Over the past few days, we’ve discussed the cost of a win in free agency and how that cost has been lowered for slightly below-average players. In this post, I want to examine some of the potential driving forces behind these changes. Specifically, I want to take a look at the following assumptions about how teams operate with respect to paying for wins on the free agent market.

• The closer teams get to the playoffs, the more money they will be willing to spend on players because of the monetary benefits that come from making the playoffs.
• The more money a team has, the more they will be willing to spend on a win on the free agent market because they can afford it, and vice versa (i.e. the Rays won’t spend the same dollars per win as the Yankees because the Rays have to hunt for bargains while the Yankees can afford to make the highest offer to any player they want).

We’ll take these assumptions one at a time. While there isn’t a great way to bucket teams by whether they’re “close” to the postseason without some degree of arbitrariness, I opted to look at a team’s projected win totals for each of the last two seasons, plus its current projected WAR for next season. I put teams into three categories: likely playoff teams, teams with a decent shot at the playoffs, and teams with little to no hope of making the playoffs. For the first group, I included teams projected to win at least 86 games, which usually provides a 50% or greater shot at the playoffs. For the second group, I included teams projected to win at least 77 games, but fewer than 86, which is roughly aligns with the 10%-50% range in terms of playoff odds. In the final group, I put teams with fewer than 77 projected wins.

The table below shows how much each group is spending over the last three offseasons, including this one:

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After a few cold, dreary, quiet hot stove seasons, free agency picked up its pace this winter. While Manny Machado and Bryce Harper got $300 million deals last offseason, it took until nearly spring to get those contracts finalized. This offseason, we’ve seen Gerrit Cole, Stephen Strasburg, Anthony Rendon, and Zack Wheeler sign for more than $100 million, and with the new year just eight days old, only a handful of decent free agents remain. While large deals and total spending near $2 billion have captivated us this offseason, it’s worth exploring what has made this winter different from years past. Is it just timing? Is it this class of free agents? Have teams changed their spending habits? Is the cost of a win still linear? A useful tool when examining those issues it to try to determine how much teams are paying for a win above replacement in the free agent market.

While putting dollar figures on players isn’t the most feel-good task, it’s helpful for framing conversations about costs in free agency. From the front office perspective, it helps to determine which free agents are good values and a worthy investment of resources compared to other free agents and veteran players. It also helps frame the value of younger players who have yet to reach the full six years of service time necessary to hit the market by showing the alternative cost to obtaining similar production. On the player side, these types of valuations tend to show how underpaid players are prior to reaching free agency, given the low cost of their tremendous on-field value compared to similarly productive free agents.

There are a variety of ways to go about determining how much teams are paying per win on the free agent market. Matt Swartz, having found that projections tended to overweight free agent player production and playing time when considered in the aggregate, instead considered actual production of past results to determine how much teams were paying for a win. He also used all players with at least six years of service time to account for players aging over the course of a contract. He acknowledged that there might be issues with including players on extensions. To be clear, Swartz wasn’t wrong about the way he formulated his dollars per win, but another approach can be helpful, and, if we are to look at the current offseason, necessary. Read the rest of this entry »

In many cases, no news is good news. But for the Cubs, their broadcasting partner Sinclair, and the new Marquee Network, no news is bad news. While there’s still more than a month to go before the network is on the air, it has yet to reach agreements with Comcast/Xfinity, the largest cable provider in Chicago, as well as RCN and streaming only services like Hulu Live, Sling, and Youtube TV. In his piece for the Chicago Tribune, Phil Rosenthal provides a reminder of where things stand for viewers in Chicago when it comes to seeing Cubs’ games this season:

While Marquee currently has deals in place to run on a handful of carriers, including DirecTV, U-verse, AT&T TV, Charter Communications and Mediacom Communications, it is lost on no one that it’s still negotiating with many others, including Comcast’s Xfinity, the Chicago-area’s largest carrier with an estimated 1.5 million households.

