This offseason should be quite a telling one for baseball. It will tell us which teams are most interested in acquiring talent and which ones instead are focused on lining their pockets.
Why is this winter different from past offseasons? Well, because the television contracts Major League Baseball negotiated over a year ago kick in for the 2014 season, and those deals more than double the amount of national TV money each team receives.
The overall effect is that baseball will take in approximately $750 million more each season via the new pacts than what the old contracts delivered. That’s an average of $25 million in new money per team. And that doesn’t account for the huge local broadcast deals some teams have signed.
So, the question is, what will each franchise do with that $25 million annual windfall?
It’s a rich man’s world
For the biggest of spenders, most of that new money likely will be poured into player salaries.
The New York Yankees have talked about getting under the $189 million
soft salary cap luxury tax threshold, but they just signed Brian McCann to a five-year deal averaging $17 million a season. And Robinson Cano is more likely to return to the Bronx—at a cost of well over $20 million a season—than he is to take his talents elsewhere. And sure, an Alex Rodriguez suspension would lower the Yanks’ 2014 salary obligations, but he would be back on the books in ’15 barring a not-so-friendly arrangement to make him go away.
In addition to the Yankees throwing money everywhere, the new-look Los Angeles Dodgers showed last year that money is no object, and there’s little indication upcoming seasons will be any different. With a 2013 payroll well over $200 million and Clayton Kershaw‘s pending free agency following the 2014 campaign, it’s likely LA will be using its new money to keep its ace and two-time Cy Young Award winner in the fold. That, the Dodgers’ signing of Cuban second baseman Alexander Guerrero, and their need for a third baseman all indicate the Dodgers will be writing plenty of big checks for a long time.
After winning the World Series this fall, the Boston Red Sox have to at least make a show of spending what it takes to keep up their success. With Jacoby Ellsbury, Stephen Drew, Mike Napoli and Jarrod Saltalamacchia all free agents, Boston will pay to bring either them back or their replacements into the fold, although Xander Bogaerts, Will Middlebrooks and Jackie Bradley Jr. could serve as cheaper alternatives. Actually, these bargain fill-ins could offer even greater incentive to spend big to fill other holes.
Detroit, San Francisco, the Los Angeles Angels of Anaheim, Philadelphia and Texas are other teams with huge salary budgets and the incentive to up them further. In the next tier, St. Louis, Washington, Baltimore, Cincinnat, and Atlanta are competitive teams with the means to add this found money to their payrolls without breaking a sweat. And while $25 million doesn’t go as far as it used to, it could acquire enough additional talent to push these teams further toward their goal of a world title.
It’s no surprise that they’re giving none away
And then there are those who will take the money and run, balking about bad timing in their competitive cycle, poor attendance, and a host of other reasonable and absurd reasons not to spend money.
Sitting proudly in the corner with his dunce cap on will be Jeffrey Loria, owner of the Miami Marlins, the poor south Florida franchise that could afford to spend big two offseasons ago to bring in a wave of talent, only to deal those players away a year later and drop its payroll under $40 million. The Marlins took in enough money between the old national TV deal and revenue sharing to cover their payroll. The rest of their intake was gravy. This new TV money? Well, if Loria has some new insanely priced artwork hanging in his owner’s suite, you’ll know ESPN, Fox and TBS paid for it.
The Houston Astros actually have good reason not to throw around their new windfall. Whether or not it was the most profitable team ever last season, Houston has little incentive to spend big this winter. In addition to paying off team debt, the Astros know they have no chance to compete for a playoff spot next year, and most likely not the year after. However, at some point, they’ll have to bring in some free agents or sign their young players to extensions. When that time comes, they ought to have banked plenty of cash.
Tampa Bay, Oakland and Pittsburgh all made the postseason in 2013 with bottom-five payrolls. And while the rising tide will lift all boats this winter, each of these clever teams now has at its disposal a significant sum with which to upgrade its on-field talent. I have a feeling the Plexiglass Principle could bite the Pirates, but the Rays and A’s ought to have enough tricks up their sleeves to stay in the running with the big boys throughout next season. And Pittsburgh does have the benefit of playing in a division without a financial juggernaut, so it’s not like the Pirates are a clear one-and-done team.
People would lie to their mother
Regardless of where teams are in the payroll continuum or the competitive cycle, whether they have a new local TV deal or a stadium, or whether they’re highly profitable or just scraping by, they all have one thing in common: they’ll never tell the public the truth about their finances.
Forbes tries its best to estimate who makes what, but its numbers can only be so accurate without an insider’s perspective. We all expect sleight of hand, misdirection, and numerous other conjurer’s tricks from team front offices as they obfuscate—anything but the truth.
And why not? This approach has served teams well over the years. More than 20 new stadiums have been built in the past quarter century, funded largely by the public. Why be honest when deception can be so profitable?
And it’s certainly not that teams are spending a higher percentage of their revenues on player salaries. This article, direct from the horse’s mouth, tells the tale of baseball’s revenue growth:
In 1992, when Selig assumed leadership of the game, total industry revenues were at $1.2 billion; by 2012, revenues had grown more than 600 percent to a record total $7.5 billion.
That “more than 600 percent” growth is actually a 625 percent increase if you simply calculate $7.5/$1.2. Nice returns if you can get them.
Then look at the growth in player salaries over the same time frame. This Baseball Cube post shows the average player’s salary increasing from $798,185 in 1992 to $3,438,241 in 2012. That’s not bad money, either, but $3.44/$0.80 works out to a 430 percent gain.
So the owners are keeping a larger percentage of the money they take in as the dollar amounts grow bigger and bigger. People talk about owners taking on the greatest risk with a business because it’s their money. It seems major league owners have found a way around this—fans’ gullibility.
Money changes everything
Well, not everything. Yes, baseball is getting an extra $750 million in 2014. No, owners won’t be spending all of it—probably not half of it—to improve their on-field product. Some teams will invest in foreign acadamies, others will go after international free agents, and a bold few will scoop up the best talent on the major league free agent market in an attempt to capture a World Series championship.
Keep a close eye on who is who. Some teams will go for it in a big way in 2014. Others will prep for their time in the sun later down the road. And a few will tuck the money under the mattresses and cry about not having enough.
It’s that last group of franchises that needs to find new owners who will make the effort to compete that their fans deserve.