Category Archives: Salaries

May 18, 2016

Real Free Agency

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Greg Simons is right, Free Agent Compensation Must Die:

Throughout this process, teams often have banked tens of millions of dollars in savings on drafted players compared to what they would have paid similar players on the open market. And at the end of said process, teams then want to cash in once more by gaining another draft pick, with which they can choose the next fortunate soul who gets to go through this same ordeal. And the Players’ Association is complicit in this endeavor, since the MLBPA thinks the money not spent on minor leaguers will be directed to big league payrolls. However, recent history shows this is not necessarily the case.

Teams receive amazing value from their pre-free agency players. Yes, to some extent, it does help competitive balance. But it largely benefits teams’ bottom lines at the expense of players throughout the game, and it’s time to say enough is enough.

In addition, the rational for limited free agency in the first place, limiting supply to drive up prices, has disappeared. We no longer see huge bidding wars for players. Teams know how to value a free agent, and they are rarely paid more than their projected worth. It’s time to eliminate the reserve system entirely and allow all players at every level to be paid appropriately for their performance.

February 17, 2016

Long Term Value

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Teams are gaining a tremendous financial advantage by signing young players to long-term contracts:

Teams have extracted a net value of over $500 million in savings by locking young players up with extensions taking them into free agency. Despite team wins in only one-third of the contracts, the savings are so great and the risk to team is so low that the net benefit works out incredibly well for the team. Teams still must choose wisely when giving out these types of contracts, but when they pay off, the team makes out very well.

From 2008-2011, the good contracts produced $668M in residual value. The not so great contracts cost $154 million in residual value. Players are leaving money on the table by not opting for arbitration and free agency. Of course, universal free agency, where everyone from amateurs to rookies to veterans can sign with any team for as long as they like might alleviate this disparity.

February 15, 2016

Adidas Dollars

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Rookie of the Year Carlos Correa signed a large deal to endorse Adidas:

“It’s a huge deal,” Correa said. “ I think the Adidas deal is a pretty good one. It’s going to help me through those five or six years that I need to get to free agency.

“It’s really special. A guy coming from a small town in Puerto Rico, with a lot of dreams as a kid. Those dreams are finally coming true. It’s something surreal. I’m just living the dream right now, and working every single day to try to get better and try to get those kind of deals.”

So how big is this five-year deal? I have to wonder, if he’s making more money from Adidas than from the Astros, is there a conflict of interest?

January 29, 2016

Under the Table Contract

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An early and somewhat crooked player contract will go up for auction. The document belongs to the grandson of Andrew Leonard:

It was signed at a time when there was a societal rift over whether baseball should pay its top players or remain amateur. Written on U.S. Treasury Department letterhead and signed by the acting Treasury secretary, the 40-word contract promises Leonard $720 for one year to be a department messenger.

“That contract sheds light on what’s long been believed but not proven, which was that there were professional baseball players posing as amateurs who were getting paid under the table for no-show jobs, and this is tangible evidence that the government was involved,” Ivy said.

The $720 was about twice what a government messenger made annually in the 1870s.

“Andy didn’t do a lick of work for the Treasury,” McCarty said.

Your tax dollars at work! The contract would be worth about $14,000 today, which is a nice example of how owners and players grew the game in a century and a half.

January 19, 2016

Visualizing Arbitration

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Sean Dolinar at FanGraphs presents a very nice graph of the players who are headed for arbitration in 2016. Note that one reason Didi Gregorius settled so quickly is that there was very little difference between where he and the Yankees placed his value. Interestingly Josh Donaldson and the Blue Jays are also extremely close. He has the highest mid point, while Aroldis Chapman is second. The Yankees and Chapman are miles apart, however.

January 13, 2016 December 21, 2015 August 24, 2015 April 2, 2015

Money and Wins

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Via BBTF, an excellent look at long term contracts in the Boston Globe.

Kleinbardâ??s study, cited in a Bloomberg Businessweek profile of John Henry, wound up challenging the widely held notion that a high payroll virtually guarantees a team more wins than a low payroll does. Instead, Kleinbard concluded that baseballâ??s most valuable currency has become skilled players in their pre-free-agency years. Veteran stars with dazzling stats and contracts to match? Not so much.

