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Can super-agents raise player salaries?
Robert, a loyal MR reader, asks:
I was recently reading about ARod's decision to leave the Yankees. The article mentioned "superagent Scott Boras." It's widely believed in the sports community that Boras has the ability to increase the salaries beyond what they would get with a regular agent. Considering that there are only 30-odd teams that might want a player, I find it hard to believe that an agent could make such a big difference.
I know more about Mark Alarie than ARod, but super-agents may matter through the following mechanisms:
1. The super-agent manages an otherwise incompetent or unruly player. The agent is about improving the quality of the player as much as extracting surplus from the team.
2. A super-agent, especially if he has repeat business with teams, may credibly certify the unobservable qualities of players, even star players.
3. Boras may be very good at marketing his players to management and getting owners to open up their pocketbooks.
4. If Boras represents multiple stars, clubs will be reluctant to cross him. The equilibrium here is tricky. But if the agent has discretionary power to steer a player to one equal offer or the other, and the club reaps surplus from each player, a club may overbid for one player to stay on the agent's good side and receive favorable discretionary treatment later on. Repeat dealings with the agent also mean that the club is more likely to follow through on its implicit commitments to both the player and the agent.
5. Robert suggests that some (non-super) agents may in fact be in league with the owners, not the players.
Can you think of other possible mechanisms?
Addendum: Here is J.C. Bradbury on Boras. And here is a New Yorker story on Boras, courtesy of John de Palma.
Posted by Tyler Cowen on October 30, 2007 at 07:26 AM in Sports | Permalink
Comments
Numbers 2 and 3 sound implausible to me. Number 1 is plausible but I'd say the fourth item is the likeliest in the group. I'd ad that some agents may simply have a better understanding than others of the economics of the teams, and hence are better negotiators. They understand the player's value to different teams, and may also be able to structure variations on the usual contracts that fit the team's finances well. In other words, some agents are smarter or harder-working than others. Maybe that's similar to Tyler's #3.
As an aside, I find A-Rod's decision to opt out very surprising. The Yankees have about $21 million of free money from the Rangers to play with in negotiating with him. The opt-out takes that out of the picture. It will cost another team $21 million (appropriately discounted to PV) more than it costs the Yankees just to match the Yankees' offer. Boras must be very confident, or else he hasn't formally opted out yet, and this is a giant bluff.
Posted by: Bernard Yomtov at Oct 30, 2007 8:28:07 AM
Recall seeing a piece on Boras ~10 yrs ago. Mostly he is a very good salesman. Traditionally agents
expected the teams GM and scouts to figure out if they wanted a player. Boras mounts impressive high
end marketing campaigns at the owners, telling them how smart they'll look to have hired this sure Hall
o' Famer. Recall him saying his strategy was to find "one rich nut." You don't need market consensus
on the value of your guy, you just need one guy of 30 thinking with the little head instead of the big one.
None of this is too revolutionary. I'd guess most of the non-super-agents relative underperformance stems
from the fact that their income is more constrained by their ability to attract and retain the marginal
client than their ability to extract the marginal dollar for their client. So expect their resources to
be allocated more toward finding clients and keeping them happy in other ways, vs. marketing their
services.
Posted by: mkl at Oct 30, 2007 8:58:47 AM
Big NYer piece on Boras in the past week or so. A couple of points of note. First, it contends that players that Boras *doesn't* represent believe that he has had a role in raising salaries generally, a spillover effect.
Second, it notes that Boras routinely used to clean up in arbitration, but more recently he has been on a losing streak (12 of the last 15 not favorable if memory serves). But, obviously, he is asking for more money than the average market valuation.
As far as #3 goes, the article notes his packaging of the players and talks about how management is often dismissive of it.
#4 sounds plausible, especially since some teams, well, the White Sox at least, go out of their way to avoid Boras' players altogether.
Every revolution has a counterrevolution.
