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Opt out clauses have become the baseball equivalent of a pre-nuptial agreement. Before committing to a team, high profile free agents are increasingly using their leverage to negotiate favorable terms for a potential early divorce. But, are these contractual caveats as one-sided as often portrayed?

The criticism of opt outs has ratcheted up as the practice has become more prevalent. Even the MLB commissioner is scratching his head over the increasing use of these agreements. In an interview with Ken Rosenthal, Rob Manfred wondered aloud about why teams would be willing to extend such uneven terms. “The logic of opt-out clauses for the club escapes me,” Manfred confessed, but is the commissioner really that confounded?

If Manfred really wanted to know why his bosses were engaging in such a counterproductive practice, he could easily ask them. So, why did he take his concerns to the media instead? Probably because he already knows the answer. The teams offering opt outs are doing so because it’s in their best interest.

All baseball contracts are guaranteed, so whenever a long-term deal is signed, an inordinate amount of risk is heaped upon the team. This imbalance isn’t unfair; it’s by design. In exchange for years of team control, owners have agreed to a free agent system the eventually shifts the burden to them. The question for clubs then becomes how best to mitigate the risk associated with long-term contracts. Deferred money, back-loaded contracts, and insurance policies have traditionally been some of the most common ways to manage risk, but, now, opt outs have been added to the owners’ arsenal.

Opt outs provide obvious benefits to the player. If, for example, David Price were to excel in the first three seasons of his new deal with the Red Sox, he could opt out and hit the free agent market again in 2018, when, presumably, a new bidding frenzy would drive his salary even higher. On the other hand, if Price were to flop, or suffer an injury, he could simply remain under the terms of his current deal and live happily ever after in Boston. Because this contrast is so stark, it’s easy to see why so many believe the benefit is one-sided. Continue Reading »

Brian Cashman still has a lot of work to do. According to the Yankees’ GM , “there are still steps in the process” to take, but if his master plan precludes adding payroll, Cashman will have to subtract salary before adding more talent.

USA Today recently reported that the Yankees’ actual payroll (AAV, not current salaries) was $241.15 million, resulting in a luxury tax just over $26 million. Based on 2016 contracts, estimated arbitration awards, and minimum-level assumptions for others on the 40-man, the Bronx Bombers only have about $4 million left to avoid exceeding last year’s payout. So, unless the Yankees deviate from their plan to hold the line on spending, Andrew Miller or Brett Gardner may become a casualty of Cashman’s future wheeling and dealing.

Yankees’ Estimated 2016 Payroll

2016 payroll

Note: Current Salary is a player’s base salary + prorated signing bonus and applicable buyout. Actual payroll is defined by the CBA as the average annual value of all contracts, and is used to calculate the luxury tax. For players who are eligible for arbitration, estimates from mlbtraderumors.com are used. For other players on the 40-man roster, the CBA prescribed minimum is used ($510,000 for major leaguers; $80,000 for minor leaguers), with a 10% raise for players that have more than a year of service time.

Source: Cots Contracts, fangraphs.com, baseball-reference.com, mlbtraderumors.com, proprietary

Even if the Yankees exceed their self-imposed budget constraints, their bottom line should still be fatter. In fact, at the status quo, the Yankees percentage of revenue spent on player costs would not only be at its lowest level since at least 2000, but it would also fall below last year’s MLB average, which, after this winter’s spending spree, is headed in the opposite direction of the Bronx Bombers’ outlay.

Yankees’ Payroll/Luxury Tax as a Percentage of Team Revenue, 2001 to 2016E
Pay vs Rev
Note: For 2001 to 2014, revenue is  based on Forbes projections and net of revenue sharing and stadium debt service. Payroll 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. 

Note: For 2015 to 2016, revenue is based on 7% growth, which matches CAGR from 2003 to 2014 (but is less than recent growth rates in wake of new long-term regional and national TV deals with build in escalators). Payroll is based on an adjustment to reported actual payroll of $241,150,000 commensurate with 2014 and carried forward to 2016 (when current payroll is reported, this number will be updated). 

