TEAR DOWN

 Part of the MLB Trade Rumors live chat from December 29:

Cubs (Comment)

2:01

Seems they just gave away Darvish. Also are Cubs in rebuild now.

 

Steve Adams (Response)

2:03

They pretty much did. They're a worse team now with Davies than with Darvish and Caratini, and no one else they acquired will help them before 2023. This team won the division and went to the playoffs -- and despite the fact that no one else in the NL Central is trying, the Cubs are content to just deliberately get worse. I'd be furious if I were a Cubs fan.

 

 "I'd be furious if I were a Cubs fan."

The Cubs are not in a rebuild. They are in a tear down. Epstein left early because he did not want the terrible job to trade away or cut his "friends" (players he signed). One commentator said of the Darvish deal, he did not realize that Jed Hoyer was still working for the Padres.

It does send an awful message to Cub Land.

It was reported that the Cubs lost $200 million in 2020. However, if you look closely, that is an exaggeration. And most of the losses were self-inflicted by ownership.

The Cubs biggest problem was its television deal. Or lack of one. The Marquee Network was a first year failure. Comcast did not pay the Cubs network until October.  The national TV revenue was probably cut to a third. The Cubs current radio rights deal is very small when it burned itself by leaving WGN in a bumbling fashion. The Cubs probably had total broadcast revenue of $25 million.

But the Cubs payroll of $214 million was prorated down to $71 million. Plus, the Cubs saved on not funding any minor league affiliates. Plus, early in the year, the Cubs laid off most of its scouting and development staff. In reality, the "baseball operations" may have lost $50 million in 2020.

But the Ricketts biblical horror has to do with the fact no fans came to games. They claim that 67 percent of their revenue comes from fans attending games. Again, there is no way to know if that is true.  But the argument is mixing apples and oranges as a great portion of Ricketts family revenue comes from non-baseball operations. Wrigley Field is a separate revenue entity. Ricketts lost all extra concert revenues. The bars and restaurants in Gallagher Way had no thirsty fans to spend big money pre and post games. There were several tenants in Ricketts buildings that went out of business, including Joe Maddon's restaurant, meant that rental revenues were seriously down. The hotel was closed for the entire year, so no revenue from that property. The other ancillary businesses, such as the parking lot revenue, also evaporated. But part of the problem of Ricketts financial cries is that they overbuilt the neighborhood, relied on public support at inflated prices, and bombed at creating their own cash cow network. If Ricketts lost $200 million, it is fair to guess that most of it is from bad ancillary business operations.

As it stands today, the Cubs projected 2021 payroll is $122 million. If the Cubs trade of Darvish is any indication, the pending free agents of Bryant (owed $18.6 M), Rizzo ($16.5 M) and Baez ($11 M) are also trade targets (but at much lesser value than Darvish). You might as well add Hendricks ($14 M) to the fire sale bargain bin. If you trade those players, Ricketts lops off another $60.1 million in payroll. NOW, YOU CAN BOAST you are at $62 million, small market level which means you may be able to break even on the baseball side in 2021.

It is obvious that Ricketts and the front office do not care about the fans. The Cubs WON the division this year. The Reds and Brewers already signaled that they were giving up on 2021. The Pirates are already in the early stages of a complete rebuild. The Cardinals lost veterans and seem to be willing to stay pat this off-season. The NL Central is going to be a weak and crappy division that the Cubs could win again if the team stayed as is. 

To say that Davies, Mills, Alzolay and Rea are just as good as Darvish, Lester, Chatwood and Quintana is an insult. The Cubs currently only have TWO outfielders listed on their 40 man roster. It speaks to the fact that the 2021 roster will be filled in with cheap, journeymen players at the end of their careers. It stinks like the teams Epstein pulled together during his rebuild (the ones he wanted losses from to get high, no risk first round draft picks).

The one elephant in the room that the Ricketts cannot see is that the great Cub fandom is not going to pay premium prices to watch a crappy, tear down AAA team play at Wrigley Field. Fans do not have to - - - they have their World Series Championship and those memories. The Cubs lost their "lovable loser" badge in favor of dynasty championship franchise. The latter did not materialize even though the Cubs did make the playoffs. The bitter taste is that the young core that has aged out underperformed (sat on their laurels) with only one World Series appearance.

