Month / February 2019

by Frank Maduri

The Role Of Revenue Sharing In MLB Free Agency

The blockbuster contract that the San Diego Padres agreed to terms with All Star infielder Manny Machado on just prior to the real start of Spring Training shocked the sports world. The contract (10 years at $300 million) is the largest in American sports history. The decision by the Padres to commit this much in both dollars and time to one single player will certainly be scrutinized for years by the pundits in the media as well as the casual sports fan alike.

The view here in this piece is how the record revenues generated by Major League Baseball (MLB) and the way those revenues are shared among all the member franchises made this player contract possible. The prevailing sentiment among many who cover the league within the media is that any team can afford any player if they chose to move in that direction.

This stands in stark contrast to the days when I was a kid and I was really interested in baseball and watched games nearly every day of the season. Those decades were marked by “big market” teams and “small market” teams. The teams in the big cities such as New York, Los Angeles, and Chicago could outspend the teams in smaller cities, and very often did just that, to land the superstar free players in free agency.

This created an inevitable shift in the balance of the league with those larger market teams seemingly always in contention for the World Series crown, and the small market teams being home preparing for the next season. The sharing of revenue in MLB from the media rights contracts, to major corporate sponsorships, and for streaming rights to games has leveled the playing field for the “small market” teams.

The signing of Machado, as wild as it sounds, will only increase the Padres payroll slightly to about $100 million this year. The perspective is that San Diego’s payroll was close to that number in 2018 as well. The smaller market teams, at points, have an advantage because they can give out a large contract because they have been budget-conscious with the rest of their payroll.

Machado is also still very young, so the decade-long contract that is usually given to an older player where the team risks losing production at the end of that contract term is not a significant concern with this deal. It helps the Padres that every MLB team kicks in a percentage of their local revenue which then gets among all the other teams.

The Machado deal is a bold move to make the Padres relevant again. The contract will most certainly have an impact on the other major free agent in this offseason, Bryce Harper, who remains unsigned.

Harper is represented by mega-agent Scott Boras, who will seek to get a larger and better deal for his client than the terms of the Machado contract. The Philadelphia Phillies are the main potential landing spot for Harper.

However, a couple of days ago, the Los Angeles Dodgers contacted Boras about a short-term deal for Harper. The problem for the Dodgers is that they already have a bloated payroll, and so they cannot make a 10 year commitment to Bryce Harper. The short-term scenario will be problematic for L.A. in its own right, with the contracts that they have already “on the books” so to speak.

The emergence of the Dodgers is a problem for Philadelphia, because Harper grew up and resides currently in the Las Vegas area. The West Coast is an attractive option for him, and there are some within the baseball media that have reported that if Harper was truly interested in playing in Philly that it would be a done deal already.

Then, the Phillies were dealt another blow on Tuesday, when the Colorado Rockies decided to hand an extension to Nolan Arenado, which on an average annual salary will make him the highest paid position player in baseball history. This deal now provides Boras with the leverage to get a better deal from Philadelphia for Harper, a much more established player with respect to Arenado.

The Rockies are also considered a small market team, and they most certainly could push the envelope on this contract because of the revenue sharing money that gets distributed throughout the league. The rise on local and regional sports media deals have also helped teams like the Rockies with additional revenue to spend on talent to improve their team.

It is a very different offseason in that the two top free agents remained unsigned until after Spring Training camps opened. Harper remains without a team, and could face a potential crossroads decision to either go to a team that has been very successful recently in the Dodgers on a short term deal, or go for the long haul approach with Philadelphia and be the star of an upstart team.

The decision for Machado and Arenado was easy in both their cases, they got very lucrative offers that made a lot of sense to sign. Harper has a different decision and it will also be fascinating to see how the Phillies handle the next few days. The asking price can be jacked up by Boras to $360 million, but the Phillies know that if no other team is going to produce a 10-year offer, they have no reason to go that high.

