MLB Payroll Might Decrease for First Time in Long Time
I probably don’t need to rehash here the stuff we’ve been writing all winter instead of writing about free-agent signings. We all know the market has been remarkably slow. We all know the theories behind the slowness. Most of those theories are probably correct to some extent.
What’s curious to me — and what prompted this article — is that, even after all of the free agents sign, there is a very real possibility that total payroll might actually decrease from a year ago. That’s pretty rare and the implications much worse than I had anticipated.
Near the beginning of the offseason, I took a pretty simple look at how much teams might be willing to spend in free agency. To get those numbers, I took Opening Day payrolls from last season and added 5% to every team — that is, roughly the observed rate of annual inflation of the game over the last few decades. With those numbers, I looked at current team commitments, including arbitration estimates, to get a sense of how much room every team had to spend.
This graph was created with payroll numbers from Cot’s Contracts:
Three months later, that graph is a bit outdated. The market has been slow, yes, but teams have nevertheless made some moves affecting payroll.
That graph also reflects estimates of potential spending. We are now at a point in the offseason where actual spending is more relevant, especially as it relates to our expectations. Instead of framing the information as potential to spend, it is probably now better looked at in terms of how much payroll teams are cutting compared to expectations. To that end, here is the same information from above, but viewed in terms of a percentage increase or decrease compared to expectations.
Yikes. Milwaukee has seen their payroll grow quite a bit; it could grow even higher, too, as they step out of their rebuild. Arizona’s commitments have increased, too, although a lot of that has been the result of arbitration raises. Houston’s big move was to add Justin Verlander last year. That’s the cause of their larger obligation.
On the other end of the spectrum, we have a bunch of teams not only failing to add salaries, but also refusing to replace the salaries of players who are departing. These changes are massive and across the board. There is some spending left to be done, but it is pretty clear that we won’t have anywhere near a 5% increase in spending this year. We can run the graph again, showing comparisons to Opening Day last year without a 5% increase, and it still looks bad.
Again, there are still free agents to be signed. Nevertheless, this doesn’t look good. More than half the teams in the league have cut spending and nearly one-third have done so by more than 20%. The graph still understates the amount of spending that is being cut because those teams on the left already had low payrolls. Increasing the Brewers spending by 43% only augments their payroll by $27 million. Nine teams are seeing decreases of at least that much. All of the increases, meanwhile, amount only to around $147 million. The drops of the Detroit Tigers, Los Angeles Dodgers, and New York Yankees add up to $147 million alone.
On Opening Day last year, payroll commitments amounted to roughly $4.1 billion. Right now, with the commitments that have been made thus far, we are looking at $3.78 billion. If not another dime were spent, that would be a decrease of nearly 8%, which would be unprecedented. In the last 30 years, here are the situations where payroll has gone down.
- In 1994, payroll declined about 4% from 1993 as the previous CBA expired. There was eventually a strike followed by a lockout.
- In 1996, payroll declined about 3% from 1995 as a new CBA again needed to be negotiated. Payroll would compensate for that shortfall in 1997 with a 19% increase, the first of five straight double-digit percentage increases.
- In 2004, payroll decreased by around 2% after modest growth the previous two seasons. Notably, the 2004 season was the first one where players could be suspended for a positive PED test. Since that time, payroll has increased at around 6% annually even with slow growth from 2009 to -11.
We aren’t going to see an 8% drop in payroll like the numbers currently reveal, but it is unlikely that we’ll witness a return to last year’s numbers. I went through the unsigned players in Dave Cameron’s top-50 free-agents post from the beginning of the offseason. I counted 24 players on that list yet to be signed. If we go by the crowd’s estimates, those players will sign deals for a total of $309 million. If that were to happen, we’d be just about $10 million short of the figure from last year. Add in anything close to $60 million for other players not on the list, and we will see something under 1% in terms of an increase from last year. That isn’t good, but we might put some hope in a one-year blip that sees some overcompensation next year with better players and more teams competing.
It’s important to note, however, that the $309 million figure I’ve cited above is based on crowd estimates that might be overstating what players will receive in the current market. If those players’ salaries end up getting discounted by 20%, we are going to be talking about a payroll that did not raise from 2017 to 2018 despite massive revenue streams available to owners. The time has already passed for players to think a typical increase in payroll is coming this season. The question now is whether players will see any increase at all.
