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Myth of the salary cap

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Myth of the salary cap

Postby Hermie13 » Fri Jan 16, 2009 11:00 am

Read this yesterday, thought it was a very good article on why a salary cap is a terrible idea in baseball. Thought some of you would enjoy it (if you've missed it).


Small-market teams love salary caps. Or rather, they think they do. At least on paper, caps stop teams in New York, Boston and Chicago from oligopolizing the free-agent market, and should therefore help level the economic playing field. And, to a certain extent, they do; a small-market team in a capped league is more likely to acquire or retain top-tier talent. But there's a catch. That same small-market team will need to win, and keep winning, just to stay financially viable. And sometimes, winning might not even be enough.

Let's say, in some far-off universe, MLB owners and players actually did agree on a salary cap. With it would come the normal provisions: a salary floor at around 75-85 percent of the cap, and a guaranteed percentage of total industry revenues for the players. Since the players have been taking in about 45 percent of revenues the past few years, we'll keep it at that figure (the other three major sports leagues, which are all capped, each pay out over 50 percent).

Using 2008 as an example, the 30 teams took in about $6 billion (not including MLB Advanced Media revenue), for an average of $200 million per team. Forty-five percent of that (the players' share) is $90 million, which we'll use as the midpoint between our floor and cap. If we want to make the floor 75 percent of the cap (a low-end figure, relative to the other leagues), we can use $77 million and $103 million, respectively.

With a $103 million cap, nine teams would have been affected last year, and a total of about $286 million would have had to be skimmed off the top. Since total salaries have to remain at existing levels, the bottom 21 teams would have had to take on this burden, which had previously been placed on the Yankees, Red Sox, et al. On the other end, 14 teams would have been under the payroll floor, by a total of $251 million. Even discounting the Marlins' $22 million payroll, the other 13 teams would have had to spend an average of $15 million more just to meet the minimum. Some of those teams might be able to afford it; most wouldn't.

Imagine being Frank Coonelly in this situation. Coonelly, the Pirates' team president, has publicly supported a cap. Had our fictional cap/floor arrangement been instituted last year, the Pirates would have needed to increase their Opening Day payroll by $28 million. Not only would the team have taken a big loss, but G.M. Neal Huntington's long-term strategy would have been sabotaged, since the team would have had to sign a number of veterans just to meet the minimum payroll.

Now fast forward to 2009. Let's say the Pirates' sales staff runs into major headwinds, with the team struggling and the economy sinking. The team's top line takes a hit, falling $10 million from 2008. The Mets and Yankees, meanwhile, open their new ballparks, and each team increases its local revenue by $50 million. If the 27 other teams are flat, total industry revenues rise by $90 million (not including any appreciation in national media revenue). Forty-five percent of that, of course, goes to the players. So even as the Pirates' purchasing power decreases, the payroll floor actually rises.

In other words, without a more egalitarian distribution of income, the system crumbles.

Until recently, the NFL has been uniquely fit for this type of model, since most of its revenues have come from national television contracts. But now, with local revenues rising, small-market teams are feeling the pinch. This past May the owners unanimously voted to opt out of their CBA, which was supposed to run through 2012. Some blamed the players' share of revenues. Others, including Dan Rooney of the Steelers, cited the need for more local revenue sharing.

But sharing local revenue has a major drawback: It is a tax, which inevitably lowers incentives and decreases output. If the NFL shared all (or even most) local intake, why would an individual team ever look to maximize revenues at its own cost (i.e. by hiring a sales staff, or cleaning its own stadium)?

The NHL, which also has a hard cap, does very little revenue sharing, partly thanks to an overly convoluted system. On a league-wide level, the results have been very positive; the NHL has had record revenues every year since its 2004-05 lockout, and commissioner Gary Bettman has been very positive about this season as well. But the NHL is a great example of why caps and capitalism don't mix: As the league grows, it ends up leaving teams behind. Small-market clubs such as the Columbus Blue Jackets and the Nashville Predators are forced to spend almost two-thirds of their revenue on player payroll. And the Phoenix Coyotes, after years of hemorrhaging money, are on the verge of going bankrupt.

