FREE MARKETS AND SPORTS

The broken winter: Why baseball must fix free agency ASAP(ESPN)

The anxiety for the fans waiting for free agent decisions is understandably high. But that does not mean market economics failed.

As mentioned in the article, baseball executives are learning from past spending mistakes. Utilizing data and information to make the best informed decision possible. To decide whether to bid or pass on assets. Doing so requires change in offer structures and more time for both sides to analyze contract value.

Market economics at its core reflect the true price a buyer is willing to pay for a product or service and the price the seller is willing to accept. Market economics at its best occurs when both buyer and seller are highly informed about the total value and impact of transactions. Baseball executives are now becoming more informed buyers and more efficient spenders.

Most unionized structures are the exact opposite of free markets. Many deny the individual of the opportunity to maximize value attainment. What is perceptually good for the gander may harm individual geese.

Baseball fans need to be patient. Teams are being more analytical in decision making and players are demonstrating greater patience to maximize value. Monster contracts of the past harmed both teams operation and the reputation of players not living up to fan expectations. Now, the market is correcting itself.

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CHANGING ECONOMICS

MLB PLAYERS CONCERNED OVER DELAYED SIGNINGS (ESPN)

The continued free agency of Bryce Harper, Manny Machado, and other big name players concerns many other MLB stars. Spring training is around the corner, where contracts are typically settled well before. As teams set aside traditional thinking in free agency, players having to wait until near spring training may become the norm.

The concerns raised are understandable. Harper, Machado, and Kimbrel are free agents that can make big impacts on teams. Especially Harper and Machado, who are still heading into their prime, can contribute to teams for the next decade. Players work hard to earn their payday, once they are eligible for free agency. The lack of teams interested, able, or willing to pay the salary requests constricts their ability to obtain their dream contract.

Players in all sports complain about metrics used to change the way teams and their fans view player performance. Largely starting in baseball, the use of advanced metrics help provide a better picture of how players contribute to wins, beyond traditional stats that may help player profiles but not the team’s win total. The advanced statistics change the way teams play the game and alter their free agent needs. A team that believes it can win games without the cost of power hitters will no longer enter the markets for certain players.

In any unionized environment, workers will defend each other regardless of the economic factors driving change. In the case of sports, the economic factors driving the greater use of advanced statistics and reluctance to pay bloated contracts is the clear lack of value these contracts traditionally provide over the life. Many decade long contracts create buyers remorse for owners, general managers, and the fan, who pay the gate revenue and create the market for advertising revenue.

There are numerous examples of players who did not live up to the size of their dream contracts. For instance, Albert Pujols never reached his iconic level of play with the Angels as he did during his time with Cardinals. Miguel Cabrera played well during the first years of his contract, but injuries and age appear to negatively impact his overall contributions. Alex Rodriguez will be remembered for his controversies and scandals, more than the contributions he gave during his bloated contract.

The right player can positively impact a team’s bottom line and its connection to the city’s fan base. Many players like Jim Thome more than offset their salary expense through connections with fans that increase revenue through higher attendance, merchandise, and advertising. When he came to the Phillies, Thome changed the culture and connected with the greatest fan base in all of sports. Teams will look to avoid the failed examples and find the Thome situation instead.

The fact of the matter is that most baseball teams do not have the financial resources to devote a significant cut of the team’s annual payroll to one player. Many teams do not have the gate revenue or television contracts to make such a commitment. Instead, these teams rely heavily on advanced metrics to attain value players for building a team that can compete with the big spenders.

No matter the industry, organizations will find new methods to measure success and attain value, especially when there are notable risks, like big contracts that deliver neither victory nor value. Data analytics brings greater insight on the risks and rewards of individual players and the team as whole. Agents and players will need to adjust their dogma on contracts and negotiations periods. Big contracts will take longer to negotiate with the additional complexity.

DIVERSITY AND PERFORMANCE

Future of black NFL coaches a concern after round of firings (ESPN)

The NFL should ensure that the limited opportunities to lead and shape the football activities of its franchises are available to all those who have the qualifications and resume. The recent firings of certain NFL coaches reduces the number of minority to coaches to 3, which is not statistically aligned to the percentage of minorities that make up the players that play for them. 

The most qualified person should get any job, whether it is leading an NFL team, a business, or an organization. But, the process where decision makers source candidates may not be inclusive for all those with the resume and experience needed for the job. Ideally, decision makers would build a diverse enough pool of candidates for consideration to ensure they truly found the right candidate. 

From an outside perspective, many NFL teams appear to identify a select few of head coaching candidates and focus efforts to land the top ranked candidate. For instance, the Miami Dolphins went all in on bringing in Adam Gase, a candidate many across the league had on their short list. A mere three years later he is once again available. In reality, the only coach still employed in the class is Philadelphia Eagles head coach Doug Pederson, who was the least heralded hire and only Super Bowl winning coach.

