First Pitch: My Philosophy on Payroll

I don’t care about payroll.

That might come as a surprise to some. We have a lot of pages on the site dedicated to tracking the payroll of the team. I point out what I think the Pirates could afford to spend. But the truth about that is, a lot of people care about payroll. And I’m in the business of providing information on a subject that a lot of people care about. As for my own personal beliefs?

I don’t care about payroll.

In a lot of cases, this draws some outrage from people who get mad over the fact that I don’t get mad that the Pirates aren’t spending X amount of dollars. I don’t look at a baseball team in terms of payroll. I look at a baseball team in terms of the quality of the team, and the quality of the individual players. It’s hard to separate this from payroll, because traditionally people view an increase in payroll as an increase in quality. That’s why the Marlins were picked as contenders after spending a lot in 2012, and it’s why the Blue Jays were picked as contenders for spending the following year on the same players that failed with Miami.

My view on payroll is that it provides the benefit of making mistakes. The other payroll discussion I bring up on the site is how MLB is unfair because it allows teams like the Yankees to spend over a hundred million more per year than the majority of teams in the league. This doesn’t buy the Yankees a talented team. What it buys them is a margin for error.

Take a look at the 2013 season, for an example. The Yankees started with a $228 M payroll. Here were some of the biggest earners:

Alex Rodriguez: $29 M / 0.5 WAR

Vernon Wells: $11.5 M / -0.8 WAR

Mark Teixeira: $23.125 M / -0.2 WAR

Derek Jeter: $17 M / -0.6 WAR

Kevin Youkilis: $12 M / -0.4 WAR

In total, they spent $92.62 M on those five players for a grand total of negative 1.5 wins. That doesn’t even consider that they paid A.J. Burnett $8.5 M to put up a 4.0 WAR season with the Pirates. It doesn’t consider guys like Curtis Granderson, who made $15 M for a 1.4 WAR season. There was so much wasted money by the Yankees in 2013. They could have gone with replacement level players for the five players above, plus Granderson, and they would have had the same win total, with enough money to fund the entire payroll of most teams. Yet the Yankees still won 85 games.

Can you imagine where the Pirates would be if they had a $29 M player producing half a win above replacement level? Or even if they had a $12 M player producing negative value? That’s what money buys in baseball. It buys the ability to still be somewhat competitive, even if you make a few mistakes. The Yankees made some massive mistakes in 2013, but they also had the biggest payroll by far, allowing them to cover up those mistakes.

Small market teams need to be smart. If they make a bad signing or two, they don’t have an extra $50-100 M to spend covering up the mistake. Big spenders can be lazy. They can just throw money at established players, without worrying about whether those players might regress after their age 32 seasons, or get injured when they’re making $15-20+ M at ages 35 and up. They don’t have to worry about these problems because they’ve got the money to waste. We saw this today with Clayton Kershaw. The Dodgers signed him to a seven year deal at $30.7 M per year. Kershaw is the best pitcher in the game, but every pitcher comes with an injury risk. All it takes is one injury and the Dodgers are eating $30 M per year for a year to a year and a half. And it wouldn’t hurt them that much with their TV deal, since they could just throw money at another top pitcher.

I’ve said this many times: when it comes to small market teams like the Pirates, payroll shouldn’t matter. The only thing that should matter is building a good team. Sometimes that approach involves spending money. Sometimes it involves going with league minimum players. A prime example of the latter could come if all works out right in the next two or three years.

The Pirates already have two top outfielders in Andrew McCutchen and Starling Marte. Gregory Polanco should join them in the second half of the 2014 season, and the trio has what it takes to be the best outfield in baseball. That outfield in 2015 will cost about $11 M. In 2016 the price will go up, as Marte will be arbitration eligible, but the trio should come in around $17-18 M.

The Pirates saw Gerrit Cole arrive in the majors in 2013, and look like an ace by the end of the season. They could see the same thing with Jameson Taillon this year. And if things work out well, they could have Tyler Glasnow and Nick Kingham join that group by the middle of the 2015 season. Those four pitchers in 2016 would cost a combined total of just over $2 M, assuming no early extensions. And if they live up to their potential, you’re talking about one of the best young rotations in the game.

There’s a lot of “ifs” in the above scenarios, and more-so with the pitchers. But consider that scenario. The Pirates could have the best outfield in baseball, and a rotation full of young phenoms, all for $20 M or less in 2016. Even if you add Charlie Morton’s $8 M as the fifth starter, you don’t see a big increase.