All of the theories about why free agency is slow are probably right. There aren’t enough teams in competitive situations; teams at the top are secure, while teams at the bottom have little reason to spend. The players in this market certainly have flaws. The new CBA has emphasized the benefits of getting under the competitive-balance tax and two massive spenders are doing it simultaneously. Maybe teams have gotten a little bit smarter. Maybe Scott Boras is still going to get owners to bid against themselves at some point. Theories are boundless, but the results are pretty close to being in. The players are about to have stagnant, at best, payroll numbers next year at a time when owners are making greater profits than ever. That’s a pretty bad look for baseball.
Craig Edwards can be found on twitter @craigjedwards.
With so little going on, I understand the desire to analyze this off season’s spending before all the players have signed, but with so many high profile players still unsigned, we really need to wait before jumping to conclusions.
Also, I’d be interested to have more information about the sources used for all the data in this graph, but according to the database I have been compiling, which includes official payrolls since 1999 (released by MLB in December of each year), some of the claims are in conflict. For example, based on official figures, 2004 payrolls declined by 8.5% after increasing 17.6% the year before. Also, if you break up the period since 1999 into three six year periods, the average annual growth rate has been 7%, 6% and 6%, but with decreasing volatility over each subsequent period.
Before we determine the true impact of the new CBA, and whether it has been good for the players, we really need to see not only this winter play out, but also next year as well. I understand why some players and nearly every agent have been sounding alarms, but the data doesn’t yet support the notion that players have placed themselves in a disadvantaged situation.
Agreed- the author keeps pushing the counterfactual narrative that this offseason is a disaster for the players.
The research for this article is biased- using words like ‘it looks bad,’ and ‘it doesn’t look good,’- when in reality, MLB payroll is very likely to increase from last year and set a new record high.
It’s misleading at best to compare spend on February 2nd to opening day totals. The 8% drop ‘if no teams spent anymore’ isn’t worth noting, since there is no chance that MLB teams refrain from spending several hundred million more in the next 60 days. And as you’ve pointed out, total spend has decreased year-to-year twice in recent times, so it’s moderate increase this year isn’t rare, nor does it have the big implications the author suggests.
Teams are likely to add $8-13m a piece before opening day, so the author’s point that only 12 of 30 teams had so far increased spending hardly matters- as clubs like Minnesota, Chicago, Toronto, St. Louis and Atlanta will all have increased their spending over last year, but at present are $6 or less under last year’s opening day number.
“in reality, MLB payroll is very likely to increase from last year and set a new record high”.
This. Yes.
The article is strangely alarmist for an off-season that’s not yet over, and probably points to something like flat YoY payrolls – which (a) would still be a powerful growth CAGR over the past 3/5/10 years and (b) is an advance of what could be an extraordinary free agent class a year from now.
As far as I can tell, in the history of professional sports there has been exactly one guaranteed deal >$275M. We might get more than that in a week later this year with Harper and Machado. (Who will be joined by Kershaw, Donaldson, Blackmon, and too many more to mention in a class that’s almost sure to increase payrolls).
Are the same parties who are shrieking about a crisis of underpayment today going to be doing the opposite then? I am skeptical.
[Only tangentially related, I’m also growing weary of the narrative (not explictly expressed here) that the MLBAM sale is extra “revenue” for the clubs – a statement that confuses income and proceeds from asset sales.]
The MLBPA has made an explicit choice, again and again, to sell out younger players for a system that benefits older ones. As the market wises up to the fact that older players can be a (rapidly) depreciating asset, what’s playing out now seems to me to be perfectly reasonable.
The MLBPA has made an explicit choice, again and again, to sell out younger players for a system that benefits older ones.
This. Hard to empathize with the whiny millionaires when they are the ones who turned kids into below-minimum-wage indentured servants. As for the billionaires, they are pond scum.
It’s time to take the game back from all these trough-swilling pigs.
Are the whiny mllionaires the players or the owners ?
I never understood why the players get crap for playing for millions while owners get the benefit of the doubt for making millions by overcharging for beer and getting subsidies from local taxpayers.
