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No Way!
If they cut managed teams down to 10 players, you would see a major revolt, and probably a mass exodus from Purebaseball.
Penalizing good ownership and people that have remained active with all of their teams is no way to restore activity to the leagues.
My four teams have a combine winning percentage of .638 this year. Counting this season, I have 12 seasons of PB under my belt across those 4 teams, with 11 of those teams going to the post season. In short, I've assembled some good teams, 2 of them were dead teams that I took over, and all make regular appearances in the postseason and are competitive. I would be very pissed off if we had to cut our teams down to 10 players. That is just not feasible. We have planned our rosters and have made trades this season based on being able to keep 27 players. If they were going to do something this drastic, it would need to be announced WELL in advance, like 1+ year(s), so that we would have time to adjust our strategies.
I like Tim's idea for the contraction drafts, but I don't think there's any way that we will have a league-wide reallocation draft as you suggest. Too many people, myself include, would likely walk away from PB.
Jon, STL Trash