The emotions also play a role in these situations, and one side will eventually give in, sometimes it is the team and others, it is the player. The one certainty is that these signings will have an impact on the next wave of superstar free agents and will shape the league for the next ten years and beyond.

by Frank Maduri

2019 Auto Show: Trucks Are Key To Industry Growth

The 2019 Auto Show in Chicago is the latest indication of where the industry is headed, and it is certainly pivoted toward growth in the truck segment. The growth of trucks, especially heavy- duty model types, or HD as the industry abbreviation denotes; represents a significant margin opportunity for auto makers.

This all comes within the backdrop of Ford announcing recalls for safety on over 1.5 million F-150 trucks from model years 2011 – 2013. This is a reminder that production realities still exist, and that no amount of money ensures that any particular vehicle will be fully free from defects or issues.

The truck market has evolved to where not just contractors, farmers, or other heavy labor job types utilize them. The HD truck market has become more mainstream over the past few years and is a trend that is expected to continue. The style of truck that was once exclusively for work has attracted casual drivers because of the towing power.

The ability to pull heavy loads is the key driver for HD truck models, according to industry experts, towing ability is the top priority for the consumer. The secondary priority is for the truck to have high tech options for entertainment and for driver and passenger comfort. Those types of examples would be a radio capable of attaching devices or heated seats.

The truck market has numerous options from small cabs, medium truck beds, and extended cabs. The heavy-duty class of trucks provide the best profit margin opportunity for automakers, especially American manufacturers. The market is dominated by Ford, Chevrolet is in a distant second, and Ram (parent company Daimler Benz) is in third.
The selling price on the new Ford HD is approaching six-figures it is hovering around $90,000 for the 2020 models. The demand is there and that is how the heavy-duty truck segment of the industry is going to move units and solve for other profit and revenue shortfalls within domestic automakers business models.

The Ram lineup of trucks is slightly less costly with their base HD Ram model at about $68,000 and the upgrades to the enhanced tech and other features packaged out at about $77,000 including the destination fees. The tech in the trucks provide amenities that passenger vehicles have currently: surround-view cameras, rear view cameras, lane warning systems, and bed-lowering systems.

It should be noted that Ram also issued a recall on their trucks on Wednesday as well for a problem potentially with the steering linkage system. The Ram series has the ability of getting a consumer into a HD model at a more modest price point than Ford, but Ford would counter with the amount of amenities and towing power that their packages provide to the consumer.

Chevrolet offers the Silverado HD with packages starting at $37,000 and with enhanced packages that drive the price up to around $70,000 per unit. The Chevy brand story is reliability, long-lasting truck performance, and the flexibility of financing the payments through GM Financial.

The Chevy also offers two V8 engine options and towing and hill assist features. They also have an “Infotainment” center option to bring entertainment to the driver and passengers for long hauls.

The Chicago Auto Show featured these Heavy-Duty trucks and Adventure SUVs and those are the two biggest trends in the auto industry. The American automakers desperately need something to differentiate themselves from their European and Asian competitors. These two categories have the added bonus of profitability.

The trend to watch will be what is already occurring at GM/Chevrolet where they are discontinuing making several passenger cars in favor of making more trucks. The executives at Ford are also weighing the streamlined approach to their regular automobile line to focus more on production of trucks, especially HD truck models.

The demand for HD trucks continues even as the price tag goes up, which for the automaker is a good situation for their profitability. The impact on the environment for these gas guzzlers and the impact of having people that are not regular truck users driving larger trucks for everyday use remains to be seen.

by Frank Maduri

Follow Up: Chris Bosh Officially Retires From NBA

In a follow up from prior posts on this topic, Chris Bosh officially retired from professional basketball on Tuesday. It was an expected announcement as he has not suited up in an NBA game in three years and is 36 years old now.

However, the news is difficult because of the way he was forced into semi-retirement and then ultimately out of the sport he was so talented in playing. Bosh suffers from a blood clotting disorder that curtailed his sensational basketball career. The doctors had cleared him to play at some point in the last few years, but by that time, no team was going to take on the liability of him playing for their team and potentially dying on the basketball court.

