Thoughts on the economics of buying the World Series
ByWhen the Yankees won the World Series two weeks ago, the team set a rather dubious record. No longer were the 2007 Boston Red Sox the most expensive team ever to win baseball’s championship. With an estimated payroll around the $201 million mark, the 2009 Yankees shattered the previous record by nearly $60 million.
Of course, with these numbers as irrefutable proof of some devious Yankee scheme to take over baseball, analysts and fans outside of the city have accused the Yankees of buying a World Series championship. The economics of baseball, they say, are broken, and the Yankees are the prime example of it. In New York, we finger teams such as the Marlins ($36 million) who pocket nearly as much in revenue sharing as they pay their team as the real economic villains of baseball, but that just might be wishful thinking.
So for the first post in a series I plan to unveil as the off-season goes on, let’s explore the Yankees’ spending. In an article in the Wall Street Journal, sports economist and Smith University professor Andrew Zimbalist states that the Yankees did not buy a World Series. Noting that 20 of baseball’s 30 teams have made the playoffs since 2004, Zimbalist says that payroll accounts for only approximately 15-30 percent of a team’s success. The other factors, he writes, “include front office smarts, good team chemistry, player health, effective drafting and player development, intelligent trades, a manager’s in-game decision-making, luck, and more.” Many of those factors are related to wealth, but more on that later this off-season.
Even if the Yankees’ payroll helped them this year, Zimbalist says, it might handicap them in the future:
Imperfect though it may be, baseball has a system, and the Yankees play by its rules. Its success this year depended significantly on the acquisition of pitchers A.J. Burnett and C.C. Sabathia, along with first baseman Mark Teixeira. But the Yankees did not sign these players to one-year contracts (though the team did sign pitcher Andy Pettitte to a one-year deal).
Mr. Sabathia was great in 2009, but he is signed through 2015 when he will be 36 years old; Mr. Burnett through 2013 when he’ll be 36; and Mr. Teixeira through 2016 when he’ll be 37. Many of the team’s other stars are also signed to long-term contracts. Third baseman Alex Rodriguez is signed through 2017 when he will be 42 and catcher Jorge Posada through 2011 when he’ll be 40.
It’s possible that the positive correlation between payroll and success the Yankees experienced this year will turn into an inverse correlation. After all, player performance tends to wane with age. But these players have contracts that require the Yankees to increase their annual pay in the years ahead. Those salaries will weigh on the team’s ability to acquire other players.
As you chew on those statements and the aging horrors that may await us, take a peek at this rough sketch of reinvestment strategies among baseball teams. Khoi Vinh of the blog Subtraction has explored the way baseball teams in 2009 reinvested their 2008 earnings on the field and found that the Yanks’ reinvestment rates were near the top and that, especially in the playoffs, reinvestment rates determined success (and winning percentage). Of the eight playoff teams, none reinvested a larger percent of their earnings than the Yankees did, and no other team, obviously, reached that 11-win mark.
And so I leave you with some initial thoughts. Maybe the Yankees’ spending came as close to guaranteeing a World Series win as is possible within the framework of baseball’s economics, but the team may pay a price for it later. Furthermore, the Yanks are simply playing by the rules of the economic game, and if the rest of baseball thinks it is broken, they will have to fix it. For decades, though, baseball has tried to bring down the Yankees, and nothing has succeeded. I wouldn’t put money on an economic sea change any time soon.
Ladies & germs, I give you…..drummmmmmmmmmmmm…….
KABAK-O-NOMICS!
Let the sessions begin.
What may happen in 2015 and beyond doesn’t concern me right now in 2009. When as many WS championships now and worry about the future once it gets a lot more closer. The payroll limit might be 250M then which means those big contracts effect on your overall payroll will be a lot less than today.
“What may happen in 2015 and beyond doesn’t concern me right now in 2009.”
That’s what got them into the mess they faced in the first half of the decade. Winding up with multiple years committed to guys who were turning into dead weight.
But I think it’s overstated. 36 isn’t that old for a Baseball player, it’s on the outer fringe of their prime years. The A-Rod deal is bad, but at least they had the sense to FRONT load that one. He makes 30 mil during his prime years and has that ease down to around 16 mil as he ages.
