SBJ/Dec. 20-26, 2010/This Week's Issue

Big contracts signal healthy MLB

Major League Baseball’s once-exclusive group of $100 million player contracts has soared by seven this calendar year to 26, by far the largest one-year spurt of nine-figure deals and another prominent indicator of the sport’s improving fiscal landscape.

Pitcher Cliff Lee’s surprising return last week to Philadelphia, buttressed by a five-year, $120 million contract with a vesting option for a sixth year, ended the high-profile portion of the Hot Stove period for baseball. Joining Lee in the $100 million-plus club this month were Carl Crawford in Boston, Jayson Werth in Washington, and Troy Tulowitzki in Colorado. Earlier this year, St. Louis outfielder Matt Holliday, Minnesota catcher Joe Mauer, and Philadelphia first baseman Ryan Howard signed similarly historic deals.

The list does not include first baseman Adrian Gonzalez, newly acquired by Boston, who reportedly has worked out the parameters of a seven-year, $154 million contract extension to be signed in 2011.

The run of deals represents another manifestation of a league that generated nearly $7 billion in revenue in 2010, setting a new record. Also, nowhere in that list are the New York Yankees and Mets, Chicago Cubs or Los Angeles Dodgers — four clubs typically among the highest earners in MLB. That quartet of teams was involved in nine of the prior 19 $100 million-plus contracts. Just as in the standings this past season, and the San Francisco Giants-Texas Rangers World Series matchup, MLB’s economic middle class continues to grow more assertive.

Additionally, a strengthening U.S. economy and relatively stable attendance pattern for MLB has emboldened many teams to increase their player payrolls. Total MLB attendance has fallen each of the past three seasons, but the 2010 drop-off was a scant 0.4 percent. And baseball exited the Great Recession with nowhere near the double-digit percentage falloff briefly feared at the depths of the economic meltdown.

“We wouldn’t be here if we didn’t have the fans supporting us the way they supported us,” said Ruben Amaro Jr., Phillies general manager, last week at the news conference announcing the Lee signing. The Phillies have sold out 123 consecutive home games and recently created their first waiting list for season tickets. “It’s really plain and simple: We don’t sell out games, we don’t give ourselves a chance to be even in this stratosphere.”

Before 2010, the calendar year with the most $100 million player contract signings was 2000. That year presaged an ultimately aborted attempt by MLB to eliminate two clubs, as well as the bitter 2002 labor negotiations that introduced several fiscal reforms, including enlarged revenue sharing. But now, there is far more confidence around baseball that the industry can absorb the high-dollar player deals without creating economic and competitive schisms.

“We have more competitive balance around the league now than ever, and there’s no doubt that teams are feeling more confident as to the state of the economy than 24 months ago, particularly as it relates to attendance and sponsorships,” said Dave St. Peter, Minnesota Twins president. The club in March signed an eight-year, $184 million extension with Mauer, by far the largest in franchise history and a pact aided significantly by the opening of Target Field.

Others, however, cautioned that this year could prove to be more of an exception, in part due to a trend among recent free agent veteran players to seek out longer deals of five years or more that will likely take them to the end of their careers.

“This year may end up being an outlier, as we have seen certain years ignore trends and end up producing higher and longer deals,” said John Mozeliak, St. Louis Cardinals general manager. Holliday’s $120 million, seven-year deal with the club was driven in large part by the 30-year-old outfielder’s desire to get as many years in his contract as possible.

“It will be interesting to see if more [arbitration-eligible] players sign for long-term deals. With regard to the free agent market, I would think that future years will not show this robust spending, with the exception of a few elite players,” Mozeliak said.

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