The knee jerk response to that is “they should spend money since they’ll have it available”. But where? They’ll probably still be paying Pedro Alvarez and Neil Walker, and I could see that pair making $15 M total. I’m guessing Tony Sanchez and Alen Hanson will be making up the catcher and shortstop positions, at league minimum salary. That means you’ve spent about $43 M on everyone except the bullpen (which usually falls under $10 M for the Pirates) and first base. If the first base position is still a problem by that point, they can spent there, but you’re still talking about a possible payroll that is lower than this year.

Again, this is all a scenario. Tons of things can happen between now and then. The point is that the payroll wouldn’t matter in that situation. It would be low, but if most of those young players worked out, the Pirates would have a contending team.

In a more realistic scenario — or at least a more current scenario — the Pirates have a good team heading into the 2014 season. They’ve got Francisco Liriano and Gerrit Cole looking like they could be aces at the start of the year. They’ve got Charlie Morton, who looks like a solid number three starter. I don’t have faith that Edinson Volquez can be the next Liriano, but I do think he could put up league average numbers over 180 innings, which would definitely save the bullpen and would have a lot of value. And the fact that they’re relying on guys like Wandy Rodriguez and Jeff Locke as fifth starter options puts them in a favorable spot compared to most teams.

The offense was a problem last year, and I don’t see that improving much. Gregory Polanco should provide a boost in the second half. Maybe Andrew Lambo carries his power over to the majors. Maybe Travis Snider’s toe was the problem last year, or Jose Tabata really figured it out in the final months of the season. I don’t think you can set your hopes too high on any of those three scenarios, but right field and first base are really the two question marks.

The Pirates have an MVP in center field. They have four win players in left field and behind the plate. Jordy Mercer could end up a top ten shortstop over a full season. Pedro Alvarez led the NL in home runs last year, and saw improved defense. Neil Walker might have had some bad luck last year, which if that regresses in 2014, could lead to above-average overall production at second base.

Then there’s the defense. That has gone highly overlooked, despite the fact that the Pirates won with pitching and defense in 2013. All of the complaints throughout the season were that the Pirates needed offense, and that they couldn’t continue to rely on pitching and defense to win games. My question to that line of thinking is: Why? Why can’t the Pirates rely on pitching and defense to win? They did it last year and it worked. They’re not the only team to try this approach and have success (SEE: San Francisco Giants).

The Pirates currently project to have a $73 M payroll heading into the season. They usually add about $8 M throughout the season with call-ups, depth options, and in-season waiver claims and trades. Without any other moves, I’d project them to end up north of $80 M by the end of the season, which is an increase over their 2013 payroll, but probably not the increase people wanted to see.

I’ve said I would have given A.J. Burnett a qualifying offer. I don’t think that matters at this point, since Burnett doesn’t look like he’s returning to baseball. I also would have tried to sign James Loney, although he said that he chose the Rays over similar offers from other teams, including the Pirates. At this point I don’t think there’s anyone who is really worth spending money on, to the point where payroll would jump to the amount people want to see. I also don’t think that there’s anyone who the Pirates need to get to make themselves contenders. Anyone added at this point would be a luxury, and not a need.

These aren’t popular beliefs that I’m stating. Most people don’t look at a prospect like Lambo at first base, or question marks in right field as strategies a contender should ever take. I’m just a guy who watches the Rays successfully take these same strategies every year, and as a result I don’t view the game in the same way as most people. There’s no reason why the Pirates can’t take the same approach, and there’s no reason why they shouldn’t take the same approach.

Links and Notes

**The 2014 Prospect Guide is now available. You can purchase your copy here, and read about every prospect in the Pirates’ system. The book includes our top 50 prospects, as well as future potential ratings for every player.

**We have been releasing our top 20 prospects for the 2014 season. Today the countdown resumed with #13 – Stolmy Pimentel.

**Jameson Taillon Ranks Fifth Among Right-Handed Pitching Prospects

**Winter Leagues: Polanco Returns In Escogido’s Clincher

First Pitch

  • In order to provide some insight for future discussions it will be helpful to do a little analysis on some of the data provided in the article that Scott Skink cited above.

    The second column provides each team’s contribution to the revenue sharing pool, from which we can calculate that each team receives $15.2MM back. For the Pirates then their 2014 TV revenues stack up as:

    Local (18MM) – Rev Share Give (6.12MM) + Rev Share Get (15.2MM) + National ($51.67MM) = Total 2014 TV revenue (78.76 MM).

    Let’s compile a table where the amounts and percentages of these figures of both total 2014 TV Revenue and Total 2014 Estimated Pirates Budget ($170MM) are listed.

