2021 MLB Non-Phillies News/Notes

zambonir 2021-02-19 04:41:53 UTC #81

Yeah, I don't think the Pads are as cheap and dysfunctional as the Marlins. If things fall apart Machado is probably a bigger problem for them than Tatis. But right now they're all in for 3-4 years.

One might also wonder who will change teams sooner, Harper or Machado. OF course the surprise answer was actually Arenado (but the Rockies are the new Marlins).

David_Criss 2021-02-19 17:47:38 UTC #82

Taijuan Walker signs essentially a 2/20 million deal with Mets.
https://twitter.com/Joelsherman1/status/1362769092369874948
The deal, which is still pending a physical, will pay Walker $10MM in 2021 and $7MM in 2022. The player option is at a base of $6MM and can rise to $8.5MM via escalator clauses based on Walker’s performance. There’s a $3MM buyout on the option.

If he can stay healthy this is a heck of a deal for the Mets.

allentown 2021-02-19 22:23:10 UTC #83

An interesting side to the Tatis deal is that former Phillies pitcher Michael Schwimer's company Big League Advance, advanced money to a young Tatis as a share of his future MLB career earnings and stands to get about $30 million from Tatis's contract. As an example, Francisco Mejia was given $360K for 10% of his future earnings.

Article in today's on-line Wall Street Journal:

Although he spent a short time with MLB Phillies, I remember Schwimer most from two seasons at Reading and the posts he made to Phuture Phillies site (and may this one as well, I forget. I think he blogged.) I was standing at end of tunnel at Reading as players left the field for clubhouse and he walked past me. REALLY big guy.

mdougherty12 2021-02-19 22:57:10 UTC #84

I hope Tatis Jr. has a good financial advisor at this point. It seems like a bad sign that he signed away future earnings in 2018, given that his dad was a big leaguer with ~$20 million in career earnings and Tatis Jr. himself got an $825,000 bonus when he signed with the White Sox in 2015.

zambonir 2021-02-20 01:10:27 UTC #85

I suspect Fernando Sr. did not have a good financial advisor.

And you might wonder if someone in the DR also got a big cut of his signing bonus.

As The Athletic article explained:

If Tatis, 22, chose 10 percent, he would owe the company $34 million over the course of his contract; if he chose 5 percent, the number would be $17 million. He said after signing with BLA that he wanted to hire a personal trainer, eat better food and get a better apartment. He used the money to upgrade not only his training regimen in the U.S., but also his offseason practice field in his native Dominican Republic.

Tatis, the son of former major-leaguer Fernando Tatis, signed with the Chicago White Sox for $700,000 in July 2015, then was sent to the Padres as part of the James Shields trade in June 2016. Prior to agreeing to his extension, he had earned less than $800,000 in the majors, including his pro-rated pay in the 60-game 2020 season.

So, not a working stiff exactly, but after taxes and agent commission he probably only made less than $100K a year during his four years pre-MLB. Pretty awful deal no matter how you slice it though, even if he got two or three times more $ than Meijia.

jimbomill 2021-02-20 12:37:35 UTC #86

This may seem to be a bad deal for the likes of Tatis. Although, if I had to give up 10% of a large number by taking a potentially free stake, I'd probably do it, too. From what I read, 4 out 5 (80%) of the folks BLA makes deals with get essentially free money.
SO, just looking at the numbers, if you think giving up 10% of your future MLB money is a BAD deal, how great is it to keep 100% of what you get for that 80 percent of minor league players who don't make it?

julio 2021-02-20 15:35:22 UTC #87

Yep.

And it's not necessarily 10%; that's negotiable. But what the player is doing is a form of insurance, essentially. BLA only approaches players who they project to likely have major-league careers. So the candidate has an attractive ceiling. But any kid in the minors can suffer an injury that crushes that ceiling - knee damage, achilles tendon, labrum, etc. So the kid might want to take a cash payment up front, at the potential cost of a percentage of major-league earnings later.

