The Monday signings of Matt Cain and Joey Votto indicate that teams feel they now have money to spend. It makes me wonder if we are going to return to the glory days of the 1990s, when it seemed every year a player set a record in contract negotiations, either in total or annual value of the deal. At one point, player salaries reached close to 60% of MLB revenue. After the Texas Rangers signed Alex Rodriguez to a $250,000,000 contract, the owners pulled back to try to get salaries under control.

MLB instituted a luxury tax to try to curb high spending and also instituted debt rules that intended to keep debt below ten times gross revenue (EBITDA). In the latest CBA, that multiplier fell to eight times EBITDA.

These rules, (and I suspect some pressure from the commissioner) kept salary growth in check. No one topped A-Rod’s contract until Alex opted out himself. Even then, the new agreement was more of an extension of the old one than a record shattering deal. Players salaries fell to closer than 40% of MLB revenue as the game grew faster than the salaries. This season, however, the $200 million plus contract is becoming common.

The thing that changed is local TV revenue. Deals with the Rangers, Angels, and Padres shows there is tons of new revenue out there. In addition, the EBITDA multiplier means teams can borrow a lot more. A $20 million a year TV deals allows an extra $160 million in debt. Teams won’t be afraid to borrow, nor banks lend, as the sale of the Dodgers show that teams are probably worth at least twice what we thought before. The equit is there to support the higher debt loads.

Owners want to win, and as they showed in the past, they’re not afraid of spending to get there. For a decade, those spending impulses were held in check. That conservative approach no doubt put teams and the game in better financial shape. Interests rates are low, teams have tons of equity and new revenue streams. Everything is ripe for the inclination to spend to return. It’s going to be a very good time to be a star player.