So what's the best solution? Certainly not the NBA's soft-cap system, which has too many problems to even count -- imagine having to take on Luis Castillo or Carl Pavano every time you wanted to unload a high-priced veteran.

So instead of these models, what if there was an uncapped league, with limited local revenue sharing to support small-market teams, and a postseason system that naturally created tremendous parity? Does this sound familiar? It should. It's what MLB has had in place for more than a decade, leading to record growth in both attendance and revenue.

The expanded postseason is key. More than in any other sport, MLB's playoff system acts as an equalizer. Fair or not, in broad strokes, a team that wins 83 games in a bad division has as much chance of winning the World Series as the Yankees or the Red Sox. Seemingly, no matter how much those teams spend over the winter, that competitive advantage is neutralized come October.

So while the capped leagues all struggle to find the right balance between capitalism and socialism, baseball continues to prosper by operating within a much more free-market system. Teams in big markets and small markets alike are making money, and everyone has a chance to win it all.

If it ain't broke, don't fix it. And right now, baseball is anything but broke.



Here's the link: http://sportsillustrated.cnn.com/2009/baseball/mlb/01/15/bp.salarycap/index.html


I tend to agree, salary cap is not needed in baseball. Doesn't really solve anything....
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Re: Myth of the salary cap

Postby jellis » Fri Jan 16, 2009 5:07 pm

end of the day no salary cap means big market teams have much longer windows a small market team has a 2-3 year window when it has a good squad a NYY never lose an all star teams liek the Indians always due anything else is just BS and conjecture, Sure a small market team can make a run and do, but a team liek the rays made it where they did cause they had a top 5 pick for 10 years
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Re: Myth of the salary cap

Postby Hermie13 » Fri Jan 16, 2009 5:15 pm

Did you even read the article? A salary cap would make it tougher for small market teams to compete for more than a 2-3 year window, not easier.
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Re: Myth of the salary cap

Postby jellis » Fri Jan 16, 2009 5:18 pm

Hermie13 wrote:Did you even read the article? A salary cap would make it tougher for small market teams to compete for more than a 2-3 year window, not easier.



yes but to me its crap look at the nba and nhl you dont loss your best players the all stars dont change teams. Sidney Crosby doesnt end up in DEt or NYR anymore thanks tot he cap. In the NBA Tor was able to keep a chris Bosh, none of that happens in the MLB. Lets face it sizemore will be gone in what 3 or 4 years, in any other league that never happens
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Re: Myth of the salary cap

Postby Hermie13 » Fri Jan 16, 2009 5:30 pm

In football teams lose players all the time thanks to cap restraints. Same happens in basketball.

The bigger issue is teams lose money and risk bankrupcy thanks to being forced to spend more than they can afford. It's not 'crap', it's fact.
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Re: Myth of the salary cap

Postby jellis » Fri Jan 16, 2009 5:43 pm

if you cant afford a team dont buy one end of story, set a cap and live with it

football teams never lose superstars, baseball is the only sport you lose a superstar
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Re: Myth of the salary cap

Postby Hermie13 » Fri Jan 16, 2009 6:29 pm

lol, you much not follow football very much.
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Re: Myth of the salary cap

Postby jellis » Fri Jan 16, 2009 6:44 pm

Hermie13 wrote:lol, you much not follow football very much.



I do a ton, I have written for NFL sites. Tell me one prime superstar in the last 5 years who has left his team
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Re: Myth of the salary cap

Postby Hermie13 » Fri Jan 16, 2009 7:00 pm

E. James to name one (of the many). Colts couldn't keep Peyton, Harrison, and him while still being under the cap.

Plenty of others, but not worth it to point out.

Salary cap is a terrible idea for baseball and won't happen, at least not anytime soon (thankfully).
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Re: Myth of the salary cap

Postby jellis » Fri Jan 16, 2009 7:35 pm

Hermie13 wrote:E. James to name one (of the many). Colts couldn't keep Peyton, Harrison, and him while still being under the cap.

Plenty of others, but not worth it to point out.