Another thing to consider is when you’re talking 5, 8 and 10 years out in economic terms, so much can change. The Stimulus dollars the Feds are spending and the massive ‘easing’ the Fed has done with the currency has many economists worried about an inflation bubble being created. So far, demand has been weak (along with the Jobs outlook) so they’ve avoided it. But if demand comes roaring back (and it could come from sources outside the US, such as China) commodities could skyrocket and inflation would soar.It’s not only plausible, but some experts would say probable.
Long story short, in 8 years the 16 mil for A-Rod could be worth around half of what it is today. If it is, his contract will be the least of your worries.
You cant compare in their prime players like Tex and CC to Randy Johnson and Giambi.
Thats why they got into that mess. Giving deals to older guys on the downside.
Giambi started in New York in his age 31 season and signed a seven-year deal. Teixeira started in New York in his age 29 season and signed an eight-year deal. So the Yanks had Giambi from 31-37 and will have Teixeira for 29-36. You definitely can compare those two but while recognizing that Teixeira is far more athletic and less prone to PED use than Giambi was.
Tex=steroid-free
Giambi=steroid-laden
not sure if that helped or hurt Giambi as he aged but I am glad Tex is clean IMHO
Actually what got them in trouble was a non-producing farm system which I think the Yankees will not allow that to happen again.
Signing premier free agents almost always involves giving them a contract that will extend past the “best if used by date.” While CC (if he does not opt out) Burnett and Tex, may still be valuable contributers at ages 36 & 37, you can not count on it.
That is why building and re-building primarily through free agents, as the Yanks did until recently, always results in deadwood on the roster (past their prime players with big contracts that can not be moved) that reduced roster and financial flexibility.
Building through the farm an filling in with a judicous choice of FAs is the way to go.
The fail is strong with you.
I meant to say win as many WS championships now.
That specter of aging Yankees future is petty grim.
As to 2009, well, what about the converse? If California had paid the highest fee for CC, might they have won? Or Boston, or the Dodgers paid for AJ and/or Teixera, might they have won? Well, they were all in the running this year, and–Yanks without these guys–likely would have beaten us somewhere along the way.
It’s one of those “if one doesn’t do it, the other will.” The only way the Yanks win the argument is by letting other teams win the championship. In which case I’ll take the championship.
But those old guys for big bucks. And we’ll be adding Jeets to that list.
Jetes plays for 8 more years…
188 hits/year
All time MLB hits leader.
Just sayin
your lips to Mo’s ears.
Power and OBP age well, Tex and Arod should be fine. CC seems to be a genetic freak who can take a beating but show no effects (yet at least). Burnett is a crap shoot, otherwise I’m fine with the long term contracts.
Not to mention Tex and Arod play the lest physically demanding positions on the field.
CC will opt out after the three years, unless the market for premium free agents TANKS over the next two offseasons, he’s surprisingly terrible, or he gets badly hurt. The only contract they signed last year that worries me is Burnett. And ARod’s deal was a couple years too long, which might make them have to give Jeter more years, which could be bad.
But if A-Rod signed for too many years and Jeter earns an extension that’s too long, we’re talking nearly $50 million tied up in players who can’t produce at that level. If we throw late-career Teixeira into the equation too, that’s a significant amount of sunk costs.
I know it’s a depressing thought, but the Yanks have more money committed long term than would be ideal.
Paging Bobby Bonilla, you are needed in the thread. Bobby Bonilla, your car’s lights are on.
Which is why Yanks have to be cold blooded killers when they renegotiate with DJ. He wants to stay as much as we want him back. None of this 4 years $100 M talk. No one else would pay him more than $15 M/per TOPS, certainly not over 3-4 years.
Eh, Jeter on the Yanks is worth more than 15 mil per.
Yes, if they commit a lot of years to Jeter because of Arod…the confluence of that and Tex’s contract will likely be a problem. The Yanks CAN deal with an expensive 1B and DH (Tex and ARod in some configuration) from 2013 on. They can’t add another really old player to that mix…I have no idea what they’re going to do there. I mean…if he wasn’t named Derek Jeter, the answer would be simple: play hardball and start looking for someone else.
What makes you so sure CC will opt out? Just curious.
I have been wondering about the A-Rod contract lately. With CC the Angels were in the mix, the Braves with Burnett, and Tex was definitely a hot commodity. Was any other team interested in signing A-Rod to anything close to what the Yanks gave him?
No, there wasn’t. But the truth is, in NY, with ARod chasing a HR record, the contract is likely to pay for itself in the long run. No other team was in a position to exploit ARod to that degree.
