January 14, 2019


The Machado rumors heated up with contradictory reports on the White Sox latest offer
(is it 7 years or 8 years? $200 million or $225 million?)

I read an interesting follow up article on the new aspect of the off-season: "player values."
Player agents are using the old system to value their clients: WAR from past seasons
was worth $8 to 10 million.

Teams have economists look at a new stat: player revenue generation. How much more
revenue does a free agent bring to the team? Teams found it is only about $1.5 million/WAR.

The great divide in valuation is probably better expressed as what a player brings to the table.
If a team is about winning, great. But most teams are now about making money because of
high debt loads and investors wanted return on their investment (dividends).

A team like the White Sox could get a substantial revenue jump with signing Machado.
If he draws in another 5,000 fans a home game, that would be at least $20 million in new revenue.
But that may not be enough to get his $30 million/season asking price. If he draws 10,000 more
fans per game, then he works as a profit center and a good team investment.

Teams like the Nationals are already at their local revenue ceiling. Signing Harper would not
increase the top line at all. How many new season ticket holders will there be if Harper re-signs?
Not many.

This is why teams are more focused on touting and developing their minor league players.
When they get to the majors, they are paid a league minimum. For home games, it costs
the team about $6,800. If a rookie can generate enough buzz to get more than 140 new fans
through the gate, the team is making positive revenue growth at minimum cost.

Teams are now looking at two component for player value. First, past performance metrics.
Second, cost-benefit analysis on whether the player will enhance local revenues. The latter seems
to be gathering more traction in front offices.