Opening Day Player Payroll: Inside the Numbersby Maury Brown
April 10, 2006
"I paid too much for it, but it's worth it." – Samuel Goldwyn
“Baseball has all the money.” – Brett Hull
Funny thing about Major League Baseball … it seems to cost a bit of money to put players on the field. Not that the owners aren’t turning a profit these days, but you know, it’s not exactly sandlot ball, right? Players need to get paid the green.
With Opening Day, comes Opening Day payroll figures, and with that, hey! I’ve got article.
First off, shocker of all shockers, the Yankees are still paying through the nose for talent. Oh, and the Marlins made a *(ahem)* "market adjustment". In between, there have been some changes that show that, at least for the moment, there’s some financial stability league-wide.
Total Team Payroll
There has been considerable talk about how revenues league-wide have been up. To place some numbers behind this, earnings before interest, taxes, depreciation and amortization (EBITDA) in 2006 is projected at $450 million, up 50% from $300 million in earnings in 2005 (source: Sports Business Journal). It’s an incredible jump. So, with that in mind, player salaries have gone up in parallel, right? Teams are all opening up their checkbooks to land those much needed free agents that many of them couldn't afford in the past.
The following chart shows total Opening Day player payroll figures for 2005 and 2006 (based on USA Today figures, which may differ from other sources):
Blue = 2006
Purple = 2005
Here are the numbers associated with the chart above:
Club 2006 2005 New York Yankees $194,663,079 $208,306,817 Boston Red Sox $120,099,824 $123,505,125 Los Angeles Angels $103,472,000 $97,725,322 Chicago White Sox $102,750,667 $75,178,000 New York Mets $101,084,963 $101,305,821 Los Angeles Dodgers $98,447,187 $83,039,000 Chicago Cubs $94,424,499 $87,032,933 Houston Astros $92,551,503 $76,779,000 Atlanta Braves $90,156,876 $86,457,302 San Francisco Giants $90,056,419 $90,199,500 St. Louis Cardinals $88,891,371 $92,106,833 Philadelphia Phillies $88,273,333 $95,522,000 Seattle Mariners $87,959,833 $87,754,334 Detroit Tigers $82,612,866 $69,092,000 Baltimore Orioles $72,585,582 $73,914,333 Toronto Blue Jays $71,915,000 $45,719,500 San Diego Padres $69,896,141 $63,290,833 Texas Rangers $68,228,662 $55,849,000 Minnesota Twins $63,396,006 $56,186,000 Washington Nationals $63,143,000 $48,581,500 Oakland Athletics $62,243,079 $56,186,000 Cincinnati Reds $60,909,519 $61,892,583 Arizona Diamondbacks $59,684,226 $62,329,166 Milwaukee Brewers $57,568,333 $39,934,833 Cleveland Indians $56,031,500 $41,502,500 Kansas City Royals $47,294,000 $29,679,067 Pittsburgh Pirates $46,717,750 $38,133,000 Colorado Rockies $41,233,000 $48,155,000 Tampa Bay Devil Rays $35,417,967 $29,679,067 Florida Marlins $14,998,500 $60,408,834
Here are the teams that have spent more this season than last:
Club 2006 2005 Difference Chicago White Sox $102,750,667 $75,178,000 $27,572,667 Toronto Blue Jays $71,915,000 $45,719,500 $26,195,500 Milwaukee Brewers $57,568,333 $39,934,833 $17,633,500 Kansas City Royals $47,294,000 $29,679,067 $17,614,933 Houston Astros $92,551,503 $76,779,000 $15,772,503 Los Angeles Dodgers $98,447,187 $83,039,000 $15,408,187 Washington Nationals $63,143,000 $48,581,500 $14,561,500 Cleveland Indians $56,031,500 $41,502,500 $14,529,000 Detroit Tigers $82,612,866 $69,092,000 $13,520,866 Texas Rangers $68,228,662 $55,849,000 $12,379,662 Pittsburgh Pirates $46,717,750 $38,133,000 $8,584,750 Chicago Cubs $94,424,499 $87,032,933 $7,391,566 Minnesota Twins $63,396,006 $56,186,000 $7,210,006 San Diego Padres $69,896,141 $63,290,833 $6,605,308 Oakland Athletics $62,243,079 $56,186,000 $6,057,079 Los Angeles Angels $103,472,000 $97,725,322 $5,746,678 Tampa Bay Devil Rays $35,417,967 $29,679,067 $5,738,900 Atlanta Braves $90,156,876 $86,457,302 $3,699,574 Seattle Mariners $87,959,833 $87,754,334 $205,499At the head of the class of those that have opened up their pocketbooks from 2005 to now are the Chicago White Sox with $27,572,667, with Jim Thome's $14,166,667 salary for 2006 taking up the brunt of the increase.
