Hamels, the team had to jettison $7 million in salary (Smyly was traded to the Rangers to clear that budget space.)  Now that type of contract shuffling is what a small market team like the Royals, Rays or Marlins would be accused of doing for a long time.

The Cubs have been in the top 5 in spending, just under the luxury tax threshold. The ceiling goes up $9 million to $206 million in 2019. So one would ask why did the Cubs have issues signing Hamels if the team was getting a $9 million budget bump?  Because the soft salary cap and the real Cubs payroll budget are two different things. The Cubs are already committed $350 million to 11 players. This does not include the arbitration awards for players like Bryant, Hendricks, Baez, Russell, Schwarber, Montgomery, Edwards and LaStella. Collectively, these arb players will be paid north of $40 million.

Major caveat: rich people stay rich by not losing money.

Epstein's off-the-cuff remark that the Ricketts have invested $750 million on development around Wrigley Field is telling; the Cubs are secondary in ownership's profit center mindset. You have to realize that the outside development is not owned by the Cubs team. Separate companies own the land and the development of the McDonald's block and the triangle. In fact, the Cubs are a tenant because Wrigley is owned by a different legal entity. Why would Theo know how much the Ricketts invested in the neighborhood? He was told it.

There has always been friction between Epstein, baseball operations and the "business" side of the Cubs run by Crane Kenney and Tom Ricketts. Ricketts wants a return on his "entire" investment and that includes premium events at Wrigley, i.e. concerts or play-off games. When the Cubs bowed out of the playoffs in the Wild Card game, the Cubs lost at least $30 million in gate receipts and the Ricketts enterprises (the hotel, the bars, etc.) lost more than that in revenue. If the business side had counted on annual deep playoff runs in their budget projections, this would have been a huge jolt to ownership.

Perhaps, that is why Epstein has been surly. He cannot buy his way out of bust or dead money deals like he tried to do in Boston. So he has to find a scapegoat, so the hitting coach gets fired after a year (and apparently the pitching coach, Maddon ally Jim Hickey is also out the door.) Epstein blames Maddon for not following "the plan" with Morrow to not pitch him more than two days in a row. Maddon pitched Morrow three times (an extra 6 pitches) that allegedly caused Morrow to get shut down. This deflects the fact that Morrow is a brittle arm, but it gave Epstein some ammo not to extend Maddon's contract. Joe will be a lame duck manager in 2019. And if the league trend continues, he will not be renewed as teams are now hiring inexperienced, stats-savvy guys front offices can control. Such a hiring would save the Cubs at least $5 million in 2020.

As you can tell, these seem to be like nickel and dime, petty things to do. But it may be by necessity. The Cubs have the weakest local television rights contracts for a big market team. In 2020, the Cubs were going to launch their own network. The idea of a multi-billion payday for Cubs broadcasts is now a pipe dream after the Dodgers deal blew up in Time Warner's face. Cable operators are losing subscribers in 2018 at a 300,000/month clip. People will not pay $5/month extra for a sports channel on their already high cable bills. Only a fool would pay a team a Dodger pay-out. (In a telling move, in the past few years, the Steinbrenners, who created the team channel revenue stream,  have divested most of their stake in their YES network.)

It seems that Epstein has hit the wall. He is under strict budget restrictions. That is why there are no rumors, stories or hints that the Cubs are negotiating for Harper or Machado or a starting pitcher like Keuchel. Epstein cannot sign free agents without making room for them in the budget (the Hamels option). He does not have a strong minor league system to either promote players to fill needs or trade prospects for proven talent.

Fans will not complain when the Cubs went "all in" in 2016 to win the World Championship. But now Epstein is sitting a poker table with a very short stack. And he is not happy about it.

November 9, 2018

A DIFFERENT KIND OF PLAYOFF

Baseball is very popular in South Korea. Many KBO stars have made it to the U.S. major leagues. The nation takes pride in its national team when it plays in international contests.

South Korea is a nation of only 51 million. It does field one league with ten sponsored teams (major corporations). The teams play 144 games in the regular season.

But the championship playoffs are interesting alternative to the American version of the post-season.

Five teams make the playoffs in Korea.

The 4th and 5th place teams are the Wild Cards. They play a one game winner-take-all contest. The winner of this Wild Card games goes on to play a best of five series against the 3rd place club the Semi-Playoff.

The winner of the Semi-Playoff plays the 2nd place team in a best of five Playoff series.

Then the winner of the Semi-Playoff series plays the 1st place team for the championship. The championship series is best of seven.

What is clear about the KBO playoff format is that it rewards regular season play. The regular season winner has an automatic berth in the championship series. It also makes teams that finish lower than the league winner to "earn" their way to the championship round.

One negative to this format is that the league regular season winner has to wait until their opponent goes through a playoff gauntlet. This year's Wild Card game was held on October 16. The first championship game (against the 1st and 2nd place clubs) began on November 4.

MLB continues to talk about future expansion or re-alignment. That also means potential more playoff games, which in the current format dilutes regular season accomplishments of the best teams.




November 3, 2018

THE CALL FOR A SET LINE UP

The off-season begins in earnest with option calls and exclusive negotiation periods for free agents.