Salary cap is a terrible idea for baseball and won't happen, at least not anytime soon (thankfully).


James was no longer a superstar and that's why he had to take a contract with Zona, still waiting on one true superstar who wasnt a past his prime bust

I mean look at the great like andre rison, emmit smith, edge james

outside of reggie white I cant think of one true superstar who left
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Re: Myth of the salary cap

Postby TheWord » Sat Jan 17, 2009 3:04 pm

Edgerrin James is not a superstar by any means.
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Re: Myth of the salary cap

Postby TheWord » Sat Jan 17, 2009 3:07 pm

As for the article, the thought that it would be tough for small market teams to compete for more than a 2-3 year window.

WHAT IS WRONG WITH THAT?

It's called parody, the NFL has it, NBA has it somewhat.

Is it so far fetched that teams would actually have to rely on...GASP...good decision making to build an MLB franchise into respectability?

No, we'll just continue to have New York, Boston, and LA monopolize the free agent market making the offseason almost completely irrelavent.
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Re: Myth of the salary cap

Postby Hermie13 » Mon Jan 19, 2009 9:58 am

TheWord wrote:Edgerrin James is not a superstar by any means.


He was when he became a free agent. Definitely has fallen off since then though. Ashante Samual is another guy. Maybe not a 'superstar' but one of the best corners in the league. Lots of defensive studs leave as teams find it hard to pay them more than they do their offensive stars.
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Re: Myth of the salary cap

Postby jellis » Mon Jan 19, 2009 2:34 pm

Hermie13 wrote:
TheWord wrote:Edgerrin James is not a superstar by any means.


He was when he became a free agent. Definitely has fallen off since then though. Ashante Samual is another guy. Maybe not a 'superstar' but one of the best corners in the league. Lots of defensive studs leave as teams find it hard to pay them more than they do their offensive stars.


He was not at all when he left there is a reason he went to zona, because no one else would pay him every other team new he had too much wear and his best years were behind him.

Samual is a good player but not a super star, hes not even a top 5 player at his position, top ten yes but top 5. You are making my point you struggle to come up with 2 guys one who was past his prime and the other not even a top 5 guy.
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Re: Myth of the salary cap

Postby Hermie13 » Mon Jan 19, 2009 2:55 pm

jellis wrote:He was not at all when he left there is a reason he went to zona, because no one else would pay him every other team new he had too much wear and his best years were behind him.

Samual is a good player but not a super star, hes not even a top 5 player at his position, top ten yes but top 5. You are making my point you struggle to come up with 2 guys one who was past his prime and the other not even a top 5 guy.


Edge was top 5 in the league in rushing and 4th in yards/gm his last year in Indy. There were other teams out there offering money, but the Cards offered the most. Indy put up a big number to keep him but couldn't go higher with the cap restraints.

Panthers may lose Julius Peppers this winter if they can't sign him. He'll get a ton as a Franchise player and will really hurt them with the cap.

Offensive linemen tend to leave via free agency a lot too.

Bottom line, no system is perfect. You're always gonna lose free agents. Baseball has the best sytem right now. Small market teams can still compete and aren't forced to spend money they don't have like in other sports. There's a reason that no US franchise has moved in baseball since 1972....and that was the Washington Senators (for the second time). Since ML baseball has gone to divsional play in 1969 only 2 US franchises have moved (Seattle Pilots after 1 year moved to Milwaukee, and then the Senators as mentioned). No team should have been in Montreal. You can count them if you want.


To compare, since 1980 there have been 7 relocations in the NFL, and 4 since 1995 (the cap was instituted in 1994.....right before the Browns moved). Since 1970 there have been 12 relocations in the NBA, and 3 since 2001 (cap was started in 1984). There have been 6 relocations in the NHL since 1980 and 4 since 1993 (though have only had the cap for a few seasons). If you want to see this, then by all means, bring in a salary cap for baseball....but it's a terrible idea.
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Re: Myth of the salary cap

Postby jellis » Mon Jan 19, 2009 6:28 pm

Hermie13 wrote:
jellis wrote:He was not at all when he left there is a reason he went to zona, because no one else would pay him every other team new he had too much wear and his best years were behind him.

