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Monday, November 11, 2013

Yankees spend too foolishly, not too little.

This is the last in a series of posts on team salary or payroll for players for seasons 2003 through 2013.  The other posts immediately precede this one, so the easiest thing is to go to radicalbaseball.blogspot.com and cruise through them in order.  Here are the titles without links:

Team Salary Cap 2003-2013.

Team Salary Cap 2003-2013, Part 2.

Team Salaries 2003-2013.

Team Salaries 2003-2013 per Win and Ticket sold.

These posts are not intended to be a complete financial analysis but the information should be helpful in evaluating the current system and the practices of each team.

There is one inescapable conclusion: the New York Yankees spend too foolishly, not too little.

It's currently conventional wisdom that the Yankees are being cheap by trying to get under the soft salary cap in 2014.  That cap is $189 million.  If the Yankees get down to $180 million, they would be at 95% of the cap and most likely have the highest payroll in the American Conference.  Only the Dodgers would likely exceed the Yankees.  Boston spent $177 million in 2013, the Yankees $246 million.

The soft cap was introduced in 2003 to reign in the Yankees who have paid 92% of all the luxury tax money to the Major Baseball League (MBL), some of which is distributed to teams in the small market (minor league) cities.  Those are the cheap teams.

http://en.wikipedia.org/wiki/Salary_cap#Major_League_Baseball_.28luxury_tax.29
Luxury tax paid per year by team (in millions of $)
Team2003200420052006200720082009201020112012
Luxury tax threshold117120.5128136.5148155162170178178
Yankees11.82634.12623.8826.925.691813.819.312[26]
Red Sox-3.154.10.4986.06--1.493.4-
Angels-0.927--------
Tigers-----1.3----

The Boston Red Sox are second to the Yankees in total payroll (2003-2013) spending but Boston  goes over the cap only half the time  and when it does it's by very little.  In the last eleven years the Yankees have outspent the Red Sox by 48%.  That's ridiculous.

Too many Yankee fans simply assume that the Yankees have the functional equivalent of unlimited amounts of money.  These are probably the reasons:
1. high attendance or more accurately, high number of tickets sold
2. high ticket prices
3. high prices for merchandise and food
4. high revenue from the Yankee Sports and Entertainment (YES) Network, a regional sports network.

But all of that can be said of the Red Sox, too, and probably about some other teams.

But I'm assuming that whatever edge the YES network might have provided the Yankees a decade ago has been diminished if not eliminated by now.  Without delving into the morass of television revenue here are a couple of articles I found, which are a bit dated but contain some insight.  I did not find any specific money data for the New England Sports Network (NESN), which carries the Red Sox.  If someone would like to use the numbers that I've presented to do a more complete financial analysis, please do.  And please share.

Regional Sports Networks Show the Money
By RICHARD SANDOMIR
Published: August 19, 2011  The New York Times

With a few exceptions, regional sports networks are money-printing operations that heavily promote the teams they carry and play on the loyalties and wallets of local fans...

Atop the list was the Yankees’ YES Network, at $435.2 million.
_______________________________________________

Baseball's Biggest Cable Deals
by Christina Settimi, Forbes Staff
3/21/2012

The Rangers television home, Fox Sports Southwest, earned $303 million in revenue, second highest among RSNs behind the Yankees YES Network ...

Of course not all can be the Yankees with the crown jewel of team-owned RSNs, the YES Network. It has the most subscribers of any with 12.2 million, and on operating revenue of $475 million, it generated a whopping $224 million in operating income last year...

Last December the Los Angeles Angels of Anaheim followed suit and scored a 17-year, $2.5 billion deal that pays an average $95 million rights fee with a 25% equity stake in Fox Sports West ...

Now the for-sale Los Angeles Dodgers are on deck, poised to land a deal in excess of $3.5 billion for 20 years, a 30% equity stake, and average rights fee of $100 million...

The Seattle Mariners, Arizona Diamondbacks and Philadelphia Phillies should be the next group to cash in, all with deals that expire or have re-opener clauses by 2015 ...