But, in terms of the largest percentage of increase in payroll, it's the Toronto Blue Jays, with a $26,195,500 increase, leading the way.
The Blue Jays are posting a mind-boggling increase of 57.3% over the year prior.
With the White Sox, the investment is based on the winning of the World Series. They have invested and banked on the increased ticket sales, and television viewing.
The situation with the Blue Jays is based, in large part, on the increase in the value of the Canadian dollar.
In 2004, the Canadian dollar averaged 77 cents US, up 7.5 percent from 2003 levels. Furthermore, the Canadian dollar continued to rise in value as the year progressed, breaking the 80-cent mark late in October of last year, and indicators are that it will continue to rise. Rogers is investing in the future after being stuck in international exchange rate woes for nearly a decade. One could also argue that the Blue Jays, like many of the other lower revenue making clubs, is banking on an increase in revenue sharing in the next collective bargaining agreement, as well as increased revenues from centralized funds such as those collected through MLB Advanced Media (USA Today is reporting that MLBAM has inked a 50-50 deal with Signature Networks to deal with non-baseball related web broadcasting and supporting Internet technologies for musicians. MLBAM generated $195 million in revenue last year, and CEO Bob Bowman says that that could soar by as much as 70% this year), and the revenues from the sale of the Washington Nationals, which is on the cusp of occurring. A large part of the Blue Jays 2006 payroll will be dedicated to Roy Halladay ($12,750,000) along with newly aqcuired B.J. Ryan ($4,000,000), and A.J. Burnett ($2,200,000).
Other smaller revenue-making clubs have dipped deeply into the pocketbooks, as well. The Brewers ($17,633,500 increase from 2005, a 44.16% change), Indians ($14,529,000 increase from 2005, a 35.05% change), Astros ($15,772,503 increase from 2005, a 20.54% change), Royals ($17,614,933 increase from 2005, a 28.23% change), Nationals ($14,561,500 increase from 2005, a 29.97% change) and Tigers ($13,520,866 increase from 2005, a 19.57% change), to name a few. These clubs are looking at MLB’s increased revenues and have decided that they need to invest now to try and gain back some fan support that has been waning, or in the case of the Nationals, the last season in which the club is owned collectively by MLB, and MLB's willingness to give them a nudge with the sale of the franchise pending.
In the final analysis, 11 of the bottom 15 clubs spent more this offseason than last.
As MLB’s Chief Financial Officer, Bob DuPuy said, "There are still concerns at both the top and the bottom. The goal would be to get a tighter range that would ensure that even more than 20 clubs at Labor Day still have a chance to compete for playoff spots, that playoff spots are based on skill and talent and blossoming stars and not just on plugging holes with economics."