Posted by: david at Oct 30, 2007 9:13:34 AM
My opinion is that Boras and agents in general raise player's salaries by not allowing them to be exploited by the owners. In the past, players could be intimidated by the awesome bevy of lawyers and specialists employed by the teams. In contrast, a player would be young, generally possessing only a high school education, and surrounded by those whose motives he may not trust to be in concert with his own.
Enter the professional agent. The agent can successfully assess a player’s true potential value and act in the true best interests of the player. Often, due to the winner’s curse, this entails getting his player to be paid more than he is worth. Once an agent has this reputation, more and more players flock to him as the capitalistic system shows its power. Imitators spring up but the reputation remains.
So do “super-agents” raise player’s salaries? Only be empowering the players with their own skills to maximize their own earning power. The past inefficiencies and the myth making that goes on in baseball exaggerates the impact on any one agent in particular may have, particularly as salaries have ballooned over the past 20 or 30 years.
Posted by: pawnking at Oct 30, 2007 9:22:15 AM
I know more about Mark Alarie
That's because he played for the Bullets, I assume? I, of course, know him from when he was playing for Duke, but I understand that you're more an NBA fan than a fan of the college game.
Posted by: John Thacker at Oct 30, 2007 10:17:38 AM
Read up on Leigh Steinberg as the original prototypical super agent. A giant nexus of acquaintance and opportunity (he was a dorm advisor to Steve Bartkowski) launched his career. He negotiated the richest rookie contract at the time and just grew from there. There's a lot of #2 to what he does, except he took great players with decent character and makes sure they were great community guys as well as players, making them more valuable as fan-friendly stars and faces of teams.
Posted by: Brad Hutchings at Oct 30, 2007 10:28:43 AM
Could it be that super-agents deliver more value on the endorsement end then they do on the pay for play scale?
Owners know that the agent will get the player high profile endorsements, thus acting as additional advertising for the team. They might not know what any of the unobservables are, but they could get extra pay just for delivering that extra advertising.
Posted by: OneEyedMan at Oct 30, 2007 10:44:28 AM
The New Yorker article talked about the inherent information asymmetry of the bidding process, where teams must deal with the agent and a prevented from colluding. A "superagent" can use this information honestly or deceptively. The article mentions that Boras has created phantom offers to drive up prices.
Posted by: TJ at Oct 30, 2007 10:49:11 AM
The New Yorker article talked about the inherent information asymmetry of the bidding process, where teams must deal with the agent and a prevented from colluding. A "superagent" can use this information honestly or deceptively. The article mentions that Boras has created phantom offers to drive up prices.
Posted by: TJ at Oct 30, 2007 10:50:28 AM
4) seems like it makes the most sense out of the options given. Strange that Cowen didn't mention anything about out right deceit. I wonder if you guys just don't want to come to terms that these things happen.
Posted by: Richard at Oct 30, 2007 11:06:20 AM
#4 in Boston is called the "JD Drew effect." There was some speculation that Boston's willingness to overpay for Drew was softening the negotiating territory for Matsuzaka. (all depends on whether you think they overpaid for Drew ex ante, of course...)
But isn't this a two-sided market? An agent (like any broker) offers management access to players and offers players access to management. The more (and better) of one side he has increases the value he can offer the other side. And then add to this the information assymetry that results - Boras negotiates with owners on behalf of multiple players. If a team tells him they won't pay a premium for Player A, a 3rd-baseman, b/c they need a Center Fielder then he knows more about what they are willing to play for player B, a CF.
In a market where info is at a premium, this would seem to tip the balance in favor of an agent who can A) bottleneck access to players and B) knows your willingness to pay, particularly as teams cannot exchange the same information (collusion).
Posted by: ACY at Oct 30, 2007 11:31:36 AM
I agree with points 2,3, and 6. In order for Boras to have become a "super-agent" he must be incredibly good at marketing his players. Then once the owners, which the players have been marketed, realize the value of the player they will want to come back to the particular agent. After there has been several great players signed to the same team with the same owner, a credibility is established. The credibility created by the agent makes their job much easier because owner will come to them asking about players on the market.