The thing is, while we sit here with our five-figure (or six-figure?) annual incomes and say, "Wow! $30 million over the life of the contract! That's huge!"... It isn't, in the context of Tatis' contract. From a practical standpoint, the difference to Tatis' lifestyle, future, etc., between $330 million and $30 million is... zilch. Zero. Nada.

Also... If Tatis and his advisors structure things carefully, that 10% off the top is deducted from his net income as a business expense. See where I'm going here? If he kept that $30 million (assuming he's paying American income tax), he'd be on the hook for $10 million in additional federal income tax (more or less). So the real impact of paying BLA is considerably less than the paper impact.

It's like doing your personal income taxes, and realizing that some increase you got during the tax year pushed you into a higher bracket on the tax table, and that incremental income is taxed at a higher rate. I mean, you can complain about that... but when you get down to it, it's a pretty good "problem" to have!

andyb 2021-02-20 16:49:30 UTC #88

This does seem a little predatory, however. I imagine the percentage that Big League Advance gets allows a healthy profit or they would not be in the business at all. Probably nowhere near as bad as payday loans, but I imagine it is much more than a typical small business loan from a bank. I know it is not the same because there is no payback if there is no major league career, but it still is picking on relatively poor youngsters in an industry where they are vastly underpaid.

Kind of moneyball that is designed to suck money out of poor players' pockets.

Now that Tatis with a major league father and a healthy signing bonus chose to do this is interesting. Clearly there is some financial mismanagement that led to this, or it is just a dumb decision by a kid who could have afforded personal coaches and dieticians anyway. If a poor kid with a $10,000 initial bonus did this then that would be different.

zambonir 2021-02-20 17:41:58 UTC #89

What it is above all is a poor reflection on the major league system. You got guys in Clearwater right now not getting paid - none of them are - or in the case of the "minor league camp" invites, not even having their expenses covered. The appeal of such an opportunity is understandable, whether you're a Rafael Marchan or a guy who only got $10K.

In hindsight, Tatis won't miss the money, while a player who only makes 5 million in his career may not lose a dime. And a lot of agents already do this - the difference is they don't charge predatory interest rates. If these were loans they'd be illegal.

allentown 2021-02-20 19:09:39 UTC #90

It's hard to say, this being a relatively new business. Schwimer and his partners may go bust. I suspect that Domonic Brown wishes he were offered this option when he was a top-10-rated prospect in all of baseball. Sure, Tatis will end up effectively paying a huge interest rate for the upfront money he received, but... that isn't the interest rate BLA earns. What effective interest rate of return they earn depends upon their ability to predict which very young players will succeed and, more importantly, which will succeed big time. Ken Giles would have looked like a great bet, until he didn't.
I don't know how many young Phillies BLA did, or would have been willing to, bet on. The only clear winner among recent guys from the farm on which BLA would certainly win is Nola. The Phillies early bet on Kingery makes him a likely winner, but without that early bet, his career could look a lot less promising today, as stuck at AAAA. Hoskins the next likely as a winning bet. Would BLA have bet on Moniak, Haseley, Quinn, Cozens, Ortiz?
Likely, a number of guys like Tatis are needed for Schwimer to make a profit.

Taudawg 2021-02-20 19:17:00 UTC #91

Maikel Franco is a BLA client. One of the first I believe.

zambonir 2021-02-20 19:21:05 UTC #92

Ken Giles has made more than $30 million in his career, that kind of player is at least a break-even proposition for them probably. And they seem to be pretty particular about the type of player they make offers to.

Like most everything else these days, they don't ever really have to make a profit. The founders make a nice living until the VC money runs out, or it's a huge success. As Schwimer said a few years ago:

Schwimer says Big League Advance will lose money on 80 percent of their invested players, but “if you invest in 10 tech startups and one or two become Facebook or Google, you are going to do very well. That’s how we do it, just with baseball instead of tech stocks.”

