July 2, 2012

Bizball

How Much Salary Can You Allocate to One Player and Be Competitive?

by Maury Brown

the archives are now free. All Baseball Prospectus Premium and Fantasy articles more than a year old are now free as a thank you to the entire Internet for making our work possible. Not a subscriber? Get exclusive content like this delivered hot to your inbox every weekday. Click here for more information on Baseball Prospectus subscriptions or use the buttons to the right to subscribe and get instant access to the best baseball content on the web.

Subscribe for $4.95 per month Recurring subscription - cancel anytime. Subscribe for $39.95 for one year a 33% savings over the monthly price! Purchase a $39.95 gift subscription a 33% savings over the monthly price! Already a subscriber? Click here and use the blue login bar to log in.

The general manager and owner’s dilemma been around since Ban Johnson decided that it was better to pay players rather than having them play as amateurs, the dilemma of trying to balance a budget with creating the most competitive team possible. We armchair GMs like to talk about whether this deal or that deal is good or bad, often within the framework of how much a player is being paid and whether they are “worth it.” Indeed, Baseball Prospectus strives daily to provide data that works to define that conversation.

The general manager’s dilemma, however, is tougher than, say, the budget that you or I set for our household. With some exceptions, most of us have a general sense of what our income and expenses will be. We may get a modest raise and the cost of living may increase at a rate that we can see coming, so for the most part, our monthly budgets can be set and we can adjust accordingly.

For the GM of a Major League Baseball club, however, the challenges are a bit more daunting. A GM’s budget is dictated by ownership and driven off revenues that can ebb and flow from year to year. A GM’s ability to adjust the roster based upon that—with veterans hitting decline years, the pace of player development, and unforeseen events such as injuries—all play a part. Not only that, a GM is planning not just for the season he is in the midst of but likely five years out as well. All the while, owners are constantly pushing for cost certainty—that amount of player salary they’re on the hook for in subsequent years—while market escalation for premiere talent can skyrocket by the move of another club’s GM in the bat of an eye, throwing a GM’s budget planning out the window.

The focus on how much clubs spend on just one player didn’t really gain serious attention until Texas Rangers owner Tom Hicks signed Alex Rodriguez to a then-record $252 million deal in 2001. Owners and the league bemoaned the move given the enormity of the deal, while those bean counting from a roster construction position panned the move for how much A-Rod was getting compared to the rest of the roster.

A-Rod’s 2001 salary of $22 million accounted for 25 percent of the Ranges’ total Opening Day payroll of $88,633,500. To put Rodriguez’ salary in perspective that year, first baseman Rafael Palmeiro was the second-highest-paid player on the Rangers at $9 million. Of course, history has since told the story of that poor salary construction model; with player payroll not evenly distributed, the ability to bring in pieces to support A-Rod never materialized, and the team performed horribly in the standings. In the end, what a GM needs is flexibility, and Hicks’ deal for Rodriguez removed that.

This past off-season, the subject of how much to allocate to one roster spot became a big story for the league when Albert Pujols pushed for a 10-year deal in excess of $250 million. Speaking at a conference during the Baseball Winter Meetings, Cardinals GM John Mozeliak, who later would lose Pujols to the Angels, mentioned the dilemma:

Our research shows that only one club has ever allocated more than 20 percent to one resource and made the World Series, and that was Todd Helton with the Rockies in 2007.

In looking over the salaries, Helton actually accounted for far more than 20 percent that season. His $16.6 million salary that year comprised 31 percent of the Rockies’ $54,424,000 Opening Day payroll.

So, with the 2012 season nearly half over, how much are clubs allocating to individual players? Is how much a club has invested in one player indicative of poor planning or an effect of other forces that have impacted revenues? Is even distribution the best way to build a winner, or can you put all your eggs in one or two baskets? Here’s a look based upon Cot’s Contracts data here at BP.

Houston, We Have a Problem
At 31.25 percent of total player payroll, Houston’s Carlos Lee is the league’s current leader in share of team payroll. His $19 million salary for 2012 chews up the Astros’ $60,799,000 Opening Day budget and is eight times the average salary for the club ($2,251,815). In fact, of the 18 players that have salaries that absorb more than 15 percent of total player payroll this season, the Astros own three of them: Lee, Brett Myers, and Wandy Rodriguez. All told, the three comprise a whopping 68.26 percent of the Astros’ salary for this season. So, poor planning, right? Sort of. In defense of the Astros, the club began shedding player payroll as soon as it became apparent that Jim Crane was going to be the favored buyer.

As the stripping of salaries to make the sale palatable occurred, those contracts that were not easily moveable, or those that now comprised a larger percentage of the pie, remained. The former may certainly be the case with Carlos Lee. While his batting average is up 10 points this season compared to his numbers last year, his slugging numbers are down (.405 compared to a career average of .489), his VORP is tracking at -4.96, and his WARP is -0.8.

With a 2.91 WARP and a $483,000 annual salary, Jose Altuve ranks as the most cost-efficient player in the league at $166,199 per WARP. If the Astros intent is to get lean while revenues catch up (something that the club has said is a priority), then they could be headed in the right direction.

Is Johan Back?
At number two for largest percentage allocated to a single player, Mets starting pitcher Johan Santana comprises 25.39 percent of New York’s player payroll. But while Carlos Lee sports a negative WARP, Santana, coming off an injury plagued 2011, has rebounded thus far in 2012 and boasts a WARP of 2.02. Still, he isn’t cheap. His dollar per WARP is $11,897,857. As is the case with the Astros, Sandy Alderson has been in cost-saving mode, slicing bad contracts off Mets books that saw a record drop in total player payroll this season. The Mets also own three players that comprise more than 15 percent of total player payroll: Santana, Jason Bay ($18,125,000, or 19.18 percent), and David Wright ($15,250,000, or 16.14 percent). One of these things is not like the others, however. While Wright is having a stellar season (WARP at 4.26) and Santana is rebounding, Bay’s WARP is -0.07. Ouch.