    Local Revenue Share National Total
    TV Rev Give Get Net Contract 2014 TV Rev

    18 6.12 1 15.20 9.08 51.67 78.75

    %TV 22.9% 11.5% 65.6% 100%

    %2014 10.6% 5.3% 30.4% 46.3%

    From this data we can conclude the following regarding about the Pirates financial situation:
    1) The net impact of TV revenue sharing is a relatively small 5.3% of their total 2014 revenue requirements.
    2) The total National (League related) contribution to the Pirates 2014 budget is the net revenue sharing (5.3%) plus the National contract (30.4%) equalling (35.7%) which leaves (64.3%) to be supplied from the local market comprised of (10.6%) from the local TV contract and (53.7%) to be supplied by other local means such as gate revenue, concessions revenue, merchandising, etc.
    So roughly speaking one third of the Pirates revenues are gathered by their connection to MLB and two thirds are related to our local market. This places the Pirates at a severe disadvantage to teams that have local markets that are as much as five to six times larger than the Pittsburgh statistical area.

  • Actually I think I remember using Wikipedia for the population statistics:

  • Great article Tim! I agree 100%.

    I tweaked some data on MLB 2013 salaries and computations of salary expended per person in the statistical market area served that I had posted previously. This time I apportioned persons in statistical areas that serve two teams (like SF-Oak or NY-NJ) on the basis of actual 2013 attendance, and increased the Cardinals market size to account for their vast radio/tv network.

    2013 Payroll per Market Size
    TEAM ($/Person) Payroll ($MM) Pop. (MM)
    Reds $48.9 $107.5 2.2
    Brewers $46.1 $83 1.8
    KC Royals $40.7 $81.5 2.1
    Pirates $30.6 $75 2.45
    White Sox $30.5 $119 3.9
    Tigers $28.5 $148 5.2
    SF Giants $28.3 $140 4.94
    Indians $26.9 $78 2.9
    Cardinals $26.4 $115 4.35
    Phillies $25.0 $165 6.6
    Nationals $24.8 $114 4.6
    Athletics $22.9 $61 2.66
    Rockies $22.5 $72 3.2
    Dodgers $21.8 $217 9.96
    Orioles $21.7 $91 4.2
    Padres $21.6 $67 3.1
    Dia-Backs $20.7 $89 4.3
    Rays $20.7 $58 2.8
    Twins $20.5 $76 3.7
    Red Sox $19.9 $151 7.6
    Blue Jays $19.6 $117.5 6.0
    Cubs $17.9 $104 5.8
    Yankees $17.2 $229 13.3
    Mariners $16.7 $72 4.3
    Rangers $16.5 $114 6.9
    Angels $15.7 $128 8.14
    Braves $14.75 $90 6.1
    Mets $8.2 $73 8.9
    Marlins $6.3 $36 5.7
    Astros $3.55 $22 6.2

    The point of this exercise is to show that at $75 MM payroll the Pirates are at the top end of MLB spenders given the market potential of their franchise location. To truly follow the Rays model the Pirates need to have a payroll around $50 million a year. This will provide long term financial stability for the Pirates franchise and eliminate the risk of team bankruptcy and Pittsburgh losing the Pirates for good.

    I think that the Pirates can compete for World Series Championships with a $50MM payroll, and a well developed international infrastructure providing the base for talent acquisition and development.

    • A payroll approaching 90 million would not bankrupt Pirates…..
      They have the money……no fear of losing team.

      • You could be incorrect on both counts. The first one because you have no idea how much money they have or have to spend on the team, they don’t reveal their budget to very many entities.
        On the second count Pittsburgh could loose the Pirates in a heartbeat, all it would take is for some other town with the ability to generate large revenue for them and some TV people to see that large revenue market and give the Pirates one of those billion dollar TV deals and the Pirates would be gone. Playing in a minor league town is very hard for a major league franchise, most owners would have moved this team out of Pittsburgh a long time ago.

        • Just stop, please. What you’re throwing out there about market size being the primary limitation and comparing finances with the Rays is just wrongheaded, fallacious, misleading and most of all, stupid.

          We know what the Pirates can spend and are comfortable in spending BECAUSE THEY TOLD US.

          Do you have some vested interest in Mr. Nutting pocketing $40 million or so?

          • How much did they tell us they could spend? and where in the post is there anything linked to the Rays? Reading a post and understanding it are two different things apparently.

            • My error. I thought your reply was in support of the silly post above it on payroll by market size.

              When? Numerous times, but here’s one from October 15 where Nutting says they’re aiming to spend more than in 2013.

