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January 22, 2013 5:00 am

Out of Left Field: Why You Should Quit Caring About Salaries

32

Matthew Kory

At some point, owners complaining about high salaries may start to lose credibility. Matt says that point is now.

I’m o-l-d-e old so I can remember when players made a few million dollars a year. I’m talking good players. The best. It’s a pittance compared to what they make today. Dave Winfield once signed a 10-year, $23 million contract. A Hall of Fame outfielder signed for $2.3 million a year. Infuriating! Rage! No way he’s worth that! But I can’t remember a time when players’ salaries were not a public discussion point.

For roughly the last three decades, salaries have been published, debated, and outraged over. Information on player salaries is ubiquitous nowadays but, if you think about it, that’s pretty weird. Baseball players and professional athletes in general are some of the only non-municipal workers in the world whose salaries are public information. Most people’s salaries aren’t made public. Front office executives don’t have their salaries appear in the papers, except occasionally.*

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February 20, 2012 3:00 am

Bizball: Inside the 2012 Salary Arbitration Class

5

Maury Brown

Taking a deeper look at the players who went through (or threatened to go through) the arbitration process this winter

Salary arbitration is a funny thing. In an era when club owners and COOs are more honed in on cost certainty with contracts than ever, few clubs fully know what player payroll for the upcoming season will be until approximately a month and a half before the season begins. Until each player has reached a contract or gone to hearing in the salary arbitration process, you don’t know what each player will ultimately be paid.

This year, I went diving deeper than ever before in salary arbitration, and for the time, I am making all my data for the 2012 salary arbitration season available for download. Here’s the details, plus an explanation as to why the increases, while large, shouldn’t be too surprising on a certain level.

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As teams and players settle in arbitration or avoid it entirely, refresh your memory on how the process works.

While looking toward the future with our comprehensive slate of current content, we'd also like to recognize our rich past by drawing upon our extensive (and mostly free) online archive of work dating back to 1997. In an effort to highlight the best of what's gone before, we'll be bringing you a weekly blast from BP's past, introducing or re-introducing you to some of the most informative and entertaining authors who have passed through our virtual halls. If you have fond recollections of a BP piece that you'd like to nominate for re-exposure to a wider audiencesend us your suggestion.

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Team owners should think twice before approving an expanded playoff structure, since it might be only the players who'll profit.

Bud Selig recently admitted that owners and players are likely to reach an agreement to add two teams to the post-season schedule for 2012, allowing an extra wild-card match-up of one or three games to precede the divisional round. This measure may seem like it would result in extra cash for owners—in fact, that has been widely cited as the reason for its inception—but perhaps counterintuitively, it will likely fatten players’ wallets far more.

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August 26, 2010 8:00 am

Prospectus Perspective: Acting Like Thieves or Rational Agents?

35

Matt Swartz

Are the Pirates not trying to be competitive by making a profit or just being good businessmen?

Many fans were outraged last weekend when the Associated Press, which had leaked some of the team's financial statements, reported that the Pirates had earned a profit while receiving money from Major League Baseball via revenue sharing while spending less on player payroll than nearly every other team in the sport. Apparently, fans are shocked that the people who charge them $5 for a hot dog are more interested in their money than their happiness. However, this is exactly what a system like MLB's revenue sharing is bound to do. It creates an incentive for small-market teams to earn more money by not investing in the product on the field.

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April 27, 2010 9:30 am

Ahead in the Count: Ryan Howard and the New MORP

83

Matt Swartz

Putting new valuation into action to evaluate the big bopper's big extension.

Just days after my two-part series introduced the new MORP to evaluate baseball contracts, the Phillies provided me with an excellent opportunity to put it into action by signing Ryan Howard to a five-year contract extension yesterday.

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February 3, 2010 11:43 am

Prospectus Hit and Run: The Lay of the Land

13

Jay Jaffe

From several angles, the AL West could prove to be the best division in baseball.

In preparing a recent column regarding the Dodgers' payroll situation, I made reference to the competitive ecology in which the team competes. "Competitive ecology" is a phrase introduced into the Baseball Prospectus lexicon by Keith Woolner, who wrote about it several times in the context of market-size issues and better revenue-sharing plans. For my money, he summarized it best in a pre-BP post to a Red Sox mailing list that was far ahead of its time:

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January 4, 2010 6:01 am

Ahead in the Count: Service-Time Contracts and Wins, Part 1

27

Matt Swartz

A look into how teams are assembled with talent from different sources at different prices.

In my last two columns, we discussed when rebuilding teams should sign free agents. Two weeks ago, I explained that teams with outside shots at competing could be doing themselves a favor to sign free agents who would be tradable for prospects at the trade deadline. Several insightful readers pointed out that signing free agents may be a way to work towards improving in the future. I investigated this claim in last week's column, in which I looked at how well free agents who signed multi-year deals performed in subsequent years of their deals. The overwhelming likelihood was that the biggest value from a free agent comes from the first year of their deal; in many cases, they declined considerably after the first year. Thus, the logical next question in my view is how winning teams are comprised. In this article, I grouped each type of player based on their service time-implied contract status, and checked how each team did at getting wins via each type of player.

