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Steelrod
02-04-2008, 08:23 AM
Does anyone besides me see the similarities between today's baseball market and real estate of 2-5 years ago. It seems that no player price is too high and the next contract is always bigger that the previous record.
If attendance starts to fall, could we witness something like whats happening in housing, with teams not having sufficient revenue to pay the players?

TDog
02-04-2008, 11:51 AM
That's an interesting observation. Of course, there are teams getting by now by not competing with small payrolls. And there are deals to be had in the player market that don't exist in the real estate market. Teams pay tens of millions for a single pitcher when other teams get nearly the same performance from pitchers being paid a fraction of the price. In the real estate market, the White Sox payroll in 2007 would have guaranteed a nice neighborhood instead of the slums where the team ended up. The White Sox' win total has decreased as its payroll increased in 2006 and 2007.

The real estate analogy is best suited for players, of course, not for teams. The perception is that the big money wins in baseball, but the Yankees haven't won a championship in this millennium. It's the smart money that wins. As long as baseball succeeds in not bringing in any new win-at-all-cost owners who have no experience in the current realities of baseball management, the market eventually will correct itself to the degree that the cost of mediocrity won't be as high.

The way to make money at baseball, as Connie Mack discovered years ago, is not to field a winner. With baseball redistributing its wealth a bit, that's more true today than when it was more profitable for the Philadelphia A's to finish in fourth than first.

Steelrod
02-04-2008, 12:25 PM
To take it to the next step, it's like baseball punishes teams economically for success.
I also am at a loss on coaching. The teams pays coaches to improve players, then pays the players more with they improve! Shouldn't players pay coaches?

jabrch
02-04-2008, 12:40 PM
A difference between real-estate and baseball is that the real-estate market is impacted by capital markets, while baseball owners are so damn rich that they aren't really (certainly not the high end teams and players) impacted by economic environments.

rdivaldi
02-04-2008, 01:15 PM
Attendance is not all that important to teams with huge local TV contracts. The Yankees could draw 0 fans and still have a $100 million dollar payroll with no worries.

Flight #24
02-04-2008, 01:16 PM
The same has been said for years and years - that contracts are too big, too long, and they'll eventually decline. But it never happens.

Only when the top line stops growing will you see any slowing or decrease in salareis, IMO. And that ain't happening anytime soon.

Lillian
02-05-2008, 07:51 AM
Although many of you strongly criticized my analysis, I made the following observations in the first post of a thread I started in January of 2005:



http://www.whitesoxinteractive.com/vbulletin/images/icons/icon1.gif Baseball’s Insane Salaries Reflective Of Something Larger
I was an analyst on Wall Street for many years. My expertise has always been in market psychology, and technical analysis. I have also studied and written extensively about long term economic cycles. It is that background, and base of knowledge that gives me cause to ponder the current state of the economics of our favorite sport.

Baseball’s recent trend of ever escalating, insanely high salaries, for even mediocre talent, is reflective of the same set of causal factors that have produced the greatest bull market in the history of the stock market, and the completely irrational boom in real estate. The latter phenomenon is on a scale of the greatest speculative manias ever witnessed.

This is not the place to explain the reasons why, but it can be irrefutably demonstrated that all such irrational market frenzies end in catastrophic collapses. There are no exceptions, and there cannot be, based upon the laws of economics, and human nature.
That said; let me state something that I can strongly support with logic, and historical precedent. We are most probably near the end of an extraordinarily long economic growth cycle, dating all the way back to the end of the deflationary Depression of the 30’s.
This cycle has witnessed some of the most irresponsible, and imprudent practices of finance, and borrowing imaginable. The refinancing that has been aggressively solicited, and sold to the public in the real estate market, will surely be viewed by historians in the same light as the “Tulip Bulb Mania”, in 17th Century Holland. Future generations will be reading accounts of this madness with similar incredulity, as they ask; “what were they thinking?”

What effect might such a collapse in the economy have on the economics of baseball?
It’s hard to imagine that baseball executives would, or could continue the current player salary trends, in an environment of declining prices, wages, and rising unemployment. During a deflation there is a generalized price and wage decline.
Even if ownership could somehow command the ticket prices required to support these salaries, it would be difficult to justify such excesses to a public, experiencing great financial hardship. People struggling to make ends meet would be much less willing, or able to support grown men being paid tens of millions of dollars, to play a boy’s game.

If you accept the premise that the economy may be headed for a very long and difficult period, how do you think baseball might be affected? What might be the best strategy for management, in order to protect themselves against such a dramatically changing economy?
At the very least, it might not be a good idea to sign a lot of guys to contracts like the ones the incompetent executives on the North Side are handing out to any free agent with a bat and glove!
http://www.whitesoxinteractive.com/vbulletin/images/misc/progress.gif

the1tab
02-05-2008, 08:17 AM
There are a lot of factors that play into player contracts other than how many seats are sold... the Cubs could put the Florida Marlins roster on the field and be over 95% capacity every day. The Yankees & Red Sox would probably be pretty close to that for a while, too. Teams want to see the $$ roll in from Nike, Reebok, Adidas, cable networks, Gatorade, Powerade, Chevy, Ford, etc. They also want to see their label in more than the city in which they play. That's where sometimes the team can make the player bigger than he could achieve in a different market (Derrek Lee), but more times than not its the player that's marketable and takes the label w/ him (Griffey, ARod in Seattle, Clemens in Houston, Nolan Ryan in Texas, etc).

Yes, the economy is slowing and people, at least from what you hear on the television at night, either already or soon will have less disposable income than they have for the past few years. But professional sports have reached the point that there would need to be a simultaneously significant drop in sales of shoes, merchandise, apparel, sports drinks, automobiles, AND tickets for owners to sit down and say "Golly, maybe $20 million for 6 months of work is a little extreme." I just don't see that happening. Not immediately. A recession won't kill professional sports... we would need a depression for there to be a slow down in mega contracts, and if that happens then professional sports is the least of our worries.

All I know is I'm glad I won't be paying $40 a game to see Johan pitch from seats in Citi Field that are practically in the LaGuardia landing zone. And I'm glad I won't be paying $10.50 for a glass of beer to see Manny be Manny. And I'm sure thrilled I won't be paying $7.75 for a hot dog to see Derek Jeter be pretty and over rated. In an edited quotation of the Miller High Life commercial, I'll take quality baseball at a tasty price any day, and I think our Sox will do that this year and for a few years to come.

eriqjaffe
02-05-2008, 10:39 AM
Can we tear down Juan Uribe, build a bigger shortstop in his place and sell it for a profit?

areilly
02-05-2008, 10:49 AM
A closer analogy would probably be the film industry; if people keep coming out to see 'em, people are going to keep paying more to employ 'em. Someone can take the high-exposure, so-so blockbuster route or the highly-acclaimed art-house route, but in the end it's all about entertaining people enough to pry the cost of admission out of their wallets.

Is Derek Jeter the Nicholas Cage of baseball? Kenny Lofton the Samuel L. Jackson? Aaron Rowand the Chuck Norris?

TheVulture
02-06-2008, 02:04 PM
A difference between real-estate and baseball is that the real-estate market is impacted by capital markets, while baseball owners are so damn rich that they aren't really (certainly not the high end teams and players) impacted by economic environments.

If they weren't able to sell out despite the insane cost of going to a game(7.00 beers and 5.00 hot dogs?), I doubt they'd be paying guys 20+ mil a year.