Roster rebuilds are the bread and butter of winter work for teams.

The Cubs have built a roster of utility players, i.e. players who can play multiple positions, In the past, utility players were bench substitutes, pinch hitters and Sunday starters. But with the new religion of advanced stats and match-ups, lefty righty, situational OBP, shift and base running at end of games becomes more important than having regular starters and bench players.

Joe Maddon loves multi-use guys. He likes to mix and match lineups to opposing starting pitchers. ESPN Chicago notes that in 2018, Joe Maddon wrote out 152 different lineups in 163 games (and that's not even factoring in the pitcher's spot). That's a bump up from 2017 (143 different lineups) and 2016 (130 lineups in the regular season of the championship year).

How does that relate to the top contenders around the league?
The last four World Series teams (2017 Astros, 2018 Red Sox and the 2017-18 Dodgers) averaged 145 different lineups per regular season. All 2018 MLB playoff teams (excluding Cubs) averaged 129.1 separate lineups throughout the regular season. The Dodgers tallied 155 different lineups in 2018 and 147 in 2017 and they made it to the World Series both seasons. The Astros posted 144 new lineups each of the last two regular seasons while the Red Sox were at 134 lineups and the Brewers and Yankees sat at 137 lineups in 2018.

It seems that all teams are  mixing and matching lineups. Front offices are living in a  world of extreme platooning, bullpening and shifting which equates to a lot of different lineups.

If the rest of the league has adopted this philosophy, why would the Cubs be any different?

In his post season press conference, Theo Epstein indicated that some players told him they would like less daily lineup shakeups. A regular lineup is what they felt would be good for them.

 If the Cubs do not make major personnel moves this off-season (due to budgetary and luxury tax restraints), then the only major change would be how the players on the roster will be used in 2019. A regular, set lineup may be that major move.

In the past, starters earned "their job" and kept their position on the field until injury or demotion. Players in the minors worked hard to "earn" a position on a 25 man roster. It is that competition and fear of losing one's spot that keeps a player focused on playing hard and performing well. But when you have a dozen position players vying for 8 daily spots with a manager who likes to mix and match, you know you will play most of the time (but not necessarily a complete game at a time.)

Professional athletes are creatures of habit. They have set pregame routines (almost superstitions). They want to know their role so they can adjust their play to match the manager/team's expectations. There are two components of knowing your position: the place you play in the field and the number spot in the batting order. Most baseball players are more concerned about the latter - - - because where you hit in the order can affect your mental approach in an at-bat.

For example, a lead off hitter has to have the mentality of getting on base so the heart of the order can drive him home. A free swinging lead off hitter cannot "set the table." When the Cubs had Alfonso Soriano hitting lead off, it was not because it make sense but because Soriano demanded the spot because he felt he would see more fastballs he could hit.

Maddon only used the same lineup a total of 5 times in 2018.

Some believe the causes of this non-regular line up were:
1.  Bryant's shoulder injury became an issue and he was out for an extended period of time.
2. Russell's nagging injuries affected his hitting and fielding in such a manner that he needed more rest.
3. Heyward's defense in RF was more important than his hitting (which then improved under Chili Davis securing more playing time.)
4. Contreras' slumping season at the plate caused him to slowly drop down the order.
5. Maddon likes to play favorites with his veterans like Zobrist, giving him more playing time than with Happ or Almora.
6. And the front office pushing Schwarber as a pure hitter so he had to play LF to get at-bats.
7. Maddon's odd approach of putting struggling hitters (including Rizzo) in the lead off spot. (The Soriano philosophy).

Granted, the Cubs won 95 games with this carousel approach. But in the second half of the season, hitting became a real problem and some players may believe it was because of the daily changes in the lineup.

The platoon situation works if you have multiple players who can evenly perform at a high situational level (righty-lefty matchups). But if your roster is filled with .240 hitting utility players, then it really does not matter which ones start a game. The Cubs multiple position player depth is not the same as having a deep bench where the bench player is as good as a starter who earns that position. The bench or role players on the club are now pretty obvious: Schwarber, Almora, Happ, Zobrist, Russell, LaStella, Heyward, Bote. You could start a game with these 8 players, but why would you?

Which players have "earned" a regular starting position? Those players who do not have enough fatal flaws to become a platoon player:

Rizzo at 1B. Bryant at 3B. Baez at 2B/SS.

If a team objectively self-scouts, you can see the need to upgrade all of the other positions with a full time player.  That may be why fans are anxious to see if the Cubs will legitimately go after Bryce Harper and/or Manny Machado. Those players would be penciled in to start 154 games.

Even if the front office is handcuffed into keeping its existing roster, spring training would be an open battle field to determine who will be the starting 8. If Bote can hit enough, that would move Bryant to the outfield. If Russell can regain his ability to hit the ball with power and RBI numbers, Baez can be set at second. Do you trust Almora to be your regular center fielder? Will Heyward be content being only a late inning defensive substitute? This is the perplexing problem the Cubs must address this off-season as Epstein was not happy with the direction of the club as it finished 2018.

Fans are like the players when it comes to a set lineup. They pay to see the best players on their team. If there is a set lineup, they are almost guaranteed to see their favorite player play.