No freakin’ way. Took a page out of the Scott Layden playbook and bid against ourselves for some reason.
Whatever, we don’t win a WS without him. Can’t be too upset about the contract anymore.
No, it was a terrible “negotiation”, and realistically from a business sense they should have bid A-Rod price down, or at least not given him a raise.
Randy Levine channeling Tom Hicks
CC might opt out but no one’s offering him comparable $s ultimately (by then $100m/5) as it looks now;
AJ’s got 4 remaining years, and those yrs will go by fast if he stays healthy for most of it since he’s already shown he can pitch in NY (I am optimistic that he won’t lose considerable velocity etc by the 4th yr out else he makes the adjustments);
Jorge will need to DH almost exclusively if he sticks around past 2011;
Tex’s deal doesn’t bother me that much since the duration is comparable to what we gave Giambi (6 yrs v 8 yrs to Tex) but Tex has shown to be a better athlete and more complete player than Giambi was at the start of his contract;
A-Rod is the one that can come back to haunt us most because he’ll be 42 at the hot corner with the captain, 2 yrs younger, by then maybe filling the DH role – 2017 is far away!
A lot of qualifiers here (if healthy etc) and overall these contracts (except for Jorge) going well into the mid 2010s are too long by at least 1-2 yrs, but hopefully no worse than that.
Eh, IDK. I think Tex has the chance to hurt us most as A-Rod clearly is a freak athlete and is better than Tex. Barring some odd PED side effects, I think A-Rod will age well. Tex? I’m not so sure. He is already a 1B so he is not that good of an athlete, even if better than Giambi.
He plays 1b. How wont he age well? And its not like hes a immovable lump.
If there is anything damning about baseball economics, it is that the Marlins are pocketing their welfare checks, rather than spend it feeding the fans.
Theoretically, game is structured to have boom and bust cycles for teams, as success weakens the farm system, while failure strengthens it. But the ability to take in talent from overseas, and the tendency for poor teams to pass on top prospects because of their signing demands, puts the lie to that theory. The draft system needs fixing, desperately.
That said, I don’t think it good, long term, for one team to have so much higher a payroll, to be able to buy star after star (as was done most of this decade), seemingly without limit. This did not win the Yankees a championship – many of their signings were short sighted and ill advised – but it did keep them in the post season for 10 of the last 11 years (the Yanks had the highest payroll starting in ‘99), and their mistakes never stopped them from getting the next big name waved under their nose.
Even if you buy into Billy Beane’s “crap shoot” theory of playoff success, those 10 post seasons should get 2-3 championships (which is exactly what the Yanks got). And while one can point out how many team have made the playoffs, how many made it just once, and how many repeated? 21 of the last 80 playoff berths were won by just 3 teams.
What we have establishe is a seemingly fixed “upper class” of teams who make the playoffs more often than not, a middle class that rotates appearances, and the bottom feeders that never have a prayer. Those bottom feeders have a real problem. However, the Yankees and Red Sox are not their primary problem. These are teams like the Royals and Pirates that have been terribly managed and are run by owners who squeeze pennies while the franchises die. Anyone who thinks the Yankees and their marketing machine and parade of all-star spokesmen is worse for baseball than the idiots running their franchises is fooling themselves.
Some good point you make. I would add that the Yankees, or so the company line goes, but it is correct, pour their profits into the team while, “bottom feeder” and even winning larger market teams, stereotypically pocket even marginal profits, by comparison. In this respect, Yankees are good for baseball. Again overgeneralizing some – but I have read multiple times, including tonight on RAB that the Yanks are near the top of reinvesting in their team. Where the “buying the WS championship” argument is strongest is in the reality that teams like the Yankees can afford the higher payroll — and thus ability to pour more $ in — because of the higher revenues generated (TV, merchandising etc), and this goes to your pt about an upper class in baseball.
I hope Cashman n’ co are preparing for the future and get even more aggressive in the draft and intl FA. Contrary to popular belief, the Yankees do have a budget, and with the production of their stars declining as their salaries stay the same, we’ll need more from everyone else.
Do you guys consider trades to fall under “buying a championship”?
Oh and only 5 players to play for the Yankees in the playoffs this year were obtained via free agency (not including Andy Pettitte).
Yes, depending.
