I was surprised by my colleague Neil Paine’s analysis of Miguel Cabrera’s record-breaking new contract extension. I thought the Detroit Tigers would come out looking much worse.According to Neil’s estimate, which used projections from Baseball Prospectus’ PECOTA system, Cabrera’s market value for the next 10 years is roughly $275 million. That’s not as much as the $292 million that the Tigers will be paying him, but the difference is modest.Neil’s valuation assumed that teams are willing to pay about $6.5 million per additional win in the free-agent market, based on research from Dave Cameron and Lewie Pollis. These estimates come from comparing the salaries given to free agents against their expected on-field production. (Neil further assumed that the market price of a win will increase by 5 percent per year.)In other words, Cabrera isn’t that vastly overpaid as compared to recent free agents. If Mike Napoli is making $16 million per year, then Cabrera’s $29 million per year doesn’t look so bad.But Cabrera’s market value is not the same as Cabrera’s economic value to the Tigers. It could be that free agents as a group are vastly overpaid, relative to the revenue they bring to their teams.In the 2006 book “Baseball Between the Numbers,” I estimated the marginal value of a win to a baseball team, based on how responsive different categories of revenue (such as ticket sales and TV deals) are to a team’s quality. I estimated that an additional game won added only about $1.2 million to a team’s bottom line, after subtracting revenue-sharing payments. (This assumes that the value of a win is constant from team to team, which it isn’t, but we’ll leave that aside for now.)That estimate is now eight years old. Total gross revenue accruing to the 30 Major League Baseball clubs has increased since then; it was $7.1 billion in 2013, according to Forbes, as compared to $4.7 billion in 2005.If the marginal economic value of a win has increased proportionately, a win would now be worth about $1.8 million. That’s still far less than the $6.5 million that teams are willing to pay for a win. Are baseball owners being irrational?Perhaps, but their motivation to own a baseball team may not be based solely in profits and losses. They may just be having fun. (I can think of a lot of worse ways to splurge.)And they may know that if they choose to sell their teams, they can do so — probably at a significant profit. The market value of an MLB franchise has increased by more than 600 percent since 1990, according to valuations from Financial World and Forbes magazine (see Rodney Fort’s website for the data). By comparison, the Standard & Poor’s 500 index rose by about 450 percent between March 27, 1990, and March 27, 2014. (Framed in terms of compound annual growth rates, baseball teams have increased in value by 8.5 percent per year since 1990, as compared with 7.3 percent for the stock market.)Not only have baseball franchises outperformed the stock market, but the patterns in their growth rates have been quite different. The stock market rose dramatically in the 1990s, but has teetered back and forth since then. By contrast, the rise in MLB franchise values has been much steadier.What accounts for this?Here’s a theory. The average baseball franchise is now worth $817 million, according to Forbes. Loosely speaking, you need to be a billionaire to afford one. And there are a lot more billionaires than there used to be.Forbes estimates that there are 492 billionaires in the United States, as compared to 99 in 1990. The increase in the number of billionaires, like the increase in baseball franchise values, has been relatively steady. (The number of American billionaires fell after the financial crisis of 2007-09 but has risen to a new high since then.)In a sense, the Tigers may be betting less on Cabrera’s performance and more on economic and regulatory conditions. If the number of billionaires continues to rise, Tigers owner Mike Ilitch (worth $3.6 billion) should find plenty of buyers should he sell the team down the line. Cabrera’s presence might make the Tigers a more attractive purchase — or if not, the liability might be modest as compared with the Tigers’ resale price. But if the rise of the billionaire reverses, Cabrera’s contract might come to look like the peak of a bubble.
Chelsea manager Mauricio Sarri became the first boss at Stamford Bridge to go through his first 11 league matches unbeaten and he has hailed his talented players for the role they played.Chelsea defeated Crystal Palace 3-1 at Stamford Bridge on Sunday to go second place and just two points behind Champions Manchester City at the top of the Premier League table.The victory means Sarri is now unbeaten in his first eleven Premier League games, which is the joint-longest unbeaten record by a Premier League manager, equalling the record set by Frank Clark in 1994.“I’m really very proud but I’m proud to be coach of this team. The record is not the record of the coach but the team.” Sarri told Chelsea FC website.“I was lucky because I have very good players and in the last two months they were able to win without a great level of organization from the tactical point of view.”Chelsea hat-trick hero Tammy Abraham hopes for more Andrew Smyth – September 14, 2019 Tammy Abraham hopes this season will be his big breakthrough at Chelsea after firing his first hat-trick for the club in Saturday’s 5-2 win at Wolves.Sarri also downplayed Chelsea’s title chances saying: “I don’t know. At the beginning, we knew there was a gap of 30 points from last season.“At the moment we need only to think about trying to recover a large part of the gap. I hope to recover almost all of it but I don’t know. It’s difficult to recover 30 points but we are trying.”
A $52 million project to rebuild the two main runways at Naval Air Station Jacksonville, widen taxiways and improve the airfield is halfway completed and remains on target to be completed in June.The last major overhaul of the runways at the installation, Florida’s oldest naval air station, occurred in 1967, reported the Florida Times-Union. The base opened in 1940.The work also includes demolition of three obsolete hangars from World War II, which will free up space to park the base’s new Boeing P-8A Poseidon aircraft as well as those arriving from other Navy bases for training at NAS Jacksonville. The P-8A reconnaissance aircraft are replacing the Navy’s aging Lockheed P-3 Orions.During the year-long project, the base’s 38 fixed-wing aircraft and 2,000 crews and civilian employees are operating out of Cecil airport, a general aviation airport run by the Jacksonville Aviation Authority.In 2010, officials envisioned a much smaller project to repair the runways. “But when the new engineers came out and looked at it again with more tests, we found it was not suitable for the new aircraft that were coming and we knew we had to make modifications,” airfield manager Doug Chaney told the Times-Union. Dan Cohen AUTHOR