Financial Considerations: Baseball Money and Spending

Part I — the Overview

Before we start, I’m gonna give a shout out to Cot’s Baseball Contracts.  The people who run it have been an amazing resource over the past two years in baseball contracts.

Baseball is a business.  It always has been and always will be.  Players are commodities and they come with price tags.  You can talk about intangibles and whatever else, but a player is–or rather, should be–valued for what he can produce on the field and baseball is lucky to have such large sample sizes from which to pull.  So let’s talk about baseball and the root of all evil.

First and foremost, let’s start with the hilarious.

The Phillies have $130 million already dedicated to the 2011 season.  Yes.  That’s right.  The year after next year, they’ll be paying at least $130 million, and probably more, in payroll.  That’s regardless of whether or not they have a greater than or worse than .500 record in 2010.  That’s after losing right fielder Jayson Werth to free agency and ditching Jamie Moyer’s contract. That’s not including the four or five arbitration hearings they’ll have to deal with, including starting catcher Carlos Ruiz.  And the kicker: this is more than the Yankees owe to the 2011 season ($116 mil).

Here’s a small breakdown of where that money’s going:

  • Ryan Howard — $20 mil
  • Roy Halladay — $20 mil
  • Chase Utley — $15 mil
  • Raul Ibanez — $12 mil
  • Brad Lidge — $12 mil
  • Jimmy Rollins — $8.5 mil
  • Cole Hamels — $9.5 mil
  • Joe Blanton — $8.5 mil
  • Shane Victorino — $7.5 mil
  • Placido Polanco — $5.5 mil

Some elements of good spending and some elements of bad (very bad).

Halladay at $20 million is pricey, but worth it.  Utley at $15 million is very good.  Victorino at $7.5 million is good.  Hamels, of course, is signed through his arbitration years, and $9.5 million is a steal. It would be revisionist history to say Jimmy Rollins’ $8.5 million (a team option which was accepted in Dec. ’09) was good at the time, so we’ll mark it zero. Because of those contracts and the addition of Howard, a cheap Jayson Werth,

But, of course, there’s some serious problems in there. Howard getting paid $20 mil is ridiculous and about $5-10 million overpriced.  Howard was rewarded handsomely before the 2008 season in his arbitration case, getting $10 million–a little less than what he’s worth.  He put up a  .251/.339/.543 slash line in 2008 and Phillies GM Ruben Amaro rewarded him with a 3-year, $54 million contract.*

*If you need evidence on the over-valuation of home runs and RBIs, Howard is your perfect guy.  Low on-base percentage–mostly because of a low batting average–and some decent slugging helped hugely by his dingers, but he hasn’t put up a line like his 2006 year since that year. The $20 mil per annum contracts should be reserved for the best hitters in the game–your Hanleys and Pujolses.  These guys are the best at patience, hitting for average and hitting for power.  Howard has decent patience and great power, but no average.  Imagine throwing $20 million at Adam Dunn.  Can you?

And then we have the absolute garbage.  The Lidge contract may be one of the funniest of all-time.  It astonishes me that Amaro felt a reliever, even one that had as good (albeit lucky) season as Lidge in 2008, was worth more than his left-fielder.  And as for that left fielder, the Raul Ibanez deal–three years, $30 million–was labeled one of the worst of the off-season.  An aging slugger with terrible defense and type A free agent, Amaro lost four draft picks (failing to offer Burrell arbitration lost him two, signing Ibanez lost him two more; and note: this team was built on draft picks) for only a slightly smaller benefit.  In 2011, his contract will most definitely hurt the team. And then Blanton and Polanco both signed three-year deals this year, both hugely overvalued–and Polanco will be playing a position he hasn’t played in years.  These are all contracts that shouldn’t have been even offered.

And now to digress a bit back to our point, we can’t criticize without seeing what other options were out there and understanding market value for the players.

For one, Adrian Beltre, who is a very, very big upgrade over Polanco in defense and a mild downgrade in offense, received a one year, $9 mil contract to play for Boston this year.* This looks especially terrible when you see Polanco’s three-year slash stats have trended downward and last year he was at .285/.331/.396.

*You can make an argument that this is one thing “big market” clubs have on “little market” clubs, or whatever you want to call them.  Teams with more money to spend can throw more per annum at a player while a team with less money can counter with more years, which ends up crippling the team in the long run.  I’ll get more into that in a later piece.

Pretty obvious that Amaro misspent his money here and cost his team financial flexibility in 2011 and 2012 by not adding a replacement player–whom they already have in Greg Dobbs.  Furthermore, who else was bidding for Polanco’s services?  Why was a three-year offer even offered?  I’ll get more into that in the free agency post.

Market value is a tough thing to figure out.  It’s fickle, intangible and sometimes set arbitrarily by whomever signs the first contract.

And here’s where you, the general manager of a baseball team, have to set your goals.

Where do you start?  Where’s the best place to invest your money?  Where do you draw the line on free agents? On draft picks? When do you go over market value for a player?  What do you have planned in case everything falls apart? How does your team go from basement dweller to a World Series apperance?

This is the start of a new series about baseball finances, divided into several parts.  I’ll be discussing free agency, the rule IV and V drafts, dollar and year values of players and how to best utilize money in different budgets.  Stay tuned.

When do you go over market value?
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Filed under baseball finances, Free agent signings

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