Major League Payrolls Set to Drop Again in 2019
Earlier this offseason, I wrote that even if everything broke right for the free agents who remained on the market, we’d see a roughly one percent increase in Opening Day payrolls compared to last year. At the time, I cautioned that things were not likely to break right for the remaining free agents, and that a similar exercise the year prior ended with a one percent drop on Opening Day. Even worse for the players, that one percent drop last season turned into a 2.5% drop by season’s end. Opening Day payrolls are down again in 2019 by roughly the same amount as last year. If last season’s scenario were to repeat itself, the players will be looking at a half-billion dollar swing in revenues to owners in 2019 alone even if we assume that the split between players and owners was 50/50 two seasons ago.
As we begin the 2019 season, here’s a look at every team’s Opening Day payroll, per Cot’s Contracts, which includes a team’s 25-man roster plus whatever other obligations they’ve accrued to players who are on the injured list or no longer with the club.
The Red Sox, coming off their World Series win and the highest major league payroll in 2018, look poised to repeat at least one of those designations this season with a decent shot at both. The Yankees appear just above $200 million this season after a major decline last season, though the team first crossed the $200 million barrier back in 2005, so it is hardly heady territory for them. The Cubs have seen their payroll rise as they try to augment their World Series-winning core with free agents, though they sat this winter out. The Nationals kept up spending after Bryce Harper’s departure, and Los Angeles looks to be trying to stay under the competitive balance tax for the second straight season after averaging a figure more than $50 million higher the previous three seasons. At the lower end of the spectrum, we see the usual suspects of smaller-market teams and traditionally weak-spenders.
To provide some context to these numbers, we can compare them to where they were one year ago. First, let’s look at percentages to see which teams have made the biggest moves compared to their own payrolls from a season ago.
After signing Bryce Harper, Andrew McCutchen, and David Robertson, and trading for Jean Segura and J.T. Realmuto, it shouldn’t come as much of a surprise to see Philadelphia leading the way. I should note that Philadelphia’s payroll was artificially low over the past few seasons as they were rebuilding. With a $140 million payroll to start this season, they are still $24 million below their average from 2011-2015, even before factoring in inflation. While Mike Trout is no longer on the table as a future acquisition, the Phillies should still have room to grow should they need to. It might be a bit of a surprise to see Oakland so far too the left, but their $65 million April payroll a year ago was a steep decline and they are actually still within about $10 million of their payrolls from 2014 to 2017.
The NL Central shows up as a big mover, with Cincinnati trying to get back into the playoff picture, the Brewers moving forward to stay in contention after a great 2018 run, and the Cubs just paying the players they do have more money. A few of the more active teams this winter like the Padres, Mets, and Cardinals didn’t actually move payroll all that much due to expiring contracts. Nearly half (14) of all major league teams are within 10% of where they were a year ago, with seven teams making jumps greater than 10% and nine teams decreasing payroll by at least that much. Curiously, Cleveland, Pittsburgh, and Tampa Bay are all potential contenders who have lowered payroll. Less of a surprise, with rebuilds ongoing in Baltimore, Toronto, Miami, and Kansas City, those clubs all saw a drop in payroll.
If we look only at dollar figures, we see a similar graph, but with a few notable differences.
In this graph, we see the Yankees move closer to the top, as a small percentage in their payroll accounts for more money than with most teams given its size. The same is true for the Giants at the other end due to a $200 million payroll to start last season. In the end, we see a $60 million deficit from a season ago, which works out to a 1.5% drop. In the scheme of things, 1.5% might not seem like much, but if the end of the season numbers drop another percent like they did last year, and MLB revenue increases by another three percent like it did last year, as a percentage of revenues, the changes are drastic.
If we assume that players and teams had a 50/50 split before 2017, but payroll drops by 2.5% in two straight years and MLB revenues rise by 3% in two consecutive seasons, the share of revenue for players drops from 50% to 45%. In a $10 billion industry, that’s a half-billion dollar move, and a one billion dollar difference between the players and owners.