“Young talent, not deep pockets, is the ultimate trump card in the MLB of today and tomorrow,” Kleinbard summarized. He noted in passing that with baseball cracking down on the use of performance-enhancing drugs, older players have, perhaps not coincidentally, seen their power numbers decline, making them even riskier to sign to multiyear deals.

On the other hand:

And yet, says Conrad, teams operating in markets like New York, LA, Chicago, and Boston look at these signings differently from smaller-market franchises. Having the resources to spend more and recognizing the need to keep their fan bases excited, the teams know that a free agent like Lester – he’ll pitch for the Cubs this year – creates a buzz that’s good for business. Ticket sales rise. Sports-talk chatter intensifies. If Lester keeps his team in post-season contention longer, that’s more revenue for the team and greater interest from fans, a win-win situation.

“So there’s an economic incentive for this,”? Conrad says, “even if people say, “Why would we pay all this money to some guy who can get hurt next week, and we still have to pay him?”

The article is interesting throughout.

March 26, 2015

Forbes Visualizations

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Sean Dolinar does a very nice job of turning the annual Forbes Baseball Team Valuations into interactive graphs. The most interesting thing I see on the graphs is that the Tigers, once of the higher payroll teams, does not measure up in revenue against some of their high payroll competition. I believe this has to do with Detroit trying to win a World Series for their elderly owner.

Have fun with the graphs!

November 24, 2014

Winner’s Share

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A playoff share for the World Champion Giants comes to $388,606 this season. The Royals each get $230,700.

The players’ pool included 50 percent of the gate receipts from the two wild-card games, and 60 percent from the first three games of each division series and the first four games of each league championship series and the World Series.

Full shares were worth $125,288 for the Baltimore Orioles, $115,481 for St. Louis, $31,544 for Detroit, $31,543 for the Los Angeles Dodgers, $29,845 for the Angels, $29,418 for the Washington Nationals, $16,556 for the Pittsburgh Pirates and $15,266 for the Oakland Athletics.

It’s a nice pay day for all.

June 3, 2014

Opposing Singleton

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Jon Singleton‘s contract upset some players.

Critics of the contract will point to the fact that Singleton, 22, potentially sacrificed greater future earnings via free agency or arbitration by taking immediate security with this deal. If the Astros pick up all three options, he won’t be eligible to test free agency until he’s 30.

Moreover, it could set a precedent for teams and their prospects going forward.

Basically, while the deal make prospects a bit more valuable, it reduces the value of good young players in the majors looking for extensions. By waiting until he’s 30 to become a free agent, he also fails to push up the price of free agents in their prime.

Now I had heard Singleton had a drug problem, but I didn’t realize it was so minor:

Acquired from Philadelphia in the 2011 trade for Hunter Pence, he was suspended 50 games last season for a second violation for a drug of abuse. Singleton told The Associated Press in spring training that he has an addiction to marijuana and had spent a month in a rehabilitation center last year.

So he’s not Josh Hamilton, with the kind of addiction that might lead to his death. I have no idea why baseball busts players for marijuana use. Can’t wait to see Singleton face Tim Lincecum. 🙂

Update: Singleton strikes out in his first plate appearance. He sports a David Ortiz beard, and a chaw of something that really distorts the line of his mouth.

February 27, 2014 February 6, 2014

Bargain Card

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In light of the Freddie Freeman contract, Jeff Gordon notes the bargain that is Allen Craig.

Craig will earn $2.75 million this season, $5.5 million in 2015, $9 million in 2016 and $11 million in 2017. The Cardinals will also have the option of keeping him in 2018 at a cost of $13 million.

He will be 33 years old that season and probably worth every penny of that.

Maybe. His power already declined, and he’s just at the end of his prime years. Freeman is very young and very good, and given his age might get much better. If baseball salaries continue to soar, in five years the Braves will be very happy they signed Freeman now.

