It all pays off in the end

LANCASTER, Pa. - Last week while in Florida, I had the pleasure of bumping into both David Montgomery and Bill Giles.[1] Mr. Giles moved in and out of the area like a flash - he dashed in and rolled out after he had done and seen what he needed to do. Mr. Montgomery, along with PR director emeritus Larry Shenk joined Todd Zolecki and I to watch Chase Utley's spring debut during a minor-league game on one of the back fields of the Carpenter Complex. Actually, I joined them. They were standing there at the one spot along the sidelines that separated us from the actual field/benches.

Still, despite a pleasant conversation with the guys, I couldn't help to think that, once upon a time, the Phillies were (internally) considered a small-market team. In fact, until recently the team collected cash from the so-called luxury tax put in place during the 2002 collective bargaining agreement.

The interesting part about the notion of the Phillies being a "small-market team" is the semantics. Technically, the Phillies play in the fifth-largest media market in the U.S. Only New York City, Los Angeles, Chicago and San Francisco are larger. Though back when the Phillies were playing in the Vet and the "small-market" statement was floated out there, Philadelphia was the fourth-largest market.

But largesse and largeness are clearly two different things.

Or at least they were until, (ahem) the Phillies got good. It's really an elementary phenomenon - when the Red Sox got good, re-worked their business plan and ballpark and really formed a Nation, they were essentially the same free-spending team as the Yankees.

Red Sox, Yankees... same difference. If either team wanted a player, they went out and bought a player.

Poaching from a David Murphy tweet (@HighCheese), the Red Sox are set to open the 2009 season with a player payroll of $120 million. It will be the lowest rate for Boston since the 2003 season.

According to Murph, the Phillies' Opening Day payroll will be $10 million higher than the Red Sox, while, according to research by Paul Hagen, the Phillies raised their payroll by approximately $26.7 million to $130,844,098.

For the Phillies it seems as if this winter was a perfect storm of arbitration-eligible players come home to roost. Better yet, Hagen dropped this from a story last month:

Closer Brad Lidge, who could have been a free agent at the end of the season, signed a 3-year extension in the middle of last season, got the biggest raise. His base salary went up $5.2 million to $11.5 million. He was followed closely by first baseman Ryan Howard, who is now the team's highest-paid player at $15 million after getting a $5 million bump.

Righthander Brett Myers ($3.5 million increase) and second baseman Chase Utley ($2.75 million) got bumps that were scheduled as part of multiyear contracts.

The biggest winner percentagewise was lefthander Cole Hamels. He got an 870 percent increase from $500,000 to $4.35 million as part of his new 3-year contract. Centerfielder Shane Victorino got a 651 percent increase from $480,000 to $3.125 million.

At the same time, general manager Ruben Amaro Jr. told us during the winter meetings in Las Vegas that the Phillies were largely unaffected by the current world economic crisis largely because they won the World Series. Had they fallen short, perhaps the payroll might not have gotten close to $130 million?

Still, as Nate Silver pointed out last week, baseball is a really, really good investment. Looking to make some money? Buy a baseball team. Just look at what happened to Messers Montgomery and Giles...

Sure, you might be small market now, but it will pay off very quickly.

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[1] Yes, this is shameless name-dropping. Make that unapologetic name-dropping.

Utley to play... again

CLEARWATER, Fla. - Just catching up on some reading here at sunny Bright House Field before the Phillies take on the St. Louis Cardinals with Chase Utley hitting leadoff. Chances are Utley will get a handful of ABs before calling it an afternoon, but the Phillies have to feel good that their All-Star second baseman is trying it out for a second straight game. This one, though, is an actual game without bloused uniform pants and mucho sock exposure, so it will be interesting to see how Utley performs in the formal structure.

Chances are he'll do well.

Meanwhile, Nate Silver of Baseball Prospectus and his own FiveThityEight blog, wrote an interesting story in the latest edition of Esquire sizing up different investment strategies. The premise of the story was if a person put $1,000 in the stock market, cash, real estate, etc. in 1998, how much would they have made in 2008?

Across the board the returns were pretty consistent, except for one entity:

Major League Baseball.

A $1,000 investment in a big-league ballclub in 1998 would have quadrupled one's investment in '08. Better yet, though such high returns have slowed slightly, count on the growth to continue.

Writes Silver:

A catastrophic collapse of the baseball market remains unlikely, however, for two reasons. First, major league baseball is a monopoly with a legal exemption from antitrust laws, and therefore it's not subject to the ordinary laws of supply and demand. In 1908 - the last time the Cubs won the World Series - there were sixteen major league baseball clubs for about 89 million American citizens, or one team per 5.6 million potential fans. But now there are thirty clubs for around 300 million Americans - just one to go around per 10 million of us. If not for its monopoly status, there might be forty or sixty major league baseball clubs, and the individual franchises would be less valuable. But because of it, buying a piece of a baseball club is a bit like marrying into the Rockefeller trust.

Second, and a little surprisingly, the sport has already begun to do something that so many other industries have struggled with: rationalize its pay structure. In the winter before its 2007 season, the industry spent a total of about $1.7 billion in commitments to free-agent contracts. But that amount dipped to "only" $1.1 billion last winter and should finish at around the same total this year.

So there you go. Take your money and put it into baseball.

Batting practice time... be back in a few.