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Spring training crowds during the first week of the 2017 exhibition season have been relatively sparse across both Florida and Arizona. With the exception of the Braves, Cubs and Red Sox, the average crowd size for every team has been down double digits compared to 2016. It must be time for the World Baseball Classic!

Y/Y Comparison of Spring Training Attendance: First Week 2017 vs. 2016 Total

Note: 2017 data is as of March 3. Attendance includes only games played against major league teams at typical spring training facilities.
Source: ESPN.com

Since the inaugural WBC in 2006, spring training attendance has taken a hit in each year that the tournament has been played. However, the decline has only been temporary. In the year following the WBC, attendance levels have immediately snapped back and continued their gradual ascent. Is this a quadrennial coincidence, or has the WBC discouraged fans from attending spring training games?

Average Spring Training Crowds Before and After WBC Years

Note: 2006-2008 data is for 15 current Grapefruit League teams only. Attendance includes only games played against major league teams at typical spring training facilities.
Source: Yahoo.com, ESPN.com and sportsbusinessdaily.com

There are a few reasons why the WBC might cannibalize spring training crowds. The most obvious is the earlier start to spring training necessitated by the tournament schedule. With a week’s worth of games in February, nearly one-quarter of the schedule takes place before a typical exhibition season begins. If these earlier games do not coincide with normal travel patterns and the habits of local residents, the result would be smaller crowds in February and an overall decline in average attendance caused by the resultant dilution. Continue Reading »

(This updated post was originally published on February 16, 2011)

For 20 years, Tampa has been the Yankees’ spring training home, but it still seems like just yesterday when the team’s camp was located down the coast in Ft. Lauderdale. I am sure most fans who grew up in the 1970s and 1980s still reflexively harken back to those days of yore, while the real old timers’ memories take them all the way back to St. Petersburg, where Yankees’ legends from Ruth to Mantle toiled under the Florida sun.

Over the years, spring training has evolved significantly. Once upon a time, it was a pre-season retreat designed to help out-of-shape ballplayers shed the pounds added over the winter. In the early part of the last century, before even reporting to camp, players would often attend spas in places like Hot Springs, where they would purge their bodies of the iniquities from the offseason. Then, games would either be played among split squads (in the old days, the camps would be split into teams of veterans and hopeful rookies, the latter often called Yannigans) or against local minor league and college ball clubs. Finally, the teams would barnstorm their way back up north before finally kicking off the regular season.

Today, spring training is more big business than quaint tradition. Thanks to the growing competition between cities in Arizona and Florida (each state now hosts 15 major league clubs), teams have been able to extract sweetheart stadium deals, allowing them to turn the exhibition season into a significant profit center. Still, at the heart of spring training is hope and renewal as teams begin the long journey that is the baseball season.

The Yankees’ spring history has been a journey all its own. Below is an outline of some significant mileposts along the way.

Yankees’ Spring Training Homes Since 1901
yankees-st

Continue Reading »

Is Jim Palmer the most overrated pitcher of all time? Disciples of defense independent pitching stats (DIPS) have often pointed to the right hander’s mediocre strikeout rate and extraordinary success on balls in play to support that claim, and the slight hasn’t gone unnoticed by Palmer. During a recent roundtable discussion convened by ESPN’s Jerry Crasnick, the three-time Cy Young award winner took on his critics with a statistic of his own.

I asked a writer I know, ‘You’re into sabermetrics. Can you look up, with a runner on third and less than two outs, did my strikeouts go up?’ And he said, ‘Yeah, they went up 17 percent.’ Well, why do you think that is? Because I didn’t want to give up a run.”

Palmer’s comment was a rebuttal to the claim that his performance was aided by luck (and the Orioles’ defensive proficiency).  At first glance, the argument sounds like an off-shoot of “pitching to the score”, but Palmer’s protest isn’t theoretical. Not only is the claim intuitively logical, but it is easily verified. So, is it true?

In order to verify Palmer’s claim, we need to establish the appropriate points of comparison. For this purpose, K/9 rates do not seem sufficient because they measure the number of strikeouts relative to outs. A more relevant comparison is between strikeouts and batters faced, but with one small adjustment. Because intentional walks have historically been four to eight times more frequent in situations with a runner on third and fewer than two outs, it makes sense to remove them from the equation. After all, the purpose of this exercise is to measure the pitcher’s intent, which, when handing out a free pass, is clearly not to record a strikeout.

MLB Rate of Intentional Walks, 1955-2016

Note: Play-by-play data is considered mostly complete from 1955 -1974, and complete from 1975 to 2016.
Source: baseball-reference.com

Before focusing on Palmer, it’s interesting to note the gradual decline in the number of intentional walks with a runner on third and fewer than two outs. With the influx of power arms and overall increase in the rate of strikeouts, this trend might suggest pitchers are more confident in their ability to get a big strikeout than, perhaps, set up a double play by putting a man on first. Has that been a successful strategy? We’ll get back to that later.

