League Salary and Contract Administration!

[alexfall862]

Hi!

So you find yourself as a robber baron who's hoarded enough surplus value from your laborer's work product that you can now own a baseball team!

Or maybe your paterfamilias did all the hard work and you're just the person to take over for daddy now that you've got your MBA from Dartmouth (finally!) and you're aging out of the short course catamaran scene. 

Congratulations either way, and now you have a team!

Next we need to fill that team with players, and then make those players dance for our amusement in the dirt and grass!

In the incoming posts this week, I'll cover some of the league processes and connect to a couple of polls for folks to have input on issues that are matters of taste rather than pragmatism or at all reliant on coding aptitude (of which I have very little, so brace yourselves).

To that end, we're going to talk about League Administration and Finances in this post!

League Administration

Money is exchanged for goods and services, and baseball is no exception. What is largely unique even among the Big 4 American sports (eat shit, soccer) is that baseball has extremely loose salary cap and team spending requirements. This is largely because unlike the the other leagues, the teams historically have been much more independent in how their general gate revenue, expenses, and media contract rights have worked out. 

The problem for a computer simulation is that you don't actually feel the pain of your organization being personally liable for spending above your revenue or for entering the luxury tax. So there needs to be a system that creates incentives to spend prudently while not distorting the natural pattern of team behavior in the simulation. 

To that end, I've worked up a set of reasonably simple rules to implement and one proposal that creates a system that allows for users to make choices of their own free will, but also keeps teams from being in 2009 Mets-level financial crisis or teams that are onboarding new users from being unsalvageable and therefore unfun to play. 

Rule 1. Borrowing more than you earn costs interest and carries over.

Issue
Cap-less teams can spend an arbitrary amount of money on players, and the only risk is to the owner's pocketbook. For teams in the sim, there's not really a way to abstract that.

Solution
Except in having your team need to 'borrow' money from their cash holdings to honor expenses above that year's revenue. The way this will work is that revenue is set at the beginning of the offseason, and teams can operate in that budget without impacting their cash holdings. 

Teams that over or underspend in relation to that threshold will have to 'borrow' their end of year negative balance from the MLB at an interest rate of 5%/year.

Rule 2: League-Wide Revenue Inflates Y2Y

Issue
Ok, so we have a system were you need to be prudent with your budget, but what's to stop a team from just hoarding cash and then blowing it in one offseason?

Solution
League revenue increases year to year, so as a percentage of salary cap a signed deal is likely to depreciate compared to overall spending. It is in a team's best interest to sign players early as the league revenue inflates by 3.5% per year (average of real MLB rate of revenue growth).

All in all, these two rules should create financials like below - where teams that spend big end up losing the opportunity cost in the future of sometimes significant potential salary to keep or cut their debt - while other teams may suffer for years with cheap losing rosters only to blow out the spending for 1-4 years once they have the cash on hand and base roster to fund it - but then deescalating the spend leaves them with 5-6 losing seasons and for just 2-3 years of contention-level spending.

Team spends modestly but slightly above revenue for most seasons, debt becomes ~3-5% of payroll cost relatively quickly.


Team spends big to begin for just 2 seasons and draws to positive below average budget in year 5, but even with a below average roster spend, debt is still increasing to 5-15% of payroll amount


Team goes full Oakland A's/Marlins and banks cash for a short window spending splurge


Saving up 5m or so each season only nets a 1-2 season splurge before need to reign in spending again to stay above water


What you maniacs are probably going to do



Rule 3. Post Arbitration Player Offers Must be Bid League-Wide, and First Post-Arbitration Deals Cannot Go Past 8 Years or Age 33, whichever is triggered first.

Issue
Now that we have an incentive to sign early, what's to stop a team from signing all their starters to infinitely long deals at current year market prices?

This does in fact happen in real life, like the recent trend of teams signing prospects that haven't even debuted (or young rookies) to 10+ year deals for modest amounts of money - basically signing on spec - but I can see a situation in the sim where this ability to lock in players with extensions becomes something that basically freezes roster movement and will create rosters in the future for new users where they're interacting with deals that will probably last their entire tenure in the sim (10-15 seasons) and it becomes a deterrent to engaging with the league.

