Updated as of the release of final 2019 payrolls on December 18, 2019.

Provided below is a graphical illustration of total player compensation (in terms of year over year growth and percentage of industry net revenue) segmented by CBA iteration and presiding MLBPA executive director.

Also presented are two interactive charts displaying how much each Major League Baseball team has spent on players relative to their annual revenue, as estimated by Forbes. To display or hide an individual team in the chart at the top, click on the circle icon next to each name. To display or hide a specific period in the chart at the bottom, click on the circle icon next to each year.

Player Cost (Payroll/Luxury Tax) as a Percentage of Team Revenue, 2001, 2003-2018

Note: Revenue is net of revenue sharing and stadium debt service. Payroll costs excludes benefits, but include luxury tax payments, and is based on final figures for each year released by MLB, and may not necessarily equal the amount upon which the luxury tax is based.
Source: MLB releases published by AP (final payroll), MLB releases published by AP (luxury tax) and Forbes (revenue)

Since MLB’s intention to realign and contract the number of minor league affiliations was first revealed, criticism of the plan has reverberated throughout the game and even in the halls of Congress. The negative responses have accused MLB owners of being greedy and shortsighted and suggested that the rumored proposal would not only deprive fans of the game they love, but also exacerbate the cultural divide in the country. Do these reactions have merit, or has a hyperbolic narrative overwhelmed a sensible plan? Let’s consider the arguments.

The Impact of Realignment

First, some facts. While 25% of affiliates are slated for removal, this percentage is somewhat misleading, though useful if the intention is to portray a more dramatic upheaval. However, because most of the teams that would be disaffiliated play abbreviated schedules in front of small crowds, the impact on a per game and per fan basis is much more muted. That’s doesn’t justify contraction on its own, but does put the potential impact in a more proper perspective.

Affiliate Attendance by League: Remaining vs. Contracted Teams

There are currently 160 affiliated teams in 14 leagues covering six basic classifications. This excludes the independent Mexican League as well as team owned Rookie Leagues (Arizona, Gulf Coast and Dominican Summer), not to mention independent leagues that have no connection to MLB. That gives major league franchises as many as 300 players in their organization, which is well in excess of what’s required at the big league level. Obviously, many of these players are at various stages of development, and can be relied upon to supplement the major league club at some point in the future. But, even considering longer-term player development, the current minor league structure seems to be a bit of overkill.

Using 2010 as a proxy, 1,525 players were drafted, but only 248 eventually made it to the major leagues. Not surprisingly, the deeper you go in the draft, the smaller the percentage of players who played at least one big league game becomes. With only eight major league-bound players, on average, entering each organization in a given year, the need for 160 affiliates seems dubious. In many ways, a 40 round draft is almost as much about stocking an oversubscribed minor league system as finding future major leaguers.

Percentage of Players from 2010 Draft to Make the Majors

Instead of having a system designed to optimize player development, MLB has remained committed to a structure that prioritizes quantity over quality. That may have been an effective approach when teams had less scientific means for evaluating players, but with so many advanced tools at their disposal, MLB clubs are not only better equipped to identify more likely prospects, but there is greater incentive to expose those players to better technology, facilities, training and competition. Having fewer concurrently playing affiliates seems to be the optimal way to achieve that end

The Arguments Against the Plan

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All data is final as of the conclusion the of the 2019 postseason.

One of baseball’s most often repeated axioms states that, although home runs work just fine in the regular season, once the calendar turns to October, small ball becomes a more effective method for scoring runs. This mantra is proclaimed with such certainty that all who hear it seem to unquestionably accept its infallibility. However, since the dawn of the wild card era, history has suggested otherwise (though home runs have declined in the post season since 1995, runs scored by other means have dropped more significantly). So, as a service to those home run fanatics who refuse to accept the short comings of the long ball in the post season, the Captain’s Blog Presents the 2019 Long Ball Meter (click on the links for 2016, 2017 and 2018), which will not only keep a running breakdown of how runs are scored this postseason, but also present that data in a historical context. In addition, a historical comparison (since 1995) of the share of post season innings by role is also presented.