I never understood why the players get crap for playing for millions while owners get the benefit of the doubt
Neither should get any benefit of doubt – but it is the MLBPA that threw minors players (their own future members) under the bus for the benefit of the stars. The salary minimum difference between AAA ($17k – and still no free contracting of players) and MLB ($500k) is purely a result of collective bargaining since no actual free market or economic competition is allowed in baseball. Just two groups of rich whiners collecting cartel rent and screwing everyone else. It’s why MLB fringe players have to go to Japan/Korea instead.
Nobody plays baseball against their free will… except maybe some ten year old kid whose father will not let him quit…
One more point: based on MLB’s official payroll numbers, 2010 payrolls decreased by 0.1%, so 2004 is not the most recent backslide.
Great Recession
“The players are about to have stagnant, at best, payroll numbers next year at a time when owners are making greater profits than ever.”
The American working class says, “it’s been that way for us the last 20+ years”.
The American working class has no chance of playing in the majors.
Comparing athletes and their salaries to the average Joe is foolish, as there are hundreds of differences in the skillsets, markets, individuals and day-to-day.
Hence why the recent NLF strike was dubbed ‘millionaires vs billionaires.’ Average Joes see the millions athletes make and get upset their Sundays are interrupted, while ignoring the fact that billions are made by rich owners who don’t contribute beyond their paychecks.
I expected downvotes. People enjoy comparing average lives to those of millionaire athletes, even when the comparison has little merit.
In this case it does though. Baseball, despite the limited number of employers and employees, has fundamentally shifted in the way it operates historically and today. Historically they were ran like mom and pop shops, family owned and operated. Now they are corporations run by Harvard Business School grads with number crunchers from MIT.
So yes, baseball have become just like corporate America. And even at the very top, when you run a team like corporations, you’re going to slash inefficient budget (free agents) and hire more cheap laber (young players with cost control). And you’re going to maximize returns using minimum cost.
No matter who constitutes the labor market (be it average Joe or millionaire athletes), the employers (whether they are owners of a restaurant or a sports franchise) have been consistently taking more of the pie for themselves. And it has been getting worse and worse over the last 20+ years.
My analogy is perfectly accurate.
Actually, it’s 40 years, for average Joes and Janes, if you look at the data, though certainly not for the MLB.
30+. It’s a feature of trickle-down economics. In 1979, the top 1% earned 8% of the national income. Today, the top 1% “earns” 24% of that income, mostly because of three decades of tax cuts for the rich. Because they “earned” it…
Seems like you’re a small step to “Workers control the means of production.” This could be college classroom. The only difference Professor is dissenting views get down voted instead of “C”s and academic disstain.
Its tough when you need to compete for foreign labor and greater participation from women. Companies have more options than ever. The pay levels of the American working class from 1950-1970 were the outlier, not the current setup.
Not really. The ‘current setup’ is entirely an outcome of the dollar as reserve currency. That will end someday and the US will have to follow ‘normal economics’ like every other country. It will be bad news for Wall St and multinationals and DC – and good news for Main St and Joe SixPack.
Yes and no. The pay levels of the American working class were a major outlier from 1950-1970. This is indisputable.
However, this was due to an unusually strong economic boom, coupled with very strong desire on the part of policymakers and business leaders to mainstream American labor and reduce labor unrest.
Offshoring did play a pretty big role in the decline of the male working-class economic position, but greater participation from women in the labor force actually was a major contributor to economic growth. Working-class men largely benefited from increased productivity of the overall American economy (at least those whose jobs weren’t shipped to South America).
Apologies for the wall of text on economic history.
One fact to remember – in 1945, the USA had half of world GDP.
Much of the “perceived golden age” in the years that followed were because of this head start, not because of the discrimination against women and minorities and various forms of corruption that helped squander much of this advantage.
Well, the median household income grew 26.5% from 1979 to 2011 adjusting for inflation and 46% adjusting for household size so it hasn’t really been stagnant, per se.
For comparison, during the same period, real US GDP per capita increased about 69%.
26.5% over 32 years. That’s pretty effing stagnant.
Adjusting for inflation? No, it is absolutely huge by historical standards.
Anyway, the real problem with that stat is that basically the entire gain on the median is from the upper half of the income distribution
but this thread is further borked by the fact that Q1 2018 is the first time since Nixon that the working class is actually seeing its incomes increase substantially, so while this has been a legitimate complaint since before my parents met, it’s not one just right now
30+. Trickle-down, siphon up.