We’ve now seen 10 contract extensions for players within a couple years of free agency for roughly $1.5 billion, but the effect of those extensions on 2019 is almost non-existent. Even when we look at the raises those players will receive, the average raise once those players hit what would have been free agent years is under $8 million per player. That means that in 2020 and beyond, we are only going to see around a $80 million increase over where payroll sits at the moment. With major league minimums and arbitration capping what players receive in their first six or seven years, free agency is currently the only realistic avenue the players have for increasing their share of revenue; all of these contract extensions don’t do much to change the trends we are seeing.
Craig Edwards can be found on twitter @craigjedwards.
Or, the players union could do what they’ve done all along, and try to increase the minimum salary instead of focusing so much on free agency. Increase that minimum contract to, say, $1.25M, and you’ve suddenly doubled the salary of half your membership. If you want to increase salaries collectively, you have to raise salaries collectively. This is not rocket science!
This whole “woe are the baseball players” line about free agency is annoying because it ignores the incredible unfairness of guys like Aaron Judge tearing up the league on the minimum. You’re not going to convince teams to spend more in free agency because they’re smarter about aging curves, and they should be. So just increase the minimums.
(My favorite solution is moving arbitration earlier and earlier, so that you have the same number of years of control but get more money to the top performers sooner. But that is going to be a really tough one)
Right. You can’t force teams to make bad decisions on aging players; therefore, the solution is to force them to be fairer to younger players.
This. Increase minimum salaries. Increase arbitration salaries. Players should not need to wait 7 years of MLB time plus whatever they did in minors to make their big pay day and risk injury.
I think this is the way to go. If you increase the minimum to $1.25 million, it also helps veterans who want and are worth $3-5 million (Morrison, Mesoraco, etc.) but are instead replaced by young guys who only cost $400,000. If you make the numbers closer, some of those vets will keep bench/utility jobs longer.
This is exactly correct. Part of the reason why guys like Neil Walker hung out to dry so long last winter was because there were players who were far cheaper doing only slightly worse. You reduce the gap in salaries there, it helps guys like him.
If you moved arbitration earlier and earlier, would we just see even more service time manipulation? I’ve been thinking about the best solution being to move arbitration up as well, but was also just trying to think about the potential drawbacks as well.
Service time manipulation doesn’t really affect arbitration. It really only affects the years of control. The people that are getting screwed by service time manipulation are actually getting 4 years of arbitration instead of a normal 3.
A team would have to be willing hold a rookie down in the minors for a couple months, not just three weeks to purposefully affect arbitration.
One other thing I want to throw out there: There’s been a lot of discussion about the minor leaguers, and whether the union can/should negotiate for them. They should, but they don’t. The idea that most (I think almost all) minor leaguers are out there making less than $20K is an embarrassment to baseball and awfully unfair.
BUT, one area where they *do* negotiate for minor leaguers is for players on the 40-man roster. Right now, their minimum is $41K, which is ludicrous because those guys ARE union members. Bump those guys up to, say, $410K instead and force teams to think hard about how badly they want to manipulate service time, and who they want to invest in.
I’m pretty sure MLBPA negotiates signing bonuses for draft picks, international money and yet won’t let people signing these deals be part of the union. If draft picks, IFAs under X can’t sign an MLB deal or join union, MLBPA should not be able to negotiate their rights away.
And for goodness sake do something to give some relief to minor league players.
According to Rosenthal, players (including signing bonuses for amatuers and minor league players) got 54.8% of revenue in 2018. I think the system is bad for players as too large a percentage of money is going to players the owners can decide not to sign. Players will get outside the 53-57% range they have historically gotten if things don’t change. The outrage should be against the MLBPA for allowing only the best of the best free agents to get overpaid while minor leaguers and guys under club control get underpaid.
Free agency doesn’t need fixing. Minor leaguers and guys under club control need their salaries dramatically increased.
The obvious point is that the Union has allowed itself to be distracted by the needs of a handful of top-tier stars, so they have focussed on side issues like the QO. Service time manipulation is openly engaged in, and rooted for by fans. MLB minimums are way too low, and team control is too long. And the worst of it is the social welfare system the owners have set up for themselves, where low-payroll losing is a profitable business model. Assembling a team of scrubs should be unacceptable for both the league and the fans. We hear complaints about ticket and concession prices constantly–yes, they are too high, but they are ridiculous when the teams you are watching are built to lose.
