Sonny Gray and the Collective Bargaining Agreement

After the A’s traded Sonny Gray on Monday, I saw a lot of people declaring that the A’s are just doing the same old thing for the same old cheapskate reasons blah blah blah. That’s an easy thing to think if you’re just looking at the surface of things, but if you dig deeper and study it, you find it’s a bit more complex than that.

One of the themes I addressed in the A’s team essay I wrote for the 2014 Baseball Prospectus Annual was that whenever you see the A’s changing their behavior, you should look at whether there have been any changes in the rules of the game (on the field and ESPECIALLY off) that motivates that change in behavior. Because the A’s have been a poorly financed club from their very founding, all of the major innovations in baseball have had a bigger effect on the A’s than any other team.

The successes and failures that the A’s franchise has had over the years have largely depended on whether the A’s have been ahead of these changes or behind. There’s really only been one major innovation in the sport where the A’s weren’t either way ahead or way behind the curve on a major change: the breaking of the color line in the 40s and 50s, where the A’s were somewhat in the middle of the pack amongst teams that integrated.

The first major shock to the sport happened in 1914, when a new league, the Federal League, challenged the American and National Leagues. The Federal League did not adhere to the reserve clause which limited player movement and kept salaries down. This hit the A’s harder than most other teams for these reasons:

  1. The A’s were more poorly financed than other teams. They were not owned by wealthy industrialists, but by people who were baseball industry lifers, including manager and part-owner Connie Mack. As such, they could not absorb financial shocks very easily.
  2. The A’s were the best team in baseball, winning four of five AL pennants between 1910 and 1914, with three World Series wins. The A’s had better players who could be lured to the Federal League with market-value salaries. The A’s could no longer afford to keep their team together. Some were traded and some jumped to the other league
  3. Much of their talent pipeline ran through the minor league Baltimore Orioles, which Mack was also a part-owner of. A new Federal League team in Baltimore, the Terrapins, drastically hurt Orioles attendance and revenues. The Orioles were forced to move to Richmond, VA, and to sell their players to other major league teams other than the now financially-strapped A’s. This sell-off included the sale to the Boston Red Sox of one promising young pitcher named Babe Ruth. It is likely that if the Federal League had not come along, Ruth would have ended up on the A’s.
  4. The Baltimore Federal League team even hurt the A’s 100 years later, when the city of San Jose sued MLB to let them move to their city. San Jose lost that case, because of the anti-trust exemption the MLB was awarded when the Baltimore Terrapins sued MLB for the deal which disbanded the Federal League and left the Terrapins without a league to play in. The Supreme Court ruled against the Terrapins, and that same ruling was applied to San Jose.

So the A’s 1910-1914 dynasty broke up, and the A’s were a bad team for over a decade. Connie Mack assembled another juggernaut at the end of the 1920s, though, winning three straight pennants from 1929-31, and two World Series. But the Great Depression hit the A’s revenues hard, and Mack was forced to disband his dynasty again because of external economic forces.

Around that time, the A’s completely missed on another innovation that revolutionized baseball: the farm system. Connie Mack simply did not believe in it. The A’s were by far the last team to develop a farm system, and the lack of a quality system to sign and develop players through kept the A’s among the worst teams in baseball for over three decades.

The A’s dynasty in the 1970s was primarily a function of owner Charlie Finley beating the other teams to another innovation, the amateur draft. Finley went out the year before the draft was set to begin and spent a record amount of money on amateur players before they could be subject to the draft the following year. From this haul, he got a nucleus of players that formed that dynasty: Catfish Hunter, Rollie Fingers, Blue Moon Odom, and Joe Rudi.

In the 1970s, Finley tried again to ahead of the next big change to baseball’s rules: free agency. He traded Reggie Jackson and Ken Holtzman. Then tried to sell off Fingers, Rudi and Vida Blue before their free agency, but commissioner Bowie Kuhn rejected the deals in the “best interests of baseball.” The next year, the arbitration system was agreed to in the collective bargaining agreement, but it was too late for Finley. This system placed value in minor leaguers because they were controllable for six years. Had he known that was coming, Finley might have tried to trade off his assets for younger players. Of the core players of his dynasty, only Vida Blue was traded for a haul of young assets. The rest left via free agency, and the team once again fell to the basement of the league.