Agent Brodie Van Wagenen came out with a statement today that came juuuuust short of alleging collusion and threatened a spring training strike:
http://www.espn.com/mlb/story/_/id/22300069/agent-says-fight-brewing-slow-mlb-free-agent-market
https://www.mlbtraderumors.com/2018/02/agent-brodie-von-wagenen-speaks-out-on-stagnant-free-agent-market.html
I am totally over this storyline.
Fact is, the Dodgers and Yankees are sitting out a poor free agent class to reset their tax before going at it next year. The Red Sox don’t want to bid against themselves for JD Martinez. Hosmer and Moustakas and Lynn and others are just not that good, and Boras is happy to hold out his clients for longer in search of a better deal. Darvish looks like he’s waiting to see if the Dodgers can clear space before signing a lucrative contract of his own with someone else.
I get that we don’t have anything to write or talk about, but we just don’t know yet how close we’re going to get to last year’s payroll. Let’s chill out and see what deal these guys are actually signing first.
There are tons of fact-based stories to write about, using sound empiricism.
This Travis & Craig series exaggerating the lack of spending and advocating for clubs to spend more in free agency is simply low quality and constantly repeated.
Jeff’s recent article on Kemp and Wilmer Font, by comparison, is excellent. Jeff’s article anticipates what is actually likely to happen- that clubs like the Dodgers will trade their 41st man to free up room under the luxury tax, allowing them to add. This is how smart clubs are trending and where the informed insight is trending.
Articles that falsely claim that 2018 opening day payroll is likely to be lower than 2017- without even considering the $60m in contract extensions that will be given out over the next two months- is simply failing to anticipate and follow what is actually going on in a changing industry.
Well, no, that scenario Jeff outlined isn’t likely to happen, but I appreciated the effort anyway.
What I’d really like to see are more articles like the Franchy Cordero one, about random players who seem interesting.
More generally, I don’t want to tell Fangraphs writers what to write, but there are basically no more angles to cover on this one.
Coda: About an hour later Jeff posted the exact type of article I was hoping for–a deep dive on Wilmer Font. See, wishes do come true!
As long as revenues increase and the percentage that is player salaries decrease, it only increases the odds of a work stoppage come the next CBA round. It doesnt matter WHO initiates or WHY we’re here (or there). Short of a lot of give backs by the owners — highly unlikely — there’s bound to be a strike/lockout.
Its never been clear to me why the players are owed BAM revenues rather than say the actual developers and workers at BAM who actually you know created that business? Just because they can use their union to barge into a process doesn’t mean they are right. Why should the owners be “giving back” to one tiny slice of their employees?
Exactly- baseball related revenues have remained split as Tony Clark and others have stated. Boras et al are simply making a PR push to grab some of the MLBAM sales.
Almost all MLB fans would support a PR campaign to pay MLB staff and minor leaguers, or to reform various employee right issues with the proceeds. No one is looking to see owners benefit unfairly from the windfall- but neither are free agent veterans entitled.
This 3-times-a-week ‘middle class’ eulogy for Pedro Alvarez and gang is misreading the situation.
Agreed.
This would be like the owners saying that players owe them a percent of their endorsement deals. Or that players don’t deserve as much in pay from the teams since they receive endorsement deals.
Baseball don’t happen without the players. Everybody else is, basically, superfluous. Owners included.
You just couldn’t be more wrong about this as is evidenced during various lockouts et cetera.
A great example is during the summer in my town you can go watch NHL players in summer training play games, same players. But at a HS rink with no amenities. It costs $10/person and maybe 500-1,000 people show up.
Meanwhile at the big rink it is $100/person and they get 16,000. The idea that the players drive the whole thing is just silly.
I think the MLBPA faces the same issue as any other union in that there’s no reason for them to think of any interests other than their own. It makes me wonder what the MLBPA would’ve done had they had a benevolent leader whose sole interest was the long term interest of all MLB baseball players.
As it stands, every right of amateur and international players has been bargained away, and that makes sense. Almost every player currently in the union will probably end up negotiating a free agent contract in the five years the CBA generally runs. Everyone’s just trying to maximize their own returns at the expensive of 18-year-old kids.
