With a new season rapidly approaching much is being discussed about the contracts players signed over the course of the off season. Many teams added new faces to the mix, some payed big money to bring in key pieces to help them succeed. I seen a few articles that have placed the market value for a player at around $5 million per win they will give the team. Measuring how many wins a player is worth is not easy to do but I feel Fangraphs has done a pretty good job with their WAR ratings. If you place a market value on players of $5 million per WAR then it would stand to reason that the team must be making more than that for each win the team has. I looked up team revenues again to see how true this is across the league.
Using the revenues listed on Forbes team valuation tables what I found is that $5 million/ win is a very steep number to being paying. Looking at a few mid-market teams first I found they were averaging about $1.7-1.9 million in revenue for each win from 2000-2009. That puzzled me a bit at first but then I realized the mid-market teams don't set the price for players the big market teams do. So I looked at the Yankees figuring that they must be making at least that to handle the payroll they have. I was wrong. Even the Yankees don't make $5 million/ win. They come by far the closest of any team with their 2009 revenue coming in at $441 million and winning 103 games that year they made about $4.28 million for each win. However, that is the closest to $5 million they came. On realizing that not even the Yankees, who appear to have bottomless pockets to put a team together, can't bring in $5 million/ win I realized the importance of having a good farm system even more.
Upon further consideration what this brought to my attention was that even the Yankees have to keep players available to fill the roster that they can keep under their value. Phil Hughes comes to mind from last years team. He isn't even arbitration eligible but he won 18 games last year with an 4.19 ERA. Last season he only made $447,000.
The more important thing that this made clear to me is that teams can't continue to pay such high amounts for players. With a linear progression of the win to revenue values of the Yankees they will break the $5 million/ win plateau around 2013 in theory but the rest of baseball is well behind them. I believe that unless something changes player values may drop for the first time since free agency came into the league. In free markets their are always ebbs and flows so to speak and it looks like player value is about to ebb to correct itself as much as the players won't like it.
Thursday, February 17, 2011
Wednesday, February 16, 2011
Cards and Pujols Fail to Reach Deal
Reading through all of the articles and analysis on the issue I have noticed that a few key things aren't really being mentioned. Everyone seems to be in agreement that Albert Pujols is, without question, the best player in the game right now. The debate seems to be over whether the Cards are holding out and just not willing to pay him what he is worth or if Pujols is being greedy. I think both of those statements are a bit narrow minded.
As I discussed in the post Labor and Capital each player has a value of skills and their demands are based on how easily those skills can be replaced with other players. With that thought in mind it is not a logical conclusion that Pujols is being a greedy SOB. If the rumors are correct and he is asking for a top 5 MLB salary, some where between $25-$30 million, he is just in doing so. No other player in the history of professional baseball has done as much as he has in their first 10 years. He very well could progress to become the best player of all time. If he continues at this rate even with considerations for decline with age, his name will belong with Babe Ruth, Hank Aaron and Mickey Mantle.
On the flip side of that, the Cards not offering a $25+million/ year contract doesn't mean they are being cheap. Looking at the city of St. Louis it is amazing they can afford as much as they can, but their fan base is extremely loyal and strong. However to promise Pujols that kind of money would be a major burden on their finances, where they already seem to pay beyond what their market should be able to support. According to Forbes last year the Cards had a revenue of $194 million. That is just revenue, not profit. That is before taking out the $109 million in player contracts and bonuses payed out last year, before figuring in stadium upkeep, etc. Based on those figures if they where to pay him that kind of money that would be roughly 13% of all money they brought in last year. From a business stand point that doesn't make much sense.
So to me the question isn't is Pujols being a greedy jerk. It also isn't are the Cards being too cheap with the face of their franchise. The question is, how much risk should a team be willing to tie up in one player?
As I discussed in the post Labor and Capital each player has a value of skills and their demands are based on how easily those skills can be replaced with other players. With that thought in mind it is not a logical conclusion that Pujols is being a greedy SOB. If the rumors are correct and he is asking for a top 5 MLB salary, some where between $25-$30 million, he is just in doing so. No other player in the history of professional baseball has done as much as he has in their first 10 years. He very well could progress to become the best player of all time. If he continues at this rate even with considerations for decline with age, his name will belong with Babe Ruth, Hank Aaron and Mickey Mantle.
On the flip side of that, the Cards not offering a $25+million/ year contract doesn't mean they are being cheap. Looking at the city of St. Louis it is amazing they can afford as much as they can, but their fan base is extremely loyal and strong. However to promise Pujols that kind of money would be a major burden on their finances, where they already seem to pay beyond what their market should be able to support. According to Forbes last year the Cards had a revenue of $194 million. That is just revenue, not profit. That is before taking out the $109 million in player contracts and bonuses payed out last year, before figuring in stadium upkeep, etc. Based on those figures if they where to pay him that kind of money that would be roughly 13% of all money they brought in last year. From a business stand point that doesn't make much sense.
So to me the question isn't is Pujols being a greedy jerk. It also isn't are the Cards being too cheap with the face of their franchise. The question is, how much risk should a team be willing to tie up in one player?
Tuesday, February 15, 2011
MLB Cities and Median Houshold Income
City Population Median
Household
Income
New York 8,391,000 $50,000
Los Angeles 3,831,000 $48,600
Chicago 2,851,000 $45,700
Houston 2,257,000 $42,900
Phoenix 1,593,000 $47,000
Philadelphia 1,547,000 $37,000
San Diego 1,306,000 $59,900
Dallas 1,299,000 $39,800
Detroit 910,000 $26,000
Minneapolis/ St Paul 666,000 $45,500
St Louis 356,000 $34,800
San Francisco 815,000 $70,700
Boston 645,000 $55,900
Baltimore 637,000 $38,700
Seattle 616,000 $60,800
Denver 610,000 $46,400
Milwaukee 605,000 $34,800
Washington, DC 599,000 $59,200
Atlanta 540,000 $49,900
Kansas City 482,000 $42,000
Miami 433,000 $28,900
Cleveland 431,000 $24,600
Oakland 409,000 $51,400
Tampa / St Petersburg 587,000 $41,600
Cincinnati 333,000 $32,700
Pittsburgh 311,000 $37,000
Aneheim 387,000 $55,100
Toronto 2,503,000 $59,000
Toronto 2,503,000 $59,000
Also keep in mind the household income numbers are for the median income not the average.
Information here was found at www.city-data.com
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