San Diego Padres. Their current contract pending league approval with the newly launched Fox Sports San Diego is worth $1.4 billion, will pay them an average $50 million in rights fees beginning this year (four times their previous deal), and include a 20% equity stake in the network ... playing in the fifth smallest market with neither commercial success (their television ratings last season dropped 41% from 2010) nor on the field success (in the last five years)
_______________________________________________

Here are some of my other posts on this general topic:

Thursday, July 11, 2013  Cano isn't worth a huge contract.

Friday, September 20, 2013  Yankees need to clean house.

Monday, September 23, 2013  Mark Cuban, buy the Yankees from the Steinbrenner Kids.

Friday, October 11, 2013  Final Four: traditional teams. Coincidence?

Monday, November 4, 2013  Payroll: Yankees v. Red Sox

The Yankee problem starts with ownership, the Steinbrenner family, first the late George and then his four kids, really the two sons, first Hank, then Hal.  The old George Steinbrenner technique was to bludgeon the player payroll into a championship team, no matter how much was spent and no matter how many mistakes were made.  In fact, that was the key: acquire a lot of marque players to attract fans and the result should be that enough will work out so that the Yankees can compete every year and win the championship often.  It worked, on and off, for a long time.

But the Yankees continue that basic policy even now that George has been gone from real power for several years.  During the last eleven years the team president and general manager have remained the same: Randy Levine and Brian Cashman.  Levine forced out field manager Joe Torre and the Yankees hired Joe Girardi to replace Torre.

The Red Sox have had the same ownership but different general managers and different field managers.  The one constant in player evaluation has been an adviser: the legendary Bill James, who pioneered the modern metrics and analytics.

The Yankees cannot solve their current problems by spending foolishly.  They need to get smarter, a lot smarter.  The money spent and committed over the next few years is not the fault of the players receiving the money.  Players are the game, not owners and sure as heck not fans.  No players, no game.  I favor the players getting whatever they can.  They wouldn't get it if it wasn't there and if the players received less, the difference would go to the owners, not the fans.

Yankee fans should not blame Alex Rodriguez, CC SabathiaMark Teixeira, Alfonso Soriano, Vernon Wells, Derek Jeter, Ichiro Suzuki, Brett Gardner, David Robertson.  Jeter and Rodriguez are all time Yankees.  Rodriguez is the first Yankee since Roger Maris (1960, 1961) and Mickey Mantle (1956, 1957, 1962) to win multiple MVP awards.

It makes sense to me for the Yankees to get their team payroll under the $189 million cap in 2014 to reset the luxury tax percentage down to 17% from 50%.  Then if the Yankees want or need to incur that penalty in future seasons, the burden will be much less and the Yankees will actually be able to spend more than they would if they do not get under the 2014 cap.  At least the Yankees resisted the two most horrendous deals, both made by the Angels with their new television revenue: Albert Pujols and Josh Hamilton.  If the Yankees get under the cap in 2014 they should be in good position in future seasons to try to sign Mike Trout, Bryce HarperGiancarlo Stanton, ... players both very young and very good.

At least that would be smart and a small step in the right direction.  The Yankees need to be rebuilt and hopefully that can somehow be accomplished with players who spend most if nor all of their career as Yankees.  I'm concerned that we are entering an era when that will be difficult if not impossible and I'm not interested in a revolving door of players being rented for a couple of seasons.

I valued Bernie Williams, Jorge Posada, Mariano Rivera, and Derek Jeter who played their entire careers with the Yankees during this recent era.  Also, long time Yankees Andy Pettitte, Paul O'Neill, Alex Rodriguez.  Robinson Cano can become an all time Yankee if he is willing to be reasonable.  Pujols could have become the all time Cardinal, supplanting Stan the Man Musial.  But Pujols opted for max millions and left.  Cano has that type of choice.

Yankees, get smart.  Get under the damn cap.  Let the Dodgers be the new dumb team.

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