This tear down will be brutal and further be financially destructive to ownership who still thinks owning the "Cubs brand" is like printing money. The pandemic may not be under control until July, 2021 when the vaccines will be readily available to the general public. The middle class that lost their businesses due to lock down closures, bankruptcies and lack of employment opportunities is not going to be season ticket holders or even cable subscribers as the season starts. 

No one is going to shed a "tear" for ownership during the tear down because the Ricketts are not very well liked in Chicago. The family politics and relationship with Sinclair still irks some fans. People will not pay premium dollars for an inferior product when there is a young and exciting baseball team on the South Side of town.

OFF-FIELD BALK

 Major League Baseball and all 30 of its teams are suing their insurance providers, citing billions of dollars in losses during the 2020 season played almost entirely without fans due to the coronavirus pandemic. But the vast majority of business cases involving the pandemic (contract clauses, payment issues, insurance claims) have failed to give aggrieved parties any relief.

The suit, filed in October in California Superior Court in Alameda County, was obtained Friday by The Associated Press. It says providers AIG, Factory Mutual and Interstate Fire and Casualty Company have refused to pay claims made by MLB despite the league’s “all-risk” policy purchases.

The league claims to have lost billions of dollars on unsold tickets, hundreds of millions on concessions, tens of millions on parking and millions more on suites and luxury seat licenses, in-park merchandise sales and corporate sponsorships. It also cites over a billion dollars in local and national media losses, plus tens of millions in missed income for MLB Advanced Media. It says all of those losses should be covered by their policies.

Since COVID-19 sparked government-ordered shutdowns in March, judges have dismissed more than four times as many business-interruption lawsuits as they’ve allowed to proceed, according to a preliminary analysis by the University of Pennsylvania Law School.

Industry executives say pandemic-related losses may be their biggest ever, and business-interruption claims will likely be part of that, even though many insurers added virus waivers to policies over the past decade following the SARS outbreak in 2003.

The Insurance Journal reports most of the cases tossed out so far had virus-exclusion clauses. When policies don’t have the exclusion, insurers are arguing COVID-19 can’t cause the physical damage or loss required for a business-interruption payout, like from a tornado or flood. And the industry is winning dismissals with that argument, according to the Insurance Information Institute.

“Business-insurance policies are meant to cover physical things,” said Sean Kevelighan, the chief executive at the institute, which has more than 60 insurance company members. “There’s a ways to go” in the legal battle over coverage, but “the beginning of it is encouraging,” he said.

A September win by Farmers Insurance Exchange in California typifies how some judges interpret “physical loss or damage.” A federal judge concluded a barbershop chain couldn’t show its business suffered a “distinct, demonstrable physical alteration.”

Other businesses have also struck out in trying to persuade judges to allow their claims to go to trial over policies that had virus exclusions. A federal judge in Arizona ruled Nov. 13 the Class AA Chattanooga Lookouts and more than a dozen other teams couldn’t overcome the exclusions.

LICENSE TO KILL

 Brew Crew Ball posts:

It’s been a while since we’ve seen a minor league baseball game. The 2020 MiLB season was lost because of the ongoing COVID-19 pandemic, and the status of 2021 is still uncertain as the pandemic continues. However, planning for the minor leagues is still underway. Earlier this year, MLB announced their decision to take control of the minor leagues and restructure them. Small pieces of information have been coming out since then, but nothing substantial has been confirmed yet. That could come as early as next week, as J.J. Cooper of Baseball America reports that MLB is nearing their decision on the minor league teams.

Though the full details are not known, the structure of the leagues appears to be set. There will be the same four top levels, with leagues in each level. Here’s how the Baseball America report breaks down the leagues:

• Triple-A: East and West
• Double-A: Central, South, and Northeast
• High-A: Mid-Atlantic, Midwest, Northwest
• Low-A: California, Florida, Carolina/South Atlantic

News from Fresno situation confirms major changes will happen. Fresno was a AAA team. Under MLB's plan, it was told to change to Class A or fold. Fresno, like most other minor league cities, has a municipal ball park and associated public debt. No team, no lease payments. The strong arm tactic worked. In addition, Fresno and the team owner had to sign off on a legal waiver of claims against MLB as part of the deal. This foretells there will be litigation on the horizon.

Part of the agreement reported on the Fresno deal was that the Fresno team could apply "for a license" to operate a minor league team from MLB. This is another significant change. In the past, each minor league team was an independent business entity or organization. It has "affiliate" agreements in which major league teams would pay money and assign player contracts to the clubs. Players without a major league contract could be bought and sold.