As Rosenthal notes, Sinclair was able to leverage its massive reach across the country, which includes local stations and more than half the Regional Sports Networks that air baseball games, to secure deals with AT&T/DirecTV/Uverse/DirecTVNow, allowing the Cubs and Sinclair to say they reach nearly all Chicagoland homes. But reaching nearly every home and actually airing in those homes are two entirely different things. The deals with Charter and Mediacom aren’t insignificant, as fans in downstate Illinois, southern Wisconsin, Iowa, and Indiana will likely have access to Cubs games in the spring with a cable package. The Cubs didn’t start their own network to reap the benefits of subscriber fees in those areas, however, as getting on cable in homes in Chicago is the big prize and moneymaker.

In Rosenthal’s piece, he notes that the Yankees’ YES network had difficulties getting onto Comcast a few years back. The Yankees’ situation provides an interesting analogue both for its similarities and its differences. While Comcast was in nearly a million homes at the time, none of them were in New York City, where YES Network was available to millions more subscribers. Comcast was a smaller fish for YES, unlike the situation in Chicago. In addition, the dispute ended when Comcast wanted to add Fox News Channel to its lineup and FOX, which owned YES at the time, was able to leverage those negotiations into carriage for YES on Comcast. It’s not clear that the Cubs and Sinclair have the same type of leverage in Chicago. Read the rest of this entry »

How much major league teams are willing to spend on player salaries in any given year can be a bit murky. Teams don’t want to show their hand and lose negotiating power with free agents, though we can usually figure out their number by the end of spring when the money has been spent. How much every team is likely to spend is more opaque. We know that, generally speaking, teams are making boatloads, but while the revenue across the sport has increased over the last few years, it hasn’t resulted in increased payrolls. Every team has lots of money — the budget constraints we hear front office types reference are, more often than not, self-imposed rather than the result of empty coffers — but some will spend more than others. Trying to pin down what teams will spend in 2020 at this point in the winter is difficult, but we can use last year’s payroll numbers as a guide to get a rough idea of what each is likely to do, and thus gauge which ones will commit to payroll increases and which are likely to embrace thrift.

To answer those questions, we can look to the contracts coming off the books at the end of 2019, but that number can be misleading. Raises to players with long-term contracts, as well as increased pay in arbitration can bite into some of the departed money. Let’s start with how much money every team has committed for 2020 as of right now, using estimates for arbitration figures and minimum salaried players. (All the data can be found in the Payroll section on our RosterResource pages.)

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Every year, FanGraphs asks our readers to provide contract predictions for the game’s top free agents and every year, our readers do an admirable job with their winter forecast. The predictions for this offseason’s most notable free agents can be found in our Top 50 Free Agents post; if you prefer a sortable, filterable table where you can easily see all the predictions, plus players’ actual contracts (when signed), we have that option as well. While their predictions are important and valuable to the site, I hope our readers will not take offense when I say that over the last few years, their contract prognostications have not been as good as they were in the past.

Going back to the winter prior to the 2014 season, here is what our readers predicted teams would spend, as well as the actual dollars spent, by year, with some figures coming from this 2018 post and Max Rieper’s prior research:

Over six offseasons, the crowd’s predictions were roughly a billion dollars too high. That total is only about 10% off, which doesn’t seem so bad. Looking at the individual years above, we can see that the billion dollar difference is housed almost entirely in the last three winters. From 2014 through 2016, the crowd fluctuated a bit but with over five billion dollars in predicted salary, the crowd was off the actual mark by just $23 million, less than half a percent off the total amount. Over the last three seasons, major league payrolls have remained static. The lack of upward movement in spending has come almost entirely at the expense of free agents, who make up roughly two-thirds of total payroll. Based on the crowdsourced predictions, it’s fair to say that readers expected payrolls to rise. The lack of a decent increase in 2017 was a surprise, as was the fact that there was no upward correction in 2018. Last year, readers were closer than they had been the previous two offseasons, but still missed the mark by 17% compared to the actual contracts signed. Read the rest of this entry »

On Tuesday, Ken Rosenthal and Jayson Stark reported that Royals owner David Glass was discussing a potential sale of the baseball team to John Sherman, who currently owns a minority interest in the Cleveland Indians. Jeff Passan is reporting the deal would be worth more than a billion dollars, which could potentially exceed Forbes’ estimate from earlier in the year. In very related news, Jeffrey Flanagan of MLB.com reported that the Royals are close to an extension of their television rights with Fox Sports Kansas City that were set to expire after this season. That deal, worth an estimated $50 million per season, looks light in relation to recent deals. Combined with the news of a potential sale, it seems possible the Royals have opted for a lesser television deal in favor of certainty in order to sell the team.

