The Business Plan

Recently, the A-Rod debacle has a lot of people shooting their mouths off at John Henry, the owner of the Boston Red Sox. They say that John Henry had to only pay a couple million more (nope – the difference was thirty million). They say that Henry should not be talking about financial issues regarding the Yankees when the Red Sox are the other team above the luxury tax at press time. Actually, he’s been talking about this for a while. The Boston Globe had a story on this today.

“In the barrage of criticism aimed at Henry, no one bothered to mention that the Sox owner has been consistent in his calls for some restoration of economic balance in the game, and the need to find a mechanism that somehow will bring the Yankees back to the rest of the industry.
Henry, immediately after the collective bargaining agreement was struck in August 2002: “Another benefit is the luxury tax, which at last is the beginning of an effort to restrain the continuing growth of salaries at the high end of the scale. There could be a new cost consciousness.”
Henry, last fall: “And what if owners, like players, began to demand a return from baseball as opposed to losses? That probably doesn’t matter, though, because at some level of debt, their bankers are going to demand enough return to service the debt and pay down principal. How many team owners have received World Series rings in return for their mountains of debt? I may be overstating the case presently, but not by much. It’s still early in the process of returning sanity to the economics of the game. People won’t forever hang on to the bubble myths of 1999-2000 such as, `the economics of baseball will never make sense.’ ”
Henry is correct. The luxury tax is not meant to be the final step. It is only the first step in which will become a long series of steps destined toward one end – a cap. While I do not advocate caps, I advocate soft caps (a harsh luxury tax) and a minimum payroll, which surprisingly, players did not agree to.
ioned something I find rather interesting. He said he thinks that the Yankees are much closer to their financial limit than we think. After all, they have no backup to their starting rotation other than Donovan Osborne, who you don’t know for a very good reason. They could afford A-Rod because coupled with the Boone, Henson, and Soriano dumps, it only costs them ~$2.6 million more. And yet … they don’t have room enough to go after a better sixth starter? Hey, Kevin Brown has already gotten injured. He took a ball to his body and has a bruise.
Sox critics refuse to take at face value the Sox’ case that yes, while their spending has exceeded the luxury tax threshold — largely with a payroll they inherited from previous ownership — they are attempting to adhere to a business model in which fiscal discipline is exercised and there is a point where they must say no. It happened last winter with Jose Contreras, it happened this winter with Rodriguez, and it will, as Epstein predicted last week, happen again in the future.
It is too facile to suggest that in the game today, there are the Yankees and Sox, and then everyone else. The Yankees are in a league of their own, with their payroll pushing $200 million. The Sox, even with the abundance of resources Henry doesn’t deny having, have limits. The Yankees don’t. And it was hardly the height of hypocrisy for Henry to make that point last week. The hypocrisy is for Sox critics to suggest that A-Rod would be in a Boston uniform today if the Sox had been willing to give just a little more. The truth is, any deal they would have made for Rodriguez would have cost more, much more.
know, I think critics of a team should do their research a little bit more. The Red Sox have said time and time again they have a financial plan – a business plan – and they will not exceed the plan to go get someone. They may try to bend it, but they will not break it. This is good because we will not see any ill-advised investments. The only investment I am a little eerie of is Keith Foulke, but it was not ill-advised.
The New York Yankees are the only team who do not have a budget – yet. We must remember this before we slam the Boston Red Sox.