Samual is a good player but not a super star, hes not even a top 5 player at his position, top ten yes but top 5. You are making my point you struggle to come up with 2 guys one who was past his prime and the other not even a top 5 guy.


Edge was top 5 in the league in rushing and 4th in yards/gm his last year in Indy. There were other teams out there offering money, but the Cards offered the most. Indy put up a big number to keep him but couldn't go higher with the cap restraints.

Panthers may lose Julius Peppers this winter if they can't sign him. He'll get a ton as a Franchise player and will really hurt them with the cap.

Offensive linemen tend to leave via free agency a lot too.

Bottom line, no system is perfect. You're always gonna lose free agents. Baseball has the best sytem right now. Small market teams can still compete and aren't forced to spend money they don't have like in other sports. There's a reason that no US franchise has moved in baseball since 1972....and that was the Washington Senators (for the second time). Since ML baseball has gone to divsional play in 1969 only 2 US franchises have moved (Seattle Pilots after 1 year moved to Milwaukee, and then the Senators as mentioned). No team should have been in Montreal. You can count them if you want.


To compare, since 1980 there have been 7 relocations in the NFL, and 4 since 1995 (the cap was instituted in 1994.....right before the Browns moved). Since 1970 there have been 12 relocations in the NBA, and 3 since 2001 (cap was started in 1984). There have been 6 relocations in the NHL since 1980 and 4 since 1993 (though have only had the cap for a few seasons). If you want to see this, then by all means, bring in a salary cap for baseball....but it's a terrible idea.



First off I am a huge hockey fan and you cant even bring it up here, why because hockey is in an entirely different boat. They moved frnachises trying to pump up the south and it failed. I love hockey but gary bettman destroyed that league

The 4 moves in the NFL. Lets look at them Al davis might count as 2 of those moves with him being fickle if he was LA or OAK. With the Browns they had an owner who couldn't afford to own a sports team, and moved rather than lose it then still lost in with in a decade. The other move was the rams where the owner cared nothing about football and moved the team to make more money. The NBA died until magic and bird when most of those moves happened exactly 2 moves in the last 20 years, and the last one was a joke. You throw out information but you dont flush it out at all.

Edge was worn down, he was not a superstar he had a good year before. But no one wants a RB with a history of knee surgery entering hsi 8th year. Besides you making my point you grasp at straws, if you want a superstar that left I would have gone with Steve Hutchinson OG only top 3 talent to leave and it was thanks to a position pill contract. You mention peppers, but that's just a might and once again hes not even top 5 at his position
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Re: Myth of the salary cap

Postby Hermie13 » Tue Jan 20, 2009 10:00 am

14 1/2 sacks is top 5 at his position. Every team in football will be after Peppers if the Panthers let him go or put him up for a trade.


And the only reason Modell couldn't afford the team anymore was thanks to the salary cap. We made the playoffs the year before we moved don't forget. And you're forgetting about the Titans who moved. Al Davis didn't move the Raiders twice in the 90s. And how was the 'last move a joke' for the NBA? Seattle moving to Oklahoma was a joke? Still happened.


You haven't shown anything that shows that a salary cap is a good idea in baseball by the way.....
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Re: Myth of the salary cap

Postby jellis » Tue Jan 20, 2009 6:39 pm

Hermie13 wrote:14 1/2 sacks is top 5 at his position. Every team in football will be after Peppers if the Panthers let him go or put him up for a trade.


And the only reason Modell couldn't afford the team anymore was thanks to the salary cap. We made the playoffs the year before we moved don't forget. And you're forgetting about the Titans who moved. Al Davis didn't move the Raiders twice in the 90s. And how was the 'last move a joke' for the NBA? Seattle moving to Oklahoma was a joke? Still happened.


You haven't shown anything that shows that a salary cap is a good idea in baseball by the way.....


how have I not? My point is only in baseball do teams lose superstars which is true. Yes a lot of teams would be after peppers but hes still not top 5 Jared Allen, mario Williams, freeney, justin tuck, and richard seymour I would put ahead of him because there is more than sacks when it comes top DE.

