MLB 2012: Joey Votto, Matt Cain Deals Show Baseball’s New Way Of Business

Joey Votto and Matt Cain are signs of the times in Major League Baseball.

While other sports might be battling for shares and pieces of pies for the players or more control for the owners, baseball is playing by, what seems to be, a completely different set of rules. 

In the past two weeks Joey Votto of the Cincinnati Reds and Matt Cain of the San Francisco Giants signed extensions worth a combined $337.5 million dollars. Cain signed an extension that will keep him out West for through the 2017 season. Votto will remain with the Reds through 2023, making the total value of his extension and the two years left on his current deal $251.5 million dollars. These were not baseball operations moves in my opinion.

When I wrote a paper back in college detailing the organic nature of the economics in baseball it highlighted Alex Rodriguez’s contract as a catalyst for bad deals. As we know, Texas was handcuffed for years by that deal because they couldn’t afford to surround him with anyone other impact players. This will hold true for the Reds, and the only people who are going to pay for it are the fans who have to now pay more at the ball park and the Reds place in the standings once he’s no longer able to produce at the level he is currently. Yes they’ve proven successful in signing two players (Jay Bruce as well) they developed from within, but what about the rest of the club? Do they really feel as though Homer Bailey and Johnny Cueto will lead them to October glory on the mound? Are they comfortable with their bullpen? Scott Rolen isn’t getting any younger, and last I checked their farm was a little thinner after bringing in Mat Latos.

Matt Cain, who resides in a larger market than Votto, and the Giants have a different dilemma on their hands. There is no doubt that, despite his won-loss career record, Matt Cain deserved to be paid as one of the best pitchers in the game. The problem is, that the other guy in the same rotation (Tim Lincecum) has not only put up better numbers overall, but he’s got two Cy Young awards to his name and will no doubt be looking to trump Cain’s deal. Can the Giants afford the both of them? Maybe once Zito is done with his albatross of a contract, but even then you have a lineup that is anemic and the cost of solid position players isn’t cheap.

Business, not baseball, decisions are driving  Major League Baseball in some cases. That Dodgers sale a few weeks back was significant because it drove the prices of a lot of franchises up by no less than $300 million dollars depending on the market. Los Angeles is a historic franchise with lots of history, but are they worth $2 billion dollars? That answer is no (Forbes had them listed in the $1.2-$1.4 billion dollar range). So why the extra cost?

Two reasons: television deals and new stadiums. New stadiums are almost critical if an owner wants to have a world-class product to put in front of our eyes and draw people out to the ballpark. In the last 15 years everyone in the National League East, 3/4 of the West and 5/6 of the Central have new stadiums. Those eye-popping deals correlate with those $12 dollar beers and $9 dollar hot dogs. New stadiums bring more revenue to your ball club because A.) people will always love sports/entertainment no matter what and B.) have you seen the fish tank at Marlins Park? In all seriousness, new stadiums also bring new life to a city, an area and a community. It is a major reason why most towns pony up a big chunk of the bill for a new one. They know it will add dollars, jobs and tourism (see: Marlins, Miami).

Television deals are the most fascinating part in all of this because they are, I feel, the most important part of the package. Isn’t it funny how things work over time? When Ted Turner launched his “Superstation” WTCG (or TBS as we’ve come to know it now) back in the late 1970’s and decided to make the Atlanta Braves “America’s Team” he was looked at by some as ambitious and as  crazy by others. He was able to tap into a market that was being neglected at the time (basic cable watchers) and it proved extremely lucrative for himself and the Braves. By eventually placing them in all 50-states, not only did he make them a brand that people nationwide would recognize (because they were all that was on television) but the effects are still seen today as they still rank annually in the top-3 of most popular major league teams even though they haven’t been seen consistently nationwide since 2007.

Now, everyone wants to follow that model. The Yankees have their own Yes Network which pumps millions into their coffers every year. As do the Red Sox with NESN and other teams have deals with cable affiliates such as Fox or Comcast that pay top dollar for exclusive rights (note:some college football franchises are looking into such deals as well). This provides significant capital on a yearly basis, that also means teams will need to pick up “must see” talent by way of signing them to contracts that may not make sense to us, but is great for viewership when in the right market.

Cincinnati and San Francisco did what made business sense by signing two recognizable names for their clubs to contracts they couldn’t refuse (although with these deals, Matt Kemp’s contract looks like a steal). Unfortunately we will see  how much they will have to bring in others to build a contender considering the size of the contracts and the markets.

One thing is for certain: the business of baseball is booming.

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