Longtime Agents Slash Fees, Try To Shake Up Industry

When deciding who will represent them in contract negotiations, professional baseball players can choose from hundreds of certified agents. There are big shops like Boras Corporation, Excel Sports Management (Casey Close) and Wasserman Media Group (Arn Tellum), and smaller agencies like Frye McCann, Sosnick Cobbe and Jet Sports Management. Whatever their size, most agencies charge a commission between four and five percent of the value of the player’s pro contract. For that commission, the agency does everything: negotiate the contract, arrange for equipment endorsement deals, and advise the player on financial planning and taxes. It’s a concierge approach: the player is cared for 24/7 in all aspects of his life, whether at home or on the road.

Proformance Baseball is trying a different approach. The Richmond, Virginia agency was created by Jeff Beck and Bean Stringfellow more than 20 years ago. The two met in Virginia Tech’s baseball program in the 1980’s. Stringfellow was drafted by the New York Yankee in 1984 (didn’t sign) and then re-drafted by the Atlanta Braves in 1985 but never made it to the majors. Beck started his career in the capital markets.

Proformance dropped its commission to one-and-a-half percent and will stick to what Stringfellow calls “the business of baseball” — negotiate the player’s contract and equipment deals, advise him on baseball rules, and answer questions when the player reaches out. No more flying to have lunch with the player six times a season. No more marketing efforts to land local appearances and commercials. No more financial planning and taxes.As Beck and Stringfellow see it, most agencies charge four to five percent commission to cover the costs of all the other services, whether a player wants or needs them.

This new approach was born of necessity after Proformance agent Jay Alou left the agency in March and took clients Jose Bautista and Ervin Santana with him. Santana had apparently become frustrated with Stringfellow after Santana rejected the Kansas City Royals’ qualifying offer but couldn’t find a team interested in signing him to a five-year/$112 million dollar contract. Santana eventually signed with the Atlanta Braves on a one-year deal worth $14.1 million, after the Braves lost starters Kris Medlen and Brandon Beachy to injuries.

When we spoke, Stringfellow called Alou’s departure with Bautista and Santana as “disruption” in the business, and nearly six months later, he seemed to still be smarting about the turn of events with Bautista and Santana. In early 2011, Stringfellow negotiated Bautista’s five-year/$65 million contract with the Toronto Blue Jays while the two sides sat in the hearing room ready to begin Bautista’s salary arbitration hearing.

The Major League Baseball Players Association doesn’t set minimum or maximum commission rates for certified agents. The four to five percent rate charged by most agencies is simply an industry standard that’s developed over the years. How did Beck and Stringfellow arrive at the one-and-a-half percent figure? They calculated how many hours they spend on average to negotiate a player’s contract and determined what “fair and reasonable” compensation for that work would look like.

According to Stringfellow, Proformance spends 300 hours or so on an arbitration-eligible player. Work begins in spring training and culminates the following winter when the contract is finalized. If an arbitration-eligible player signs a one-year deal for $10 million, Proformance will earn a one-time fee of $150,000 for that 300 hours of work, or $500 per hour — on par with, if not less than, what top attorneys charge for their time. Free agent contracts take well more than 300 hours of work, but have a higher rate of potential return. If a free agent signs a four-year deal at $15 million per year, Proformance will earn $225,ooo each year of the four-year deal, or $900,000.

Both Beck and Stringfellow described the response from potential new clients as “encouraging,” They are getting the word out through conversations with existing clients and on social media, although the new company website was nothing more than a placeholder at the time of this writing,

The two longtime friends and partners expect their new model to shake up the industry. Whether that happens depends on how many new clients they attract away from more traditional full-service agencies.

We hoped you liked reading Longtime Agents Slash Fees, Try To Shake Up Industry by Wendy Thurm!

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Wendy writes about sports and the business of sports. She's been published most recently by Vice Sports, Deadspin and NewYorker.com. You can find her work at wendythurm.pressfolios.com and follow her on Twitter @hangingsliders.

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Mr. Observant
Guest
Mr. Observant

An interesting turn of events. I’ve long wondered why so few players choose not to represent themselves in non-arbitration situations. What would be the main factors prohibiting this approach? Complications owing to state to state taxation variances? Something else?

Incidentally, Wendy, please ask Appelman to get you a thrice-weekly article gig with FanGraphs, please! Dayn Perry once provided an interesting report on meeting Appelman over at NotGraphs. He seems like a reasonable fellow who might be amenable to my suggestion!

Billy
Guest
Billy

I think maybe the reason Wendy doesn’t write on here regularly is because she is best at writing about things like this, which seem to happen at random times. Interesting business or legal aspects of baseball don’t come on a regular schedule, so I think if she wrote a few times a week, she’d have trouble finding topics that fit her specialty.

Basil Ganglia
Guest
Basil Ganglia

Jamie Moyer is the most prominent player current or recently active player that I’m aware of who did not use an agent. I expect that the did retain an attorney to help on the legal and contractual components of the negotiations.

dave gb
Guest
dave gb

Kevin Millar also didn’t an agent

LHPSU
Guest
LHPSU

When you make millions of dollars a year, it makes less sense to spend your own time just to save tens of thousands of dollars. Especially since negotiations can occur during the regular season.

HawaiiFO
Guest

300 hours of specialized contract work is not something most players want or should want to do.

Basil Ganglia
Guest
Basil Ganglia

“An interesting turn of events. I’ve long wondered why so few players choose not to represent themselves in non-arbitration situations. What would be the main factors prohibiting this approach? Complications owing to state to state taxation variances? Something else?”

I think that it’s a question of optimizing skills. The skills that are needed to excel on a baseball field are not the same as those that are critical in contract negotiations. Sure, the player could forego an agent. But it’s likely that the player would spend even more time on the contract negotiations than would an agent who already understands the process. And due to experience, the agent is likely to obtain a better product than the neophyte player would obtain.

And that presumes the player would be effective in representing himslef in a negotiation. It’s more likely that a dispassionate party, such as an agent, would be better equipped in a negotiation.

I speak from experience as a business operations consultant. The situation for my clients is similar to that of an athlete and an agent. My clients retain my services because they know that if they tried to replicate what I do, they would face a steep learning to acquire the knowledge that I bring to the table. And the time that they would spend learning to do what I do is time that taken away from maximizing operations efficiency, which is my area of weakness and their area of strength.

In the end, the optimal strategy is to have someone who is expert in contracts handle the contracts, have someone who is expert in financial affairs handle finance, etc. Meanwhile. the player, qho is expert in the on-field performance that fuels the whole system, focus on maximizing that contribution.

Frankly, the most important thing a player can do is to take whatever steps are necessary to prolong his career. If contract negotiation detracts from that effort, the player is better off hiring someone to take of those details while the player focuses on training and conditioning.