Forget about WAR, FIP,  wOBA and other saber creations. EBITDA (earnings before Interest, Taxes, Depreciation and Amortization) is the metric baseball fans should get to know.

The Chicago Cubs won the World Series in 2016, but, using EBITDA as a barometer, the Philadelphia Phillies had the last laugh, presumably on their way to the bank. According to Forbes’ annual report on MLB finances, the fourth place Phillies led all teams with a whopping operating profit (defined by Forbes as EBITDA) of nearly $90 million. And, not only were the Phillies the most profitable team in 2016, but it also scored the highest EBITDA figure reported by Forbes since at least 2003 (Forbes has conducted the study for 20 years). In fact, four other teams would have qualified for that distinction had the Phillies not claimed the honor. In total, all but five clubs ended up in the black, with the industry as a whole topping $1 billion in profit, a 50% increase over 2015.

Top-5 and Bottom-5 Teams by Valuation, Net Revenue, EBITDA – 2016
Note: Revenue for each team is net of stadium debt and revenue sharing.
Source: Forbes.com

MLB’s profit picture was boosted by continued steady revenue growth and stable cost management. Industry income of $9 billion-plus, which differs from gross figures reported by the league, represented a 7% increase from 2015, while player expenses remained relatively flat (Forbes estimates player costs are 57% of operating expenses; I have calculated player cost at just over 50% of net revenue). The rising tide of revenue also lifted nearly every boat. Only the Reds (-3%) and Royals (-10%) collected less money than last year, while eight teams enjoyed double-digit increases.

Total Player Compensation as a Percentage of Net Revenue, 2003-2016
Note: Revenue is net of stadium debt service. Total compensation is actual payroll + player benefit costs + players’ share of the postseason revenue pool. Benefit costs are determined by working backward from the known 2015 amount and assuming a 4% growth rate (CBA calls for increases up to 10%).
Source: MLB releases published by AP (actual payroll), baseball-almanac (postseason revenue) and Forbes (net revenue)

With such healthy income statements, it’s easy to see why team valuations continued to soar across the league. In 2013, only five teams had an enterprise value above $1 billion, but now the average is $1.54 billion, a 19% jump over last year. Every team in the survey enjoyed at least a nominal bump, while all but four advanced double-digits. As a result, the relative debt levels of the league have fallen, giving each team a much more stable operating structure. Continue Reading »

A note of caution to optimistic Yankee fans: Having lots of top prospects is nice, but most rebuilds don’t work, and even those that do, often have setbacks.

The Yankees’ young talent is undeniable, but even players with All Star potential often struggle early in their careers. That, of course, does not bode well for the 2017 Yankees, who have leveraged their season to the immediate success of the team’s up and comers. However, if the Bronx Bombers struggle, don’t blame it on their youth. After all, that’s what gives this year’s team a glimmer of hope. The real limitation on expectations comes from a lackluster core of veterans borne from several years of roster neglect and financial entrenchment.

Starting with the positive, the Yankees’ bullpen could be one of the best in baseball. The dominant duo of Dellin Betances and Aroldis Chapman gets all of the attention, but the bullpen runs deep. A veteran like Tyler Clippard could close on some teams, but he’ll anchor the seventh inning, at least until Brian Mitchell dislodges him. Adam Warren as a swing man, and Tommy Layne as a situational lefty who can also handle righties, speak further to the bullpen’s depth, and that’s before considering young power arms like Jonathan Holder and Ben Heller. If the Yankees get leads, they should be able to hold them.

Although the Bronx Bombers could boast one of the most dominant relief corps in the majors, the big question is how many innings will they be forced to pitch? Without a single starter who is a lock to throw 200 innings, Joe Girardi may be calling on his bullpen earlier and more often than he’d liked, which, by the end of the year, could seriously mitigate the team’s strength. Perhaps, if the rotation made up for its lack of quantity with quality, the epidemic of short outings wouldn’t be as much of a concern, but, aside from Masahiro Tanaka, the Yankees cannot reasonably expect much better than league average performances from the rest of their starters, and even that’s being optimistic.

A blockbuster offense and a dominant bullpen are the best way to overcome a weak rotation, but the Yankees’ lineup, though improved, not only lacks depth, but also the kind of middle of the order experience that defines consistency. When Gary Sanchez and Greg Bird hit, the Yankees will score runs. If Aaron Judge breaks out, they’ll score even more. But, it’s a little unfair to expect three hitters with less than a year’s experience between them to be the engine of an offense.

Young players have growing pains, so, when Sanchez, Bird and Judge suffer the inevitable pangs, who will pick up the slack? Matt Holliday comes to mind, but can he stay healthy for a full season? Otherwise, the Yankees lineup is filled with disappointing veterans (and Didi Gregorius) whose recent track records suggest mediocrity as a baseline. Players like Jacoby Ellsbury, Starlin Castro and Chase Headley should be the ones providing leadership, but instead, they are actually the supporting cast, and that’s why the offense is unlikely to carry the team as much as it will need.

The Yankees have upside. Young prospects can breakout, and talented veterans can rediscover old glory, but when you’re depending on both, mediocrity is often the result. However, don’t expect the Yankees to hover around the .500 mark. Because of the team’s reliance on youth and veterans with mercurial talent, peaks and valleys are likely to define the season. The timing of those ups and downs could further impact how the team approaches the trade deadline. If the Yankees catch a hot streak during the summer, the organization will need to determine if the team really can make a run, or if another downturn is just around the corner.

Following are 10 key questions outlined and answered in the context of reasonable best, base, and worst case scenarios. Also, scroll below to see how well the Captain’s Blog has predicted the Yankees’ annual win total in the past, as well as a forecast for the rest of the league. Continue Reading »

Do spring training records matter? The answer often depends on whom you ask, and how well their team is currently doing during the exhibition season. But, what does the data say?

Top-10 Spring Training Records, 1984-2016

Note: Excludes the 1990 and 1995 exhibition seasons, which were shortened by work stoppages. Tie games excluded from winning percentage calculations.
Source: espn.com, mlb.com and springtrainingmagazine.com

Yankees’ Historical Spring Training Performance, 1962 – Present

Note: 1995 data excludes record compiled by replacement players.
Source: Yankees media notes (h/t @LouDiPietroYES ‏)

With the Yankees in the midst of a strong spring campaign, Joe Girardi is likely to find some virtue in March success. However, a more dismissive attitude from John Gibbons should be expected. Not only have the Blue Jays struggled during this exhibition season, but it wasn’t too long ago when Toronto parlayed a historic spring performance into a fourth place finish during the regular season. There’s enough anecdotal evidence to support both sides of the debate, so let’s look at the aggregate data.

Distribution of Playoff Teams by Spring Training Winning Percentage, 1996-2016
Note: Tie games excluded from winning percentage calculations. Chart compares playoff and non-playoff teams within defined winning percentage range.
Source: espn.com, mlb.com and springtrainingmagazine.com

Continue Reading »

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 »

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


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
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
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


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
Note: Revenue is net of stadium debt service.
Source: MLB, Forbes (net revenue)
Continue Reading »

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