Remaking the Yankees, Part VII: Adding It Up
In analyzing the Yankees offseason moves over the past couple of weeks, I've largely steered clear of any commentary about the consequences of the Yanks' spending spree, both for themselves and for the rest of baseball. I did this for several reasons:
First, because I wanted to focus on the vacancies in their 2002 roster, their options for filling said vacancies, and the quality of the decisions they made.
Second, because in this contentious environment, we are currently so awash in misleading financial data, that it's tough to take any analysis of baseball's finances seriously.
And third, because if I'm nowhere near being a major-league baseball player (even a futility infielder with a sub-700 OPS) or a General Manager, I'm even further away from being an economist or an accountant. In general, money bores the hell out of me, unless it's my own we're talking about.
Nevertheless, I do feel some nagging responsibility to address the issue now that I've watched George Steinbrenner's team throw $165 million at four free agents. So bear with me as I try to weed through some of the numbers.
According to figures released last week by the Major League Baseball Players Association, the Yankees paid an average annual salary of $3.93 million to the 31 players on their August 31 roster or disabled list, leading the major leagues. This figure was 84% higher than the major league average of $2.14 million. This was the first year that the average salary surpassed $2 million, and was up 12.8% on last year's figure of $1.9 million
This was the third straight year that the Yanks have had the highest annual salary, and the seventh time in the past eight. Multiplying the average salary by the number of players on their roster and DL, we get a figure of $121.8 million worth of salaries. Back in April, ESPN reported the Yanks' opening day roster as totalling $109.8 million in salary, which barely edged out the the Boston Red Sox ($109.6 million) and Los Angeles Dodgers ($109 million) for the top spot. If I understand correctly, those opening day figures were based on average annual values of contracts rather than what the teams would actually be paying this year, but it's unclear whether the recently released figures are calculated the same way. We may be comparing apples and oranges.
This is an important distinction. Take Derek Jeter's contract, for example. Jeter signed a 10-year contract worth $18.9 million annually, so that $18.9 mil figure would be included in the MLBPA's calculations. But according to the structure of the contract, in 2001 Jeter actually received an $11 million salary, plus $2 million of a $16-million bonus which was spread over 8 years. Total salary for 2001: $13 million. You can see where this is going--a vastly inflated figure compared to their actual payments for the year. Still, according to these figures, the Yanks spent more money on player contracts than any other team.
The Yankees spend the most money because they make the most money.
Forbes Magazine estimated their revenue for the 2000 season at $192.4 million, tops in baseball. The Mets were second, at $162.0 million, the Braves third at $145.5 million, the Expos last at $53.9 million. The league average was $105.9 million. According to
2001 unaudited figures released by Major League Baseball a couple of weeks ago, the Yanks' revenue was $242.2 million, again tops and about twice the major league average of $118.3 million. Montreal again brought up the rear, this time at $34.2 million. Not coincidentally, these high revenues make the Yankees the most valuable franchise in baseball. George Steinbrenner's team was valued by Forbes in the beginning of the season at $635 million, almost 40% higher than the next most valuable club, the Mets, and 241% of the major league average franchise valuation.
According to those numbers released by Bud Selig, numbers about which we should be very skeptical because of the lack of detail they provide and the accounting tricks they undoubtedly conceal, major league teams posted a $232 million operating loss in 2001, or an average of $7.73 million per team. Against all of this, the Yanks posted an operating profit of $14.32 million after factoring in revenue sharing (towards which the Yankees kicked in $26.5 million this year), making them one of only nine teams to show a profit for 2001:
Milwaukee $16.13 million
Seattle 15.48
NYY 14.32
SF 12.69
Detroit 5.66
Oakland 3.41
Cincy 2.35
Minnesota 0.54
Anaheim 0.03
A closer look at the numbers reveals that revenue sharing put the Angels, Reds, Tigers, Twins, and A's in the black, while it put seven otherwise profitable teams in the red. The Brewers, in addition to turning a profit (nice job, Bud, I mean Wendy) received a small amount of revenue sharing ($1.7 million), meaning only three teams withstood their revenue-sharing contributions and still showed a profit. Not surprisingly, the Yanks were one of those teams.
According to Selig's
testimony before Congress, the Yankees were one of only two profitable teams over the past seven years, the other being the Cleveland Indians. The Yankees posted a $64.5 million operating profit from the years 1995-1999, as the
Blue Ribbon Committee reported last summer (I don't have updated figures covering all seven years).