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June 29, 2006 12:00 am

Schrodinger's Bat: Variations on a Monetary Theme

0

Dan Fox

Does an evenly balanced payroll put you at the front of the pack? Does it have anything to do with postseason success? Dan takes a look.

As this article goes to press, your humble author will be enjoying his first Society for American Baseball Research (SABR) convention being held in Seattle. In next week's column I hope to include a full report on some of the more interesting quantitative research presentations, along with a few general takes on the convention itself. I'll also be blogging from the Emerald City, so you'll be able to get a peek at the goings on.

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January 31, 2005 12:00 am

The Arbitration Process

0

Thomas Gorman

Over the next three weeks, hearings will be held to determine salaries for dozens of ballplayers. These hearings are the culmination of a process that begins in December, but has its roots in the early 1970s.

Salary arbitration had humble beginnings. The owners were exhausted by holdouts who refused to show up for spring training. The players were sick of having that refusal to play as their sole leverage in contract negotiations. With Flood v. Baseball failing to force a change in the reserve clause, arbitration seemed a reasonable solution.

Ed Fitzgerald, the Milwaukee Brewers Chairman and head of the owners' Player Relations Committee (PRC) in the early 1970s, embraced the idea as a way to neutralize the MLBPA's push for free agency. The Association's arguments against the owners would be weakened if the Lords showed a willingness to submit to binding and independent salary arbitration. Other owners, in particular the A's Charlie Finley and the Cardinals' Dick Meyer (who had experience with binding arbitration when he was labor chief of Anheuser-Busch), were suspicious, claiming that arbitration would drive salaries up. Which it would, compared to the status quo.

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Whenever "competitive balance" is debated, the debaters inevitably turn to published information about team payrolls to support their positions. This sounds straightforward. Unfortunately, "team payroll" is a fluid concept. The four most widely reported measures each use different methods and can lead to different conclusions.

Whenever "competitive balance" is debated, the debaters inevitably turn to published information about team payrolls to support their positions. This sounds straightforward... but unfortunately, "team payroll" is a fluid concept. The four most widely reported measures each use different methods and can lead to different conclusions.

The four measures are (1) the Opening Day payrolls reported by the AP and USA Today a week or so into the season; (2) the August 31 payrolls reported by MLB after the season; (3) the August 31 average team salaries reported by the MLBPA after the season; and (4) the luxury tax payrolls reported by MLB after the season.

The first three have a lot in common. Each begins with the salary of every player on a club's 25-man roster, or its major league disabled list, as of the stated date. Each computes each player's base salary in the same way: the actual amount he is paid during the season, plus a pro-rated share of his signing bonus and the discounted present value of any part of his salary which is deferred to a future year. Each has a common flaw: by taking a snapshot of the roster as of a specific date, it ignores the effect of midseason player moves.

The MLBPA's formula has a more serious flaw which renders it essentially useless for meaningful team-to-team comparison. Its averaging method involves dividing the club's total payroll by the number of players on its roster-plus-DL. However, the size of the disabled list varies widely from team to team. In 2002 just 26 players were used to compute the Kansas City and Oakland averages, while San Diego's average was based on a 36-man roster. Thus while the August 31 payrolls for Oakland and San Diego were virtually identical, Oakland's reported average was $450,000 higher. Given the other information available, that's an unacceptable variance.

Here are each club's 2002 payrolls as computed by the three other methods:

Opening Day Aug. 31 Luxury Tax Team Payroll Payroll Difference Payroll Difference Anaheim Angels $ 61,721,667 $ 62,757,041 $ 1,035,374 $ 69,449,444 $ 7,727,777 Arizona Diamondbacks $102,820,000 $103,528,877 $ 708,877 $106,590,086 $ 3,770,086 Atlanta Braves $ 93,470,367 $ 93,786,065 $ 315,698 $103,035,498 $ 9,565,131 Baltimore Orioles $ 60,493,487 $ 56,504,685 ($ 3,988,802) $ 64,351,025 $ 3,857,538 Boston Red Sox $108,366,060 $110,249,535 $ 1,883,475 $106,060,766 ($ 2,305,294) Chicago Cubs $ 75,690,833 $ 74,950,543 ($ 740,290) $ 81,104,031 $ 5,413,198 Chicago White Sox $ 57,052,833 $ 54,534,084 ($ 2,518,749) $ 57,800,783 $ 747,950 Cincinnati Reds $ 45,050,390 $ 46,310,698 $ 1,260,308 $ 54,663,420 $ 9,613,030 Cleveland Indians $ 78,909,448 $ 74,888,365 ($ 4,021,083) $ 82,693,915 $ 3,784,467 Colorado Rockies $ 56,851,043 $ 56,509,185 ($ 341,858) $ 72,300,867 $15,449,824 Detroit Tigers $ 55,048,000 $ 54,390,870 ($ 657,130) $ 67,589,693 $12,541,693 Florida Marlins $ 41,979,917 $ 40,822,536 ($ 1,157,381) $ 45,369,104 $ 3,389,187 Houston Astros $ 63,448,417 $ 65,412,960 $ 1,964,543 $ 74,384,060 $10,935,643 Kansas City Royals $ 47,257,000 $ 49,362,709 $ 2,105,709 $ 50,973,807 $ 3,716,807 Los Angeles Dodgers $ 94,850,952 $101,504,889 $ 6,653,937 $112,274,884 $17,423,932 Milwaukee Brewers $ 50,287,333 $ 49,259,130 ($ 1,028,203) $ 50,455,737 $ 168,404 Minnesota Twins $ 40,225,000 $ 41,309,031 $ 1,084,031 $ 45,931,954 $ 5,706,954 Montreal Expos $ 38,670,500 $ 37,901,032 ($ 769,468) $ 35,814,751 ($ 2,855,749) New York Mets $ 94,633,593 $ 94,395,575 ($ 238,018) $102,182,193 $ 7,548,600 New York Yankees $125,928,583 $133,429,757 $ 7,500,992 $167,592,745 $41,664,162 Oakland Athletics $ 39,679,746 $ 41,942,665 $ 2,262,919 $ 58,143,776 $18,464,030 Philadelphia Phillies $ 57,955,000 $ 59,593,741 $ 1,638,741 $ 64,505,697 $ 6,550,697 Pittsburgh Pirates $ 42,323,598 $ 46,059,984 $ 3,736,386 $ 55,967,080 $13,643,482 St. Louis Cardinals $ 74,098,267 $ 76,227,801 $ 2,129,534 $ 88,378,549 $14,280,282 San Diego Padres $ 41,425,000 $ 41,791,170 $ 366,170 $ 57,943,130 $16,518,130 San Francisco Giants $ 78,299,835 $ 78,426,572 $ 126,737 $ 88,488,058 $10,188,223 Seattle Mariners $ 80,282,668 $ 86,084,710 $ 5,802,432 $ 92,310,287 $12,027,619 Tampa Bay Devil Rays $ 34,380,000 $ 34,728,540 $ 348,540 $ 36,249,505 $ 1,869,505 Texas Rangers $105,302,124 $106,915,180 $ 1,613,056 $122,887,987 $17,585,863 Toronto Blue Jays $ 76,864,333 $ 66,814,971 ($10,049,762) $ 58,963,374 ($17,900,959)

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There is no competitive balance problem in baseball, even in the latest period of Yankee pennants. Supposedly, the Yankees play an entirely different game than other teams. If this is true, we should see this in almost any metric we choose, but it's not there.

I recently wrote a column in which I explained about how boring I found payroll caps, and how I felt that they forced everything in their leagues to become about the cap. I got a ton of e-mail, much of which read (and I'm omitting some colorful language here) "What about competitive balance? That's what the cap gives fans, you Yankee-loving..."

There is no competitive balance problem in baseball, even in the latest period of Yankee pennants. Supposedly, the Yankees play an entirely different game than other teams. If this is true, we should see this in almost any metric we choose, but it's not there.

I'm going to set out some real simple standards for measuring competitive balance in baseball, and look at what we get out of them. I've decided to use seasons following the 1994 strike as an arbitrary start point, but this coincides nicely with the Yankees' perceived dominance.

So for the seven-year stretch of 1995-2001, let's check out some cumulative records of franchises (expansion teams ommitted, which means the cumulative record here is 14,597 - 14,399).

Team W L Pct. Atlanta Braves 679 437 .608 New York Yankees 661 452 .594 Cleveland Indians 652 462 .585 Seattle Mariners 616 499 .552 Houston Astros 606 510 .543 Boston Red Sox 602 513 .540 New York Mets 589 528 .527 Los Angeles Dodgers 588 528 .527 San Francisco Giants 587 530 .526 St. Louis Cardinals 569 545 .511 Texas Rangers 568 548 .509 Chicago White Sox 566 548 .508 Cincinnati Reds 566 550 .507 Oakland Athletics 564 551 .506 San Diego Padres 564 552 .505 Baltimore Orioles 551 564 .494 Anaheim Angels 544 572 .487 Toronto Blue Jays 541 575 .485 Chicago Cubs 527 590 .472 Milwaukee Brewers 512 602 .460 Philadelphia Phillies 507 609 .454 Montreal Expos 500 616 .448 Kansas City Royals 490 622 .441 Minnesota Twins 489 625 .439 Pittsburgh Pirates 488 627 .438 Detroit Tigers 471 644 .422

The top five on this list includes two franchises that would have been contracted when I was going to games early in my life, ones that were used then as examples of how unbalanced baseball was.

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