The potential television deal will be addressed later in this piece, but the bigger news is clearly the potential sale. Glass purchased the team for $96 million back in 2000, and if he were to sell the team for a billion dollars, it would be one of the most profitable sales in the history of the sport in sheer monetary terms. The graph below shows all sales of MLB franchises since the Orioles were sold back in 1988. During that time, every team except for the Yankees, White Sox, Twins, and Phillies have been sold, with the Diamondbacks and Rockies still with their original ownership group in some form. There have been 33 sales, with the Royals a potential 34th transfer.

The graph above can be a bit misleading as inflation and the amount of time a team has been owned can greatly affect the numbers above. The sale of the the Dodgers is still the biggest on the list, with the Mariners coming in second, and even after accepting a deal at only 75% of the rumored price, Jeffrey Loria’s profit on the Marlins was enormous. The average profit on a sale over the last 30-plus years (without the Royals) has been $306 million. Over the last decade, seven sales have averaged $900 million in profits. Read the rest of this entry »

Over the last decade, we’ve seen a change in the demographics of baseball, with playing time shifting away from older, declining veterans toward younger players still in their prime. There’s a good reason for that, as each new generation of player entering the majors has been getting better and better relative to their older peers. Baseball’s owners have capitalized on this development — those younger, better players are also much cheaper. And teams have not reinvested those gains elsewhere on their rosters, as major league payrolls have stagnated the last few seasons while amateur talent expenditures have become hard-capped. Given the emphasis on younger players, it might be reasonable to believe that when it comes to fielding a winning team, payroll matters less than ever. But that hasn’t been the case this season.

This piece marks the fifth season during which I’ve taken a look at the standings in August and compared them to Opening Day payrolls (2015, 2016, 2017, 2018) and for the most part, the relationship between Opening Day payrolls and wins has been relatively low. I’ve used the Pearson correlation coefficient “r” to track the strength of the relationship between the two and from the end of the strike through 2011, the average correlation per year was .45. In the last seven seasons heading into this season, though, the correlation coefficient between the two was higher than .31 only once, when it was a high .62 back in 2016.

In past years, I’ve noted that while individual season correlations have remained low, looking at either sustained spending or using Forbes franchise valuations to gauge a team’s overall financial might tends to show that the relationship between spending, wealth, and winning remains strong. That logic remains for this season, and indeed, the relationship between wins and payroll trails only that of 2016 season this decade:

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We don’t know exactly why Dallas Keuchel and Craig Kimbrel didn’t sign with teams during the winter and early spring like the other prominent free agents did. It’s possible that early posturing around large contract demands pushed some teams away and caused them to explore other options. It’s possible there were just too many teams that weren’t sufficiently interested in adding good players at a reasonable cost, even if Keuchel and Kimbrel’s demands had come down. We do know that neither signed before the season, or in April, and that coming up on the end of May, both players are still looking for a team.

What we might have heard over the last few months is that teams are waiting until after the draft in June to sign Keuchel or Kimbrel so as to avoid losing a draft pick. Over the last decade, as the game has gotten younger and younger players have gotten cheaper relative to veterans, teams have placed greater emphasis on draft picks. Ahead of the last CBA, one of the bigger issues for players was the free agentcompensation system, in which teams made qualifying offers to free agents and then received a first round pick (or something close to it) when those free agents signed elsewhere. One of the major changes in the new CBA was a change to that system designed to make free agents more attractive by lessening the penalty for signing free agents attached to a qualifying offer. While Keuchel and Kimbrel aren’t ironclad proof the system didn’t work, they are a couple of key pieces of evidence. A breakdown of the penalties provides further reasoning.