Major league owners through the league somehow believe they "own" the sport. To "license" intellectual property means you own a brand, a product or a service. Baseball itself is in the public domain. But to "license" a team is different than the first rumor that MLB would "franchise" minor league teams. A franchise is a security regulated by state laws. A license agreement is not; it is controlled under contract law. Even though MLB can put in restrictions in these new license agreements, new club owners probably will have little recourse.

Minor League players already have a class action pending against MLB for unpaid wages under federal law. MLB's new minor league plan would eliminate 40 clubs and 1000 players. The cut clubs and players will not be happy with MLB's strong arm tactics. The cities and towns affected by the loss of their minor league teams will be upset. Anyone with a long term view of the sport needs to be troubled because minor league baseball is still one of the major ways to hook young kids into being baseball fans.

It is clear that MLB owners want to save money. They do not think they are getting enough value for the millions spent on minor league development system. It is surprising that the owners finished the short 2020 season with a 35 man taxi squad/minor league practice team. That model makes one wonder if that may be the next minor league contraction (similar to the small NBA development league).

SHUFFLING THE DECK CHAIRS

 Everyone knows the Cubs are a sinking ship. Tom Ricketts continues to declare "biblical" losses during the 2020 season. Theo Epstein could not part the sea of red ink. So Theo decided to bail; he cut a deal where his friend, Jed Hoyer, would retain his job with the new President title. The move saves Ricketts $10 million in Theo's 2021 salary. (The Athletic reported that recently the Cubs laid off 100 employees which we assume does not count the scouting and minor league staff let go early in the year.)

The Cubs are still a highly leveraged (debtor) team. The Ricketts family is also highly leveraged due to their overbuilding around Wrigley Field. The pandemic crushed their real estate holdings as many tenants, including Joe Maddon's restaurant, went out of business. Tom Ricketts had convinced his parents that the Cubs were a money making machine even in bad times (under the Tribune ownership).

But the Cubs bowing out early in the playoffs since the World Championship has hurt the club, both financially and structurally. Theo and Jed put all their eggs in early first round (can't miss) prospects like Bryant, Schwarber, Almora and Happ while overpaying for free agents to fill roster gaps (especially in pitching.) 

Since 2016, the team core (Bryant, Rizzo, Baez, Contreras and Schwarber) have not lived up to high expectations. Instead of a dynasty, the Cubs gained one World Championship (which was a generational accomplishment not to be dismissed in their legacy). But as 2021 is around the corner, the cupboard is bare.

Three fifths of the starting rotation is gone to free agency. The core of Bryant, Baez, Rizzo and Schwarber are in their final contract years. The Cubs minor league system is devoid of any major prospects. The system ranked 26th with Nico Hoerner the only Top 100 prospect.

2021 appears heading toward a "crash and burn" season. The pundits believe the Cubs should trade their pending free agents to get something for them (other than a compensation draft pick). But others note that those players are coming off bad seasons so they have little trade value. A few writers even speculated that the Cubs could non-tender Schwarber to save his projected $8 million arbitration award. No team is going to take Bryant and his $18.5 million projected salary as a rental player, especially with his injury history and poor 2020 stats.

The only players with real trade value are Darvish and Hendricks. But Hoyer cannot be insane to trade away his remaining starters for prospects. Internal candidates to fill the rotation are Mills, Alzolay and Rea. Ian Happ was the only player to show a break out potential to other clubs. But trading Happ leaves Almora the sole center field candidate.

Even though money came off the books (Lester, Chatwood, Quintana), that money appears to be lost in 2021 as Ricketts clearly indicated that the payroll must come down substantially. As of today, there is not one AAA player who projects to be a starting MLB player. 

Another problem is that the fan base may not support another complete tear-down rebuild. The Cubs were good enough in a bad division to have middle round draft picks but it will be more hit and miss since the scouting department was gutted in 2020. Player development has always been an issue for this team. Hoyer indicated that he may rely more on advanced stats than scouting eyes. But that has been the problem with stat overload on major league players (and a rotation of coaches preaching new approaches). 

The Epstein era had the Worst of Times and the Best of Times and now fades back to the Worst of Times. For diehard Cub fans, the White Sox resurgence with young, exciting players, is going to be bitter pill to swallow as the Cubs begin to wallow.