The Cardinals will just find another first baseman with decent enough talent to fill the position, and spend their money on skill positions. Long term, the Cardinals will probably do better with that strategy. The test for the Braves will be what happens when Freeman reaches the end of the deal. Will they give him a silly extension, like the Phillies did with Ryan Howard, or let him go, like the Cardinals did with Albert Pujols?

October 17, 2013

Win Costs

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New research values a win at around $7 million. This has huge implications:

This number also has some interesting implications for another side of free agency: qualifying offers. A team losing a core player to free agency this winter must offer him at least a one-year deal worth around $14 million in order to receive draft pick compensation for his departure — but that means risking spending $14 million on him if he accepts. Under the $5 million win cost estimate, a team would be foolish to make such an offer to anyone short of a solidly above-average player, as spending $14 million would imply an expected return of around three wins. But at $7 million per win, $14 million becomes the market value for two wins — i.e., a league-average player. Thus, the pool of players to whom it is worth making qualifying offers is probably a lot bigger than many fans would think.

The other thing I find very interesting is that for the last seven years, the value of a win fluctuated in a narrow band around $6.5 million, despite a huge inflow of TV money in the most recent years. There may be pent-up spending waiting to happen, or that money may be going to keep home grown players long term.

February 2, 2013

Teixeira on Value

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Mark Teixeira mostly nails value in MLB:

“Agents are probably going to hate me for saying it. You’re not very valuable when you’re making $20 million. When you’re Mike Trout, making the minimum, you are crazy valuable. My first six years, before I was a free agent, I was very valuable. But there’s nothing you can do that can justify a $20 million contract.”

Alex Rodriguez, Manny Ramirez, and Albert Pujols come to mind as three players who at their peak were valuable at the $20 million level. Free agency makes up for all the residual value players don’t receive when they are subject to the reserve clause. That’s why the Cardinals were actually smart to let Pujols go; they made their money off him, and the big contract he required would just cause them to lose most of the gain from his younger years. I truly hope that some day players and teams figure out they are better off paying players what they are worth in the moment, rather than making up for previous value.

December 15, 2012

Moneyball

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The commissioner’s office relaease final 2012 team salary figures.

Figures are for 40-man rosters and include salaries and pro-rated shares of signing bonuses, earned incentive bonuses, non-cash compensation, buyouts of unexercised options and cash transactions.

In some cases, parts of salaries that are deferred are discounted to reflect present-day values.

The Yankees are far out in front at $223 million, followed by the Phillies at $170 million. It looks like the Dodgers will spend about $100 million more on salaries in 2013.

Rounding to the nearest million, 14 teams reached $100 million in salary, (counting Milwaukee at $99.9 million). Oakland received the most bang for the buck, making the playoffs despite an MLB low of $59 million. Cincinnati was pretty good, too, at $88 million. The Cubs, Mets, and Red Sox each paid over $100 million for their poor seasons.

Total salaries for MLB came in at at bit over $3 billion, so an average of $100 million per team, or $2.5 million per roster spot.

December 5, 2012

That’s What I Want

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David Schoenfield comes very close to a rant about the amount of money going to free agents this winter:

Five years and $75 million for a player coming off a .298 on-base percentage (B.J. Upton), and everyone is already referring to the deal as a bargain.

Four years and $40 million for a 31-year-old center fielder (Angel Pagan), and nobody blinks an eye.

Three years and $39 million for a catcher who hit .227 and likely will spend most of his time at first base (Mike Napoli), and the signing sort of makes sense.

Three years and $20 million for a 37-year-old second baseman who posted a .684 OPS in 95 games with the Rockies in 2012 (Marco Scutaro), and the contract isn’t roundly criticized.

Now … Shane Victorino. That signing finally seemed to stir up the masses.

I think most of us realize that broadcasters like David’s boss, ESPN, are flooding baseball with money. Believe it or not, more money in the game means more money going to the players. For the first time in a while, I keep seeing lines like “six teams interested in X.” We’re been waiting for salary inflation every since Joey Votto signed his contract. I’m actually a bit surprised that these players aren’t signing for more given the competition for their services.

