Archive for payroll

If the playoffs started today, the Washington Nationals, Chicago Cubs, Los Angeles Dodgers, San Francisco Giants, and St. Louis Cardinals would be in the playoffs on the National League side. The top-five payrolls in the NL belong to those same five teams. Over in the American League, the Cleveland Indians seem likely to make the playoffs while the New York Yankees likely will not — and the Los Angeles Angels aren’t anywhere near the playoffs, but these are merely exceptions to the rule. Anecdotally it certainly seems like money matters this year after several years of parity. Digging into the numbers of the relationship between money and wins, the numbers indicate that a team’s payroll really is more important now than at any other time in the last decade.

There are 15 teams this season whose opening-day payrolls exceeded $130 million. Among those 15 teams, only the Los Angeles Angels possessed a losing record through Tuesday’s games, and if the playoffs started today, the top half of teams by payroll would claim nine of the 10 available playoff spots. Of that bottom 15, the only teams with a winning record are the Pittsburgh Pirates, Houston Astros, Miami Marlins, and Cleveland Indians. Cleveland would represent the only team among that group to qualify for the playoffs if the season ended today. If this seems unusual, it is. And it isn’t.

Last season at around this time, I looked at the relationship between wins and payroll and found that there was nothing significant. The correlation coefficient between wins and payroll was .17, and that number had been part of a decline that had been occurring over the previous decade. As Brian MacPherson pointed out when he researched the issue the year prior, the relationship between wins and payroll had been declining since the start of this decade. At the end of last season, the correlation coefficient for wins and payroll in 2015 was a very low .22, but in discussing the issue last year, I pointed to two causes for concern (if a lack of parity is concerning).

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At last year’s the trade deadline, the Texas Rangers made a deal for Cole Hamels despite a 50-52 record that placed them three games back in the wild card race, with four teams in front of them — and seven games back in the division, with two teams ahead of them. The club ultimately finished the season 38-22, winning the division in the process. The addition of Hamels was certainly integral to their success.

That said, the trade wasn’t necessarily made with just 2015 in mind; in the process, the Rangers were able to move Matt Harrison’s contract and retain Cole Hamels through either 2018 or 2019 (for which latter year the club holds an option). Hamels hasn’t been at his best this year — his 2.93 ERA obscures uncharacteristically weak fielding-independent numbers — but the Rangers have continued winning this season, having produced a 53-32 record and a 7.5-game lead on the Houston Astros.

The Rangers leveraged some payroll flexibility into the acquisition of a player likely to help them in the present and future. A look at the current state of future payroll commitments could help determine which teams are best positioned to take on money at this year’s deadline.

While the traditional would-be free agents are always popular trade targets, there are quite a few players who could be moved in the next month who are owed money beyond this season. Ryan Braun has $76 million remaining on his contract after this year. Andrew Miller will earn $18 million through the 2018 season. Carlos Gonzalez has $20 million coming to him next year while Jay Bruce has a reasonable option and Jonathan Lucroy has a ridiculously team-friendly option. While teams have more money to spend than ever before, they still operate on budgets, and looking at future commitments is a start in determining how much money a team has to spend.

The graph below shows every team’s commitments for the 2017 season, per Cot’s Contracts. Only guaranteed money is included, which means options and potential arbitration salaries are left out for the time being.

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Building a rotation is a difficult task for any organization. Drafting and developing prospects takes time and patience and often yields little in the way of results. Free agency is incredibly expensive not merely for proven pitchers, but unproven and mediocre ones, as well. Trades mean giving up talent and making sacrifices for the future. There is not a best way to build a rotation, but some teams have more limitations than others financially and the most efficient way to build a rotation includes young, cost-controlled starters. Ideally, a team would want the best rotation at the least possible expense. It’s a difficult task, but the New York Mets (to name one team) appear to have accomplished it.

