April 9, 2012

Bizball

Big Money and the Opening Day Payrolls

by Maury Brown

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I’m not saying this in a Chicken Little way. I’m saying it as a reality that some fans may not fully be grasping: MLB is hitting the mother lode, and that’s translating into player contracts that see greater average annual values (AAV), lengths, and total dollar amounts.

Case in point: USA Today recently released their annual Opening Day salary numbers, and the league will see a 5.55 percent increase in total dollars allocated to 25-man rosters from last year—a jump from $2,786,163,302 on Opening Day in 2011 to $2,940,659,204 this year. This represents the largest year-to-year increase since 2007.

According to the annual numbers, there are now 14 players that will earn at least $20 million this season.  Below, I’ve listed the top 25 players in terms of 2012 salary:

The most staggering increase for a single club comes by way of the Miami Marlins. While USA Today’s numbers do not account for deferred payments, incentive clauses that include money paid/received in trades, or salaries of players who have been released, the number is still mind-boggling. According to the annual numbers collated from MLB and MLBPA that are filed with the league’s central office, the Marlins’ 2012 Opening Day payroll is $118,078,000, ranking them seventh in the league. Even if we subtract $15 million of the Carlos Zambrano trade that the Cubs are picking up, the Marlins would still rank 10^th as one of 10 clubs to have an Opening Day payroll over $100 million. To place that number in perspective, when accounting for the salary the Cubs are picking up, the Marlins’ Opening Day payroll has increased by over 81% since last year ($56,944,000). To further put things in perspective, the adjusted number is seven times higher than the Marlins’ 2006 Opening Day payroll of $14,998,500. So where’s it all going? Hanley Ramirez ($15 million), Josh Johnson ($13.75 million), and Jose Reyes ($10 million) account for salaries that are at or above $10 million.

And salary for the Marlins only stands to increase over the next few years. Next season, Ramirez gets a $500,000 bump. Mark Buehrle goes from $7 million this season to $12 million next, Ricky Nolasco jumps from $9 million to $11.5 million, and Heath Bell goes from $6 million to $9 million. Beyond that, Jose Reyes’ back-loaded deal really begins to make an impact; he begins receiving $22 million annually in 2015.

Another interesting study is the Texas Rangers and the wild ride that their payroll has taken over the last decade, especially in regard to the new television deal that the club reached after exiting bankruptcy when the new owners took over three seasons ago. According to USA Today, over the past two seasons salary has increased $65,260,430. In 2010, the year that Tom Hicks had the club in bankruptcy and eventually had to auction them off, the Rangers ranked 27^th; they’re sixth this season. Prior to 2012, the last time that the Rangers ranked in the top 10 was in 2003 when they ranked fifth with a payroll of $104,526,470.

Coming back to the league as a whole, within the next three-to-five years expect total player payrolls to increase—and not just a little, but dramatically. Yes, there will be some watering down at the top (this has already started; the Yankees’ $197,962,289 payroll for 2012 marks the first time that the Bronx Bombers have been under $200 million since 2007), but by and large, many will see sizeable growth.  Television deals by the Rangers, Angels, and soon the Dodgers are redefining how fast teams can obtain money for use in free agency, and lesser deals (the Astros and soon the Padres) will have a similar (though muted) impact as well.

Even without local television deals, however, money is flowing into MLB’s coffers. Whether it’s money through MLB Advanced Media, the gate, or (shortly) through the national television deals, clubs are spending. The Reds, for example, don’t have the local television money flowing in but are spending lavishly. In baseball’s second-smallest media market, they signed Joey Votto to the third-highest active contract at 10 years and $225 million. Think about that… Not the Yankees. Not the Red Sox. Not the Dodgers or Angels, but the Cincinnati Reds. It would come as no surprise to see steady increases in the seven-to-eight percent area over the next few seasons. Get ready; a steady flow of “green” is coming. Next season, the total amount spent on Opening Day payrolls will crack $3 billion. For context, here is the past decade’s worth of Opening Day payrolls by USA Today’s accounting:

To close things out, here is a full breakdown of all 30 MLB teams based on the USA Today salary data.

Maury Brown is an author of Baseball Prospectus. 
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