October 26, 2012 October 2, 2012

Double TV Money

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Baseball revenue grew today as Fox and Turner signed new eight year deals.

The amount baseball receives from the two networks will double to an average of about $800 million annually, with Fox’s share averaging about $500 million.

ESPN and MLB last month announced a new deal covering 2014-21 that will increase ESPN’s average yearly payment from about $360 million to approximately $700 million.

This just continues the trend of TV money growing. Expect teams to have a lot more money to spend this off season, and player salaries to rise significantly.

September 11, 2012

The Year Payroll Hardly Mattered

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Dave Cameron finds the lowest correlation between payroll and winning since the collusion years of the 1980s. I blame all the saberists in front offices.

I wonder if there will be a big change in the next CBA. Teams are paying more to young players, signing them to long term deals that still give teams tons of residual value. Free agents seem to have less teams bidding than in the past. While Albert Pujols received a rich contract, it seems low compared to what he might have received if the free agent market was similar to that of the early and late 1990s. It used to be that players were underpaid for the first six or seven years of their careers, then lavishly overpaid after that. Now they are somewhat less underpaid for the first six or seven years of their careers, then paid pretty much what they earn for the rest. Teams have become good at valuing free agents, and only the team that really wants the player goes past the value a bit.

In other words, baseball front offices figured out how to keep the residual value they earned from young players. (Again, I’m talking in aggregate, not team specific.) Eventually, the union is going to want some of that money back. The best way to do that would be to make the years to free agency shorter. The problem, then is an increase in the supply of players available via free agency, which should hold down salaries as well.

I’ve suggested a bonus pool with the money distributed based on WAR. There may be other ways, as well, such as a pool of money on top of the post-season gate that goes to participants in the playoffs and All-Star game as another way of rewarding success. The way teams distribute money is changing to their benefit, and the job of the union is to make sure it doesn’t get out of hand.

July 23, 2012

Finding Value

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Beyond the Boxscore researches the players returning the most bang for the buck this season, as well as those producing the least value compared to their contracts. Impressively, Barry Zito still tops the list of worst pitchers, despite a decent season. Youngsters Mike Trout and Chris Sale head the list of best hitters and best pitchers.

June 21, 2012 April 3, 2012

What’s a WAR Worth?

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In a comment to a previous post on how the flood gates of money may be opening, rbj writes:

Still not sure about the Votto deal. A-Rod & Pujols at least have a long track record with legitimate shots at the all-time HR record (better odds go to Albert.) What screams $200+ million for Joey, in Cincinnati?

My guess is that $200 million is not the same as it was last month. If you do the math on FanGraphs WAR and dollar values, you find one WAR for a free agent is pretty steady around $4.5 million over the last four seasons. If you assume Votto’s average of 7.1 for the last two seasons is his true talent level, that would be worth about $30 million a year. Let’s say that value holds up until the contract kicks in, then declines 0.5 WAR a year (per Tango), while the value of one WAR increases 5% a year. He would then produce $263 million worth of value for $225 million dollars.

That doesn’t seem like much of a discount, given that the deal doesn’t kick in for two years. There is plenty of uncertainty in the game, and Votto did not have other teams bidding on him. The break even point of the deal would be eight years, and that seems very far off. This suggests the Reds value one WAR much higher than $4.5 million. I suspect they peg one WAR at around six million. Votto would then produce $350 million in value during the contract. The Reds would then break even after six seasons, so Joey only needs to last through age 36. That seems doable.

It is a very good thing the Angels did not announce their TV deal until after Albert Pujols signed. Don’t compare the two contracts, since they are working off different assumptions. The price of free agents just went way up, and Votto’s deal suggests next winter’s crop of players are going to reap a windfall.

February 14, 2012 December 20, 2011

Stop Central Planning!

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David Berri makes the case for relegation in North American sports:

The chronic failures of the Pirates and Clippers suggest that the ownership of these teams are less than competent. And in a capitalistic system, incompetence leads to failure. But in North American sports leagues, when incompetence leads to shortfalls in revenue, the league turns to the players and demands wage cuts to compensate the losers.