A "super-agent" isn't just formed over night, it comes with skill, connections and a bit of luck.
Posted by: Shannon2026 at Oct 30, 2007 11:34:45 AM
An aside, to those of you who wonder why A-Rod opted out:
The deal A-Rod had with the Yankees was for 10 years, $252 million. He left 3 years on the table because he is 32, and Boras believes he can get A-Rod another 10 year contract at 32. If A-Rod were trying to get a deal at 35, when his previous contract would've expired, he would be unlikely to get more than 5 years.
Boras is marketing A-Rod as a great investment for teams, because he is currently on pace to break the career homerun record (recently broken by Barry Bonds) as well as the career hits record (currently held by Pete Rose). These records are not only two of the most sacred in baseball, but also the records held by the most despised characters in baseball history. A-Rod will be extremely popular if he breaks one or both of these, the team will have a marketing bonanza and make back every dollar they spend on A-Rod. By marketing A-Rod this way, Boras gives himself a chance to get the huge deal he wants. Would other agents see this possibility and market A-Rod this way? Perhaps not. Perhaps this is why Boras is considered a super-agent.
Posted by: Pete at Oct 30, 2007 11:42:11 AM
Quick random thought.
You are leaving out risk. Maybe he is just more risk tolerant and maybe because of that he attracts clients who are more risk tolerant. This
certainly seems true with the college players he represents.
From the article -
'There was even a segment devoted to the “Boras Effect,” in which a couple of analysts explained his practice of simply stating a player’s worth in advance and warning teams not to draft him unless they planned to pay it. As a result, the Boras advisee Andrew Brackman, one of the top-rated pitchers, and a star basketball player as well (“two-sportability,” for those watching the telecast), fell to the deep-pocketed Yankees, with the thirtieth pick. They then gave him a signing bonus that was nearly a million dollars greater than the bonus given to the fourth over-all pick, the pitcher Daniel Moskos, by the resource-poor Pittsburgh Pirates. Kentrail Davis, an outfielder whom Boras had valued at “low-first-round money,” or about what the slot recommendation would have been for Brackman, was not chosen until the fourteenth round. Boras advised him to go to college instead.'
That was a big risk for Kentrail Davis.
The size and not just the quality of your client pool should matter. With more clients you can take more risks.
Posted by: SomeGuy at Oct 30, 2007 12:09:46 PM
Further to Pete's comment, it is likely that Boras is simply a better agent then others. Boras offers the whole package for Arod: marketing record breaking campaigns, insinuating non-existent offers, insinuating package deals, assessing potential offers (for clients who opt out like Drew & Arod), offering complex sabermetric arguments, quantifying team endorsement opportunities and, most important for a negotiator, simply having no shame and, consequently, never negotiating against himself. Some people just do a better job.
Posted by: guy in the veal calf office at Oct 30, 2007 12:24:26 PM
As a lawyer, I have observed that some people are simply better negotiators than others. (Just as some people are better salesmen, or better arbitrators, or better seducers.) The precise talents that go into being good at these things are hard to specify, and even harder to quantify. In general, good negotiators are psychologically astute, in that they are able to identify what the other side values more or less highly, creative in being able to invent deal structures that may maximize return for both sides, and experienced and knowledgeable in the field, which gives them precedents to draw upon and causes others to respect their judgments.
So for example, Boras presumably knows how each GM and each owner values things like clubhouse leadership versus on-field performance, offense versus defense, and pitches his clients accordingly etc. He presumably has some ability to come up with salary deferral plans, incentive payments, etc. that enable both player and team to maximize expected value. If there is a particular sticking point in a negotiation, he may recall a similar problem, and a solution, from the past. And if he tells either a player or a GM that something is "market," he has credibility.