But because every time they negotiate, they bargain away more rights of young players, cost controlled talent has remained incredibly cheap relative to the free agent market.
The players viewed caps on draft signings, international signings, arb years, etc. in a vacuum. They assumed it would only affect those players, so they just bargained them away.
It just seems like a lack of foresight, though. Obviously, all salaries except the very top are going to be judged relative to their replacements.
I am not an economist, but it seems like they should definitely hire one. There’s almost certainly an equilibrium between veteran salaries and cost-controlled salaries, and since only one of those things moves, we know it’s going to be the veteran salaries that goes up or down relative to the cost-controlled salaries.
The recent THT article touches on this:
http://www.fangraphs.com/tht/the-mlbpas-indifference-toward-international-amateurs-is-coming-back-to-bite-them/
I just finished it up, and he hit the nail on the head. It’s not just int’l though, it’s all amateurs. The fact that the signing bonus for the #1 pick *just* reached levels that it was at 10 years ago this year or last year is crazy.
The MLB seems to understand that if you keep signing bonuses down, not only are you lowering costs, you’re also creating an entire generation of players willing to accept long term deals.
The teams probably have a number, let’s call it 5M, where they know that players will scoff at a long term deal in favour of betting on themselves. Their goal should obviously be to keep as many players under that number as possible because that’s how you get crazy team-friendly deals.
If everyone starts going over that number, players simply wont sign away their years for financial stability because they already have it.
It makes more financial sense now for a team to trade 100M in made-up fake money (prospects) to acquire a player like Yelich than it is to spend 100M in real money for Free Agent X. If the young players cost becomes more in line with their actual value, it will start to make sense to buy free agents again.
These are some pretty dodgy economics. First, veteran MLB FAs and 16 year old Dominican kids are very imperfect substitutes. If I have a need for major-league talent RIGHT NOW, I have only one option: the veteran.
Second, just because the price of amateur talent has plummeted, doesn’t mean I can go out and acquire more than before. Two reasons: (1) the prices are deflated in the first place because of a SPENDING CAP => I’m still limited in the quantity of amateur talent I can acquire; (2) the quantity of amateur talent supplied to the market certainly isn’t going to increase after bonuses fall (it may not decrease much either; supply is probably pretty inelastic).
The likely consequence of the all the restrictions on amateur signings is a simple transfer of wealth from amateurs to owners, with no effect on free agent prices. And if teams are budget-constrained (and they certainly act as though they are), then the amateur restrictions would actually release funds and free agent prices would rise.
If you back out the big outlier in Detroit since their Ex owner was a special case, add in the unsigned free agents… I think you’re at least at last year’s average budget.
The three teams with the most theoretical room to spend – Detroit, Philadelphia, and the White Sox – have no intention of being any good next year and no reason to throw stupid money at free agents that can only harm their draft position. They may sign some bargians to short term deals and hope to flip them, but they are not the ones keeping the guys like Arrieta and Martinez out of work.
That doesn’t account for the Santana deal.
Baseball salaries may get a pullback. Let’s follow the money. Players get paid by teams. The teams get a huge chunk of revenue from programmers (ESPN) who pay to show the games. Programmers get their money from cable companies that pay to carry their channel. Some, like the Yankees and YES, combine the team and programmer, but in either case, they then get paid by a cable company. The cable company pays the programmer based on the number of subscribers it has, and my most recent cable bill has a Sports Surcharge of $7. In the last 10 years, the number of cable customers has gone down from about 65 million to 53 million (thanks Wikipedia). $7 times 12 million customers is only $84 million, but that’s $84 million per month. Multiply that by 12 months and you get a billion dollars. Divide it by 30 teams and you get $33 million less per team. That works out to about $1 million less per player every year. I’m not making a case for owners being broke, just making a case as to how owners may be adjusting their forecasts. The agreements with programmers can last for years so the effect of decreased cable subscribers on baseball teams may not be immediate, but the agreements eventually get renewed and the amounts are adjusted based on how much these parties are making. The teams can adjust by raising revenue in other areas, or by trying to save a few bucks on labor costs, which may be what we’re seeing this offseason.