Of course, with the current CBA set to expire on Dec. 19 of this year, it will be interesting to get the MLB Players Association take on this given that …
Here are the clubs that have spent less this season than last:
Club 2006 2005 Difference Florida Marlins $14,998,500 $60,408,834 ($45,410,334) New York Yankees $194,663,079 $208,306,817 ($13,643,738) Philadelphia Phillies $88,273,333 $95,522,000 ($7,248,667) Colorado Rockies $41,233,000 $48,155,000 ($6,922,000) Boston Red Sox $120,099,824 $123,505,125 ($3,405,301) St. Louis Cardinals $88,891,371 $92,106,833 ($3,215,462) Baltimore Orioles $72,585,582 $73,914,333 ($1,328,751) Cincinnati Reds $60,909,519 $61,892,583 ($983,064) New York Mets $101,084,963 $101,305,821 ($220,858) San Francisco Giants $90,056,419 $90,199,500 ($143,081)The eye-popper on this list would be the Marlins with a whopping $45,410,334 cut in payroll deemed a “market correction.” When you see that this drop represents a 75.17% decrease from 2005, it makes the change all the more dramatic. Seventeen of those on the 25 man roster for the Marlins will make the league minimum of $327,000 per year. The reasoning for the drop in player payroll is being directly tied to the club’s inability to finalize a stadium deal, which would allow them to have access and control to more revenue streams. That saga, coming up on a decade in the making, still continues.
Some may look at the fact that the Yankees are spending $13,643,738 (-6.55%) less than last year as a sign that spending doesn’t always bring you a World Series. The number is misleading. The Yankees are still spending $84,801,692 more than their nearest competitor, the Red Sox. With that you’d be all of $6,847,775 short of the entire payrolls for the Marlins, Devil Rays, and Rockies combined. It’s difficult to say that the Yankees are hurting given these figures.
What's interesting is when you look at Opening Day team payroll in relationship to 2006 ticket price increase or decrease for the clubs lowering total team payroll from the year prior (source: Team Marketing Report):
Club Ticket Price %(+/-) from the year prior Rank Florida Marlins 7.39% (avg. $16.70) 27th New York Yankees 3.38% (avg. $28.27) 4th Philadelphia Phillies 0.55% (avg. $26.73) 5th Colorado Rockies -1.34% (avg. $14.72) 29th Boston Red Sox 4.27% (avg. $46.46) 1st St. Louis Cardinals 12.09% (avg. $29.78) 3rd Baltimore Orioles 0.0% (avg. $22.53) 12th Cincinnati Reds 0.0% (avg. $17.90) 22nd New York Mets 6.86% (avg. $25.28) 8th San Francisco Giants 5.64% (avg. $24.53) 9thOf the clubs lowering team payroll from this time last year, only the Rockies are actually dropping prices, with the Orioles and Reds holding steady (OK, we'll give the Phillies a pass as well, since they nearly kept the status quo). The increase by the Cardinals is due to Busch III opening ... ownership seeing interest in fans wanting to take in the new facility.
In the case of the Marlins, it's, well ... The only logic that can be made is that Loria and Samson feel that they've been bleeding red in the past, and now they plan on making up for it a bit. They can claim that they are still 27th in the league for average ticket prices. Cutting payroll by over 75% while raising ticket prices by 7.39% ... It does look bad, however. No wonder fans are upset.
According to Ronald Blum of the AP, "The median salary—the point at which an equal amount of players fall above and below—rose to $1 million from $850,000, breaking the previous high of $975,000 set in 2001."
The following chart outlines the total median salary for each of the 30 clubs for Opening Day of 2006:
Here are the top eight clubs by median salary:
Club Median Salary Boston Red Sox $3,023,894 New York Yankees $2,925,000 Chicago Cubs $2,500,000 Philadelphia Phillies $2,500,000 Chicago White Sox $2,325,000 Los Angeles Angels $2,250,000 Los Angeles Dodgers $2,205,000 Toronto Blue Jays $2,200,000
Note that there is a $425,000 drop between the Yankees and the Cubs. Between the number three club (Cubs) and the number eight club (Blue Jays), there is only a swing of $300,000 in median salary.
There is dramatic drop is in difference between this group of eight and the rest of the league.