THOSE DARN SOX

Reporters, insiders, pundits and fans are perplexed by the White Sox pivotal off-season move.

MLBTR reports on the announcement and immediate ash fall.

The White Sox announced today that Hall of Famer Tony La Russa is returning to the organization as their new manager for the 2021 season. La Russa has agreed to a multi-year deal according to Scott Merkin of MLB.com.

La Russa managed the White Sox from 1979 and ran through the 1986 season. It appears that La Russa was owner Jerry Reinsdorf’s pick from the beginning. Indeed, ESPN’s Jeff Passan stated that the move to hire La Russa was purely a “Reinsdorf decision” while noting that others in the organizations “have concerns” about La Russa’s ability (or lack thereof) to connect with the club’s young core.

It’s been nine full seasons since La Russa last managed at the MLB level, with the Cardinals, and the game has changed considerably since that time. Data from clubs’ analytics departments has increasingly made its way into in-game decision-making, often generating polarizing reaction from fans, and the sport as a whole has moved to embrace aggressive defensive shifts and pitching strategies that defy the conventional wisdom which permeated big league dugouts during La Russa’s last run.

Since that time, La Russa has remained involved in the game in a variety of roles, most notably serving as the Diamondbacks’ “chief baseball officer” from 2014-17 — a stint that is remembered more for his role in overseeing one of the more lopsided trades in recent memory than for the team’s performance in that time.

After moving on from skipper Rick Renteria, it was reported that the White Sox wanted an experienced manager with a winning pedigree, which prompted many onlookers to speculate about Hinch and former Red Sox manager Alex Cora. La Russa does fit the bill on a fundamental level, having spent 33 years a Major League manager during which time he’s posted a .536 winning percentage, taken home six pennants and won three World Series titles.

Still, to say this hiring bucks the industry trend at this point would be making a colossal understatement, and the decision to bring La Russa aboard has already generated a rather perplexed reaction from those within the game and pundits alike.

LaRussa can be considered an old school hard liner, but he was in the forefront of creating the modern bullpen assignments in managing a pitching staff (more credit could go to pitching coach Dave Duncan). There is a question whether LaRussa's presence will upend the current roster chemistry that exceeded expectations in 2021.

There is no doubt that Jose Abreu can keep the numerous young Latin players in line. It is the vocal, clubhouse guys like Tim Anderson and Dallas Kuechel who could be a concern. They know they are ready, willing and able to win. Will LaRussa be a help or a hinderance?

It was also puzzling that the White Sox did not interview any other candidate. League rules require at least a minority interview, and it is claimed that LaRussa qualifies because his mother was born in Spain. But it did not matter because who is going to ruffle the feathers of Reinsdorf, who is still considered a leader of the MLB owners.

The other key decision points to come will have LaRussa's input: coaching staff and free agent roster decisions. The White Sox need to shore up starting rotation depth and middle relief. Right field is still an open for someone to take it. Will the Sox retain second catcher James McCann or go with their two minor league catchers? Is Michael Kopech ready physically and mentally to assume the #3 starter role in 2021? Or do the White Sox spend money on a big free agent arm like Trevor Bauer (another off-the-cuff speaker who can rub some people the wrong way).

 For years, local media has reported that Reinsdorf desperately wanted to win another World Series. It probably stung when the Cubs won in 2016, putting the White Sox back into little brother position. But the building excitement is on the South Side as the Cubs have hit a hard financial wall and barren farm system.

THE BIG CHANGE IN THE LITTLE SHOW

 The current MLB and minor league cooperative contract has expired. MLB is making a dramatic move on how it treats the minor league system.

In the past, the minor leagues were independent ball clubs. Minor league teams created their own leagues. Those leagues then made agreements with MLB in regard to player contracts. MLB teams draft and sign players to contracts. Those contracts are "assigned" to a minor a league club that has a working developmental agreement. Major league teams helps pay certain costs and provides staff such as head coach and pitching staff to minor league teams. Minor league teams were responsible for scheduling games, paying players, and coaching them for promotion. But not all players on a minor league roster have a major league agreement. During a season, a minor league team can "sell" or assign their player contracts to their affiliate major league team. In the past, this is how many smaller minor league owners made a good deal of money for their teams.

In 2020, the minor league system, relying on attendance as a major revenue source, shut down. 