Most teams have long term RSN deals. Their revenues are from the negotiated rights fees with RSN. The MLB team does not see the carriage fees paid to the RSN directly. Those who have part ownership of the RSN are affected, but I suspect the Boston and NY markets have fewer cord cutters (may be wrong). In any event, those revenies lost don’t show on MLB/team books
Long term its entirely possible MLB. TV replaces RSN’s and even NSN’s (possible merger coming)
Paul’s point is correct, but I think that there could be a different impact.
Over the past 10-15 years, we saw several revenue streams increase for MLB teams. One of those was teams signing RSN contracts that generally resulted in big annual increases from prior local TV deals. While reporting on these deals rarely if ever shows year-by-year breakdowns, it’s expected (as Craig wrote at Fangraphs a couple years ago) that the normal structure of these contracts is relatively modest annual increases over the term of the deal. So, basically, a big jump in local TV revenue in Year 1 followed by more modest increases after that. There are still a few teams left to try to cash in by signing new deals to replace old deals that were signed before big growth in local TV rights fees, but this jump in local TV revenue has by land large already happened for teams.
There were also a couple other new shared revenue streams from the MLB Network (launched in 2009) and out-of-market streaming (MLB.tv).
While I’d be very surprised to see total payrolls actually back up, outside of perhaps a 1-year blip that later reverses itself, I also don’t know that the rate of payroll increase over the last 10 years is a good guide to what’s likely in the future.
I understand the relationship and that’s why I said, “The agreements with programmers can last for years so the effect of decreased cable subscribers on baseball teams may not be immediate, but the agreements eventually get renewed and the amounts are adjusted based on how much these parties are making.” New agreements will get made, but the terms may change as cable subscriptions have decreased for a decade. MLB.com and Internet viewing can create revenue for MLB, but that is only paid by baseball fans as opposed to the sports surcharge that is on everyone’s cable bill whether they watch baseball or not. I’m not saying that the sky is falling, just that a chuck of revenue that increased greatly every year may not continue to do so and this will get passed on somewhere – perhaps to players, and perhaps this year.
Could the slow off season be explained by a shift to pay players more annually on a short term? What if owners are getting tired to pay players for 6+ years? How many contenders would pay JD 90M for 3 years or even 100M? 150M for 6 years… not as many for sure.
The author is not factoring in the $60m or so that will be added via contract extensions during the next two months.
The likes of Betts, Bryant, Degrom, Correa, Springer and others likely to add tens of millions onto the 2018 payroll. In 2017, from February 1 to Opening day, ~$50m was added to total 2017 MLB payroll with extensions for Jose Ramirez, Carlos Martinez, Kiermaier, Odor and others. This year’s group is better, deeper, and on richer teams.
The author’s own calculations estimate a 1% increase, to roughly $138m or $139 per team- a new all time record high. Adding in the $60m from contract extensions not considered, that brings the author’s own estimates up to around $142m per team- a healthy, nearly-3% increase: fitting the trend line.
IMO the series of articles by Travis & Craig dramatically and constantly appealing for more free agent spending has been misinformed and anti-empirical. There isn’t a serious fact-based reason to be confident that opening day 2018 payroll will be lower than 2017.
Moreover, why should anyone be expecting across the board raises every.single.year? Crazy talk. When other unions strike it’s because the workers haven’t received raises (but rather cuts) for YEARS… Losing one’s religion over a one year correction seems like a wild over-reaction.
It makes perfect sense for the players to have a smaller overall salary, given the fact that ML revenues aren’t at an all-time high, and increasing. I mean, if the league isn’t making more money than ever, the players shouldn’t expect to be getting anymore.
Of course, if baseball somehow WAS making record profits and the league WAS making money hand over fist, it’d be ridiculous to expect the players – the ones whose talents make all the money for the league in the first place – to have their salaries going backwards. But that scenario is so outlandish it couldn’t possibly be true.
MLB revenues are at an All Time high and increasing 5-8% per year
That was what I was sarcastically alluding to.
Not very well, then.
My apologies. I assumed that what I said was so over the top, outlandishly ignorant to the basic, common knowledge of baseball’s revenue growth that the good commentators at Fangraphs would recognize it as sarcasm. I won’t make that mistake again.