This in turn leads to labor disputes. It’s my opinion that all of this could be avoided if losing teams in North America were simply relegated and all markets opened to competition.

The whole post is well worth the read.

Hat tip, The Book Blog.

December 5, 2011

Money for Nothing

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The average MLB salary went up to $3.1 million in 2011. The players making the most money, however, are also the most one-dimensional:

Among regulars at positions, designated hitters took over as the highest average at $9.3 million, followed by first basemen at $8.9 million. With the Yankees’ Alex Rodriguez spending time on the disabled list and failing to play 100 games at third base, that position’s average dropped from $6.5 million to $5.2 million.

The problem with this is that a regular at a position is considered one with 100 games played at that position. There are not many regular designated hitters:

2011 Designated hitters, 100 games played (stats as a DH only)
Designated Hitter Games Plate Appearances Batting Average On Base Percentage Slugging Percentage
Johnny Damon 135 596 0.263 0.328 0.433
Victor Martinez 112 466 0.340 0.393 0.511
David Ortiz 135 590 0.314 0.403 0.561
Vladimir Guerrero 137 582 0.292 0.320 0.421
Bobby Abreu 108 462 0.247 0.345 0.345
Hideki Matsui 110 462 0.248 0.306 0.375
Billy Butler 142 618 0.299 0.367 0.465

A better measure would be salary per plate appearance for position players. I’m guessing DH would take a big hit in that case.

November 28, 2011

Winning Bonuses

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Major League Baseball announced the bonuses received by teams making the playoffs and finishing high in the standings this season.

St. Louis Cardinals (Share of Players’ Pool: $20,627,727.92; value of each full share: $323,169.98) – The Cardinals awarded 51 full shares, a total of 11.962 partial shares and eight cash awards.

Texas Rangers (Share of Players’ Pool: $13,751,818.61; value of each full share: $251,515.76) – The Rangers awarded 47 full shares, a total of 6.5 partial shares and 19 cash awards.

So a player making near league minimum would end up with around a 75% percent raise by winning the World Series.

At the other end of the scale, the non-wild card second place finishers paid out about $10,000 per player. That’s a nice vacation for the family.

November 2, 2011

Tigers Dollars

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Michael Rosenberg notes the $26 million coming off the Tigers books with three free agents leaving is already committed to contractual pay raises and arbitration players.

That’s actually good — the Tigers won 95 games this year, so they are quite happy to take another shot at the World Series with basically the same group. But fans should understand that the Tigers won’t compete for the priciest free agents. Their payroll is almost all locked up.

Detroit’s attendance was up over 2000 fans per game in 2011.  If you figure a conservative $50 per head in revenue, that’s an extra $8 million to play with, not counting what they made in two rounds of playoff games.  My guess is that the Tigers could add a decent free agent if they so desire.  They could certainly afford to fill a whole with a two WAR player.

October 12, 2011

More Money, Fewer Years

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Via MetsBlog.com, Joe Posnanski pushes for something I’ve talked about before, more money for fewer years:

I wonder if we will ever see a real restructuring of baseball contracts. That is to say, I wonder if teams will start trying to pay players huge YEARLY sums, but cut down on the number of years. I’m sure there are financial reasons that teams don’t want to do this — that seems to be why so many contracts are backloaded — and I’m sure there are financial reasons why players don’t want to do that. But it sure seems to me that purely as a baseball question, you would much rather give a guy a bigger and shorter contract than stretch it out over six or seven or eight years, where everyone finds themselves facing an awkward ending when the player isn’t worth the money anymore and the team has to figure out how to handle it, the player has to deal with the abuse, and so on.

Things changed since the early era of free agency. Players came to care more about the total worth than the yearly worth of a contract. I remember free agent record contracts were always reported as most money per year, rather than total value. Meanwhile, owners still worry about the yearly average, since that is what sets the prices for all free agents, dollars per WAR if you will. Since the original Alex Rodriguez contract with Texas, owners did a very good job of controlling the average yearly salary. They did that, however, by allowing contracts to lengthen. So they pay a player seven years for four or five years of production.

There’s definitely a flaw in the system.