Goodbye, 2013 season. Hello, Hot Stove. Stop sobbing. Really, stop. We’re going to get through this. There will be qualifying offers, declined options, over-the-top free agent signings and rumors galore. Before you know it, we’ll be complaining about beat writers’ spring training play-by-play tweets.
Today we’re going to talk about the effect of the new national TV contracts on 2014 payrolls:
- The teams that have already built their 2014 payrolls on the revenue expected from those contracts.
- The teams that haven’t already accounted for that revenue, and have money to play with this winter.
- The teams that have revenues so high and payrolls so large that another $15 million means close to nothing.
In August 2012, Major League Baseball and ESPN announced a new eight-year national TV deal to cover the 2014 through 2021 seasons. ESPN will pay MLB $700 million per year for the right to broadcast games exclusively on Sunday nights, other games (non-exclusively) on Monday and Wednesday nights, extended highlights for Baseball Tonight, the Home Run Derby and other All-Star activities (but not the game) and one Wild Card Game. The deal also includes national and international radio and digital rights.
Several months later, MLB announced a new national TV contract with Fox and TBS, which also covered the 2014 through 2021 seasons. Under that deal, MLB will receive $800 million per year in combined revenue from the two networks, in exchange for broadcasts rights for the Saturday game of the week on Fox, the Sunday game on TBS and all of the postseason games — save for the one that will be broadcast on ESPN. Fox also retains the rights to the All-Star Game.
That’s $1.5 billion in national TV revenue per season that will go into MLB’s Central Fund, or $750 million more than under the contracts that just expired. MLB can spend money from the Central Fund in a variety of ways, but it’s been assumed in the reporting that the league will distribute the TV money to the teams. If so, each team will receive $25 million more in national TV revenue in 2014 through 2021 than they did in 2013.
Teams aren’t obligated, of course, to use all or even part of that additional $25 million on player salaries. That money can also be helpful to expanding a team’s national and international scouting operation, or its data analysis department, or marketing, or all three. But some teams appear to have made payroll commitments for 2014 — and beyond — knowing an additional $25 million was coming their way.
The chart below lists each team and their 2012 and 2013 Opening Day payrolls, as reported by Cot’s Contracts. The final column is labeled “2014 Payroll Obligations.” I calculated this number using several different sources: (1) Cot’s 2014 payroll numbers for players under contracts; (2) trades made since the start of the 2013 season; (3) contract extensions since the start of the 2013 season (aka Hunter Pence and Tim Lincecum); (4) options exercised or declined since the start of the 2013 season; and (5) Matt Swartz’s projected salaries for arbitration-eligible players, as reported on MLB Trade Rumors.
The 2014 number, therefore, is an estimate. For some teams, the estimate is rougher than others. We don’t know if teams will tender a contract to every arbitration-eligible player currently on their roster. We don’t know what the final salaries for those arbitration-eligible players will be.
We also don’t know how many minimum-salary players each team will have. I assumed the Astros would have 22 minimum-salary players, because otherwise their 2014 payroll would have been $5 million, for Jason Castro, Jose Altuve, and Trevor Crowe. But for most teams, I didn’t account for three, four or five players at close to $500,000.
The chart starts with Houston, which has the lowest 2014 payroll obligations, and ends with the Los Angeles Dodgers, which has the highest. But those numbers don’t tell the story. The key is to see which teams are already at or above their 2013 payroll, even with significant holes that need to be filled.
|Team||2012 Payroll||2013 Payroll||2014 Payroll Obligations|
The Astros, Marlins, Mariners, Twins and Cubs head into this offseason with tremendous financial flexibility — at least as compared to their player payrolls in 2012 and 2013. The new television money will provide a cushion for these teams as they continue their rebuilding plans. The Rays, too, look to have wiggle room, even if they don’t trade David Price. (The TV money could keep Price on the Tropicana Field mound until he becomes a free agent.)
On the other end, we find the Dodgers, which don’t seem to care much about budgets. There’s also the New York Yankees, which claim to be pushing to get under the $189 million luxury tax threshhold. The extra national TV money will be nice, but the cash likely is irrelevant to their plans.
Among bigger-spending teams, the Cardinals, White Sox, Rangers, Red Sox, Mets and Phillies have shed tens of millions off their 2013 payrolls, with trades or players leaving in free agency. How much these teams use the new TV money on free-agent signings or trades for expensive players remains to be seen.
The Indians sit in an interesting position. Cleveland made several splashes in the free-agent market last winter, signing Nick Swisher and Michael Bourn to four-year contracts. Both of those deals are backloaded to some extent, with the first-year payments the lowest of the four. Those contracts suggest the Indians were doing some early planning for the additional $25 million. Now that the Tribe has non-tendered Chris Perez and is said to be ready to walk away from Ubaldo Jimenez, they’ll have payroll flexibility even with the bigger paychecks owed to Bourn and Swisher.
The remaining teams — whether small-market or big-market — appear to have already made at least some plans for the additional $25 million they’ll receive this season. I say this based on the teams’ 2014 obligations, as compared to their 2012 and 2013 Opening Day payrolls.
For example, the Giants’ new contracts with Hunter Pence and Tim Lincecum bring them close to last year’s payroll — and they still need two starters, a left fielder and upgrades to the bench and to the bullpen. The Angels head into the offseason with $14 million more in salary commitments than they had to start 2013, thanks mostly to Josh Hamilton‘s backloaded contract. And the Halos need pitching in the worst way, prompting rumors that they’ll trade Mark Trumbo or Peter Bourjos or both to get some quality arms. The Reds, too, are ahead of where they were to begin 2013, thanks to Joey Votto’s and Brandon Phillips‘ contracts. Again, it’s not surprising there are rumors the Reds might try to trade Phillips. Cincinnati has several holes to fill, the biggest of which is the rotation spot previously held by Bronson Arroyo, who now is a free agent.
Sally forth, baseball fans. You are now armed with the knowledge of where your favorite team’s payroll stands heading into 2014 and which other teams are most likely to compete with yours for coveted trades and free agents.