The Yankees are the wealthiest and healthiest franchise, so what else is new? Well, YES--the Yankee Entertainment and Sports Network, George Steinbrenner's new cable channel--will be carrying the Yankees games starting next season, bringing a new revenue stream of bigger and bigger local broadcasting dollars. The Yankees made $56.75 million in local broadcast revenue this year, according to Major League Baseball, 2.5 times the major league average. Estimates on what the team will earn in its first year of YES range from a low of $52 million (
according to a former president of CBS Sports) to a high of $80 million (according to Doug Pappas, head of the Society for American Baseball Research Business of Baseball Committee, who maintains
a site devoted to his excellent writings on the subject and who has been writing a
worthwhile series on similar grounds over at Baseball Prospectus). The rich, in other words, stand to get a whole lot richer, which is why they've been spending so much money lately.
One of the things wrong with baseball right now is the ill-structured revenue sharing agreement, a result of the
1995 strike settlement, which allows teams receiving luxury taxes paid by the likes of the Yankees to pocket those dollars rather than reinvesting them in player salaries. But just as wrong is that the Yankees are allowed to maintain their huge local revenue advantage unchecked. As it's structured right now, teams do not share their local broadcast revenues, despite the fact that it takes two teams to tango on the Madison Square Garden Network or YES. A revenue-sharing solution which requires teams to contribute some percentage of local revenues (AND prevents those receiving revenue sharing from merely pocketing the income) is one of the most commonly offered solutions to the current revenue disparity problems.
It remains to be seen whether the owners will get hip to this idea, as it makes much more sense than a salary cap. Given George Steinbrenner's public support for Bud Selig but his just-as-public disdain for revenue sharing ("I'd rather send a million dollars to Save the Whales than to the Pittsburgh Pirates," he's been quoted as saying), it will be some measure of Selig's sincerity in tackling the problem if he shows the courage to try to reach inside of George's pocket himself.
You can stop laughing now.
In the wake of the Yanks' wave of free-agent signings last week, ESPN offered up a headline which read "Yank payroll closes in on $150 million." The story--mostly about YES--included a sidebar which listed the average annual value of Yankee players' contracts, along with estimates for their unsigned younger players. The total reported there was $147 million--an astronomical number. But it's also one that simply isn't true. Those numbers do not take into account the salary structures of several of the Yanks' top contracts, as I hinted at above. Derek Jeter and Jason Giambi, for example, both have heavily back-loaded contracts. While ESPN reports the averages as $18.9 million for Jeter and $17 million for Giambi, the truth is that Jeter will receive "only" $15 million in 2002 including signing bonus, and Giambi only $10.8 million (on the other hand, they will be receiving respective salaries in 2007 of $20 and $21 million). These figures are taken from a
contracts page which lists the year-by-year structure of nearly every long-term contract. Using these figures (which include the structure of bonus payments), as well as what's been reported this week, we come up with a much different estimate of the Yankees payroll. In creating the table below, I've averaged out bonuses over the life of the contract unless they were otherwise indicated, and I've used ESPN's estimates for unsigned players, denoted by an asterisk:
2002 ESPN
Base + bonus total AVG
Jeter 13.0 + 2.0 15.0 18.9
Giambi 8.0 + 2.8 11.8 17.0
Mussina 9.0 + 2.0 11.0 14.8
Clemens 7.8 + 2.5 10.3 15.4
BWilliams 12.0 12.0 12.5
Pettitte 8.5 + 1.7 10.2 8.5
Rivera 7.45 + 2.0 9.45 9.9
Ventura 8.25 8.25 8.0
Posada 8.0* 8.0 8.0*
Karsay 3.0 + 4.0 7.0 5.75
Hitchcock 5.0 6.0 6.0
White 4.5 5.5 5.0
OHernandez 4.0* 4.0 4.0*
Stanton 2.5 2.5 2.58
Mendoza 2.5* 2.5 2.5*
GWilliams 2.0 2.0
Vander Wal 1.55 1.55 1.92
AHernandez 1.0 1.0 1.0
Soriano 1.0* 1.0 1.0*
Spencer 1.0* 1.0 1.0*
Henson 1.0 1.0 2.83
Johnson 0.5* 0.5 0.5*
-------------------------------------
130.55 147.08
As you can see, those are two very different figures--a 12.7% difference. What's interesting is that the righthand column of approximate annual values is what the MLBPA uses to calculate revenue-sharing figures, rather than basing them on actual payments due.