Jim Palmer’s Strikeout Rates

Note: Strikeout rates are as a percentage of batters faced, excluding intentional walks: K/(TBF-IBB).
Source: baseball-reference.com
Continue Reading »

The Dodgers opened up their wallets again this winter, but no one should be surprised. According to final payroll data reported by major league baseball, Los Angeles has retained its ranking as the game’s biggest spender for the third consecutive season.

2016 Final Payrolls

2016-payrolls

Note: Final payrolls represent actual amounts spent (salaries, benefits, earned bonuses and pro-rated shares of signing bonuses), but not AAV valuations used for luxury tax purposes.
Source: MLB release published by AP

Although the Dodgers’ $255 million payroll in 2016 easily outpaced all other teams, it also represented one of the largest year-over-year declines. Compared to 2015, L.A. trimmed nearly $40 million from its ledger, or almost two-thirds of the Milwaukee Brewers’ league-low $65 million payroll. The Dodgers’ diminished player expense also resulted in a much smaller luxury tax assessment. With a final average annual value (AAV) calculated at $252.5 million, Los Angeles’ tax bill came to almost $32 million, the third highest figure ever recorded, but a fraction of the whopping $57 million owed last year.

Year-Over-Year Payroll Changes (Final), 2016 vs. 2015
yoy-final
Note: Based on base salary of contract year plus pro-rated items, earned bonuses.
Source: MLB releases published by AP

Year-Over-Year Payroll Changes (AAV), 2016 vs. 2015
yoy-aav
Note: Based on Average annual value of contracts plus pro-rated items, earned bonuses, and defined benefits of $12,953,201, which, according to AP, includes items such as health and pension benefits; club medical costs; insurance; workman’s compensation, payroll, unemployment and Social Security taxes; spring training allowances; meal and tip money; All-Star game expenses; travel and moving expenses; postseason pay; and college scholarships.
Source: MLB releases published by AP Continue Reading »

Most in the baseball media have declared management as the winner in the sport’s latest round of labor negotiations. Over the last two days, I’ve portrayed the outcome as a split decision by illustrating how the new CBA will do little to change the prevailing trends in the game. But, that begs the question: is the status quo good for the players?

Rise in Luxury Tax Threshold, 2003-2021

lux-tax-history

Source: MLB

The first step toward answering that question is to consider the history of the current luxury tax system, which dates back to 2003. Since then, three new agreements have amended the structure, resulting in a rising threshold, but decreasing capacity as a percentage of revenue. This latter trend has been cited as a failure by the MLBPA, but that criticism is baseless. The reason why luxury tax capacity compared to revenue has declined is because the sport’s business fundamentals have improved dramatically, not because the threshold has limited salary growth. After all, in 2015, the last year for which there are official numbers, there was a $1.3 billion gap between capacity and actual player compensation, so even if the new CBA provided for no increase in threshold, there would still be plenty of room for salary growth. However, the new agreement does call for an 11% bump in the tax trigger over the next five years, which is double the rise that resulted in the previous accord. So, even if big spenders like the Yankees and Dodgers are deterred from spending more, the other 28 teams have more than enough room to pick up the slack.

Luxury Tax Capacity as a Percentage of Net Revenue, 2003-2015
net-rev-vs-lux-tax-cap
Note: Revenue is net of stadium debt service.
Source: MLB, Forbes (net revenue)
Continue Reading »

Was the CBA process hijacked from the players? Are payrolls likely to stagnate? And, is the deal so one-sided that the seeds of future discord have already been sewn? All of these assessments are based on the premise that the new CBA will discourage spending, but is that true?

As illustrated yesterday, the additional penalties imposed by the new luxury tax scheme are likely to only effect two teams: the Yankees and Dodgers. Even if other teams exceed the new thresholds, none are habitual offenders and all are unlikely to spend at levels that wouldn’t trigger the new surcharges. So, any analysis of the new system’s dampening effect should center on how it will influence the Yankees’ and Dodgers’ willingness to spend.

Comparative Tax and Rate for Hypothetical Payrolls (chart and graph), 2016-2021
comparative-tax

comp-tax-chart

Note: Assumes payroll is taxed at the maximum rate and surcharge (i.e., applies to habitual offenders). Green shading in the chart indicates where total tax is lower than would have been under 2016 rules.
Source: Proprietary

The new CBA will impose more stringent tax rates on habitual big spenders, but these gaudy percentages look more imposing when divorced from the proper context. As illustrated above, in dollar terms, the tax paid out on a commensurate payroll will gradually decrease over the agreement’s five year term. And, for  payrolls around $265mn or lower, the fine levied will be less from 2019 forward than it would have been under the 2016 rules. In other words, the new surcharges will only have a significant impact on sustained payrolls approaching $300 million. Continue Reading »

Major league baseball owners and players continued their impressive streak of labor peace by tentatively agreeing to a new five-year collective bargaining agreement. Although the final agreement has not been drafted, not to mention ratified, enough details have emerged to allow for an early analysis. So far, the conventional wisdom is the owners were the clear winner, but a closer examination suggests both sides did well, with the only losers being international amateur free agents.

