When Will The Astros Start Spending On Major League Payroll?

This week started with some hullabaloo when a Forbes contributor published a column claiming that the Houston Astros were the most profitable team in MLB history. Contributor Dan Alexander did some pretty simple math in concluding that the Astros would clear $99 million in “operating revenue.” “They have become so profitable thanks to slashed payroll expenses and soaring television revenues,” Alexander wrote.

But another Forbes contributor —  Maury Brown, of the Biz of Baseball — refuted Alexander’s column. Brown explained the Astros “soaring television revenues” aren’t so soaring because CSN Houston — the new regional sports network the Astros and the NBA’s Houston Rockets own — isn’t carried on any cable or satellite service in the Houston area other than Comcast. Indeed, we reported last month that cable and satellite companies are using new technology to determine how many customers tune into local sporting events and for how long. AT&T U-verse used that information in deciding to forgo carrying CSN Houston. That’s left CSN Houston well short of projected viewership and revenue from carriage fees.

Brown also takes his Forbes colleague to task for describing the Astros and owner Jim Crane as profiteers. Crane hasn’t stripped the major-league payroll down to $13 million as a means to make quick cash, but as part of a system-wide rebuilding process.

The premise by which Crane and General Manager Jeff Luhnow are operating works like this: the minor league system was rated one of the worst when Crane purchased the Astros, and player contracts at the Major League level were inefficient in terms of gaining wins for the salary being spent. In a case of “pulling the Band-Aid off quickly,” MLB player payroll has been stripped to the axles and emphasis has been placed on building up the minor league system. The Astros organization now has playoff teams at all four levels of the full-season minors (Oklahoma City, Corpus Christi, Lancaster, Quad Cities).

The question then becomes: When will the Astros start spending again on their major-league roster and how much will they spend?

Earlier this season, ESPN The Magazine’s Molly Knight spoke to Jim Crane and asked him the “when” question. Knight wrote:

Crane insists he’ll loosen the purse strings once the team begins to win. “We’ll spend the money when it’s time, but right now is not the time,” he says. “Once our minor league system is filled in, we’ll move up into the top five or 10 in payroll.”

“Filling in” a minor-league system and winning at the major-league level are not the same thing, of course. And the former is much more difficult to measure than the latter. It’s pretty clear the “winning” hasn’t happened yet. Heading into Thursday’s game, the Astros are 44-88, leading the Marlins by 4.5 games for the worst record in the majors.

On the “how much” question, Maury Brown wrote in Forbes: “Along the way, Crane has said that he will not spend more than 50% of revenues on MLB player payroll, something that Commissioner Selig has said he’d like to see of all owners, as well.”  As we wrote in January, that trend has already taken hold in MLB, as revenues have far outpaced payroll spending since 2003.

The Astros aren’t the first team to undertake a rebuilding process, although no team  — not even the Marlins — has stripped its major-league payroll to $13 million in the past 15 years. Still, it’s interesting to look at teams that have dropped payroll significantly and see how long it took them to return to prior spending levels.

For that, I turned to the new and indispensable MLB Payroll interactive charts by Phil Roth. (Dave Cameron highlighted this amazing tool a few weeks ago.) Roth used data from Baseball-Reference and Cot’s Contracts to build payroll charts for each team, from 1998 to 2013.  I identified 10 teams other than the current Astros that shed significant payroll expenditures for at least one season.

Four teams faced financial instability that either led to, or was the result of, a change in ownership: Rangers, Nationals, Padres and Cubs.

Of those teams, it took the Rangers the longest (from 2004 to 2011) for the payroll to rise close to prior levels, but it took less time for the Rangers to produce a winning season. They did that in 2009, for the first time since 2004.

The Nationals’ payroll dipped sharply in 2007, the first full season after Ted Lerner purchased the team. But the dip was only for that season, and payroll has been climbing steadily ever since. Last year, the Nationals had their first winning season since 2003, back when they were the Montreal Expos.

The Padres had several expensive veterans on the 2008 roster, including Greg Maddux, Trevor Hoffman and Jim Edmonds. Those players were gone in 2009, which kicked off a four-year period of reduced payroll. The Padres came within a game of the postseason in 2010, but that’s their only winning season since 2007.

The Cubs were sold to the Ricketts family in 2009, but it wasn’t until the new owners brought in Theo Epstein and Jed Hoyer to run baseball operations that payroll plummeted. Like the Astros, the Cubs are undertaking a significant rebuild. The Cubs’ last winning season was 2009.

The Mets are also facing financial difficulties, as a result of the Wilpons’ involvement with Bernie Madoff. There’s no ownership change in sight, but there are substantial controls on the purses strings now.

The Orioles, Indians and Blue Jays saw their payrolls drop substantially after sustained runs of success came to an end.

The Orioles were two games from the World Series in 1997, but then suffered 14 consecutive losing seasons. Payroll took a hit from 2001 to 2004, and again in 2008.

The Indians were riding high in the late 1990s, with a power-hitting lineup and a gleaming new ballpark. Cleveland played in the postseason six out of seven years, from 1995 to 2001. When performance fell off in 2002, the payroll followed the next season, and didn’t regain 2001 levels until 2008.

The Blue Jays have had eight winning seasons since they won the World Series in 1993, but haven’t made the postseason in the past 20 years. Playing in the American League East hasn’t helped, of course. And if this season is any guide, spending and spending and spending may not be the answer, either.

That leaves the Royals and the Marlins.

The Royals have had four winning seasons in the past 20 years and haven’t played in the postseason since 1985. Yet the payroll has risen — with yearly fluctuations expected for a small-market team. Spending shot up considerably in 2007 and again in 2009, only to drop precipitously in 2011. But in two years, the payroll is up again. Way up, to the highest levels in team history.

You probably pictured the Marlins graph in your head. Their boom and bust cycles are well known and widely derided. Sure, the Marlins had a fire sale when free-agent buying spree that led up to the opening of the new Marlins Park didn’t go as planned. But which team is better poised for the future? The Blue Jays, which bought those assets, or the Marlins, which sold them for prospects? If it weren’t for owner Jeffrey Loria and his penchant for dreadful decision-making, we’d say the Marlins.

Again, the Astros’ payroll cuts have been far deeper than any of these teams, so it’s not an entirely fair comparison to ask whether Houston’s rebuilding will look more like one of these teams than another. The Astros had unique problems and are approaching them in a unique way. Still, these teams provide a marker by which we can judge Houston as its rebuilding process continues to unfold.

[Note: Several readers asked to see the Astros chart, so I’ve added it below.]