The other side of this is that there's nothing mechanically to represent a players' willingness or understanding of what they may want, such as flexibility to change employers or the ability to go into Unrestricted Free Agency and let teams bid up on a veteran contract. That behavior is not collectively in the interest of owners (why pay later for what I have now and can sign for comparatively cheap since no one can bid against me?), and so would likely not be used unless there was lever against that.

Solution
Partly this will be solved by the inherent uncertainty and risk built into the player progression system (future dev diary) making teams sending offers something they have to weight a larger amount of inherent risk into, but there are two other aspects.

One is the approximate an agent getting a sense of the outstanding market. In order to do that, we'll have a system where using a version of @Piercewise1's contract calculator fit for MLB, players on extension will field blind 'bids' from teams that are binding starting offers if the player enters FA. The team offering an extension must come with 5% of the value of those offers to successfully retain the player without them going to unrestricted free agency first and then having to bid against the previously anonymous offers to retain the player. This is to approximate an agent saying 'hey baby, you got a lot of moola being offered if you wanna move!' (sorry I don't speak agent very well) and getting their player to refuse an extension without going to market first.

The second leg of this is that any player post-arbitration looking to sign a deal will not sign a 9+ yr deal, meaning those are for a practical matter banned (I suppose you could offer a long deal to a player coming off their first post-arb contract at age 30 or something, but in most cases it'd be a real bad idea). The goal here is to allow for teams to take care of securing what in their opinion are their worthwhile assets to deals players would actually accept, while not causing either hoarding or malicious FA deals from competitor teams.

Rule 4. Player expenses are what they say they are on the tin, no deferred salary agreements or performance incentives. 

Issue
IRL compensation takes all kind of different forms. In baseball, which historically has had one of the strongest players' unions in the country, makes sure that 99.9% of the compensation for baseball players is guaranteed. (playoff and all-star bonuses non-withstanding). Teams have gotten creative with this, as evidenced by the recent Shohei deal, but I think the flexibility to do things like that is not effectively balanced as compared to IRL because while we can calculate contract value against 'real value' factoring in inflation and such, players can't bridge the gap of the deferred money with endorsement deals from Kingery Farms or any other entity in simFBA.

Solution
You can't be doing that.

Rule 5. Teams can hold or send out any amount of salary on a player's contract, but contracts cost money during the season.

Issue
Given an unlimited salary with no hard cap, a team could find it in their best interest to hoard players specifically to wield as trade assets, with the intention of having a year-end cost that's relatively low (not saying I've ever done this in OOTP or anything...)

Solution
To counter this, the revenue and expense measure is calculated monthly. Basically the players on your roster cost your team 1/6 of their listed salary each first day of the sim month's 'evaluation' of team's financial position. The interest on the money owed isn't calc'ed until the next league year, but this keeps teams from taking lessons from the American Healthcare system and profiting off being a middleman pass-through of the product folks actually want (players in this case) or essentially buying puts on player assets. These dates will be 1st day of season, and each month following that - a month in the sim is approximated as 3 out of game weeks and contract values accrues at the beginning - so the schedule would be weeks 1, 4, 7, 10, 13, and 16. (more on schedule later, don't think about 3 weeks == a month too hard)

Rule 6. The League Can Seize Your Team

Issue
Even if teams, like some of the examples above, end up wracking up insane negative cash holdings on their year to year balance, it doesn't make any difference to a user. This can lead to situations where teams are spending potentially (TRIGGER WARNING: student debt PTSD) more than their all of their possible surplus revenue on interest and being effectively in an endless spiral. 

Solution
To combat this, if a team has accumulated interest exceeding 15% of their revenue (which a couple of the above example do) - the league 'captures' the team and will prevent them from signing contracts above veteran minimum until they're back under the interest being 15% of the value of their revenue. In crunching some numbers, this still allows teams to have some considerable fun and variety with year to year spending, but any team seized by the league recovers from their death spiral within 1-3 seasons.

Revenue Proposal  
So that's it for rules, now I have a piece of league administration that I think should be something we all decide on, and that's - wtf is revenue?

There are 3 systems in my mind that we can use to calculate this: flat, dynamic, fixed, hybrid: 

Flat
All teams make the same amount of revenue each year. I think this is probably the best for encouraging an active sim that welcomes newcomers, as they will have equal financial footing as other teams. 