              • Scott, A careful reading of the article you referenced shows that it doesn’t say what you think it does. Nutting carefully says that they have proven that they have increased payroll in the past and would like to see it increase in the future. He also said he would like to see AJ sign as a Pirate. Yet the Pirates didn’t (couldn’t) make the

                • (HIT WRONG BUTTON) qualifuing offer. “liking to see it happen” and committing to increasing payroll are two very different things. I don’t know any of the Nuttings, the other owners or any employee of the Pirates. My interest is only as a fan.

    • Not sure where you got all the data, but I’d love to see this expanded into an article and published somewhere that can be cited/linked to. If you added info on the per capita income, ticket prices, tv contracts, etc. that would be great!

      • You forgot to ask about the amount of revenue share, which makes market size more or less irrelevant. There’s a base where ALL teams start from that is in the tens of millions and has nothing to do with size of market. The only way that chart would have relevance would be if ALL revenue was 100% organically derived from the local market.

        • Revenue sharing helps, but it is still a small fraction of the overall budget. The local market still has to support the lion’s share of a team’s annual budget.

          • Not really. In the Bucs’ case it’s looking like north of $50 million in 2014.


            • Interesting article that you reference Scott, but what the authors ignore, a many people do, is that players salaries can account for less than half of the operating costs of the Pirates. A few years ago someone from the AP obtained leaked information on the Pirates finances from 2007 and 2008 that showed that the Pirates made $14MM to $15MM in those two years. See:
              There, if you look at the 2008 data when payroll salaries were about $51MM there were a total of $73MM non payroll costs for a total of $124 MM total operating costs. People tend to forget that it costs a lot of money to employ all the people and operate all the facilities throughout the Pirates system, not only in Pittsburgh, but in Florida, the DR, and across the minor league system. I don’t know how much the non payroll costs have escalated since 2008, but let’s guess that they are now $80MM. If the Pirates Salaries are $75 MM then their total costs are $155MM. If you add a profit f $15MM this would require total revenue of $170MM. Your cited article lists total expected TV revenue for 2014 at $79MM. So to break even the Pirates need additional non TV revenue of $76MM, and to meet the $15MM profit goal they would beed additional revenue of $91MM.

              So TV revenue gets the Pirates 46% to their total revenue needs. Hence their stated move to increase revenue and concession prices. I would rather see the restrain salaries and keep ticket and concession prices the same or lower them.

      • Thanks for your interest MattinMD. I got the info with a few clicks on the Internet, but I wasn’t trying to write a research report so I didn’t record the sources. The 2013 salary figures and the 2013 home attendance figures were gotten from a sports info site referenced on this blog, but I don’t remember which one. Likewise the population data was gotten with a few clicks away from Bing. However the same data can be obtained from . Click on Population Estimates – 2012. I agree that the additional info you suggest would be interesting and make the study more accurate, but gathering it would require more time than I have available. In spite of Scott Skink’s opinion, I think that the general point that the size of a team’s natural fan base is a constraint that restricts their budget size is a valid one.

  • While Tim left it vague, and has defend the Pirates’ offense as average, was it truly a problem in 2013?

    Yes there were problem spots but the Pirates were forth in the NL with a 106 wRC+, and forth with 41 batting runs. If you include pitchers the wRC+ falls to 5th but is still above average. I am not sure how others are defining the offensive problems but remember park factors and the overall offensive environment.

    • Agreed Andrew. The pitching and defense were so good last year that the eclipsed the offense a little, but the offense really wasn’t that bad, a little above average I’d say. Plus, can they possibly get less out of RF and 1B than they did last year? So let’s count on some “regression” to bring those positions up, even if Lambo or anyone else doesn’t set the world on fire.

  • One more potentially amazing thing to think about the outfield of the near-future. It’s fairly realistic that Cutch/Marte/Polanco would put up at least a combined 15 WAR in each of 2015 & 2016, right?

    That means that the Bucs will see roughly $200 million of value in those two years, for a total price-tag of around $29 million. That’s a stunning number if it pans out the way it should. Just……wow.

  • Tim: Good piece and I agree with this statement:

    My question to that line of thinking is: Why? Why can’t the Pirates rely on pitching and defense to win? They did it last year and it worked. They’re not the only team to try this approach and have success (SEE: San Francisco Giants).

    That is the reason Andrew Lambo as the left handed platoon at 1B makes no sense to me. A team that wins on pitching and defense cannot afford to have a player who has not played the position (41 games over his minor league career is nothing) learning on the fly.

    If the Pirates want to see if Lambo’s bat plays in the majors let him play RF.