Getting one or two Tatis types out of 10 seems like a big expectation but it'll be another 3-4 years before we really know I guess.

julio 2021-02-20 23:05:59 UTC #93

BLA essentially treats a baseball prospect as a startup firm. They invest in the firm (the player), in return for an ownership share. If the business goes bust, the investment is lost. If the business thrives, BLA is entitled to net earnings that are consistent with its ownership share. All that's required is that the startup and the investor agree on what percentage of the firm they sign over, at what price.

One might argue that teenage baseball players aren't up to this kind of wheeling and dealing. Well, Scott Boras certainly is, as are his peers. And frankly, I might argue that a randomly-selected single-A prospect is just about as well equipped to deal with a venture capitalist (which is what BLA is, effectively) as some 20-something engineer who has a brilliant engineering solution to some problem, but no clue about business.

Baseball players already sell a percentage of their business, to their agents. I’m not sure selling a percentage to a cash investor is hugely different.

jimbomill 2021-02-21 12:13:14 UTC #94

Excellent point, amongst others (lifestyle impact)

bkox 2021-02-22 05:20:26 UTC #95

Called a star player overpaid.. Talked down about having to pay an interpreter for an Asian player. Made comments about manipulating service time to keep costs down. Comments about a prospects lack of English.

andyb 2021-02-22 12:53:39 UTC #96

Well the initial "loan" was probably taxed as income so I am not sure how not getting 10% later saves the player much money.

jimbomill 2021-02-22 19:17:35 UTC #97

The player is getting taxed on the Big Payday. The fee, be it 10%, or whatever was negotiated, becomes an expense and tax deduction.

Yep - the initial payout ("loan" as you put it) was income to the player and almost certainly too is taxable income. Not sure of the point you're trying to make. But in the first place, he receives taxable income from BLA. In the latter, if he gets MLB money, he pays the fee to BLA and deducts that as an expense from the MLB income.

andyb 2021-02-22 19:25:56 UTC #98

The business expense line implied that there were tax benefits to this arrangement. I prefer to think of it not as a business expense but as a salary cut. It is all semantics.

Regardless, I would hope MLB puts some limits on this practice because it is predatory. MLB should be paying minor league players more (and drafted and international signings more). One way would be to cap the payout at a certain multiple of the loan going in. Maybe a 10X payout? So a $500K advance could net a maximum of $5 million to the lender.

They would not be raising huge amounts of venture capital for this project if it was not profitable. Remember they are not offering this advance to non-prospects. A player probably has to be a top 10 prospect in a system to get this offer. So there is a high probability of some payback from top prospects. It is not a situation where like 1% of advances pay something back. I imagine it is more than 50% and the lenders might make a profit on like 25% of the loans.

Agent fees are limited. There is no reason that baseball could not limit these advances as well.

allentown 2021-02-22 22:56:15 UTC #99

That is not at all true. Lots of venture capital flows into new business concepts that are not profitable, many of which never become profitable. It is a novel investment that allows baseball wannabes to feel more a part of the game, probably the equivalent but more of a connection than sports betting. A lot of investor money goes into start-ups. Tesla was worth more than GM before it turned its first profit. Is it abusive? Scwimer asks potential clients to review with their advisors. Very few of the kids will give anything remotely approaching the yield from Tatis and he has an MLB parent, who had an agent, and likely a financial advisor, so the kid isn't someone likely to be taken advantage of. As noted in one article, he's a kid who wants to protect his future, rather than take risks in shooting for maximum lifetime payout. They pointed to his taking basically a lifetime contract at what might turn out to be and udnerpay if he actually becomes an uber-star but totally ensures the financial future of himself and his family for multiple generations. He is not a bet-on-yourself risk-taker, yet he has more than guaranteed his future. This is certainly a lot less ghoulish a business than investors who buy out people's life insurance and then only make a good profit if they die relatively quickly.

bkox 2021-02-22 23:43:12 UTC #100