Current Season Data

Long Ball Meter: Regular Season vs. Postseason, 2019

Note: Long/Small Ball Meter compares the rate of runs scored via the home run to all other means. Regular season data is for playoff teams only.  Averages are per team per game.
Source: Baseball-reference.com

Long Ball vs. Small Ball Tactics: Regular Season vs. Postseason, 2019

Note: Averages are per team per game.
Source: Baseball-reference.com

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2018 was a banner year in the Bronx, at least from a financial standpoint. Although the Yankees didn’t perform as well on the field as fans might have hoped, the team’s accountants had plenty of reasons to celebrate. According to the latest Forbes study of the business side of baseball, the Yankees won a financial triple crown, as net revenue increased by 8%, operating profit doubled and the franchise’s enterprise value increased by 15%, more than any other team in the league.

Yankees’ Financial Snapshot, 2003-2018

Note: See below for relevant footnotes pertaining to financial metrics.
Source: Forbes.com

A big reason for the Yankees’ financial successful was a significant reduction in payroll. In 2018, the Yankees slashed player salaries by over 12% to dip below the luxury tax threshold, thereby eliminating a further expense and reducing the team’s overall investment in players to a minuscule 27% of revenue. Only the Chicago White Sox invested at a lower rate in 2018, making the Yankees one of the chief culprits in terms of under investment in payroll. In real dollar terms, the Yankees would have had to have spent over $100 million more to just reach the league average rate of 42.8%.

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Major League Baseball’s financial fortunes continue to rise, as franchise values, revenues and operating profits all exhibited healthy growth in 2018, according to the latest Forbes survey of the game’s financial landscape. The top-line was augmented by continued increases in local and national television deals as well as new online opportunities for content, while the bottom line was supported by flat player costs. The end result was a more profitable and valuable league, with only a few teams failing to share in the riches.

MLB Financial Snapshot, 2003-2018

Note: See below for relevant footnotes pertaining to financial metrics.
Source: Forbes.com

League-wide, net revenue was up 5% for the second straight year, although seven teams reported either flat or declining income. The Boston Red Sox were more than just champions on the field, leading all teams with a 15% increase in revenue. On the flip side, the Blue Jays suffered the largest decline as revenue tumbled 3%. In terms of overall net revenue (after subtracting stadium debt service payments and revenue sharing), the Yankees easily remain the game’s top earner, topping the Dodgers’ income by over $100 million. Bringing up the rear was the Oakland Athletics, who, despite recording a 4% increase in revenue, reported net income of only $218 million.

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Strikeouts have taken over baseball like a plague. Or is it an epidemic? How about a crisis? All across the majors, “three strikes you’re out” has become an unwelcome routine at the old ballgame, and, early indications suggest there is no end in sight. Can baseball survive this assault on the aesthetic quality of the game, or will inactivity finally be the death knell that the sport has long avoided?

Strikeouts are boring. That’s the underlying concern of many who fear their seemingly interminable proliferation. But, have strikeouts really had a negative effect on the entertainment value of the game?  To answer that question, we need to examine the impact that the increased level of strikeouts has had on both positive and negative offensive outcomes, and then consider whether those changes are more or less pleasing from a spectator’s perspective.

Strikeout Rate vs. wOBA, 1989-2018

Source: fangraphs.com

Over the last 30 years, strikeouts and offensive production (wOBA) have had a moderate negative correlation, but a plot of both measures defies a discernible pattern. In fact, aside from strikeout and home run rates, the seasons before and after the infamous steroid era peak look very similar. So, if baseball is suffering because of a decline in offense, strikeouts aren’t the culprit. And, if strikeouts really are a plague, it’s not because they have suppressed run scoring to an unprecedented level.

Base Hit Rates by Type, 1989-2018

Source: fangraphs.com

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The Associated Press’ annual report on Opening Day payrolls set off another round of alarm bells in baseball circles. Despite the recent spate of long-term extensions and mega contracts paid to high profile young stars and elite free agents, the average salary was down…again! This revived concern about pending labor strife, and led some to extrapolate an even larger decline for the entire year, essentially heralding the destruction of baseball’s middle class. Framed in that context, it’s easy to understand why so many are predicting a work stoppage when the current collective bargaining agreement expires.

In the AP report itself, however, was an important explanation. Because of all the long-term deals that were signed recently, the average salary was artificially deflated by signing bonuses. Players often prefer these lump sums for a variety of reasons, including their preferred tax treatment and higher present value. However, baseball allocates signing bonuses on a prorated basis, meaning year one of each contract is assigned a value much lower than the actual payout. According to AP, that turned a $46,000 per player increase into the $36,000 decline that triggered so much concern.

How Signing Bonuses Deflate Year-One Contract Values

Note: Accounting basis = Base Salary + (Bonus/Contract Length)
Source: Spotrac and proprietary calculations

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