Over the past couple weeks, I've been on many radio shows and the hosts naturally ask me about the economy and sports. One area that I didn't think I was strong as I could be in was the baseball free agent question. Will baseball's free agents like Manny Ramirez, Mark Teixiera and C.C. Sabathia get less money because of the economic downturn?
For that question, I turned to Vince Gennaro. He's the author of the book "Diamond Dollars: The Economics of Winning in Baseball" and has been a consultant to a variety of teams. Here's Gennaro's take on how the economy with affect this year's free agent market.
"You have two counter balancing forces--the economy versus the dramatic revenue growth from new stadiums in New York, along with a number of high priced players coming off the Yankee payroll, priming them to be aggressive. Regarding the severe downturn in the economy, and I know many people think sports and particularly baseball are recession proof, but I don't agree. We are already seeing the impact in how teams are setting pricing for next season's tickets. Many clubs are being extremely conservative, meaning they are taking very small increases, or even holding last year's pricing. So, if the economy were the only new development, I would expect the free agent market to soften somewhat."
"However, we've got the two new Stadiums in New York, leading to huge revenue increases for both teams. All of my analysis shows that these two teams have raised the stakes--they cannot afford to miss the postseason. Supporting their new ticket pricing levels and suite prices, without a first-rate (playoff bound) product could be a disaster. Also, teams like the Cubs and Red Sox will be insulated from the economic pressure based on their strong brands and heavy season ticket base. So, in what could be viewed as somewhat of a paradox, I feel these teams will help prop up the top end of the free market this year, despite the economy. I see Sabathia getting top dollar, I see Manny, Teixeira, K-Rod and a handful of others getting more than they would have gotten last year. But, the middle of the free agent market--the place where mid-market teams usually dabble--could potentially be soft. Lesser know guys like Nick Punto or Mark Grudzielanek may get less than they would have gotten one year ago. In other words, the top quality free agent will get top dollar and the rest of them may be disappointed."
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