Source: bizofbaseball.com and MLB releases published by AP (final payroll), MLB releases published by AP (luxury tax) and Forbes (revenue)

So, why are the Yankees being so frugal in a deep free agent class with so much difference-making talent? One reason is because Hal Steinbrenner doesn’t believe he should “have to have a $200 million payroll to win a world championship”(despite charging the highest prices in the league and enjoying taxpayer subsidized financing), but, regardless of motive, the Yankees new ways of doing business have made it necessary for fans to be just as familiar with the team’s payroll as its 40-man roster. So, as a service to Yankee fans, the Bronx Bombers’ 2016 payroll and future commitments will be maintained on the aptly named tab above. Consider it a new kind of scorecard for Cashman’s unfinished business…one that measures success in dollars saved, not games won.

Brian Cashman has had a lot to say this week about the state of the Yankees, but all of his comments can be summed up with two words: Bah Humbug!

The Yankees GM has been playing the role of Scrooge for some time now. Since Hal Steinbrenner first announced plans to trim the Yankees’ payroll below $189 million, the team has taken a miserly approach to adding talent. So, while the franchise’s revenue has steadily climbed, the percentage allocated to players has declined just as precipitously. And yet, when asked about the team’s penny pinching, Cashman seemed to portray the Yankees more as Tiny Tim. Unfortunately, the media’s acquiescence has been a crutch.

Below is a summary of Cashman’s recent comments, along with obvious rebuttals that so far have not been forthcoming from those with access to Steinbrenner or the Yankees’ GM.

“I don’t have the money.” – Brian Cashman, quoted by Bryan Heyman.

Presumably, Cashman meant ownership has not budgeted the money for offseason acquisitions. Otherwise, a lie like that might land the Yankee GM on Santa’s naughty list. The Yankees may not want to spend money on improving the team, but they sure have plenty of it. This would seem to be an easy statement to refute, but so far, neither Cashman nor Steinbrenner has been challenged when they plead poverty.

“We’ve spent more than when The Boss was running the show.” – Brian Cashman, appearing on the Michael Kay Show

Although true in real dollar terms, every team is spending more because salary inflation and industry revenue have exploded. In these relative terms, the Yankees’ investment in player costs has dropped dramatically. Cashman knows this. He also knows he can get away with such a vacuous statement because many fans and media don’t grasp the financial nuances involved. Still, truth cloaked in deception is as good as lie.

“I think we’re just operating in a different environment. It’s a completely different arena than The Boss operated in.” – Brian Cashman, appearing on the Michael Kay Show

This comment was a lament about the siphoning effect of competitive balance measures like revenue sharing, but one that’s easy to refute because we know George Steinbrenner allocated much larger percentages of revenue to team payroll. Also, revenue sharing and the luxury tax existed during Steinbrenner’s reign, and neither caused him to shy away from reasonable efforts to field the best team possible. If Cashman wants to defend Hal’s stinginess, that’s fine, but he shouldn’t question the Boss’ dedication to winning in order to do so.

“I feel that we have a good, strong process. We’ve evolved. We’ve grown. The way I do business today is radically different than the way I did business back in the day, and I’m proud of that. I’m proud of how we’ve moved forward.” – Brian Cashman, quoted by Chad Jennings

Back in the day, the Yankees perennially won 95 games, advanced far into the playoffs, and posted record setting attendance and ratings. That would seem to be a source of pride, but apparently not for Cashman. Under the new “process”, however, the team has had three mediocre seasons and suffered declining attendance and television ratings. And, yet, Cashman is proud of that transition? If winning is the focus, it shouldn’t matter how it’s accomplished, unless other priorities have emerged. For Hal, it’s clearly profit; for Cashman, perhaps it’s the legacy of winning without a big budget?

It’s hard to blame Brian Cashman for being so defensive. He has been given his marching orders, and is bound to fulfill them. However, that doesn’t excuse the blatant dishonesty used to justify what he and Hal Steinbrenner refuse to admit. The Yankees unwillingness to spend is not about an improved process, changing financial landscape, or economic restrictions. The reason is much simpler. Hal Steinbrenner doesn’t want to spend $200 million to win a world championship. He does, however, want Yankee fans to keep paying through the nose to watch his increasingly mediocre team.

Ever since Moneyball was published in 2003, the baseball world has been in hot pursuit of the next great market inefficiency. Whether it was Billy Beane’s mining for high on-base percentage, the Rays’ dedication to the “extra 2%”, or, more recently, the Royals’ embrace of contact hitters in a swing-and-miss era, the last decade has seen momentary success heralded as a new paradigm for winning.