A few weeks ago, FanGraphs previewed the 2016 by using the Depth Chart Projections found here to rank the teams by position. While the exercise itself is most useful for creating context around the projections — and to highlight individual players and teams — the foundation for the whole endeavor is the projections themselves. While often a very small difference exists between certain teams in terms of wins, it’s also true that two equally productive starting rotations, for example, can have very different costs (in dollars). That has an effect on how the corresponding teams can distribute salary throughout the rest of their respective rosters.

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There is an inherent optimism when contracts are signed. The Cleveland Indians believed they were putting themselves over the top three years ago when they signed Nick Swisher and Michael Bourn to four-year deals. The team did not get the production they were hoping for, and after making the Wild Card their first year with the team in 2013, the team has won fewer games the last two seasons, and the Indians agreed to pay money to the Atlanta Braves to get rid of Bourn and Swisher while taking on the contract of Chris Johnson, who they have also jettisoned. As a result, the Indians have a larger percentage of their payroll going to players not playing for them in 2016 than any other Major League Baseball team.

The Indians might have the largest percentage of their payroll devoted to dead money, but they do not have the largest amount in total. The two franchises from Los Angeles both best the Indians. Thirteen of the 30 MLB teams have money going to players not currently on their 40-man roster. The graph below shows those 13 teams, with data collected from Cot’s Contracts.

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Pay scales using merit and tenure seem to be opposites of one another. Under the tenure system, pay rises as more service time accrues; under the merit system, pay is correlated with performance. While two the models might seem at odds, the Major League Baseball Players Association, along with Major League Baseball, have created a bit of a hybrid between the two systems.

Those players without much service time, like Gerrit Cole and Jacob deGrom, have their salaries set for them without regard for their performance, while veteran players like David Price and Jason Heyward are free to receive pay based on their track record and expectation of future performance. While we can debate how fair this system is, particularly for young players, what is more certain is the disparity in pay between players — it is massive.

There will be 750 players on MLB Opening Day rosters, and while we do not yet know the identity of all those players, given the contracts that have been given out, we can get a fairly good idea of the breakdown of salaries and service time of the group as a whole. Looking at all the players with guaranteed contracts and providing minimum salaries to fill out the roster in the same manner I did when projecting 2016 payrolls for all MLB teams, we can get a decent idea of how money is spread out among players.

Taking a broad look at salaries with respect to service time, here is a scatter plot of 2016 salaries and service time.

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While a few more moves will certainly occur here and there before the start of the season, team payrolls for the 2016 campaign are taking shape. After adding in the Baltimore Orioles’ signing of Pedro Alvarez, we have a pretty good idea of how the Opening Day payrolls will appear. Much of the offseason has been spent discussing the qualifying offer and “tanking,” but those issues are related to the larger issue of team spending. Revenue and payroll have been growing, but based on the team payrolls, it looks like the growth we saw over the past few years slowed down this offseason.

To determine Opening Day payrolls, I took the raw data from Cot’s contracts and added in minimum salaries to reach the 25-man total needed to field a team. Dead money paid to other teams was included. Over the next month, as players hit the disabled list or veterans with minor-league contracts earn their way onto rosters and get guaranteed deals above the minimum, the team payrolls will likely rise by a small amount, perhaps a few million dollars per team, but will not change the overall outlook by team.

Below is the current Opening Day payroll information for every team. To nobody’s surprise, the Dodgers lead the way.

Update: The Minnesota Twins have not been contracted and are included in the chart.

Also not a surprise: the Tampa Bay Rays bring up the rear. The average payroll right now is $128 million, and the median is right up there at $126 million. However, right after that median, there’s a major dropoff. The Chicago White Sox come in at $125 million, but after them, there is more than a $20 million drop to the Colorado Rockies. The top-four teams have a higher combined payroll than the bottom-ten teams combined, but that tier above $120 million speaks somewhat to the Royals’ success and the second wild card. Teams who might project for 75-80 wins can make a move or two and put themselves in contention for the playoffs, where anything can happen.