According to reports, the tentative CBA contains some interesting changes, such as a 10-day disabled list, revised free agent compensation rules, and a new system for determining home field advantage in the World Series. However, the most consequential part of the agreement concerns adjustments to the luxury tax structure and revenue sharing system.

Rise in Luxury Tax Threshold, 2003-2021
lux-tax-historySource: MLB

Starting in 2017, the luxury tax threshold will rise 3.2% to $195 million and then gradually climb to $210 million when the deal expires in 2021. Some have portrayed this modest increase as evidence of the MLBPA caving into ownership demands, but the 11.1% increase over the span of deal nearly doubles the 6.5% rise between 2011 and 2016. Not coincidentally, if you take Forbes revenue estimates for the industry (and assume 2016 growth mirrors 2015), then the 30% increase during the just-expired CBA would also be double the 15% bump that occurred during the preceding deal. Is that a coincidence? Perhaps, but the symmetry suggests the revised thresholds are fair to both sides.

Tax Rate Snapshots

lux-tax-snapshots

Another reason the owners have been hailed as victors is the introduction of new surcharges that will be levied against extreme luxury tax offenders. In addition to an escalating tax rate, which climbs from 20% to 30% to 50% for repeat violations, teams will also be slapped with an additional 12% tax on payroll that is  $20-$40 million over the limit and a 40% surcharge for going beyond $40 million (rising to 42% for consecutive violations). Although this has been portrayed as a maximum rate of 92%, the surtaxes only apply to defined overages, meaning a team would have to maintain a payroll of approximately $350 million for three years to end up paying an effective tax rate that high. Still, a habitual offender like the Yankees would end up paying a 69% tax on a $250 million payroll in 2017 (see above), so the introduction of these surcharges is not inconsequential. However, under reasonable assumptions, they are likely to only apply to the Yankees and Dodgers.

2015 AAV Payrolls Compared to 2017 and 2021 Luxury Tax Thresholds
lux-tax-deficit

Note: Based on Average annual value of contracts plus pro-rated items, earned bonuses, and defined benefits of $12,626,624.
Source: MLB releases published by AP (2016 payrolls have not yet been released)

Aside from New York and Los Angeles, there are only two other teams within arms distance of the new threshold, which means 26 other teams are unlikely to approach the penalty. It’s hard to argue that the new scheme represents a quasi-cap when it is only relevant to four teams, and only two in a significant way. Though it is possible that other clubs will be deterred from becoming big spenders over the next five years, most would have had to increase spending significantly just to approach the luxury tax trigger (as illustrated in the chart above). So, even if other clubs pull up short of the new thresholds, the overall increase in their spending would still be a boon to the players.

The new luxury tax system isn’t as onerous as it seems, and certainly doesn’t rise to the level of a de facto cap for all but the Yankees and Dodgers. And, even for those teams, there is mitigation in the form of a revised revenue sharing system. According to reports, the owners have agreed to scrap the supplemental component of the revenue sharing system that used a series of performance factors to increase the shared pool from 34% of local revenues to 48%. And, which teams would have been expected to pay into that supplemental plan? The same big market teams that could run afoul of the stepped up luxury tax regime.

Using estimates I calculated in 2013, the elimination of this plan could result in a $20 million savings to the Yankees. That’s a highly speculative number, but without the supplemental scheme, several big market teams are assured of paying less into the revenue sharing pot. And, if, for example, the $20 million estimate for the Yankees is accurate, it would offset the increased luxury tax and lower the effective tax rate on the $250 million payroll illustrated above to only 33%. That would be a significant discount from the just expired system, which means a team like the Yankees would actually be afforded extra cushion under the new agreement, assuming they want to spend the savings instead of bank it as profit.

Unfortunately, not everyone was a winner in the new CBA. Foreign born amateurs bore the brunt of compromise as the players agreed to a hard cap on international signings in exchange for eschewing an international draft. Adding insult to injury, the new CBA also extended these rules to more players by increasing the eligible age from 23 to 25, leaving talented foreigners with little leverage when it comes time to negotiate a new deal. Full details have not yet been released, and it’s important not to extrapolate too much before the ink has dried, but it’s likely that international amateurs will end up paying the price for the MLBPA’s and owners’ continued good fortune.

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