When the trade is a salary dump (see David Cone, Chuck Knoblauch, Roger Clemmens, Randy Johnson, Kevin Brown), then yes, you are buying the player, though it doesn’t always work out and the Yanks have been more reluctant to engage in these sorts of deals lately.
ARod is an odd case because we traded Soriano for him. Clearly ARod cost more, but Soriano had a few years and would eventually go on to command money similar to what we were paying ARod on his old contract (remember the Rangers were picking up part of that salary). So it was, I think, at least as much a fair trade (Roberto Kelly for Paul O’Neill, eg) as it was salary relief.
For the sake of clarity, at least make clear why the Khoi Vinh posting is a rough sketch. It’s so rough, I would be reluctant to reference it. For one, it’s based on Opening Day payrolls. This is important because it doesn’t necessarily reflect what a team actually paid its players. For example, in 2009 the Red Sox paid about $3MM to Billy Wagner, but his entire $8MM salary is still being shown with the Mets, who actually paid him about $5MM.
On top of that, those payroll numbers are only loosely tied to the 40-man payroll. As I presume most people know — but it’s worth repeating just in case — a team has at least a 40-man roster. Like, say, how the Yankees had a 40-man roster with two well-paid players (Wang and Nady) who spent large periods of time off the roster. On top of that, the players on the roster are not static, so there are always additions and subtractions.
Another key factor missed is that each team in 2009 has a $10.2MM payroll addition for player benefits. This number gets applied when calculating where each team stands in relation to the competitive-balance tax (CBT) threshold, and is money actually paid.
Also of importance is the fact that those salary numbers can have some funny math behind them. For one, the CBT calculation is based on the average annual value of contracts. And there’s some of that thinking behind the payroll numbers used in that post. For example, a $5MM signing bonus paid to a player when he signs a contract today will be calculated for the CBT and at Cot’s (which is where the Subtraction blog got its numbers) across the life of the contract.
The net result is that what a team actually pays is very different from the numbers we see. Alex Rodriguez, for example, received $33MM from the Yankees this year, but for the CBT assessment he was only paid $27.5MM since that’s the average annual value of his contract.
Here’s a net result of how numbers like those the Subtraction blog listed can be way off the mark. Since the blog used numbers from Cot’s, the Tigers 2008 Opening Day payroll is listed there as a tick under $138MM. For CBT purposes, the Tigers’ payroll was $160.8MM. What actually was paid out by the Tigers was probably somewhere between those numbers, though there is a chance the actually paid more.
And since the number was over the CBT threshold, the Tigers also paid $1.3MM in tax, and this would logically count toward their investment in the players. Had the Subtraction blog done its post on the 2008 payrolls — and I’m not certain why those numbers weren’t used since the revenues were of 2008-related Forbes data — the supposed investment rates still wouldn’t have been an accurate reflection of teams’ behaviors.
Really, it was such a shoddy piece that I don’t think it’s accurate to say it was rough. In fact, I’m a little surprised it was referenced here, even with the caveat.
A Rod’s contract? I think that is the major reason Hank disappeared off the Yankee horizon. They were negotiating seven years and finished with ten.
The A-Rod contract is an embarrassment. As I recall, correct me if I am wrong, but no other team in baseball reportedly had offers out to A-Rod that came close to the 10 yrs that the Yankees committed.
I mentioned this before. I just do not understand how the whole thing played out and no one really seems to know. 1. I do not believe that Hank just took over and did the entire thing himself and 2. if that assumption is true it is pretty shocking that a group of very intelligent people from one of baseball’s smartest front offices would so dramatically bid against themselves.
I remember during the negotiations when Alex came back on his on ESPN was saying the Yankees are going to get him at a discounted rate and like the original poster said for only about 7 years. Then a day later the headline on ESPN says Arod sings for $300 million over 10 years and I was just like how the hell did that happen?
It would be great if someone could somehow find out really what went on behind closed doors during this negotiation. Maybe if Cash leaves one day he will pull a Torre.
Hes the best player in baseball. how is it an embarrassment?
How much have the Yankees made off of him the past few yrs and how much will they in the future???
This post is going to hurt tomorrow’s Confidence Poll (if there is one)as it’ll be fresh in everyone’s minds.
I’ve made this point before – the Yankees have more long term contracts than any other team in baseball and its not even close. CC, Teix, A-Rod alone tie up close to $80m in 2015. Virtually no other team has any commitments in place for 2015 yet.