In order to play catch up with the likes of the Royals and crosstown Mets, Brian Cashman has reportedly been considering all options. According to teams who have had early talks with the GM, Cashman has been aggressive and creative. The irony, of course, is Cashman doesn’t really need a big imagination to turn the Yankees into World Series favorites. He just needs a good short-term memory.

Market inefficiencies are difficult to exploit because baseball is a copycat industry. As soon as one team strikes gold, another is right behind ready to stake a claim. However, amid the cascade of short-lived formulas, one model has been a true foundation of sustained success: the Almighty Yankee Dollar. For the better part of the last century, including most of the past 20 years, the Yankees have flexed their financial muscle. However, more recently, the team has decided to devalue its currency. Instead of “winning at all costs”, the franchise’s new strategy prioritized profit margin over winning percentage. Well, three year later, the Yankees have certainly fattened their wallets, but winning games has proven much more difficult in a cost cutting environment.

Only Hal Steinbrenner knows whether the Yankees will be once again willing to leverage the advantage of their oversized wallet, but if so, this year’s free agent market presents several compelling opportunities to remedy the team’s deficiencies. So, guided by the old franchise philosophy of money being no object, below is a championship blueprint the Yankees can use to once again lord over the baseball world. Continue Reading »

Baseball’s final four is set, and it features a quartet with one of the longest cumulative championship droughts in LCS history. So, forget the recent talk of dynasties and title defenses. When the champagne flows after this year’s World Series, it will quench the thirst of a long-suffering fan base.

Yearly Cumulative World Series Drought of LCS Participants, 1969-2015
LCS Drought

Note: Includes the sum of years between a World Series victory and the current season for all teams. A team that won the World Series and played in the LCS in the following year is considered to have a drought of one year. For teams without a World Series victory as a reference point, either their first season or 1903 was used.
Note: 1904 and 1994 were included in calculating the durations.
Source: baseball-reference.com (data)

LCS with Longest Combined Championship Drought
Top 10 lcs droughts
Note: Includes the sum of years between a World Series victory and the current season for all teams. A team that won the World Series and played in the LCS in the following year is considered to have a drought of one year. For teams without a World Series victory as a reference point, either their first season or 1903 was used.
Note: 1904 and 1994 were included in calculating the durations. Droughts of longer than 20 years in bold.
Source: baseball-reference.com (data) Continue Reading »

The MLB postseason had a power surge on Monday. Yesterday’s four division series games featured a long ball barrage that set a myriad of records, including the most home runs and runs scored in a single day of postseason play. Who said the playoffs were all about small ball?

To be fair, before Monday’s outburst, both runs and home runs had been in short supply in October. The 21 homers and 61 runs scored nearly doubled the cumulative output for each statistic, so yesterday’s breakout hardly represents a trend. However, that doesn’t mean the small ball narrative has validity. Although home runs aren’t likely to be as plentiful during the rest of the month, history suggests they will continue to play a significant role throughout the rest of the postseason.

Rate of Runs Scored via the Home Run, Regular Season vs. Postseason, 1995 to 2015YTD
HR percentage
Note: PS = Postseason; RS = Regular season.
Source: Baseball-reference.com

Since the start of the wild card era in 1995, home runs have accounted for 38.6% of all runs scored during the post season. Contrary to conventional wisdom, which suggests hitting home runs becomes more difficult in October, that’s three percentage points higher than the MLB regular season rate. When compared to the regular season performance of playoff teams, the gap narrows, but remains at two percentage points. What’s more, the yearly fluctuations have a similar bias. Compared to the entire league, 15 of 21 seasons (including year-to-date 2015) have featured a higher percentage of runs scored on homers in the postseason. Relative to playoff teams only, the ratio actually increases to 16 of 21. In addition, the differential has routinely been larger when it favors the postseason. Whereas there have been seven seasons since 1995 with at least a five percentage point increase in postseason runs produced by the long ball (six seasons when comparing to playoff teams’ regular season output), only two years (2000 and 2012) have featured a decline of a similar magnitude.

Home Runs Per Game: Regular Season vs. Postseason, 1995 to 2015 (ytd)
HR per game

Note: PS = Postseason; RS = Regular season. Averages are per team per game.
Source: Baseball-reference.com Continue Reading »

Records are made to be broken, not rules, and certainly not the legs of middle infielders.