As a result, MLB teams decided to create 60 man squads (40 man roster plus another 20 players). The teams split them into an active roster (for most of the season) and a training squad at a separate location to fill in for injured players. It did provide top prospects the opportunity to reach the major leagues quicker than the normal path.

The MLB split squad concept worked well. We thought that MLB may decide to eliminate the minor league system in favor of a modified in-house training squad. But MLB had a bigger fish to catch.

MLB had been hinting that it wanted to eliminate at least 40 minor league teams from their affiliate status with major league clubs. Minor league baseball teams, especially the lower classes in small rural markets, were upset by that proposal. 

MLBTR reports that changes for MLB and MiLB’s working partnership have been moved forward.  The agreement between the two entities recently expired, and MLB now plans to bring the minor league system under their governance. MLB took a big step towards accomplishing their goals this week.

MLB released a statement announcing their plans to transplant the minor league offices to MLB’s headquarters in New York City, per Bill Shaikin of the Los Angeles Times. Shaikin also notes that MLB is now referring to minor league clubs as “licensed affiliates.”

By joining the offices to MLB headquarters, the minors are now a branch of MLB, notes Maury Brown of Forbes. Part of this process is the hiring of Peter Freund and Trinity Sports Consultants to help MLB and their new “licensed affiliates” transition. Freund owns minor league clubs at three levels, and he is a partner with the Yankees. His broader responsibilities will be in spearheading MLB’s efforts to build a cohesive minor league system and “implementing a modern approach to player development,” per MLB’s statement.

It would seem that the old independent clubs are now being turned into minor league "MLB franchises" like your local McDonald's or Burger King. If true, MLB (and/or MLB clubs) will get to set standards and practices that all minor league teams must follow.

MLB has taken a lot of heat for their movement in this direction, specifically for insufficient minor league players salaries and the cutting of some 40 teams from the minor league system. Minor league ballplayers recently won early round of class action litigation when the Supreme Court denied MLB’s appeal, thereby granting players to move forward on their labor payroll lawsuit against Major League Baseball. Basically any minor league player since 2009 can now join the suit in suing MLB for violation of minimum wage laws. This is one of the many issues that MLB hopes to address over the coming months.

But one thing is certain: the traditional minor league system is going to drastically changed by MLB.

THE ROAD AHEAD

 The Cubs dismal playoff run ended in another whimper.

Since the 2016 Championship, the Cubs have steadily gone down hill in October.

And it is surprising since they had home field advantage for this run.

The promise of a Cub dynasty was an illusion.

Theo Epstein has one season left on his contract. He will leave the Cubs because he is being handcuffed by the Cubs business side and the bitter taste of bad contracts which led to his down fall.

The Cubs only have 16 players under contract for 2021 (assuming the Cubs are not stupid to exercise $25 million option on Lester).

The projected payroll for those 16 is still $162 million.

Another $16 million is minimum to fill out 40 man roster. That is $178 million.
You have your starting OF and IF in tact, but no bench.
And you only have two starting pitchers (Darvish and Hendricks).
And you are stuck with Kimbrel as your closer (Jeffrees is a FA).

Consideringwe estimate  Ricketts lost at least $75 million on baseball and his failing real estate development (many tenants went bust during the pandemic), the Cubs will not spend any money (again) as the core 4 become free agents after 2021 (Rizzo, Bryant, Baez, Schwarber). There will be no "let's go for it" final charge by this team. It looks more likely it will fizzle before the end of next spring training.

The prospect of another LONG rebuild is here. The Cubs minor league system is barren. Epstein did not draft and develop one quality starting pitcher during his tenure. The post-2020 pandemic season may lead to a very tense stand-off with the players union in the last year of the CBA. Owners will demand lowering the luxury tax (as a means of repressing salaries). Owners will probably try to keep the 60 man bubble taxi squad program in lieu of spending millions on a minor league system that did not play in 2020. (It is important to note that minor league players won the first part of their class action lawsuit against minor league owners and MLB for being paid less than the minimum wage.)

Another fall out from 2020 is that the Cubs (and most clubs) terminated most of their scouting and training staffs in order to save money. The Cubs were an administrative top heavy organization so it is doubtful that Epstein in his final year will have the budget to spend to re-hire his former troops.

If the Cubs 2020 was a lost season, then 2021 could be a dead one.