Here are the median salaries for the rest of the league:
Club Median Salary Baltimore Orioles $1,512,500 Cleveland Indians $1,500,000 San Francisco Giants $1,488,079 Cincinnati Reds $1,300,000 St. Louis Cardinals $1,000,000 Houston Astros $940,000 Arizona Diamondbacks $932,000 San Diego Padres $925,000 New York Mets $912,500 Minnesota Twins $900,000 Washington Nationals $900,000 Detroit Tigers $865,000 Oakland Athletics $800,000 Milwaukee Brewers $775,000 Texas Rangers $750,000 Seattle Mariners $650,000 Tampa Bay Devil Rays $550,000 Kansas City Royals $500,000 Atlanta Braves $462,500 Pittsburgh Pirates $424,000 Colorado Rockies $350,000 Florida Marlins $327,000
The reason for the separate tables is to outline the drop between Blue Jays in the first table and Orioles in the second table in terms of median salary: a swing of $687,500.
The other drop is between the Indians ($1,500,000) and Cardinals ($1,000,000) a $500,000 difference, with the Giants ($1,488,079) and Reds ($1,300,000) sandwiched in between. From the Cardinals to the Marlins (a total of 18 clubs), the average median salary sits at $720,167. The difference between this group of 18 being all of $673,000 (Cardinals at $1,000,000) and the Marlins at $327,000). As the graph shows, it's a gradual and even spread across the clubs.
Putting Some Analysis Behind the Numbers
There isn’t anything overly dramatic about the differences between this year and last, and that may be something to look at. Given the increases in total revenues between this year and last, clubs are not turning much of these monies around into player payroll, with the possibility of the bottom 11 of 15 revenue making clubs aside.
The league average team payroll for 2006 is $77,556,890, up $4,708,716 from 2005's $72,848,173 league average. Contrast this with the difference between 2004 ($69,042,198 league average) and 2005, a difference of $8,514,691.
What we have is a bit of profit making, or if you are MLB, fiscal responsibility. The argument has been made that the 2005 offseason wasn't exactly a bumper crop for free agent talent. But then, we've seen the average ticket price jump 5.7% this off-season, as well (source: Team Marketing Report). You make the call as to whether it's profit making or fiscal responsibility.
What’s clear is that the MLBPA and clubs such as the Yankees and Red Sox that are investing heavily in player payroll will want to see clubs investing these increased revenues more directly into player payroll, or the on-the-field product. The lower revenue making clubs are pushing for increased revenue sharing (currently at 34% of all local revenues, minus stadium improvements or development).
Donald Fehr, the Executive Director of the MLBPA doesn’t see it that way.
As Ronald Blum reported in the AP:
"I don't see a need for increased revenue sharing," Fehr said, adding that revenue sharing and the luxury tax discourage teams from growing revenue.
Players also are concerned about teams that receive money, which according to the labor contract must be spent by a franchise "in an effort to improve its performance on the field."
"There's an issue as to whether or not clubs are using revenue-sharing receipts in an appropriate way," Fehr said.
And let’s make sure that we all understand what Fehr is implying when he says, “appropriate way”… it’s spending the green on talent, not pocketing it. After all, we want to continue to see labor peace on the horizon.
Something to remember ... There are 30 clubs, which makes for 30 different sub-stories from this look inside Opening Day player payroll, league-wide. There are sub-plots within this data—the hows and whys as to increases and decreases beyond this offering. You may have more questions than answers after looking at the data. That article (or articles) on individual team data, will have to come another day, because, remember ... it's a week after Opening Day; we all still need to get our baseball fix in after the Winter.
Maury Brown is the editor of BusinessOfBaseball.com, co-chair of SABR's Business of Baseball committee, and covers the business of baseball at his blog, The Baseball Journals. His analysis and commentary has been published in the Boston Globe, CNN/Money, Toronto Globe and Mail, Los Angeles Times, Pittsburgh Post Gazette, San Jose Mercury News, and Oregonian. The opinions expressed here are solely those of the author and do not represent the opinion of the Society for American Baseball Research or its Business of Baseball committee. Maury can be contacted through the miracle of e-mail.