What this actually means is that the Yankees relative payroll is highly impacted by the inflationary environment in general and specifically the revenue development of MLB. If we have 5% inflation each year in the next 6 years, those $80m will only be equal to $60m in today’s monetary terms. If we have no inflaton it of course remains $80m.
In an inflationary environment MLB revenues are likely to, but not guarnateed to, go up. If we on top of inflation continue to see MLB revenues rise quicker than the inflation, the last few years of those contracts become less of a burden.
Normally the long term economic development should not make a diference for the competitive balance but since no other team has significant long term commitments the Yankees are exposed because they are different than everyone else. In fact already in 2013 the Red Sux commitments fall to about $12m and the Yankees are still at $95m.
This looks like a much smaller risk than it did last December when a deflationary environment was much likelier, but the Yankees have still made much bugger bets on the long term growth of baseball than everyone else
This is a great point, and something I’m surprised people don’t talk about more often. Whenever people talk about long term contracts, they seem to think of the salaries in today’s terms. The RAB crew, for instance, is very down on the A-Rod contract because we’ll be paying A-Rod $20 million per year 2015-17 when he is presumably in steep decline. But I’m not at all convinced that that won’t look like a bargain, which is why I’ve always been happy with the deal.
Bargain is a strong word – I think the best we can hope for for those years is acceptable.Also I don’t think it is $20m – its likelier to be closer to $30m.
CC and Teix are less problematic in my mind, and hopefully inflation can help the team out a bit.
As I understand it, the last three years are $21, $20, $20. Obviously the risk of a debilitating injury or a major fall-off between now and then, but the early 40s years of one of the greatest hitters of all time might not be such a bad thing to spend $20 million on in 2016 dollars.
I don’t buy it. When A-Rod signed in 2000, would you have guessed that the only player to earn more on a per year basis than A-Rod would be…A-Rod? I believe $20 million in 2016 dollars will still be a very significant amount of money for one player as it is today.
The A-Rod contract happens when you have marketing guys negotiating with $$$ in their eyes because of milestones.
I am the first one to agree that long-term contracts can hurt the Yankees (Especially if someday they go to a salary cap (Although extremely unlikely because of the strength of the union)). The Yankees have a greater revenue stream than their competition (Yes Network, New Yankee Stadium. DOMESTIC Merchandising etc), which allows them to offset expenses. Another example is International Marketing: The signing of Matsui, got them lots of coverage in Japan (And signage at the Stadium, as well as Yankee brand sales in Japan (Not to mention the World Series MVP)). Another aspect is their farm system. They have loads of prospects at the most highly desired positions (Pitcher and catcher). These prospects can be either inserted into the lineup or traded away to fill needs (Even a FAILED first rounder like CJ Henru, got them Bobby Abreu).
Sports media will complain about the “Big Boys” such as the Yankees, but it is teams like the Yankees who make the system go (It is no accident that in a depressed economic state like 2009 the big teams won (Yankees, Penguins (The number ONE American home attendance team in the NHL), Steelers, Lakers, North Carolina Basketball, and Florida Gator Football). 2010 looks like a repeat of this trend, with the success of Florida, Alabama, and Texas in College Football, and the Indianapolis Colts in the NFL).
It is the Yankees who keep the game profitable, and relevant, in an era of multiple options (For watching, and more importantly PARTICIPATING in the sport (The Major Leaguers of tomorrow, are the kids wearing Yankee gear and watching the World Series)). I think the future for the Yankees, will be bright, despite the contracts.
This is nonsense:
This guy doesn’t seem to know what ‘correlation’ means. High payroll is, was, and under the current rules, anyway, always shall be correlated with success at winning baseball games. If the Yankees go on to become a bad team, that fact won’t change, even if their payroll were hurting them (which doesn’t make much sense outside the mind’s of this guy and Matt Taibbi.)
In any case, this whole ‘buying the World Series’ business is bullshit. That’s what 30 baseball franchises try to do every year. Teams pay people to play baseball. That is the business. There is nothing evil or nefarious about it.