There's no getting around the fact that the Yankee payroll is extremely high. So far, they've been the most active team in the free-agent market, and while teams have paid lip service to cutting payroll, questionable mid-level signings have abounded. Many of the top free agents--Barry Bonds, Juan Gonzalez, Chan Ho Park, for example--remain unsigned, with their respective suitors keeping a very low profile. Right now the Yanks are getting all of the exposure and taking all of the heat.
For what it's worth, I would like to point out that with the exception of the Karsay signing, the Yanks haven't really broken any new ground, contract-wise. Jeter's contract is still about $6 million per year lower than Alex Rodriguez's. Giambi's contract is one of the top five in terms of average annual value, and it's probably going to become a millstone over the second half unless he stays in shape and very productive. What is new ground is the number of players the Yanks have who will be making over $10 million a year--five or six, depending on which method you use.
Right now the Yanks are clearly in a class by themselves when it comes to spending. There's no doubt that losing the World Series and shedding mid-priced mediocrities has opened their checkbooks wider than if they had won the Series. Whether they'll be the only team in that stratosphere come opening day remains to be seen.
As I said before, I'm not an economist. I highly recommend anybody who's got even a passing interest in the finances of baseball read Doug Pappas's writings--there's a man who understands where the money comes from and where it's going much better than I do.
Remaking the Yankees, Part VI: The Bullpen
In the era of the Feel-Good Yankee Dynasty, it's ironic that one of the team's most glaring weaknesses last season had its roots in an old-school Bronx Zoo-style feud. It started when Joe Torre bypassed his own righty setup man, Jeff Nelson, for a spot on the 2000 AL All-Stars. Nelson, en route to a 6-2, 1.69 ERA first half, publicly vented his frustration at Torre. The seeds of ill will thus sown, they were further cultivated when Nelson questioned Torre's use of him later in the season as the team began to struggle. Nelson's complaints earned a put-up-or-shut-up rebuke from the Boss himself: "I want to offer Nelson the following advice," Steinbrenner told the New York Daily News in early September. "Just give us what we need and zip the lip."
Nelson began talking like a man on the way out. "I have 29 more days plus the playoffs to put up with this stuff," he
responded, then made good on his prediction by signing a 3-year, $10.5 million contract with the Seattle Mariners during the offseason. The Yankees had offered Nelson $9 million over the same period, and despite his role in bolstering a dominating bullpen which anchored four World Championships in five years, Steinbrenner let him walk over such a relatively small amount.
The Yankees never did replace Nelson adequately last season, and their failure to do so had a trickle-down effect on the entire bullpen. They auditioned a sordid assortment of righties, trading away prospects such as D'Angleo Jiminez and Ricardo Aramboles to get mediocrities like Jay Witasick and Mark Wohlers. Lefty Mike Stanton got the bulk of the setup duty in the bullpen, appearing in 76 games and wearing down as the season progressed. Randy Choate stepped into the spot-lefty role with mixed results, including some serious control problems. With the back end of the starting rotation struggling, Ramiro Mendoza racked up lots of innings in middle relief instead of the type of setup duty in which he's excelled in the postseason.
In the end, Torre put his trust in only three relievers--Stanton, Mendoza, and Rivera. Not coincidentally, they were the only ones to pitch over 50 innings for the team. This short bullpen had ramifications during the playoffs, as Rivera was called upon for five outings of longer than an inning, including Game Seven of the World Series, where... well, you know the rest.