Ichiro and King Felix
While the Astros and Mets have been in the midst of cost-cutting measures, the Mariners have floated about in recent years but now seem to be purging and going the development route. Sure, there is still Chone Figgins (-1.23 WARP with a $9.5 million salary), but for the most part, Seattle has been trying to strip the dead wood to gain flexibility. Where things have been interesting is where Ichiro Suzuki and Felix Hernandez fit into the equation. Ichiro will be a free agent at the end of the season, and Hernandez, the former Cy Young winner, continues to be involved in trade rumors. The two rank third (Hernandez) and fifth (Ichiro) respectively in terms of percentage of total player payroll. Hernandez comprises 23.27 percent, while Ichiro is 21.26 percent. With a .86 WARP, you’re basically paying $20,961,870 per WARP for Ichiro at this stage. Only Prince Fielder, at $22,866,460 per WARP, ranks higher. King Felix, with a 1.85 WARP, comes out to $10,624,643 by WARP.

Spreading the Wealth
So how have some of the more competitive clubs allocated salaries? Heading into the season, here’s how the division leaders (plus the Cardinals, to allow analysis around the defending World Series champs) have allocated salary by the top five:

AL East – Yankees

Player	Pos	Salary	Pct
Alex Rodriguez	3B	$30,000,000	14.32%
Mark Teixeira	1B	$23,125,000	11.03%
CC Sabathia	SP	$23,000,000	10.98%
Derek Jeter	SS	$16,000,000	7.63%
Mariano Rivera	CL	$15,000,000	7.16%

AL Central – White Sox

Player	Pos	Salary	Pct
Jake Peavy	SP	$17,000,000	17.41%
Adam Dunn	DH	$14,000,000	14.33%
Alex Rios	RF	$12,500,000	12.80%
Paul Konerko	1B	$12,000,000	12.29%
Gavin Floyd	SP	$7,000,000	7.17%

AL West – Rangers

Player	Pos	Salary	Pct
Michael Young	DH	$16,000,000	12.57%
Josh Hamilton	CF	$15,250,000	11.98%
Adrian Beltre	3B	$15,000,000	11.78%
Mike Napoli	C	$9,400,000	7.38%
Ian Kinsler	2B	$7,200,000	5.66%

NL East – Nationals

Player	Pos	Salary	Pct
Jayson Werth	RF	$13,571,429	14.35%
Ryan Zimmerman	3B	$12,100,000	12.79%
Edwin Jackson	SP	$11,000,000	11.63%
Adam LaRoche	1B	$8,000,000	8.46%
John Lannan	DNP	$5,000,000	5.29%

NL Central – Reds

Player	Pos	Salary	Pct
Brandon Phillips	2B	$12,500,000	14.23%
Bronson Arroyo	SP	$12,000,000	13.66%
Joey Votto	1B	$11,500,000	13.09%
Scott Rolen	3B	$8,166,667	9.30%
Ryan Madson	DNP	$6,000,000	6.83%

NL West – Giants

Player	Pos	Salary	Pct
Barry Zito	SP	$19,000,000	14.40%
Tim Lincecum	SP	$18,250,000	13.83%
Matt Cain	SP	$15,833,333	12.00%
Aaron Rowand	DNP	$13,600,000	10.30%
Aubrey Huff	1B	$10,000,000	7.58%

WS Champs – Cardinals

Player	Pos	Salary	Pct
Matt Holliday	LF	$17,000,000	15.38%
Carlos Beltran	RF	$13,000,000	11.76%
Kyle Lohse	SP	$12,187,500	11.03%
Lance Berkman	1B	$12,000,000	10.86%
Adam Wainwright	SP	$9,000,000	8.14%

The interesting thing to note with this data is that, with the exception of Jake Peavy, the division leaders are allocating 14-15 percent of their total player payroll to their highest-paid player. The White Sox could be in a tenuous position, allocating 56.83 percent of total player payroll to four players with percentages in double-digits. The Rangers, the bridesmaid in the last two World Series, have the most balanced allocation of salary of all the division leaders.

What Works?
Of course, this analysis is a one-year view, and therefore, how veteran salaries escalate at or near the end of a contract has a bearing on payroll distribution. Once again, flexibility (or lack thereof) can have grave implications on a team’s ultimate success. These types of long-term contracts are becoming a growing trend that we may not see the full ramifications of for a few years, once players age and the back-loaded aspects of their contracts come into play.

Interestingly, when looking at how player payroll is being allocated, “position” is a moving target. A good example is St. Louis this year. With Albert Pujols leaving for the Angels, left fielder Matt Holliday becomes the team’s highest-paid player. The Giants have lumped most of their resources into pitching, with the Zito deal still being an albatross while Tim Lincecum and Matt Cain occupy positions two and three. Only the Rangers, as a division leader, are lack any pitching among their top-paid players.

Ultimately, the key to payroll construction depends on your philosophy. Some clubs that have limited revenues over a long period of time may choose to spike spending on an individual player in the hopes of reaching the postseason for a given year. Others with less volatile and more sustainable revenues may be in a position to allocate a larger total sum to more players. That’s the position you prefer to be in. That should give you the ability to be the most competitive over the longest period of time. Welcome to the GM’s dilemma.

Maury Brown is an author of Baseball Prospectus. 
Click here to see Maury's other articles. You can contact Maury by clicking here