Good MLB Teams Oppose Income Inequality

In 2000, the Cleveland Indians wanted to digitize the bulky binders of scouting reports, rivals’ payrolls and medical information they took to the winter meetings. So well before Michael Lewis published “Moneyball” in 2003, the Indians developed DiamondView, the game’s first proprietary database. And it was in the winter of 2002-03 that DiamondView informed the Indians to be wary of re-signing star free agent Jim Thome, who had just turned 32.

The Indians were concerned that Thome would drop off in production over the course of the long-term deal he was seeking — a view that has become more common among MLB teams in the years since, in part due to data-driven insights. But DiamondView told them to worry about something else too: depositing too many dollars into the bank account of just one star. The Indians were not comfortable allocating more than 12.5 percent of their payroll on Thome. So the 2018 Hall of Fame inductee signed with the Philadelphia Phillies for six years and $85 million — a contract that would have accounted for 18.7 percent of the Indians’ 2003 payroll. Cleveland’s database revealed that dating back to 1985, no World Series champion had committed more than 15 percent of payroll to one player. It’s a finding that still largely holds up going into this much-anticipated free agency shopping season.

Since 2000, only one World Series-winning team included a player who accounted for more than 20 percent of its opening day payroll, according to a FiveThirtyEight analysis of club payrolls found in the Cot’s Baseball Contracts database at Baseball Prospectus. That was the 2003 Florida Marlins with catcher Ivan Rodriguez. Only three other teams in that time frame even exceeded 16 percent: the 2010 Giants, the 2009 Yankees and the 2004 Red Sox. The other 15 champions allowed between 10.3 and 15.8 percent of their payroll to their top player.

This offseason, the Diamondbacks are reportedly seeking to trade Zack Greinke, whose contract accounts for $34.5 million of the club’s $77.5 million commitments so far for 2019, according to Spotrac. The Padres probably already regret the eight-year, $144 million deal they gave to Eric Hosmer last year, after a season in which he produced -0.1 wins above replacement (WAR)²⁴ while accounting for 22 percent of payroll. The Los Angeles Angels have long lamented the albatross that is Albert Pujols’s contract. Pujols, who signed with the Angels at age 32, has produced 0.2 WAR over the past four seasons and hampered L.A.’s ability to build a team around Mike Trout. So while 26-year-old superstars Manny Machado and Bryce Harper are appealing as free agents because of their rare youth and production, what they would require in terms of share of payroll should give many teams pause.

In terms of Machado and Harper, there aren’t many comps for the combination of their youth and the dollars they’re expected to receive. In 2001, Alex Rodriguez signed what was then the largest contract in baseball history (10 years and $252 million). In 2015, Giancarlo Stanton signed what remains the greatest contract in history: 13 years and $325 million. Both players were 25 years old in the first season of those deals. Both remained stars after signing the deals. But both were traded to the Yankees three years into those deals in part because the contracts hamstrung their respective clubs’ ability to build rosters. The Rangers, who declared bankruptcy in 2010, are still paying Rodriguez deferred money as part of the trade agreement with the Yankees.

Now not all payrolls are the same, of course — and similar shares mean much different amounts in small markets than in large markets. The 2018 Red Sox led baseball with their $233.8 million payroll. The highest salary on this Boston team was the $30 million paid to David Price, and that accounted for just 12.8 percent of the payroll. But a $30 million salary in Philadelphia, paid to Jake Arrieta, took up a whopping 31.5 percent of the Phillies’ $95.3 million payroll. But regardless of budget size, successful teams rarely allocate a large share of payroll to one player.

The Major League Baseball Players Association, which has fought to keep limits off of earning potential, would perhaps argue that most budgets could be larger. But front offices must work with the dollars ownership gives them, and the players’ share of revenue has remained steady in recent years.

Last year, Arrieta’s share of the Phillies’ payroll was the greatest in baseball. The next two were Greinke, who accounted for 25.8 percent of the Diamondbacks’ payroll, and Joey Votto of the Reds (24.7 percent). All three played for teams that missed the playoffs. In total, seven players accounted for 20 percent or more of their respective club’s payroll last season, and only one of those players, Milwaukee Brewers outfielder Ryan Braun, participated in the postseason.²⁵

In 2017, four players accounted for a least 20 percent of their teams’ payrolls. Greinke (36.5 percent) and Joe Mauer (21.3 percent) appeared in the postseason, though the Diamondbacks lost in the National League Division Series, while the Twins lost in the American League wild-card game. In 2016, eight players accounted for 20 percent or more of payroll, and only one — Yoenis Cespedes of the Mets — played in the postseason.

This may be part of why teams have become more leery of free agency in general. The combined salaries of each team’s top-paid players totaled $680 million last season. But those players accounted for a middling 69.8 WAR, or $9.7 million per win over replacement level. Teams seem content to spread the risk in a sport loaded with uncertainty.

Some franchises that are caught between rebuilding and contending have tried to use free agency to jump-start the process. The Phillies aimed to accelerate their return to contention last winter by front-loading deals for free agents Arrieta and Carlos Santana. But the pair accounted for only 4.1 of the club’s 32 wins above replacement while combining for 50.7 percent of the club’s opening day payroll, the greatest two-man share of payroll in the game. The Phillies finished third in the NL East at 80-82 and are already shopping Santana — and they might be trying to clear even more space to court Harper and/or Machado.

“We’re going into this expecting to spend money,” Phillies owner John Middleton told USA Today. “And maybe even be a little stupid about it. We just prefer not to be completely stupid.”

Harper and Machado are not run-of-the-mill free agents. While these types of ultra-expensive stars often sign with large-market clubs, there might be interest from teams with considerable lower-wage young talent and payroll space, like the Phillies, Atlanta Braves, Minnesota Twins, Tampa Bay Rays (yes, the Rays can hypothetically afford Harper or Machado in 2019) and Chicago White Sox. One of those teams may be looking to make the leap to contention by signing a young superstar — following the Milwaukee Brewers’ path of winning the offseason and the regular season.

History suggests, though, that this feat is hard to repeat.

Baseball is much different than the other major North American team sports. Stars simply don’t provide as much impact, and overall roster depth is more important. A quarterback in the NFL handles the ball on nearly every offensive snap, and a superstar talent in the NBA will be involved on the vast majority of possessions. So when Peyton Manning missed the 2011 season, the Indianapolis Colts collapsed from a 10-win team the previous season to one that won two games and had the first pick in the 2012 draft, selecting Andrew Luck. And when a generational talent like LeBron James moved on, his former teams didn’t stand much of a chance. In baseball, though, stars like Trout, Harper and Machado can bat only once every time through the lineup. In the regular season, an ace pitcher takes his turn only once every five days. It is nearly impossible for a baseball star to have the impact a star has in other sports.

Thome left Cleveland for the Phillies in 2003. He never played a playoff game in Philadelphia and was later traded to the White Sox. The Indians pivoted toward youth and made it to the American League Championship Series in 2007, where they got one win away from the World Series. Just about every MLB club now has a proprietary database. Every club knows the risks of placing too many dollars into one contract.