If I may be so obnoxious, I wrote about this re: Taibbi’s deranged rant here:
http://www.businessinsider.com.....-0-2009-10
I agree there is NOTHING wrong with having the highest payroll and winning. The people who complain are usually “Touchy Feeley Liberals”, like Mike Lupica. (But to be fair, you do have certain teams with high payrolls, and (Or)big markets who just don’t win (Chicago Cubs)). This goes right to leadership. In the past, the Yankees saw the value of spending $100,000 on Joe DiMaggio, during the heart of the Depression, and today, Cashman looks at the big picture, and projects the futures market, instead of just focussing in on winning in 2008 (Which is why he refused to trade Phil Hughes for Johan Santana (Knowing he had a chance for Sabathia), and deciding to buy “Early” for Mark Teixeira, knowing the 2009 free agent class STUNK. This kind of foresight, although not always perfect, is why the Yankees win, and the Cubs lose.
of course, they (jete, arod, tex, cc, aj) could also age like MO!
Mariano doesn’t age. Age Marianos.
No longer were the 2007 Boston Red Sox the most expensive team ever to win baseball’s championship.
For what it’s worth, the difference between the Yankees’ payroll and the Phillies’ payroll this year ($88,445,143) is smaller than the difference between the Red Sox’s payroll and the Rockies’ payroll ($88,602,2014) was in the 2007.
Using the numbers from Cot’s.
not to mention more out of line when considered on a % basis
In terms of regretting some of these big contracts, I think we have more of a chance to regret resigning Jeter and Mo next year than Tex, CC, AJ or ARod.
Tex, CC and AJ will all see their contracts end in their mid-30s (35-36). This is not long after most age related declines occur, and by the time we get to that point, I expect the salaries to have continued to climb. At some point, $15m was the salary for an elite pitcher. Now that buys you a #2 (or #3, depending on your team). Don’t be surprised when these pitchers start demanding $30m contracts in 7 years.
ARod is a special case. Even if he declines, he’ll be chasing the HR record, and worth a fortune in marketing. This justifies keepinghim around past his prime, much like Pete Rose and Cal Ripken.
Jeter and Mo will be the bigger questions. Mo is an atypical closer, but there’s no reason to think he won’t fall off the cliff at some point. A year to year deal ala Wakefield would be the ideal path for him.
Jeter’s main value comes from his position and his personality. Like ARod, his marketing prowess pays for his contract. But how true will that be if he’s playing past his ability to put numbers up? He can’t play short forever, and as a DH or left fielder, his value declines dramatically.
Exactly. You dont regret signing in their prime players.
I often wonder why no one calculates the “real” payroll of a team. With that I mean reported payroll + discount on player under control.
The Nationals might have Harper and Strasburg playing for them. The implied market value of having them will be much higher thna they are paid.
The Rays are reaping the benefit as we speak.
If the Yankees bought their way to the WS this year, last year the Rays lost their way to the WS – nine losing seasons add up to a lot of draft picks. Why is the latter better than the former?
I hate the argument that the Yanks won the world series. Last year when the Phils won the world series, their payroll was $98 million and the Rays payroll was $43 million. The Phils had twice the payroll of the Rays. I didn’t see anyone complain about the disparity in payroll then. So, why when the yanks win?
Sigh.
Read the post. Yes, the 2008 Phillies had twice the payroll of Tampa, but no team has spent more to win the World Series than the Yanks. Plus, they outspent the Phillies by nearly $90 million. That’s a significant chunk of change.
Then again, the whole point is that the Yanks may not have been bought the series. We’ll see where that goes.
Aging is one thing. mid 30’s isnt exactly aging here.
This org isn’t like the others were long term deals and dead money kill anything they can do and zap how they operate. They can afford to gamble on 5 yr deals for talent like Burnett. They can afford to sign Posada to an extra yr.
Competitive balance is better in baseball today than it has EVER been. John McGraw bought championships. So did every other owner who won a championship, more or less, in the pre-WW2 days.
I keep hearing that baseball economics are “bad.” Says who? The people living in cities with teams whose owners aren’t aggressive marketers of their teams? I think the sports teams exist to serve their fan base. If the Yankees, or the Red Sox, have huge fan bases which pay alot for tickets and cable TV subscriptions, why shouldn’t the Yankees and the Red Sox have that money to pay players to field a winning team? I can’t stand hearing people lament about the Rays or Marlins. If you can’t muster more than 5,000 people per game – when you’re the defending pennant winner (!!) – why should every other team in the league pay the salaries for your players?
A simple thing which could be done which would be better than a luxury tax system would simply be to distribute cable TV money more fairly. Since cable TV money is the big thing separating teams like New York and Boston from others, you simply make a rule that TV money must be shared equally between the two teams playing a given game.