To understand why the system hasn’t worked, it helps to look at the penalties. Here are the rules from MLB:

Any team that signs a player who has rejected a qualifying offer is subject to the loss of one or more Draft picks. However, a team’s highest first-round pick is exempt from forfeiture, which is the most notable change that went into affect with the new system. Three tiers of Draft-pick forfeiture — which are based on the financial status of the signing team — are in place to serve as a penalty for signing a player who rejected a qualifying offer:

• A team that exceeded the luxury tax in the preceding season will lose its second- and fifth-highest selections in the following year’s Draft, as well as $1 million from its international bonus pool for the upcoming signing period. If such a team signs multiple qualifying-offer free agents, it will forfeit its third- and sixth-highest remaining picks as well.

Examples: A team with one pick in each round of the 2019 Draft would lose its second- and fifth-round picks. A team with two first-round picks and one pick in each subsequent round would lose its second-highest first-round pick and its fourth-round pick.

• A team that receives revenue sharing will lose its third-highest selection in the following year’s Draft. If it signs two such players, it will also forfeit its fourth-highest remaining pick.

Examples: A team with one pick in each round of the 2019 Draft would lose its third-round pick. A team with two first-round picks and one pick in each subsequent round would lose its second-round pick.

• A team that neither exceeded the luxury tax in the preceding season nor receives revenue sharing will lose its second-highest selection in the following year’s Draft, as well as $500,000 from its international bonus pool for the upcoming signing period. If it signs two such players, it will also forfeit its third-highest remaining pick and an additional $500,000.

Examples: A team with one pick in each round of the 2019 Draft would lose its second-round pick. A team with two first-round picks would lose its second-highest first-round pick.

Determining exactly which picks can be forfeited is a little tricky, as essentially all picks count when determining a team’s second, third, or fourth pick, but compensatory picks from not signing a player the previous season, as well as the market/revenue picks at the end of the first and second rounds, are not subject to forfeiture. That said, since the market/revenue comp picks can be traded, if one of those picks is traded to another team, it is no longer protected. For example, Oakland was awarded the 40th pick in this year’s draft. That pick would have been a protected pick for the club, but since they traded it to Tampa Bay in the Jurickson Profar deal, it becomes subject to potential forfeiture for the Rays if they were to sign Dallas Keuchel or Craig Kimbrel.

To provide concrete examples, the table below shows the pick every team would give up for signing Keuchel or Kimbrel right now, along with the slot value for that pick (which can be found here), and the present value of the pick based on my research. Also included is the value of the international money penalty based Kiley McDaniel’s research, with one dollar of international spending estimated at five times that amount in value.

A note about this table: Houston and Boston are assumed to sign their own free agent, and thus not get a compensatory pick, which is the value listed below. In reality, that pick is now worth considerably less, as it is far less likely to happen. If Boston or Houston were to sign the other team’s free agents, the cost would be significantly higher.

For no team is the extra cost greater than the amount guaranteed to Matt Harvey this offseason and for half the teams, the cost is around what Daniel Descalso or Jordy Mercer received. These are not large sums. This list isn’t meant to provide a justification for a team signing or not signing any particular free agent, but it does show that there are pretty significant differences in the penalties teams face. The amounts of money we are talking about shouldn’t be the deciding factor in determining whether or not to sign a free agent, and “We are unwilling to forfeit a draft selection to sign Player X” is actually a prohibited phrase under the CBA, whether on or off the record. Teams can and do factor in the value of a draft pick when making an offer. The argument that teams horde draft picks as things to be held at all costs rings false when Cleveland, Cincinnati, Milwaukee, Oakland, and St. Louis have all traded early-round draft picks in the current draft alone.