Chase Utley was just trying to break up a double play. As it turned out, he not only broke the leg of Mets’ shortstop Ruben Tejada, but also one of baseball’s most ignored rules. Whether or not you believe Utley’s slide was dirty or a good clean baseball play, the MLB rule book says it was illegal. In fact, any slide designed to interfere with a fielder, as opposed to reach a base, is against the rules.

Rule 5.09(a)(13)
509a13
Note: Rule 5.09(2)(13) was Rule 6.05(m) in the 2014 version of the Official Baseball Rules.
Source: Official Baseball Rules (mlb.com)

Baseball’s rulebook is rife with ambiguity, but Rule 5.09(a)(13) is actually quite clear. Whenever a runner makes an obvious attempt to crash into the pivot man on the double play, instead of trying to reach the next base, it is a violation of the rules, and both he and the batter are liable to be called out. Unfortunately, second base umpire Chris Guccione didn’t see it that way, but it’s hard not to wonder if his judgment was more clouded by MLB’s tacit acceptance of illegal takeout slides than illuminated by his knowledge of the rules.

That’s not a slide. That’s a tackle.” – Mets outfielder Michael Cuddyer, quoted by MLB.com

Any reasonable person watching last night’s game would conclude that Utley’s sole purpose was to prevent Tejada from making a return throw to first. The 13-year veteran admitted as much in his postgame comments. Besides, the visual evidence is clear. Utley not only began his slide after the bag, but he was perpendicular to the baseline at the point of contact and never made an attempt to touch second base (in fact, his first contact with the base came after returning to the field from the dugout).

So, does that mean runners like Utley should simply concede the double play? Although Rule 5.09(a)(13) prohibits slides with the express intent to interfere with fielders, it doesn’t outlaw those designed to actually reach the base. Baserunners can still breakup double plays by simply sliding hard into second base and preventing the pivot man from moving forward into his throw. When fielders come across the bag, they are entering the runner’s domain and assume responsibility for contact. However, when runners go after the fielder like a heat-seeking missile, they go from trying to break up a double play to breaking the rules. This simple, logical rule of thumb should govern how the play is officiated.

As had occurred with plays at the plate, MLB has ignored its own rules for so long that it may now become time to either more explicitly define what a legal slide is, or, at least, re-educate umpires and players on what the current rulebook allows. In addition, illegal slides should be reviewable. If the replay officials were able to overrule Guccione’s out call, why shouldn’t they be permitted to evaluate his judgment of Utley’s slide? With this second layer of enforcement, major league baseball may be able to more quickly and fairly alter what has become ingrained behavior due to neglect.

The insult to the Mets’ injury occurred when the replay officials, who weren’t able to review the legality of the slide, overturned the out call and placed Utley back at second. Unfortunately, because of how the umpires on the field ruled, that was actually the right decision. Although Utley had never touched second (as we established, that was never his intention), Guccione’s out call removed that requirement. So, when the replay officials decided to overturn the call, they were tasked with determining what would have happened had the incorrect verdict not been rendered. In this case, it was more reasonable to assume that Utley, upon realizing no out signal was made, would have scrambled back to the base ahead of Tejada, who was now on the ground with a broken leg. So, not only was Utley not penalized for his illegal slide, but, he was actually rewarded because of the violent consequences.

The umpires on the field didn’t give the Mets justice, but MLB chief baseball officer Joe Torre’s cryptic comments after the game suggest a measure might be forthcoming from the league’s disciplinary office. Just because Utley may not have intended to break Tejada’s leg, his slide was an example of willful negligence. The veteran, who has a history of violent take outs, had to be aware that his actions had the potential to cause great harm, so, whether or not he viewed his slide as illegal, there should be consequences. A suspension probably won’t make the Mets, or Tejada, feel any better, but it would set a good example and signal MLB’s seriousness about eliminating a needlessly violent part of the game.

Unfortunately for MLB, the NLDS between the Dodgers and Mets has gone from a showcase of great pitching to a discussion of a lack of fairness and potential retaliation. Equally unfortunate is Chase Utley’s career could now become defined more by one dirty play than 13 years of skillful performance. Such is the price for not playing by the rules.

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