Baseball is making record amounts of money. That the players aren’t also making record amounts of money is dumb, unfair, shortsighted, and damaging. This isn’t sarcasm.
But they are making a record amount. Even this crappy FA class – when all is said and done, the player’s pool of cash will be higher in 2018 than it was in 2017.
And guess what – next year it will jump even more.
Spending is cyclical. We shouldn’t be surprised by anomalies on a single year basis. This year will be a slow growth year. Next year will be a big growth year. Neither result is unexpected.
Exactly.
And here’s some math to make the problem facing high payroll teams clear.
Suppose a team like NYY or LAD plans to exceed the luxury tax threshold by $30M in 2019-2020 (because of the generational FA cohort).
Suppose this team’s current tax rate sits at 50%.
Suppose this team’s current 2018 payroll sits right at the threshold, $194M.
What are the tax implications of adding one of this year’s mid-tier free agents?
By exceeding the threshold this year, the team’s 2019-20 expected tax liability goes up by $30M x (.50-.20 + .50-.30) = $15M. Plus, there is the 50% rate this year.
So if this team were to, say, sign Mike Moustakas for 3 years @ $16M/year, the incremental tax liability is $23M, i.e. the real cost is more like 3 years @ $24M/year.
New FA salaries in a given year are only 10-15% of the overall average salary in a year, less this year. Its hard for new FA to have a significant impact on MLB average salary in a given year. However, if it continues, the effect will approach 20% next year and will start having an impact on arb increases from which 30% of players derive their income. Furthermore increases in the minimum will decline and be tied to CPI by the end of this CBA
How does Tony C still have a job?
Also, the deflation seen in 2004 may be attributed to collusion in 2002-2003. MLBPA filed a grievance and it was settled for 12 million by MLB as part of the 2006 CBA
Every period of deflation in the last 30 -40 years has been caused by collusion or lock out or the Great Recession that deflated 2010 salaries
Clubs are offering market value offers, right about at the top of what players have ever been paid (i.e. $9m/WAR).
A decent number of players in this FA class has standing offers above market value, they simply haven’t yet accepted. Apart from Cozart, there haven’t been many below market deals.
Aiming at Tony Clark for nonsense reasons only hurts the players’ cause.
Well the MLBPA has done a great job for a decade or more to make sure no one gets paid except guys who have already been in the league for a long time. No money for international players, no money for guys who are not currently in the league, no money for minor league players.
No money for anyone except longstanding union members. Now they are finding what happens when you distort the labor market that much. Teams have the choice of choosing underpriced almost anything, or wildly overpriced veteran free agents.
It is not much of a choice. But yeah it is all the fault of the greedy owners!
We’re collectively supposed to feel bad for players because analytically-minded front offices won’t overpay for age-37 seasons any more, Mr. Boras?
Let me get back to you on that…
Let’s add to that “because reasonable people don’t try to outspend the Yankees or Dodgers when they start off at a projected double-digit game talent deficit”
Combo of poor negotiating on the CBA by the Union (it’s as if they didn’t understand the core issues) and a mediocre FA class. Aided by a little soft collusion–nothing actionable, but clearly there.
Which player should obviously have a big offer that he doesn’t yet have?
Did I say that? I don’t think so.
You said collusion. Soft collusion (what do you mean by that?).
Regardless of where spending winds up, it seems clear to me that MLBPA needs new leadership. Tony Clark simply isn’t up to the job. The MBAs and lawyers across the table are playing him like a fiddle. Draft pick compensation, luxury tax, etc.. they don’t really help small-market teams or improve competitive balance – they just incentivize owners to reduce spending.
The top free agents will get paid, regardless. The only one who really cares whether Bryce Harper gets $350m/10yrs or $210m/7yrs is Scott Boras and his ilk. MLBPA needs to protect its rank and file, and I’d argue that should include minor lgers, as front offices maximize their years of player control. Increasing the MLB minimum increases wages while simultaneously reducing the marginal cost of free agent contracts.
There are more radical steps, like eliminating the draft and/or MLB’s antitrust exemption. Maybe have draft order go by market size instead of record (why punish a small-market team that punches above its weight? why reward a big-market team that sucks or doesn’t spend to compete?).
The players just need to wait until the new, lower corporate tax rate kicks in. Then the corporations that own the teams will invest most of that “saved” tax money in personnel, just like we were told they will do.