For the four coaches listed in the ESPN article, there should not be any surprise with the teams’ decisions. The coaches clearly under-performed and did not produce the desired results. There really is not a strong argument for continuing the relationships when Super Bowl victories are not in the forecast. While the results are not completely up to the coaching staff, the head coach is the one burdened with responsibility of the outcomes. The job security risk comes with the job description. 

The focus needs to be on identifying effective ways for NFL teams to diversify their candidate pools so that minority candidates have fair access to elite positions. There is difficulty in forcing organizations to not zero in on a single candidate, but more likely than not, that person will not be the right one. The NFL needs to find ways to prevent teams from giving token interviews in favor of substantive evaluations of candidates record and potential. 

The best people should get the jobs. The process needs to ensure organizations are able to see the best candidates. 

TRANSPARENCY AND HEALTHCARE

Hospitals must post ‘chargemaster’ prices online. How useful will that be?

The posting will only be useful if the price schedules reflect realistic prices, not list pricing that no one actually pays. If policymakers want to protect competitiveness of hospitals, price schedules could reflect prior year actual pricing. 

Without realistic pricing, the policy is a hollow effort to improve affordability in care 


OTC GIANT IN THE WORKS

Pfizer, Glaxo to Create Over-the-Counter Drug Giant – The Wall Street Journal.

The two pharmaceutical giants shed their consumer health units to focus on more profitable ventures, like the reliable prescription drug market. 

The deal allows Pfizer to focus on growing its biologic and biosimilar pipeline. GSK can now attempt to get stability in its pharma operations. 

STADIUM SURPRISES

Health inspection reports find critical violations at NFL, NHL, NBA, MLB stadiums – 2018 ESPN Outside the Lines

The health and sanitation issues surrounding our sports facilities is quite troubling. This is not the first time ESPN raised the concern and probably won’t be the last. The study did not include college facilities or other arenas not used by the big 4 sports leagues.

What is the big fuss? The food vendors at many stadiums either improperly store or handled food or do not adequately maintain cleanliness of facilities to meet requirements. Given the crowd sizes, the potential for outbreaks of food related illnesses is significant.

People want to attend games for a positive experience for their families, friends, or other groups. Sports executives should ensure that the fan experience does not involve sickness and death.

REMAINING COMPETITIVE ADVANTAGE

Walmart employee app gives physical stores more power – Business Insider

WALMART ADVANTAGE

The ability to sell to cash customer is a slight advantage Walmart has on Amazon, but the ability to leverage store inventory as well as distribution inventory is another.

The only problem with the new strategy is the ability of the Walmart workers to effectively satisfy customers. It is no secret Walmart struggles with in-store customer service. The increased engagements may not improve the perception.

As Amazon continues to consider brick and mortar stores, retailers need to figure out how to improve the in-store experience to keep consumers coming back. Amazon is not perfect in its service by any means, but provides convenience.

LOCAL PROGRAMMING GIANT

Nexstar Confirms Deal to Buy Tribune Media WSJ https://www.wsj.com/articles/nexstar-confirms-deal-to-buy-tribune-media-for-4-1-billion-1543842177

Tribune Media found a new home after all. Following the failed merger with Sinclair Media, Tribune merged with Nexstar Media. The combined entity will be the largest operator of local TV stations in the United States.

Interesting to see how local TV stations proceed with content, as consumer taste and behaviors continue to evolve. Can these operators evolve and find a path to greater relevancy in changing market space.

BENEFIT OF STUDENT LOANS

Study Cites the Benefits of Taking Student Loans – The Wall Street Journal. https://www.wsj.com/articles/study-cites-the-benefits-of-taking-student-loans-1542191401

Not surprising that people who invest in themselves and their own future will be more focused and efficient when navigating their way towards a college degree.

While not having the trust fund or full ride can be challenging after the fact, students that pay their way find ways to avoid unnecessary charges, like non-essential classes and bloated meal plans, and focus on the GPAs, which can help their ability to attract higher paying employment to pay down the loans. All while providing them life lessons that will help them in their future.

The push for free college will undoubtedly make colleges perform like high schools, as the personal investment will not be there to motivate student performance. Over time, student drop outs will increase, as many high schools ill-prepare students for completing a college curriculum. Progressives will then push for policies that force colleges to graduate students, even though they lack the needed competencies.

The goal should be to incentivize colleges and universities to operate efficiently and pass savings to students, not passing the cost to the taxpayers. Students should truly only pay for the cost of education and services attained. Other activities and projects should be funded through donations, fundraisers, public grants, and other channels.