Can super-agents raise player salaries?

by on October 30, 2007 at 7:26 am in Sports | Permalink

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.

Bernard Yomtov October 30, 2007 at 8:28 am

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.

david October 30, 2007 at 9:13 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.

John Thacker October 30, 2007 at 10:17 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.

OneEyedMan October 30, 2007 at 10:44 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.

TJ October 30, 2007 at 10:50 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.

ACY October 30, 2007 at 11:31 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).

Pete October 30, 2007 at 11:42 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.

guy in the veal calf office October 30, 2007 at 12:24 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.

Steve Sailer October 30, 2007 at 1:57 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.

Johnny Debacle October 30, 2007 at 2:54 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.

James Roane October 30, 2007 at 4:44 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.

Bernard Yomtov October 30, 2007 at 6:35 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.

Paul N October 30, 2007 at 10:33 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.

Chicagoan October 31, 2007 at 11:06 am

#3 is very plausible!

Boras has access to a statistical database that is unparalleled. The presentation he is able to make on behalf of his players is extremely convincing because he can quantify so much of each one’s performance. It makes it more difficult for management to argue against spending the money when Boras can show them any number of ways they are currently overpaying for existing players on the roster. In effect, Boras has better information on a team’s players than the team does.

This is no joke. The guy has an entire lab of computers and staff dedicated to analyzing baseball.

mpowell October 31, 2007 at 6:09 pm


I think that Boras is just great at convincing the owner with the highest reserve price that the rest of the owners think the same way he does. The player doesn’t get the salary that clears the market, he gets the salary which is the highest opinion of value.

There are many examples. I sometimes wonder if Boras gives owners some kind of benefit for being a loser in a bidding war.

This goes back to what Paul N said. If the stories are true, then Boras does an excellent job of capturing all of that surplus for his players. I’m just a little surprised that these owners are that inept at negotiation. If this theory is true, the superagent is really delivering a lot of value.

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