I think teams just feel they no longer have to compete for the division. Look at the Cardinals, their GM (or whatever) just bragged he built a 90 win team and is standing pat. He knows that’s not good enough to catch the Cubs, but apparently it’s good enough for ownership and seemingly fans.
And because the Cardinals are not challenging the Cubs, the Cubs can pretty much coast
I also wonder how much is the 2nd wildcard & turning the WC “round” into a 1 game affair. If you’re in the NL West & LAD is going to win 98 games, what is the incentive to get from 84-88 to get into the wildcard? For a 1 game deal, that if you lose, you may not even get a home playoff game. It’s not worth breaking the bank for many teams for that one game.
Obviously, you have exceptions (SF, Boston, LAA) that are going to try to win still, even if they have a superior division rival, but, I think many teams look at it & wonder why spend the $$ when the return could be 1 game. Pittsburgh is a prime example of this reasoning, I think.
This is a good point. Maybe we’d be better off with just one wildcard, three divisions. I’m not sure that many teams are willing to spend to get a one game winner take all slot. But if that slot basically had parity (without home field advantage) with the divisional winners, perhaps they would try harder.
The second wild card is necessary because of the Yankees and Red Sox. Since we “need” both of them in the playoffs most years, there has to be another prize for everyone else to play for.
A hard salary cap with proper elimination of loopholes would eliminate this “need” and motivate more teams to spend. The luxury tax does not do this because if a rival tries to spend to catch up, the leader will just pay the tax and up their own spending – the marginal value of a win is huge in such a situation.
Since it does not take a crystal ball to see this will happen, few teams try to massively increase spending to catch up to wealthy front-runners.
The Cubs may be uniquely vulnerable and have been the lone division leader seriously pursued. This was aided by the combination of a huge Marlins sell off when the Cubs lacked top prospects and a weak free agent class that makes it difficult for the Cubs to respond.
Yes and no…teams aren’t going all in to get a 1-game playoff, but they’re also not totally mailing it in when it only takes a bit of luck to make that 1-game playoff. Pittsburgh is also a prime example of this reasoning.
Nathaniel Grow foreshadowed this problem back in 2015, I highly recommend reading it & a possible followup: https://www.fangraphs.com/blogs/the-mlbpa-has-a-problem/
Growe’s data and his conclusion have lots of flaws. I won’t rehash the same rebuttals (they are in the comments section of each respective article), but I think the problem with the prevailing take here at Fangraphs is the use of poor data, which is ironic considering the nature of this site.
At some point we need to see the bubble burst and bring things back down. No need for it to continually rise.
I do think payment of the players is going to be a problem but I’m not sure we are there yet. Can’t really judge this off season before it is over and next one will certainly set a new record (which it of course should as long baseball revenue goes up).
The top stars are always going to get paid but for the average or slightly below veterans the market already got tougher.
I think we will see a concentration,the top guys continue to get more but the average guys are replaced by cheap labor.
This is actually the same like in western economics.the top guys like a work class software developer or enigineer still gets paid but the average or below worker gets replaced by third world workers (that is creeping though, first only manual labor got replaced and now also engineers and other high quality jobs)
No one claimed Verlander. This says a lot more than not wanting to get in a bidding war over Neil Walker or Lance Lynn.
ThIs topic has been written about a lot. There are articles and interviews discussing this on more mainstream sports sites. Agents are ranting publicly in an increasingly desperate tone. It is not exactly novel, but that doesn’t make it not news. It is impossible to explain the lack of signing for any one player or how uncertain any up-and-coming player’s role is without also discussing the larger context.
Ignoring the elephant in the room is poor journalism. Please take a moment to draw any analogies with coverage of national politics. In short, bravo Fangraphs.
players need to strike. time to throw this commisioner to the curb, hes destorying the game.
Something tells me next year will even every thing out and no one will be complaining about the explosion in team payrolls.
What isn’t mentioned is how there are less than 20 spots available across the entire league on anyone’s 40 man roster. For some teams to sign a free agents means someone else losing a job.
” Nevertheless, this doesn’t look good. ”
You’re not a player or an agent, right? Because if you’re not someone who makes your money off of player salaries, this is not a bad thing.