Here's a breakdown of the relievers' stats, with the pretenders to Nelson's role grouped together in roughly chronological order (I threw Nelson's stats with Seattle on for comparison's sake). Note that while those relievers' ERAs weren't uniformly bad, they allowed a high number of baserunners per inning (WHIP) and a majority of inherited baserunners (IR) to score (IS). The last column is saves (SV) and blown saves (BS):
IP ERA WHIP IR-IS SV/BS
Todd Williams 15.1 4.70 2.02 12-8 0/0
Carlos Almanzar 10.2 3.38 1.50 13-11 0/2
Brian Boehringer 34.2 3.12 1.36 14-6 1/1
Jay Witasick 40.1 4.69 1.61 18-10 0/1
Mark Wohlers 35.2 4.54 1.43 17-5 0/0
Randy Choate 48.3 3.35 1.25 19-4 0/0
Ramiro Mendoza 100.6 3.75 1.11 46-7 6/2
Mike Stanton 80.1 2.58 1.36 44-12 0/1
Mariano Rivera 80.2 2.34 0.81 25-5 50/7
Jeff Nelson (SEA) 65.1 2.76 1.13 38-5 4/1
The good news is that the Yankee brass has recognized the cost of their penny-wise, pound-foolish decision to let Nelson walk. Brian Cashman even took public responsibility for his less-than-stellar work in this department. And so the Yanks did what they have done all winter--carefully evaluated their options, then threw A LOT of money at their top choice and induced him to sign a contract. In this case, they settled on righty Steve Karsay, who started the year in Cleveland before being traded to Atlanta in the John Rocker deal. Karsay signed a 4-year, $23 million dollar contract to serve as the belated replacement for Nelson. Reportedly, Joe Torre plans to have Karsay, who has a history of elbow trouble, share the righty setup role with the equally fragile Mendoza so as not to overwork either. This in turn should take some of the pressure off of Stanton to throw as many innings as he did. And it should also take some pressure off of Rivera; Karsay's experience in the closer role (though not wildly successful--29 saves, 15 blown saves overall) may prevent Mariano from working too many days in a row.
While the signing was emphatic (almost twice the amount they offered to Nelson per year), this was one example where they overspent significantly. The Yanks also toyed with the idea of signing David Weathers, a former Yankee with a longer track record of mediocrity (save for his '96 postseason in pinstripes, when he won two games) who just signed with the Mets for three years at $9.4 million. The two posted very similar stats, though Weathers entered many more games with men on base:
IP ERA WHIP IR-IS SV/BS Car. ERA
S. Karsay (CLE-ATL) 88.0 2.35 1.11 19-3 8/4 4.00
Weathers (MIL-CHC) 86.0 2.41 1.15 44-8 4/6 4.81
If you see double the annual value in Karsay, you'll have to show me how that works, because I certainly don't see it.
Be that as it may, the Yankees bullpen is much stronger than it was when Luis Gonzalez's broken-bat single fell for a game-winning base hit one sad November night. Rivera will be back, and he's expected to shrug off that devastating defeat with the same success he did Sandy Alomar's home run in the 1997 AL Divisional Series. With one inning to go and the World Championship on the line, he's still the man any manager in baseball would be thrilled to turn to. As for the rest of them... Witasick was just traded for outfielder John Vander Wal. Wohlers was offered arbitration but is probably a longshot to make the team in the spring. The question marks are:
Whether Randy Choate will emerge to take on significant innings and earn the trust of Torre. Rather than being used as a spot lefty, Choate pitched most of his innings doing mop-up, perhaps to better showcase his trade value. Looking at his
game log, 15 of his last 19 outings were in games decided by more than three runs, and his last six appearances (from August 18 on) were all in losses. Choate showed control problems, walking 27 batters in his 48+ innings (5.0 per 9 IP). Given the Yanks' surplus of developing lefties, it wouldn't be surprising to see him traded.
Whether Ted Lilly, bumped to the bullpen by the signing of Sterling Hitchcock and Brian Cashman's
assertion that the team will keep El Duque (I think he reads my column, as
Baseball News Blog's Pete Sommers has suggested), will get enough work in the bullpen to develop. Given Lilly's high strikeout rate (8.4 per 9 IP) and success out of the pen (3.78 ERA, 1.08 WHIP, 5.0 K/W in 16.2 innings), this may be an appealing option.
Whether another Yankee youngster, such as Adrian "El Duquecito" Hernandez, will make the club and get some major league innings. Hernandez, a Cuban defector, is at least 27. He didn't wow anybody at Columbus (5.51 ERA, 7.4 K/9, 1.5 WHIP as a starter), but he acquitted himself reasonably well with the Yanks (3.68 ERA, 1.14 WHIP in 22 innings). If they're going to find out what they've got in him, now may be the time.
Those are minor questions, however. The Yankees seem very content with the answers they can offer out of the bullpen at this point.
Before I put the issue of the Yanks' big makeover to bed and depart for the ski slopes of Utah, I have some final thoughts on the ramifications of their spending this winter. I'll be back with those in my next piece, as well as some words about what's going on elsewhere.