One could argue that part of the A’s success in the late 80s/early 90s was because the A’s beat the competition to the innovation of steroid use, but I’m (Canseco cough cough) not going to go there.

Since then, the A’s fortunes have primarily been shaped by two major innovations, one of which the A’s hit and the other of which they completely missed.

The missed one: the construction of Mount Davis to lure the Oakland Raiders back to the Coliseum. It was a disaster for the A’s, especially since it happened just as the retro-ballpark innovation began. Suddenly, the Coliseum became a much inferior product compared to other ballparks around the league. And when AT&T Park opened across the bay, it became obviously inferior to another ballpark in the same market. This had a huge effect on the team’s revenues relative to other teams in baseball.

The hit: the A’s were ahead of every other team on the statistical analysis innovation. Of course, you know all about Moneyball by now.

* * *

The point of this history lesson is this: innovations and rule changes matter. If you don’t adjust your behavior quickly in response to these innovations and rule changes, you can find yourselves decades behind the competition.

So if you’re going to write about what a team is doing (especially if you are getting paid to do so), it would help if you had a good grasp on the rules of the game that the team is playing. And if a team changes its behavior, look if there are any underlying innovations or rule changes that may be motivating this change.

So here’s the frustrating thing to me about this Sonny Gray trade: I read a bunch of analysis of the trade, and some of it said it was “same old same old”, some of it mentioned trying to align the team’s age with the possible opening of a new ballpark, but I did not once read anywhere (maybe it existed but I didn’t see it) any mention of a BIG GIANT RULE CHANGE that affected the A’s and ONLY THE A’S.

Here’s the rule change in question: in the latest collective bargaining agreement, the A’s portion of revenue sharing from the league is phasing down to 0, starting THIS YEAR. This is a rule change that applies ONLY TO THE A’S, and to no other team.

Here’s why: in previous CBAs, teams shared 20-34% of local revenues with each other equally. In the 2011, CBA, they decided to only distribute revenue sharing to the smallest 15 markets. But an exception was made for the A’s, because Oakland is actually one of the 15 largest markets. The 2011 CBA lets the A’s to collect revenue sharing as long as they were still in the Coliseum. In the latest CBA in 2016, they decided to phase this out for the A’s over four years.

The A’s were receiving $30-$35M per year from revenue sharing, according to various sources. Let’s call it $32M to make the math easy. That means the A’s revenue sharing income looks like this:

2016: $32M
2017: $24M
2018: $16M
2019: $8M
2020-onward: $0

If you take all of this information together, it explains several things about the A’s behavior:

  • Why, despite their low revenue, they would occasionally sign mid-range free agents like Ben Sheets, Esteban Loaiza and Billy Butler. They were afraid that if they did not spend this money, the other owners would get mad at them for taking revenue sharing without spending it, and take their revenue sharing away from them.
  • Why they never tried to pull off a full tank-and-rebuild scheme where you let the team be awful for a few years to collect top draft picks. They tried every year, with varying degrees of success, to assemble a roster that had at least some reasonable chance if everything worked out right to make the playoffs. Same reason, really: it would look bad for a big-market team to take revenue sharing and not use it.
  • Why they suddenly this year decided that they would pick a spot in Oakland and build a stadium. They need to get something built soon, because they don’t have $32M in revenue sharing to prop them up.
  • And finally, why the A’s are finally now saying that they are willing to go through a full tank-and-rebuild process. It’s not simply because they expect a new stadium. It’s also because the motivation they had in the past to avoid the tank-and-rebuild process is no longer applicable because of the new CBA.

So this means that the timing of this mattered to the A’s. Gray will be getting more expensive each year just at the same time as the A’s revenues will be falling. And so the A’s have a huge motivation now to avoid free agents and expensive arbitration eligible players until they can increase their revenues again with a new stadium. And that decreased the A’s leverage in trade negotiations, because keeping Gray would hurt them more than it did before.

So, once again, the A’s sold off a successful player, just as they have had to do many many times in their 116-year history. But it’s lazy to just claim that nothing is different about this one. Yes, it’s a similar outcome, but it has behind it a very different motivation from the previous ones. And isn’t that an interesting story to ponder?

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