Model couldnt afford the browns because he was one of the worst business men in Cleveland well known for failed ventures, and he only had one avenue to make money the stadium. He had no business owning a team. He never had the funds to own a team and as the cost of teams rose he should have sold a long time before he did. Sports in general became a big business and he did not belong. The Seattle move had nothing to do with money guy bought a team and moved it back to his home, he screwed the city and thats why its a joke. I did forget about the titans move, but as I recall that was stadium related.

At the end of the day only in baseball will a team lose 4-5 potential hall famers in there prime like you can argue the indians where on track to do if injuries hadnt hurt a few careers. If you the yanks you lose no one and get the top players when they hit the market, yes they havent won in 10 years, but we havent won is 60 odd. They make the play offs every year in the last ten we made it what 2 to 3 times. Its a huge competitive disadvantage to every team
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Re: Myth of the salary cap

Postby TheWord » Tue Jan 20, 2009 10:03 pm

Hermie13 wrote:
jellis wrote:He was not at all when he left there is a reason he went to zona, because no one else would pay him every other team new he had too much wear and his best years were behind him.

Samual is a good player but not a super star, hes not even a top 5 player at his position, top ten yes but top 5. You are making my point you struggle to come up with 2 guys one who was past his prime and the other not even a top 5 guy.


Edge was top 5 in the league in rushing and 4th in yards/gm his last year in Indy. There were other teams out there offering money, but the Cards offered the most. Indy put up a big number to keep him but couldn't go higher with the cap restraints.

Panthers may lose Julius Peppers this winter if they can't sign him. He'll get a ton as a Franchise player and will really hurt them with the cap.

Offensive linemen tend to leave via free agency a lot too.

Bottom line, no system is perfect. You're always gonna lose free agents. Baseball has the best sytem right now. Small market teams can still compete and aren't forced to spend money they don't have like in other sports. There's a reason that no US franchise has moved in baseball since 1972....and that was the Washington Senators (for the second time). Since ML baseball has gone to divsional play in 1969 only 2 US franchises have moved (Seattle Pilots after 1 year moved to Milwaukee, and then the Senators as mentioned). No team should have been in Montreal. You can count them if you want.


To compare, since 1980 there have been 7 relocations in the NFL, and 4 since 1995 (the cap was instituted in 1994.....right before the Browns moved). Since 1970 there have been 12 relocations in the NBA, and 3 since 2001 (cap was started in 1984). There have been 6 relocations in the NHL since 1980 and 4 since 1993 (though have only had the cap for a few seasons). If you want to see this, then by all means, bring in a salary cap for baseball....but it's a terrible idea.


This is silly. There are very few "superstar" running backs in this league, and Edge was helped out because of a great offensive line and the best quarterback of our generation.

He is NOT a superstar, and if he was, he wouldn't have been a BUST in Arizona (regardless of this playoff resurgence).

Superstar offensive lineman leave all the time?

You mean Orlando Pace, Walter Jones, and Jon Ogden? Those are the three biggest superstars at their position over the last 10 years or so, all of them have stayed/stayed with one team throughout their career. This is probably the WORST position to point to when talking about "superstars" leaving.

Carolina hasn't lost Peppers, and they will most certainly retain him via franchise tag to at least get something out of him, which evens out the theory of losing players for nothing. Much like Jared Allen, he'll be tagged and dealt for at least 1 first round pick.
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Re: Myth of the salary cap

Postby Hermie13 » Wed Jan 21, 2009 10:06 am

Only reason 'superstars' don't leave in football is the 'franchise tag', which I've stated before would be a nice addition to baseball if they could somehow figure out how to make it work. A one year deal like football does will never fly. But if a 4 or 5 year 'franchise tag' could somehow be worked out with the player getting top 5 money at a position (CC would have gotten about 5 years $90M for example....which the Tribe technically could have done if they were willing to give a 5th year).