Chris Bosh was one of the first in the modern game to play a “stretch forward” position. He was able to rebound, score from greater range from the basket including from the three-point area, and he could play the post as well. His versatility and dominance paved the way for his selection to the All Star team in 11 of the 13 seasons he played in the NBA.

Bosh began his career with the Toronto Raptors, where he was the star of a team that played largely in obscurity because of the market and the irrelevance it had with the average American fan. The team was also not very good outside of Bosh for many of the years that the Texas native spent north of the border.

He earned his free agency and used that to take less money than he would have earned in the open market going to the highest bidder on a different team in order to join up with LeBron James and Dwayne Wade with the Miami Heat. It was a startling move at the time, and it began a new trend now known as “super teams”, where star players decide together in a pact to join a team and take less money.
The move placed winning ahead of earnings, which was a rare situation especially in the NBA where the salary cap rules allow for “max level contracts” and “Bird rights” as well as being able to circumvent the cap to pay a star currently on your roster more money than any other team could offer.

Bosh was also very humble in his role with the Heat and was willing to play “third chair” behind Wade and James. He figured out how to play with his two fellow superstars and the trio spent four years together in Miami going to the NBA Finals in each of those four years. The trio would lead the Heat to back-to-back NBA championships in 2012 and 2013 respectively.

Bosh started having health issues in 2016 (see earlier posts on this site) and eventually failed a physical and was released by the Miami Heat. The two sides came to an agreement on a buyout of his remaining contract term. He was determined to resume his basketball career, but no call ever came for an opportunity for him to do so.

The NBA also had a role in that by stating that they deemed his clotting disorder to be a “career-ending injury”. The fall from the heights of stardom to being out of the league by age 33, is certainly something Bosh could utilize in his off-court interests in helping youth organizations as a mentor.

He has many interests outside of basketball including a foundation, the CB4 Foundation, that helps youth to understand the importance of both sports and education. Bosh frequently promotes the importance of reading at a variety of events throughout the country.

Chris Bosh will be remembered for the way that he played both offensively and defensively as well as the selfless nature in which he put his team ahead of his own statistics to win games. He will be remembered in Miami always for his role in those two championship teams, where his reluctance to be the main star helped the team to efficiently play together cohesively. It is hard for any competitor to give up what they love doing, and give up something that they have committed their life to doing on the highest level.

Therefore, while this decision was inevitable, it was the way in which Chris Bosh had to retire, not able to go out on his own terms, and not being able to play his last game; it is that way he left the game that is regrettable to basketball fans such as myself.

Bosh will now embark on the next chapter of his life, having fully shut the door on his basketball career. I am excited to see what he will do with this part of his life in the years ahead.

by Frank Maduri

Knicks Trade With Dallas: Brilliant Or A Blunder?

My unfailing loyalty as a fan of the New York Knicks has inevitably led people to ask me about my opinion of the trade the team made last week with the Dallas Mavericks. The interest level of my friends and colleagues from my perspective as a writer, who at one point in my career, published many articles in sports writing.

The move by the Knicks front office was a bold one sending a once beloved rising star, Kristaps Porzingis to Dallas. New York also packaged Tim Hardaway Jr., Courtney Lee, and Trey Burke to the Mavericks in this deal. The Knicks received point guard Dennis Smith Jr., DeAndre Jordan, and Wesley Matthews from Dallas.

The methodology behind the trade was clear: Porzingis requested a trade in a meeting the Knicks had with him the day before the trade, the team also needed to clear salary cap space, and the Knicks had a logjam at the shooting guard position they solved by moving Lee and Hardaway, Jr in this transaction.

Lee was saddled with a big contract and did not have a defined role with the Knicks in Coach David Fizdale’s system. Hardaway Jr took far too many shots and was also very inconsistent this season while carrying a huge salary. Porzingis has not played at all because of the ACL injury to his knee and has been injured often in the early stages of his NBA career.

My opinion of Porzingis is that he was not a team-first player. He was acting like he was an All World player and he has never won anything or taken the Knicks to the playoffs. Porzingis has always been preoccupied with one thing: himself. I am not a proponent of players who act that way and I am not sorry to see him shipped out of New York.