So when the Yankees play the Indians and YES carries the game, the Yankees get half of the money for that game, and the Indians get the other half. Or 60-40; whatever the owners work out as fair. Currently, it’s 100-0, which strikes me as somewhat unfair. Yes, the Yankees own the network, but they can’t exactly play games without opponents.
Doing this would reduce the revenue disparity between teams by a decent chunk, but teams like the Yankees and Boston would still maintain a hefty lead in revenue.
As they should.
The WSJ writer is correct, too. Teams that sign free agent stars do get a benefit, but it’s tempered somewhat by the fact that free agent stars are almost always players at their peak, and the long contracts they demand mean that the teams are paying high dollars for players who will, eventually, decline.
George Steinbrenner, for all his faults, loves baseball. He loves the Yankees and his fans. I think many baseball owners are rich dandies who don’t really care about baseball. And if you are the heir to a fortune, even if you DO like baseball, there is no guarantee you’ll know what you’re doing and be able to field a winning team. I had to laugh a few years ago when Bud Selig said Anaheim was a “small market.” Anyone who’s driven SoCal freeways knows it ain’t no small market out there.
Competitive balance is better in baseball today than it has EVER been. John McGraw bought championships. So did every other owner who won a championship, more or less, in the pre-WW2 days.
This is important. The Yankees dominated the game more in the pre-free agent period, especially starting in 1921, than since the mid-70’s. And many of the complaints today about teams not spending on payroll had parallels in the old days as well. It was hardly unusual for owners to simply sell off player contracts to make money. Babe Ruth was not an unusual case in that regard.
I do buy into the idea that the Yankees are going to suffer at the end of a lot of their big money contracts, but I also believe the cost – even if it only results in one championship every 8-9 years – is WELL worth the pain a franchise endures along the way.
Of course, we all look at last year’s offseason and wonder aloud why the Yankees couldn’t have made smarter decisions instead of constantly slapping aging, overpriced band-aids on the problem.
Of course, we all look at last year’s offseason and wonder aloud why the Yankees couldn’t have made smarter decisions instead of constantly slapping aging, overpriced band-aids on the problem.
I assume you mean that last year was the right way to do things, in contrast with previous years, when they were slapping the aging, overpriced band-aids on?
I think the reason the Yankees “failed” in prior years was that the ideal players weren’t available. I think Cashman did the best he could. Some signings were not Cashman’s idea (Sheffield, as opposed to Vlad; never knew what happened with Beltran), in other cases he had bad luck. The Pavano situation was not anything you can really hang on Cashman, and as we saw by this season, had Pavano stayed healthy, he probably would have been very effective.
I don’t know if it was that ideal players weren’t available. You said it yourself – Vlad & Beltran were probably theirs for the taking, but for one reason or another the deals never materialized.
It’s a mistake to look at contracts on a per year basis and match the paycheck for a given year to performance, or expected performance, in that year.
Take an extreme and silly case. Suppose you sign a guy for two years at $40 million in 2010 and minimum wage in 2011. Would you say you paid way too much for 2010 but boy, was he a bargain in 2011? Of course not. The right way to do it is to take the present value of the contract and see what it gets you over its term. (That’s why, among other things, front-loading a contract is really not a good idea. From the team’s point of view, for any given total amount, the contract should be back-loaded as much as possible, though luxury tax might have some effect).
In other words, you’re buying a package of years for a sum of money. As long as the package as a whole is worth the total payment (both taken as PV) you’ve made a good deal.
Take Teixeira’s contract. Discounting at 5% you get a PV of about $145 million as of the signing day. So the question for the Yankees is whether they get that much PV over the eight-year term. What he does at age 37 doesn’t matter so much if he delivers a lot of value in the earlier years.
The rest of baseball should examine the old adage that to make money you must spend money. Baseball is not only America’s pastime it is also one of America’s greatest business. Baseball economics are purely capitalist even though the Yankees must pay a “tax” for what they spend, thus redistributing some wealth through the league. Even though a team like the Brewer’s, who’s host city had an approximate population of 604,000(wiki) there’s no reason that they can’t put a competitive team on the field, it’s just a different kind of team and strategy that the Yankees are forced to field due to the draft system that punishes success and rewards futility. So if small market teams get better picks they therefor get the better player and thus should be able to match Yankee success with cheaper elite players(until they reach FA obviously). Seems like in theory the system should work just right.