You could make the case that the only reason Manning is the best Quarterback (or one of them) is because of a great offensive line. James was still a great back and left via free agency, period. Browns added Steinbach who was one of the best offensive Guards in the league, and left via free agency. We also landed LeCharles Bentley a few years ago. Yeah that one turned out VERY bad, but he was still one of the best centers/OGs in the league when we got him. Guys leave teams all the time. Much of the time it's because of salary cap restraints though. Which is one reason Peppers may be on his way out in Carolina. If they place the franchise tag on him he'll me making around $14M from what I've heard....Carolina might not be able to fit that into their salary cap, thus FORCING them to trade him. So yeah, maybe NFL teams don't lose stars via free agency as much as baseball, but they can be forced to lose key players via other means thanks to the cap.


And everyone says there's no competitive balance in baseball......in the last 3 years over half the teams in baseball have made the playoffs! And that's saying something considering only 8 teams make the playoffs which is nearly a quarter of the teams (as opposed to basketball and hockey where more than half make it every season). In the last 3 seasons, 60% of ML baseball teams have made the playoffs....compared to the NFL that has had 69% in the last 3 years (with 4 extra playoff teams each season despite only have 2 more teams). Sounds like baseball is doing pretty well to me.

Only 2 teams have EVER won a World Series with a payroll over $100M (the 2004 and 2007 Boston Red Sox). Baseball may actually have have more parity than football. Teams are able to spend what they feel necessary and spend money in areas of need. With a cap this will hurt small market teams. Only way a cap would work in baseball is if you want to contract about 8 teams.......which wouldn't necessarily be a bad idea IMO.....but will never happen....


Best thing for baseball is to slightly restructure how the luxury tax works and get some better revenue sharing. And the absolute best would be a 3rd team in the NY/NJ area......but the Steinbrenners (and Mets) would fight that like none other.
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Re: Myth of the salary cap

Postby jellis » Wed Jan 21, 2009 7:37 pm

ok I am going to stop only hermie believes this and we all know arguing with him is like running into a wall repeatably and I have to spend all day making sure kids dont do that, so no reason I should do it on a message board

Everyone else here sees the broken system baseball is
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Re: Myth of the salary cap

Postby TheWord » Thu Jan 22, 2009 12:16 am

He says "superstars" leave all the time, then lists nothing but above average to good players who left via free agency.

Bentley, Steinbach, James are all good players. Calling them superstars is a slap in the face to real superstars in the NFL.
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Re: Myth of the salary cap

Postby Hermie13 » Thu Jan 22, 2009 10:29 am

There really wasn't a better center in the league at the time Bentley hit free agency. Maybe that doesnt make him a superstar, but then you're just saying that there are no superstars at that position in all of football.....

Never said he still was. That injury totally killed his career obviously.


I'm not the only one that thinks baseball doesn't need a cap. Only you and TheWord have said anything good about it in fact. and I never said that baseball didn't have some flaws. Just that a salary cap is NOT the answer as proven by the article posted (which is another guy that's on my side).


You think that lowering what the Yanks can pay will make things all better, but it most definitely won't. You fail to realize that there would have to be a cap floor. More teams would be hurt by a cap than helped by it, which makes it bad for baseball. End of story.
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Re: Myth of the salary cap

Postby jellis » Thu Jan 22, 2009 4:56 pm

lets just agree to disagree, I dont want to get into a flame war
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Re: Myth of the salary cap

Postby Hermie13 » Thu Jan 22, 2009 5:03 pm

Fair enough
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Re: Myth of the salary cap

Postby TheWord » Thu Jan 22, 2009 7:05 pm

Hermie13 wrote:There really wasn't a better center in the league at the time Bentley hit free agency. Maybe that doesnt make him a superstar, but then you're just saying that there are no superstars at that position in all of football.....




Pretty much.
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Re: Myth of the salary cap

Postby jhonny » Thu Jan 22, 2009 9:34 pm

In football, players hold out after being franchised and are traded. Free agency almost never happens. Also, the different systems make if very rare for free agents to be superstars.

Lastly, one good player in the NFL can make a team. That's why the Colts can give Manning huge money. If one good player could make a MLB team, the Indians would go all out to keep Grady no matter what. But no baseball player is that valuable. It's just a different sport, and you can't use it to compare to MLB economically.
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