A handful of teams would incur additional penalties if they signed another free agent in the form of competitive balance taxes. An extra $18 million in salary would result in only a few million in penalties for teams like the Yankees and Cubs, though the Red Sox would pay an additional $15 million if they added the same amount to their roster. As for why the new qualifying offer system didn’t provide the improvements players expected, we can look at how the old rules applied compared to the current system. Under the old system, teams gave up their first pick so long as it wasn’t in the top 10. For teams picking in the middle of the first round, this constituted a pretty sizable amount of potential value lost, particularly under a system with a hard draft cap and the inability to pay more for greater talent later.

Using this year’s draft as an example, here is the value teams would give up under the old system versus the new system. Some of the penalties above might not match those below, as trades, qualifying offers, and free agent signings weren’t assumed below so we could get a better theoretical understanding of the differences.

The penalty was lessened, but for teams picking in the top 10, it was virtually unchanged, and for teams paying the competitive balance tax, it was the same or worse. The gap would be even smaller if the Cubs, Yankees, and Dodgers were over the competitive balance tax as they have been fairly recently. While the most substantial improvements in terms of lessening the penalty come right in the middle of the draft, those teams generally still have the biggest penalties, with teams at the end of the draft not seeing much of a change. If draft picks played a big role in free agency prior to the current CBA, there isn’t that much reason to think the new CBA constitutes a big step forward, as the number of teams significantly affected isn’t that great and most of those teams were still left with penalties approaching eight figures.

Whether or not it is a sound decision to sign Dallas Keuchel or Craig Kimbrel at their current asking prices, it is important to understand the exact cost of signing either at this point in the baseball calendar. There is certainly a credible argument to be made that for the teams that might need those players now, the cost of their missed production over two months of the season outweighs the penalties above, and perhaps by a significant margin. There is always a need for starting pitchers and relievers, and most teams had a pretty good idea if they would be contending this season. If these players were available for the same price now as they were at the beginning of the season, which we don’t know, then not signing them then was a poor choice for most teams. Now the missed production is a sunk cost, and the penalties for the draft pick, when signing a player only gets you another week of their services, weigh more heavily. Even still, the costs aren’t great and shouldn’t be too difficult for any team to justify whether it is for this season or into the future.

Near the end of 2017, reports surfaced of a massive deal that would see Disney buy more than $50 billion in FOX assets, including 22 regional sports networks that broadcast the games of about half of the 30 major league baseball franchises. After a bidding war between Comcast and Disney saw the latter win out, moves needed to be made to satisfy antitrust concerns. Given Disney’s already powerful place in the market with its ESPN family of channels, one of those moves included the sale of those regional sports networks. The first domino fell in March when the Yankees agreed to buy back the YES Network at a total valuation of around $3.5 billion dollars. Now, the remaining dominoes appear to have fallen, with the Wall Street Journal first reporting that Sinclair Broadcasting Group has agreed to buy the remaining 21 networks, valued at $10.6 billion.

The networks included in the deal are as follows:

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A year ago, warning bells rang out across the league as attendance dropped precipitously in April, down nearly 3,000 fans per game from the previous season and about 2,500 fans per game from the April average from 2014 through 2017. The rough April came on the heels of a 2017 season that finished rather meagerly as well. From 2014 through 2016, total average attendance at the end of the season gained over 1,300 fans on average compared to the April numbers. But in 2017, the league added fewer than 500 fans per game in the summer months, ruining a once-promising season at the gate. A lackluster summer followed by a disappointing April was worrisome, though the weather might have been a factor. As it turned out, the summer made up a lot of the ground lost in April, but attendance still fell by 1,237 fans per game. This April has been met by slightly better weather, but attendance has not improved, and without a great summer, we might see a pretty big loss at the end of the season.

Before comparing previous seasons, here’s home attendance per game by team so far this season.