Dynamic by Play
Team revenue expands and contracts based on on-the-field performance. There will be 30 revenue 'slots' and your rollings average in standings for the last 3 years evaluated at end of the season set your revenue for the following year. The span would be something like bottom revenue 50m, average league revenue 150m, top revenue 300m and the teams in between would be a normalized distribution between those with a standard deviation of ~20% - which is what it is in real life.

Fixed by Media Market
Teams would be assigned by dice roll or by assigning based on irl values to their revenue slot, which we'd set at probably half the extremity of the Dynamic options, and then that's your revenue from your market. This better captures the media market impact on revenue compared to what product is being put on the field (for example the Mets and Angels can make tons of money but put turds on the field perpetually)

Hybrid
Combine both media market fixed slots with dynamic on-field revenue.

Poll
Of those 4 options, hybrid probably best captures the incentives that drive the behavior of real MLB teams, but personally I would endorse the flat model as it protects against endless financial spirals from bad teams being bad - which to be fair is a real thing in the MLB too - and helps to insure users against inheriting disaster teams or being limited by circumstance to have fun and creative teams.

I know there are folks in the sim that like approximating real life aspects of a league, and I know there are others that have more of a preference for keeping users on even competitive footing. In the case of salary/revenue, my vote is for leaving approximating MLB finances here and going with flat, but I want y'all to be involved in that choice since it would be a strong departure from real MLB rules.

Because those rules would be very powerfully impactful for 2-4 teams on both the positive and negative end of the spectrum, I think we'll set the threshold at 2/3rds. If 2/3rd of users vote to enact either version unequal revenue sharing, we'll explore that further, otherwise we'll stick with flat revenue distribution.

Poll Link: https://forms.gle/Jw42R25Kh8mFn9MS9

Thanks,
alexfall862

[Spoof]

@alexfall862 - Royals are currently discussing how we'll vote, but on the financial model. Would it be worth just adding in a "Newcomers Bonus" where if a team is taken over by a new Owner, who was never affiliated with another team (for say 3 seasons), they get a cash injection of x% so that they're given incentive to salvage what is probably an absolute mess of a situation? If so, best to codify that nice and early.

[alexfall862]

4 minutes ago, Spoof said:

@alexfall862 - Royals are currently discussing how we'll vote, but on the financial model. Would it be worth just adding in a "Newcomers Bonus" where if a team is taken over by a new Owner, who was never affiliated with another team (for say 3 seasons), they get a cash injection of x% so that they're given incentive to salvage what is probably an absolute mess of a situation? If so, best to codify that nice and early.

There's definitely room for that conversation. Or a standard debt forgiveness or something for formerly user teams changing users.

[Spoof]

Yeah basically. Just can see a way someone goes all in to try and win, cocks it up and bails 

[Jieret]

Will you be implementing luxury tax tiers to penalize overspenders?

[Bundy]

1 hour ago, Spoof said:

Yeah basically. Just can see a way someone goes all in to try and win, cocks it up and bails 

Leave me alone 😭 

[alexfall862]

1 hour ago, Jieret said:

Will you be implementing luxury tax tiers to penalize overspenders?

A bit of a hat on a hat for 1 post, but yeah that's coming in contract discussions that aren't new rules per say, but real MLB things. I grouped it in mentally with the arbitration process and Super 2s and Rule 5 and such.

Though I wouldn't say it's to penalize as much as it's to disincentivize wildly price inflated long-term roster construction.

If we go with non-flat revenue distribution, then it'd factor into the lower revenue slots' revenue since luxury tax is given to the 'poors' when paid.

[Rocketcan]

Can you go into more detail on how the hybrid model would work? 

[alexfall862]

Just now, Rocketcan said:

Can you go into more detail on how the hybrid model would work? 

Basically on the back end of calculating it, you'd do both the models, and then halve the values and combine them for each unique team.

So a team could get 30th in the Market Model, that's going to be 30th, nothing they can do about being located in, say, Alberta. They get $60m as the bottom revenue slot. 

A team could be .500 and be 15th in the on-field model. They'd get 150m for their slot. 

Hybrid would halve both and combine it, so a team with last in market and middle in success on-field, as above, would get (60/2)+(150/2) = 105m for revenue.

 

[Ape]

White Sox vote in