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The eight teams playing in the Division Series all built their teams in different fashions. The Astros and Cubs appear to be at the end of rebuilding projects and ready for an extended run at contention. The Rangers have a mix of holdovers from their runs a few years ago, some young players and an infusion in the form of Cole Hamels. The Royals’ combination of process and prospects allowed them to begin a surprising run one season ago. The Blue Jays built a dynamic offense which they supplemented with major moves at the deadline. The Cardinals are in the midst of continuing contention, the Dodgers have spent their way to the top, and the Mets were mired in mediocrity before young pitching and Yoenis Cespedes aided their surge into the playoffs. The teams come with different experience and payrolls.

It’s no secret that the Dodgers have the biggest payroll in the game by close to $100 million over the second-place Yankees. Also fairly well known is that a considerable amount of that money is going to players who are no longer on the team — and many of whom, in fact, were never even on the Dodgers at all this year. Dan Haren, Matt Kemp, Brandon League, and Brian Wilson were responsible for $45 million all on their own. Despite all of the dead money on the Dodgers’ payroll, however, they still have considerably more money on the field compared to the rest of the teams still competing for a World Series.

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Back before the 2012 season, Frank McCourt owned the Los Angeles Dodgers. He had purchased the team in 2004, inheriting a club that featured a $105 million payroll in 2003. Nearly ten years later, he sold the team to the deep-pocketed Guggenheim-led group — handing over a club that also featured a $105 million payroll. Major League Baseball revenues had doubled during McCourt’s tenure as team owner — and salaries for players increased at something close to the same rate — but the Dodgers, sitting in one of the biggest media markets in the country, stuck to the status quo after fielding one of the bigger payrolls in baseball at the beginning of the century. The Dodgers have finally caught up with the times (some would say surpassed) in terms of payroll, but while their $300-plus million payroll might seem enormous, the team would still be right in line with the New York Yankees and Boston Red Sox if those two teams had not slowed their spending in recent years.

Prior to the arrival of the Dodgers’ new ownership and $8 billion cable deal, the Yankees were the only team to exceed a $200 million payroll. The Yankees crossed that threshold in 2005, but kept their spending fairly static over the following decade, only getting above $225 million once (in 2013) and falling below that mark last season. Their total outlay on players was often somewhat higher, given the luxury-tax payments the team was forced to make every season. Given the Yankees’ spending over the last decade and the Dodgers’ spending over the last few seasons, it might appear that the luxury tax is not much of a deterrent towards spending, but as Nathaniel Grow detailed back in May, the luxury tax has kept spending down at upper levels.

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With the trading deadline now one week in the rear-view mirror, it is much too early to truly understand that impact that the players will have on pennant races. The Toronto Blue Jays went from among a crowd of American Wild Card contenders to favorites for the Wild Card with a potential chance to catch the Yankees. Teams like the Houston Astros, New York Mets, and Kansas City Royals all made significant additions to help them in their chase to the playoffs and potential success once October arrives. It is not too early, however, to discuss the impact on payroll that those changes have had on the dealing teams.

The Blue Jays have made the biggest moves of the season, but those moves did not have the biggest impact on payroll. Contenders like the Pittsburgh Pirates, New York Mets, and Houston Astros made multiple moves that had an even greater effect on their payrolls while sellers like the Milwaukee Brewers and Detroit Tigers made moves that cleared significant space on the payroll.

Of the 30 Major League Baseball teams, only the Arizona Diamondbacks refused participate. More than 100 players changed teams at the deadline. Considering only those players making more than close to the major league minimum salary, nearly $100 million in 2015 rest of the season salary was moved at the end of July. The graph below took into account every single move made near the trading deadline where more than a minimum salary was added to the payroll. Focusing first only on additions made to payroll without considering subtractions, the Blue Jays do take the top spot. Data from Cot’s Contracts. Read the rest of this entry »