• Boras: New CBA Hurts Big Revenue Teams In Many Ways

    Posted by on March 4th, 2012 · Comments (4)

    Via the Boston Globe

    Scott Boras thinks that because the superpowers in baseball are going to save money on the luxury tax and can’t spend it in the draft because of restrictions in the new Basic Agreement, trade-deadline activity will decrease in time.

    And this is despite the fact that the new playoff format – adding one more wild card to each league – would in theory have more teams trying to make deals to vie for that final berth.

    Extreme or plausible theory?

    While the Red Sox will likely be over the $178 million luxury tax threshold this season, the goal is to be beneath the $189 million threshold by 2014. And Yankees partner Hal Steinbrenner acknowledged to reporters Thursday that they will attempt to be beneath the threshold by then.

    Boras is taking this tax-savings scenario a step further. He figures the savings will simply be profit because the money can’t go toward scouting and player development. Eventually, he reasons, minor league systems will have less depth and ultimately teams won’t be able to make big deals because they won’t have much to give up.

    Not only will the Red Sox and Yankees benefit by paying no luxury tax if they stay under $189 million by 2014, they also will see a significant decrease in the amount of revenue sharing they must pony up.

    But there will be no place to put the money.

    Why? The new Basic Agreement has a tax system in place that severely penalizes teams that go over a limit for spending in the first 10 rounds and more penalties on bonuses over $100,000 from the 11th round on.

    The tax goes from 75 percent if a team spends up to 5 percent above the $100,000 limit, to 100 percent if it spends above 5 percent, and that also triggers a harsher penalty: a team loses a first-round pick for going more than 5 percent over, loses a first- and a second-rounder for being 10 percent over, and loses two first-rounders for being 15 percent over.

    “I think the draft now, with the inability of teams to spend money and the inability to use amateur scouting, is going to have less impact,’’ Boras said. “There are two freight trains going one against another, where you have a collective bargaining agreement where you’ve got the benefits of the luxury tax and you have the detriment of . . . even if you save that money, you just can’t spend it in the draft.

    “You cannot do it internationally anymore. You’re going to have franchises that may be able to save $20 million-$30 million over a four-year period by keeping the luxury tax, but all the money they save is basically going to go for profit rather than going for development.

    “Any team now that is a successful team annually and says, ‘We’re about player development,’ well, their entire player development budget is going to be about $6 million-$7 million a year. And that’s not a team that’s entirely about player development when you’re making $400 million-$500 million a year.

    “It’s just something that has really taken one of the most important aspects of our game – which is scouting – and put it in the back seat for almost 12-13 teams, really, and the most successful teams. The consequences of that are really detrimental to the franchises that create a great part of the economic success of the game.

    “Those 10 franchises make about 60 percent of the revenues. So we have to be very guarded about what they’ve done to restrict these franchises from doing the things they need to do.

    “Because in the end, when you don’t have players in the minors leagues one year, two years, and three years in a row, you’re going to lose that depth and you’re not going to be able to pick up players in July. The other teams aren’t going to want to trade with you because you don’t have much to trade.’’

    Teams like the Red Sox, who have been able to give large bonuses after the 10th round – in some instances to kids they’re trying to persuade to play baseball over football – may now not have that ability, unless they want to pay a steep price for it.

    It’s an interesting theory. Time will tell if it works out this way.

    Comments on Boras: New CBA Hurts Big Revenue Teams In Many Ways

    1. Raf
      March 5th, 2012 | 7:45 am

      It will probably hurt smaller revenue teams as well. May futz with the minor league teams as well.

      No matter how much you try to dress up chuck steak (smaller revenue teams), rarely will they ever be filet mignon (big revenue teams). Penalizing the big revenue teams isn’t going to help the small market teams, if anything, it will hurt them.

      Beware the law of unintended consequences.

    2. BOHAN
      March 7th, 2012 | 5:13 am

      I think he’s more worried about his pocket being hurt… Less money spent by team fewer big contracts for his clients… and with the taxes on the draft he can’t get his new clients huge bonuses like has in the past… he doesn’t care about the baseball team or the game of baseball in general he just wants to up his 10% or whatever it is he gets

    3. Raf
      March 7th, 2012 | 7:51 am

      @ BOHAN:
      Smart men like Boras will always find a way to find holes and make money.

    4. MJ Recanati
      March 8th, 2012 | 11:08 am

      BOHAN wrote:

      I think he’s more worried about his pocket being hurt… Less money spent by team fewer big contracts for his clients…

      The way I see it, if the big market teams (or the perennially successful ones) lose access to the Rule 4 (amateur) draft then they’ll simply spend more in free agency. As long as Boras represents the most clients then he’ll continue to rake in the highest gross commissions.

      BOHAN wrote:

      and with the taxes on the draft he can’t get his new clients huge bonuses like has in the past…

      The guys that Boras was representing — guys in the top-100 picks of the draft — will continue to get healthy bonuses. A team can’t outspend its total allotted pool number but they can still blow all their money on one or two big bonuses. As a result, Boras will easily be able to get his top amateur clients the big paydays.

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