We see mostly what we would expect near the top, with the Dodgers, Cardinals, and Yankees checking in with the best attendance. The Dodgers and Cardinals have claimed the top two spots at the end of the season in each of the previous six seasons except for last year when the Yankees overtook the Cardinals for second-place. Philadelphia is benefiting from a decent record a season ago and a big offseason this winter, while the Cubs and Red Sox are still doing well, though they are limited by the size of their parks when it comes to attendance. They more than make up for it with the highest prices in the game. Milwaukee is hardly seen as a large market, but Brewers fans have long done a good job supporting their team, particularly when the team is successful. The most surprising absence from the top of this list is the Giants, who averaged over 41,000 fans per game from 2011 through 2017 and still had a fairly robust 39,000 fans last season but have dropped off pretty significantly. The Giants are coming off a very good run, and it is possible their fans and stadium might insulate them a little during a rebuild, but they will have to figure out how much losing they can stomach; the Phillies had half as many fans attend games in 2015 compared to 2010, and the Giants could be facing even bigger drops the next few years.

This next graph shows the change in attendance from last April.

The Phillies created a fair bit of excitement in the offseason with trades and free agency, including signing Bryce Harper, and that excitement has translated to the box office. Nearly 200,000 more fans watched the Phillies this April compared to a year ago. The increase is bigger than the total attendance for five teams this season. A year ago, the Pirates traded away Andrew McCutchen and Gerrit Cole and saw a pretty significant attendance drop. Contending in July saw a decent increase as the season wore on and that has carried over to this season. The Yankees have seen more growth as they return to perennial contender status. Oakland and Milwaukee are seeing some gains after solid 2018 campaigns, while the Padres and Mets are seeing an uptick after making some big offseason moves.

At the other end of the graph, Houston is seeing a dip, but they were coming off a World Series win in 2017 that likely goosed attendance last year. Cincinnati not seeing more fans is a bit disappointing given their moves in the offseason. The Angels really need to start winning, though their overall attendance numbers are pretty good. Baltimore and Kansas City are seeing drops commensurate with their rebuilding status. The Twins were supposed to be good last season, but disappointed. They are off to a good start and it wouldn’t be a surprise if they end up with more fans than they did a year ago. The Blue Jays drew extremely well when they were in contention, but do much worse when they aren’t in the running. The team did see about 18,000 more fans during Vladimir Guerrero, Jr.’s debut weekend series compared to how they did for a weekend series against the Rays two weeks prior.

While the factors for attendance are numerous, it is possible that teams’ plans for rebuilding are creating more big drops than in season’s past. From 2013 through 2017, there were a total of six attendance decreases exceeding 5,000 fans per game over the previous season; there were six of those drops in 2018 alone, and we might be looking at two more this year. As for how much April numbers presage those at the end of the season, here’s how last year’s April attendance looks when compared to the end of the season.

There are some minor outliers, but April numbers tend to do a pretty good job lining up with the rest of the year if you include a small increase from the April numbers. Last season’s poor April attendance numbers were bailed out a little by good numbers the rest of the way, but that is a bit of an outlier compared to the last few seasons, as the table below shows.

If we only see an increase of 1,000 fans per game at the end of the season compared to April, baseball is going to lose more than three million fans in attendance. It’s possible slow winters have dulled early-season excitement for some fans, though some of the most active teams have seen pretty big rises this April. Some teams’ fans might be taking a wait-and-see attitude while others are simply staying away. Another factor in baseball’s overall attendance lag could be the lack of new stadiums, which tend to send attendance upward for a few years. The graph below shows attendance per game, and the number of new stadiums over the past 30 years. As new stadiums have stagnated, so has attendance.

Attendance is still well above where it was in the 1980s, and it grew by 20% in the 15 years following the strike as a new stadium was built basically every year. But those gains have stopped, and are showing some signs of decline that very well could continue this season. Whatever teams are doing, whether it is the slow winters or the lack of expected competitiveness or the price of tickets, it isn’t attracting more fans at the ballpark. The teams that are doing well this season compared to last had active winters or just won a bunch of games. The sport needs to do whatever it can to cultivate new fans and to get them out to the ballpark because without them, the television money that has made baseball less dependent on attendance will eventually dry up as well. Generating excitement about a team, through wins and activity in the offseason, is the best way to get more people to buy tickets.