The Overall Impact of Free Agency on Big Spenders

This article isn’t timely for anyone, but me, but the topic is interesting so I thought I’d share with the class. In the reading of the Brad Snyder book, A Well-Paid Slave, I saw a very interesting note. The book is about Curt Flood‘s lawsuit to remove the reserve clause from baseball and essentially begin free agency and Dodger’s owner, Walter O’Malley Snyder discussed O’Malley’s remarks here:

Dodgers owner Walter O’Malley said the elimination of the reserve clause would favor his franchise because players would clamor to play in Los Angeles. “Realistically,” O’Malley said, “there would be such imbalance that the game couldn’t exist.”

Essentially, O’Malley was being altruistic. He was against removing the reserve clause because the Dodgers would win all the National League pennants for the rest of eternity and it wouldn’t be fair to the other teams. While this may be taking his statement to extremes, there was legitimate worry at the time that the Yankees, Dodgers and Giants would simply buy up every great player once they hit free agency and form unbeatable dynasties, relegating all the middle America teams to obscurity.

The funny part of this was that it had already essentially happened. From 1903 through 1975 (the end of the reserve clause as it was known), the Yankees went to 39% of the World Series ever and won 20%. The Giants were the only other team to have played in at least 20% of the championship series while the Dodgers, Cardinals and Athletics were the only others who played in more than 15%. Ignoring expansion franchises (which is fair, because only the Mets went to a World Series during this time span of true expansion teams), there were 16 teams during these 71 meaning that if all things were equal, each team would have won about four World Series by 1976 and have played in about nine. There were only six teams who actually played in nine or more Series, however. There had always been imbalance in baseball and somehow, it existed.

Directly, 15% of the teams in the AL amounted for 54% of AL pennants through 1975 and 37.5% of NL teams amounted for 56% of NL pennants. Of course, there were many changes to baseball from the 1960’s onward that would effect future results as much or more than free agency, including the amateur draft that began in 1965 and the eight expansion teams between 1961 and 1975 and the six that followed between then and 1998.

It is interesting to note, however, that the expansion teams in the latter group, the Blue Jays, Mariners, Marlins, Rockies, Diamondbacks and Devil Rays, have had much greater success than those who expanded prior to the draft and free agency. As already mentioned, the Mets were the only of those original expansion teams to make it to (and win) a World Series, but it only took the Marlins five seasons to win their first World Series, then the Diamondbacks managed to win one within three before the Marlins won their second within 20 years of existing. While it occurred later in their franchise history, the Blue Jays also went 2 for 2 in World Series.

Going back to the original 16 to keep the games played near equal, here are the breakdowns of how each team did in the postseason prior to and after the advent of free agency.

Looking specifically at the ultimate goal, winning the World Series, baseball post-free agency was exactly the opposite of O’Malley’s prediction. The teams who were most successful prior to 1975 were still the most successful, but they were proportionally much less successful than previous seasons. Again, this has a lot to do with expansion, but prior to free agency, many were of the opinion that the institution of baseball would be completely destroyed. Looking at regular season win/loss records, the results are similar and more significant.

Again, franchises that had been great for most of a century continued to be great, but the biggest improvements were found in some smaller markets. In the AL, the St. Louis Browns were a joke through 1953 and even when they moved to Baltimore, they struggled. Now the Orioles, Baltimore wouldn’t win a World Series until 1966 and wouldn’t have sustained success until shortly after. While this happened before free agency and so near the draft that it couldn’t have been affected by it, Baltimore has generally continued that success to this day despite playing in a division with two of the highest paid teams in baseball.

The most interesting part of the free agency era may not be that there hasn’t been utter dominance by the most expensive teams, but that when those teams have won, it hasn’t been because of free agency. The Yankees success since 1975 was almost exclusively in the 1990’s. While they did have great success from 1976 through 1981, they didn’t reach the post-season again at all until 1995. From then through 2003 they would reach the World Series in all but three seasons. This roster was largely the same through the years, built around a home grown core of Derek Jeter, Jorge Posada and Bernie Williams. While it wasn’t cheap by any means, there isn’t a real reason why any other team couldn’t have built a team similarly.

However, after having  a team salary near $100M in 2000, the Yankees reached $200M in 2005 and continued to increase to a max of $228M in 2013. The bulk of this salary came from free agents acquired over the years including Alex Rodriguez, Mike Mussina, Randy Johnson, Gary Sheffield and Hideki Matsui. As everyone already knows, excluding the 2009 season, this new strategy Yankee team never again reached the World Series and except for 2010 and 2012, never advanced beyond the ALDS.

Obviously, Mr. O’Malley was wrong, although his real argument against the reserve system was obviously that he’d have to pay his players more money, not that there would be a small number of super teams. Prior to the restructuring of the reserve clause in 1976, the MLB minimum salary had been $16K in 1975 and the average salary was $44K per year. By 1980, the minimum had nearly doubled to $30K and the average had skyrocketed to $144K. Five years later, both had doubled again, essentially fixing the huge disparity that had always existed between what players deserved to be paid (based on their value to the club) and what they actually were paid.

While this information isn’t new, it is a good reminder of negotiation tactics. Any time anyone says changing something to make it more fair will destroy something that you love, they probably have ulterior motives. Looking exclusively at baseball, discussions about a 26 man roster, shorter schedule, and other changes that would benefit players are often dismissed at being sport ruining, but while they may be slightly game changing, they aren’t going to ruin anything. One thing they’ll do for sure, however, is cost the owners a larger percent of their profits, so expect them to fight it, just like they always have.