Posted by: y81 at Oct 30, 2007 1:28:14 PM
By way of analogy, Hollywood super-publicists who represent multiple stars can prevent bad coverage by magazines by threatening to withhold access not just to one star but to their entire stable. Consider the wonderful coverage Tom Cruise got when he employed super-publicist Pat Kingsley, and the awful coverage he's gotten since he switched to his sister.
Posted by: Steve Sailer at Oct 30, 2007 1:57:46 PM
Boras definitely represents multiple stars; read the sports section any off-season and you'll see his name a lot.
He also figures prominently in Moneyball, a book you surely should have read if you have not, which would shed some light on this.
Posted by: Andromeda at Oct 30, 2007 1:58:01 PM
"A-Rod will be extremely popular if he breaks one or both of these, "
I don't know. Between how he announced this, and the trail of unhappy teams he has left, and the fanbases which do not like him, what is A-Rod really worth outside his on the field production? If it's anything at all, I'd bet it's negative, 1) from having tied up all your capital in one investment rather than a diversified strategy and 2) from the fact he's a jerk. Last season Joe Torre batted him 8th in the PLAYOFFS, despite the fact he was their best hitter; this was primarily in response to fan sentiment. He's a jerk. Simple as that. And announcing DURING the clinching game of the World Series, an event he has never participated in, is just the icing on the cake of being a jerk.
He will not be extremely popular. Ever. He hasn't been since Seattle. How popular is the current all-time home run leader / jerk?
I have no doubt Boras will get what they expected when they opted out, but that's not an accurate gauge of what A-Rod is really worth. It's a broken market, the majority of FA signings produce negative value; A-Rod's old deal probably would be a counter example, despite how it's treated, because he's that good.
Posted by: Johnny Debacle at Oct 30, 2007 2:54:30 PM
Johnny, I'm confused. A-Rod was worth $25M/year 7 years ago, but not more than $30M/year now? Inflation alone takes care of this. Do you think he is worth less b/c he is older now? For a 10 year contract, I would have to agree, I am just wondering if this is what you are arguing.
As for likeability, sure, A-Rod is not high on the list. But he is nowhere near as bad as Bonds or Rose. If people don't start to warm to the idea of him breaking the record as he gets closer, I'd be surprised. Also, keep in mind that Bonds is pretty popular in SF. If A-Rod moves to a new team, I think 5 years from now he could be pretty popular with that fan base as long as its not NYC or Boston. And your own fan base is where you get your revenue.
Finally, I don't think the FA market is as broken as people think. Sure, you pay more than the average for a player of that talent level. But that's only b/c a huge pool of talent is locked up under rookie contracts and arbitration. Those salaries are kept lower, probably partly by the poorer teams in the league I would imagine. So the more wealthy clubs have tons of cash left over to chase far fewer quality players. FA as a market is only broken if you can show that a solid starter isn't worth the $6-10M they get paid in comparison to FA bench players. You have to take players under arbitration out of the equation when comparing contracts, but include them when you realize that teams only have so many starting spots to fill. Its like a double-whammy making the FA market look screwed up, even if its not.
Posted by: mpowell at Oct 30, 2007 3:27:29 PM
A-Rod was worth $25M/year 7 years ago, but not more than $30M/year now? Worth is not linear. And remember, he was only worth that to Tom Hicks and the Texas Rangers, no one else was even close to offerring that package to A-Rod. 29 teams believed that Hicks was duped into that deal. I don't know what the pitch was to Hicks but I'm sure that it didn't include that Hicks would be paying A-Rod for somebody else, long after he was no longer a Ranger and the Rangers not close to being a competitive baseball team. Baseball is not a classic market. It only takes one owner to buy the pitch. A consensus of the 30 teams would be a clearer indication of market value.
Posted by: James Roane at Oct 30, 2007 4:44:23 PM
Well I don't know the story of how A-Rod got $250M from Hicks. It doesn't seem like that bad of a deal in comparison to Manny making something like $18M/year. Is it really the case that nobody else was offering anything close to that? If that's true Hicks is really dumb, regardless of how good A-Rod is. I'm not sure I buy those claims.