The press conference held yesterday in Dallas officially confirmed that Porzingis will not be playing this season. The rumor mill was buzzing around NBA circles because apparently the Knicks were pushing for him to return this season. The Mavericks decided not to press the issue because their team is not going anywhere this season and Mavericks owner, Mark Cuban, is going to play the “long game” here with Porzingis.

The rumor mill was also speculating that Porzingis did not want to go to Dallas and that the Knicks made the best deal that they could for their franchise regardless of the desires of their former star player. The rumors persisted that Porzingis was planning on not signing long-term with the Mavericks; a topic that Mark Cuban quashed in the press conference by stating that Porzingis would be paired with his other European star player, Luca Doncic, “for the next twenty years”.

The media then asked Porzingis if he was on board with that plan and he replied very softly: “we are on the same page”. So the Knicks basically sent this guy packing into a situation that he was not on board with, and now he is stuck on a Mavericks team in a very similar stage in their rebuilding as the Knicks.

However, I would argue that the Knicks are better positioned to get significantly better in a shorter time frame than the Mavericks will after this trade. New York also received draft picks from Dallas that brings them to eight draft picks under their control that they can use as pieces in a trade for a star player.

The Knicks also have close to $75 million in salary cap space for next season after this trade which will allow them to get two max-level contracts and they can trade for that third star level player. The team already has some good young talent on the roster that they can develop this year, and they will have a very high draft choice based on their finish in the standings this year; potentially the first pick in the draft.
New York could have the best chances for the first overall draft selection if they finish with the worst record (which they are on pace to do so). The consensus top pick for them could be Zion Williamson from Duke. He would fit their roster and their style of play very well.

The free agent class this summer is tremendous and loaded with star players in their prime production years: Kevin Durant, Kyrie Irving, Klay Thompson, Kemba Walker, Kawhi Leonard, Jimmy Butler, and Al Horford. The Knicks are poised to land two big name free agents and could trade for a star like Anthony Davis, who requested to be traded out of New Orleans two weeks ago.

I have read the accounts that the Knicks have been told by back channels that Durant is coming to The Big Apple in free agency. In my opinion, whether they get Durant or two other big-time star level guys, either way I do not care. The fact is that they can get these guys now that they traded Porzingis.

The past versions of the Knicks would have kept Porzingis and tried to get one or two other mid-level star type players to try to pair with him and be a middle of the road team that might make the bottom half of the playoff tier in the East. The Knicks dumped a lot of salary and any chance of being even remotely competitive this year in order to have a “clean slate” to build a team starting with the 2019 free agency class and the draft.

Some feel that the trade was a blunder and that they did not get enough in return, especially in light of the fact that they are trying to move Wesley Matthews by the Thursday trade deadline or buy him out of his contract. There are fans and media analysts alike that feel that the Knicks made a bad trade, that Durant will not end up with the Knicks, and that the whole thing will be a blunder in typical Knicks fashion.

My view is different as I never thought Matthews would fit or actually play in any games for the Knicks. The acquisition of Matthews allows the team to clear even more salary cap space for next season, which could become a major factor in getting that third star to play at Madison Square Garden.

New York also received a young point guard in Dennis Smith Jr, who could become a more dynamic playmaker than any guard they had on their roster. The center position is upgraded with them gaining DeAndre Jordan, who in my view has always been undervalued by the media and fans of the sport.

The Knicks will emerge from this trade and be rid of a guy in Porzingis who complained more than he did anything meaningful for the team. They will have the opportunity to play all of their young players this year with Hardaway and Lee off the roster. That will be an invaluable period of evaluation of these players to determine how they will shape their roster for next season.

In the end, I believe that this bold move will pay off and that whether the Knicks get Kevin Durant and Kyrie Irving or not, they will be in a much better position to win than if they kept Kristaps Porzingis and had less salary cap flexibility. The next seven or eight months will tell whether my position on this trade will be correct or whether the Knicks will swing and miss on remaking the franchise into a championship contender for their long-suffering fans.