Totally disagree that team control is too long. Small market teams need 7 years of control under MLB’s current organization. To change control, it would require radical change in revenue sharing such as the NFL and NBA do. That seems like over-engineering for service-time manipulation which affects maybe 5 players per year. The better solution is raising minimum salaries and starting arbitration earlier.
Compared to 20 years ago when the Marlins had a to break up a World Series winner because they lost money, MLB teams’ profits are far more correlated to wins. Teams field scrubs because they are rebuilding. When this is happening, fans don’t come out in droves and reduce their TV viewing of the team. Only when the rebuild nears completion, do fans start buying tickets and watching the team on TV again. They may eke out some profits while being bad, but it’s not a preferred state.
I know the Indians’ owner said something to the effect of “the team makes more money when it’s not good.” That may be idiosyncratic since the team has poor attendance while fielding a 92+-win team year-in, year-out. Maybe Cleveland isn’t a good baseball market anymore.
I have no problem with some exclusive period, with a higher minimum wage. We have to disagree about control, and service time manipulation isn’t the only issue. Imagine working in a profession where, at your most productive, you must work for the pay the smallest/weakest employer can afford.
Even the smallest/weakest employer is guided by the same payscale of the strongest/richest teams: minimum salary of $550k, a bit more in the 2nd & 3rd years, and then a lot more if the player is good in his 4-7th years. Your analogy doesn’t apply to MLB.
Are you arguing for total FA for every player without a long-term contract, no matter how long the player’s tenure? That seems at odds with union workforces where wages rise with seniority not with productivity.
I said at the very top, “I have no problem with some exclusive period with a higher minimum wage.” I think seven years is too long, and the justification that it’s needed to artificially support the smaller-revenue teams is the point I was referring to.
Your analogy still doesn’t help in that regard. No, it’s never made much logical sense, but the sacrifice of 6-7 years of team control is still a necessity in order to maintain competitive balance. Most other professions aren’t built around their employees being in direct, open competition with the employees of rival companies.
If team control was 5 years, with pay scale same as today and everything, we’d see much more competitive baseball.
Teams will push to be competitive during the shorter period under which their core is controlled. Players will hit FA sooner and at better years, making more money. Teams will actually get productivity from FA, spending more. Owners who can’t handle the financial impact hopefully will be pushed out of the game and replaced by those actually willing to spend.
“Teams will push to be competitive….” How, by spending a lot on Eric Hosmer? Machado’s and Harper’s don’t come along every year. LOL, silly rabbit, wins come from good young players who are cost-controlled so you can keep a number of them at one time. Not all of them are great rookies like Soto and Acuna, they may take a couple years to blossom like Moncada and then, poof, they’re gone under your system. Small market teams can’t compete that way. I don’t think the solution is to get Bezos/Gates/Zuck/Brin etc to push out the mere $100M net-worth owners. They didn’t get rich by lavishly spending and lavish spending on the likes of Eric Hosmer doesn’t lead to wins anyway.
Biggest bang for your buck are in the US Amateur & J2 drafts.
People have to realize that their ideas for more rewards for players and game parity are inversely related. Advocate for NFL- and NBA- style revenue sharing and payroll caps if that’s what you want. MLB is not going to do that, but at least you’ll make sense.
Dynamic pricing has already taken care of most ticket price issues, and there’s also an easy fix to those concession prices. Just have every team do what many already do: allow fans to bring their own outside food into the ballpark, aside from some exceptions like alcohol, cans, and glass bottles.
When comparing players’ share of revenue, you need to include more than just salaries. In addition to other smaller considerations, two larger components are benefits and post season awards (see chart here: http://tinyurl.com/y99jwbtk). As a result, if you are going to make extrapolations based on assumed revenue increases vs. salary declines, you need to moderate the reduction to account for these other elements.
I would also caution against assuming Opening Day declines will translate exactly as they did last year because of the existence of Keuchel and Kimbrel on the market as well as several veterans on minor league deals with April opt outs. This could have a muting effect.