Posted by: mpowell at Oct 30, 2007 5:54:10 PM
Finally, I don't think the FA market is as broken as people think. Sure, you pay more than the average for a player of that talent level. But that's only b/c a huge pool of talent is locked up under rookie contracts and arbitration.
mpowell,
It seems clear that the fact that talent is locked up as you describe helps drive up FA salaries by limiting the supply of players available. I wonder if the lock-up really does much to reduce team payrolls, especially when you consider the signing bonuses paid to high draft picks.
BTW I do recall that no one was close to the deal Hicks gave A-Rod. Apparently he wanted to make some sort of giant splash or something. He did.
Posted by: Bernard Yomtov at Oct 30, 2007 6:35:56 PM
RE: if that's true Hicks is really dumb ...
He did pay Chan Ho Park an absurd amount of money the year after signing A-Rod despite the fact he was posting 3.50+ ERAs in Dodger Stadium. Although looking at the standard numbers makes the Park contract slightly more understandable. And the rumors were that Hicks was "bidding against himself" (similar to rumors this year that the Red Sox really overpaid for the rights just to negotiate with Dice-K). As for Boras, he did have this massive tome about A-Rod's projected statistics and likelihood of reaching certain milestones that he was parading around town back in 2001. And Boras did manage to land J.D. Drew a sweet deal when every single person following MLB thought Drew was insane to opt out of his contract after 2006. Boras is really good at #3, although there are some teams that he routinely deals with (the Cardinals come to mind - I know they signed Rick Ankiel in the 2nd round of the draft out of high school when he should have gone much higher because Ankiel was a Boras client and other teams were afraid to draft him).
Some background:
A-Rod's contract was basically set at the height of long-term, high dollar guaranteed contracts in MLB. Manny Ramirez signed the same year for something like $18 million per. Mike Hampton signed some ridiculous deal with the Rockies that is still being paid for by various teams. The Ramirez and Hampton deals were done BEFORE the A-Rod deal (I think the Yankees signed Jeter to an extension as a reaction to the A-Rod deal). Wikipedia has a list of the highest total dollar value for sports contracts ever:
http://en.wikipedia.org/wiki/List_of_largest_sports_contracts
In addition to the 4 mentioned above (A-Rod, Manny, Hampton, and Jeter), Todd Helton is also on that list as a 2001 signing (extension). While there were a few blips on the radar between 2001 and 2007 (Giambi, Beltran) it wasn't until last offseason that baseball teams started handing out these long-term, $100+ million deals (Soriano, Zito, Wells) again.
Finally, I think Pete Rose is still beloved by fans even though he is persona non grata with MLB and the HOF. And Barry Bonds, while not really beloved by many, is not as disliked as MLB and the "media" would like people to believe. I have witnessed the fickleness of the crowd with Bonds in DC - a late September game in 2005 between the Giants and Nationals, the stadium was packed (30,000+ on a weeknight for 2 teams out of the race), and 99.9% of the people booed Bonds - until he hit a HR into the upper deck (not easy at RFK) at which point 99.9% of the people gave him a standing ovation.
Posted by: AZ at Oct 30, 2007 9:50:24 PM
Any transaction can take place in a range of prices between the minimum that the supplier would possibly offer and the maximum that the buyer would possibly pay for it. I.e. the surplus value can go all to the player, the team, or somewhere in between. Only in competitive markets with multiple suppliers is the price driven to the cost. There is no ARod market, there is one ARod, the supply of which Boras controls monopolistically. Boras doesn't conduct an auction for ARod - he deals one-on-one with teams, and sometimes no transaction is made (JD Drew holding out after being drafted is one example) and he is very good at extracting his players' value...this is like any negotiation in business or whatever; Boras is a good negotiator.
Posted by: Paul N at Oct 30, 2007 10:33:04 PM