Finally, in addition to comparing overall share of revenue, it is becoming increasingly important to also look at total guaranteed amounts. With players sacrificing total payout for longer-term deals, owners are assuming more risk, and this changing dynamic needs to be considered when looking at how fairly revenues are shared.
owners love to bring up benefits….because they can put an arbitrarly ungodly high value amount multiples higher of what the actual value of said benefits are on that stuff. They then lump it into black box expense accounting procedures to show they compensating players more than they are. Then audited by a 3rd party that checks off. MLBPA sees audit and just takes it at face value sadly. Been numerous articles written on MLBs bogus accounting methods coming out of NY.
For lamen terms…..Its like buying a car. You have the “sticker price” of the benefits, you have the “invoice price” of the benefits, and then you have the “real invoice price” of what it really costs the manufacturer that no one sees when you buy in bulk.
The shady NY accounting MLB procedures are using the “sticker prices” of the benefits that are inflated 30% at a minimum just to not pay the players that 30% and keep more for themselves.
Liberty Media CEO last November: “We are making money now at the Braves at a pretty serious clip.”
Atlanta needs Ted Turner back ASAP.
Not sure what your point is. Of course the Braves made a lot of money in 2018. They won the NL East, opened a new stadium, and sold out a condominium complex attached to the new stadium. Any one of those things is going to lead to an explosion in revenue and profits. They had all 3 in one year.
As I’ve said before, if Braves’ profits offend you, don’t worry. In a few years, the stadium won’t be new, the team won’t be good, and thus won’t make much money just as the Braves weren’t making much money before 2018.
I just thought it was interesting to see in this article that the Braves payroll, already bottom half, actually decreased this offseason while the Nats, Phillies, and Mets added payroll (not significantly, admittedly, in the Mets case). I’m not offended by the Braves’ profits- but I think that, were I a Braves fans, I could be offended by ownerships’ refusal to reinvest those profits in the team. In what looks to be a close division race, they may regret passing on very reasonable opportunities to strengthen the rotation, bullpen, outfield, etc.
The MLBPA has two choices when negotiating the next CBA:
1) They can seek to have owners implement a financial reward structure for winning, and hope that makes teams more competitive and therefore willing to spend on marginal wins. Something like this: http://tinyurl.com/y99jwbtk)
2) They increase leverage for younger players, realizing that the most valuable player commodity are young players, stars and especially young stars. Right now, the constituency with the most leverage, older veterans, is also the least valued. The existing system was set up to basically pay veterans for past performance that was hitherto unrewarded. Now, however, young players and stars are undermining that dynamic by signing unleveraged long-term deals, which not only shifts money away from those with the most leverage, but also lowers the average annual salary for classifications of players. Unless players are committed to eschewing extensions, the current framework will continue to work against them.
Are you guys just not going to comment on last Friday’s report that for 10+ years, the league has given out a toy award to whichever team best suppresses salaries in arbitration?
At best, it’s a massive show of disrespect to the player talent. But I’m also not sure how it isn’t collusive behavior for the league apparatus to condone all of its teams suppressing salary as best they can. This seems like a big deal.
agreed. sad.
Or you can go to a performance based compensation system.
Sorry, but the existing system still needs to remain intact at a basic level for competitive balance. The small markets would never have a chance if they had to pay their young stars what they’re actually worth.
so sad. mlb revenue going up. payrolls going down. players are getting squeezed.
FIRE MANFRED
Personally, I think MLB and the MLBPA should focus more on instituting a salary floor so that even rebuilding teams are forced to spend in the lower end of free agency and field a somewhat competent team, while many of their prospects aren’t rushed to the Big Leagues before they’re ready, which ironically actually keeps their service time down (only with the elite big-league ready prospects has service time manipulation been an issue).
If teams like the A’s, Rays, and Marlins wind up losing money due to this floor, then that gives them more incentive to field a winning team and get their revenues up through increased ticket and merch sales and postseason shares. If they still can’t make any money despite all the revenue sharing MLB has now, then they simply need to relocate. I’m seriously starting to wonder if expanding MLB to Florida was a huge mistake. After all, the people with most of the money don’t even live there during the summer!