    • Cato the Elder
      January 16, 2014 10:51 am

      It is not hard to play 1st base; moreover the difference between a really good and really bad defensive 1st baseman is minimal. Finally, if Lambo can’t handle the position, signing a cheap veteran who can will not be hard.

    • Cato…having played first base, it is a lot harder than it looks.

      Good first basemen are underrated.

      That being said, I am just hoping Lambo can be better than Jones.

  • Tim, I agree with a lot of that. I think most people see that we had glaring holes last year that haven’t been addressed at all, even though we have more money to spend than we did last year. Thats what upsets people. We could have afforded to pay Loney an extra 1. whatever million a year to bring him to pittsburgh if we wanted to without a second thought. we didn’t. we could have locked up Byrd (although i agree with you that blocking Polanco is folly) and thats really where people pause. Myself, I consistently complain about us not addressing shortstop at the system level, generally because i don’t believe in Hanson at all, and I think Mercer will be the second baseman, and Hanson+Mercer up the middle doesn’t fit with the Pirates belief system of a strong up the middle defense. When your only off season signing is a washed up never was pitcher in Volquez, that doesn’t instill confidence in the masses, especially when you lose your ace potentially to retirement

    • Y2 ~ I don’t agree with you here: ” We could have afforded to pay Loney an extra 1. whatever million a year to bring him to pittsburgh if we wanted to without a second thought. ”

      The deciding factor was not an extra million per year, in Loney’s case. Loney wanted a third year, which our F/O did not offer, as I understand. I have read that Loney chose TB over other competitive offers, including from us.

      so, and most importantly, the player must WANT to relocate and sign with us, or any other franchise for that matter. For years, TB has been a desirable location, both the city and team.

  • Tim….I am a huge Polanco fan, but this statement is incorrect:

    “Gregory Polanco should provide a boost in the second half.”

    I hope he does, but I think it should be “could”.

    • Otherwise, I agree with everything you said.

      A lot of people are stumping for Drew, but that is never gonna happen.

      And Jim Bowden wants to keep giving us K Morales….lol.

      No way, NH gives up a first round PLUS money for either of those guys.

  • I think baseball owners are their own worst enemy . The haves and sometimes have nots continue to give these large contracts over a long period of time . They still do it even when history gives a pretty good picture that a lot of them will come back to bite them , even the Yankees are now feeling the effects of large contracts . Over 30 million a year for seven years , a great contract for Kershaw , in my opinion not so great for baseball .

  • AJ Burnett was not given a qo because of payroll….I think Justin Morneau is not here because of payroll.(according to Hurdle)
    I agree with a lot of your points, but the Pirates care about payroll and that impacts moves.
    It will always be this way so keep feeding the farm system.
    And hope Huntington and scouts continue to hit on prospects in the draft, otherwise it is back to the dark ages of Dave Littlefield.

    • Cato the Elder
      January 16, 2014 8:22 am

      Justin Morneau is not here because he stinks: 0.4 WAR total over the last 3 seasons; that is half of what Gaby Sanchez put up last year.

    • To be fair, both of you guys are correct…he stinks AND is not worth the money the Rockies are paying him.

  • just because they have the extra TV money and playoff revenues doesnt mean they should stop placing internal values on FAs that they won’t go higher than, IMO.

    They reportedly outbid the Padres for josh johnson, AND said something like “nothing we have tried to do would have prevented us from AJ burnett” so it seems like the are willing to spend it on the right players. But the right players are (probably all) gone and they might just have to stay in the playoff race with the group they have now (and it really is a great group still!) and re-tool at the trade deadline when they can pick up a prorated version of a good player’s bad contract.

  • There is an old saying that power corrupts and absolute power corrupts absolutely – the same could be said about money. As someone who grew up in Pittsburgh but now lives in Australia, I would suggest that there is a “Pittsburgh Way”, reflective of the city’s down to earth character and work ethic, distinguishing itself from the lavish. wealthy easy money cultures of New York and LA. As the Yankees demonstrated in 2013, you can spend all the money in the world and still be average or less – maybe without all that money to cover up injuries and mistakes the Yankees lose 90 last year, who would have been sorry to see that? The Pirates are following a very sound fundamental strategy – they used the high draft picks and over slot on the draft to get some high end talent (Cutch, Pedro, the Cole Train) and have been smart with international signings (Marte, Polanco, etc etc) so they have the potential to be very competitive for the next several years. How refreshing is that after so many down years! There’s no real trick to signing a Kershaw or a Cano if you throw money at them, but who really wants to be paying Cano 24+ a year when he’s in his late 30s? I am very very excited about the strong talent base the Pirates have, and like Tim, think that what really matters is finding great talent, not throwing money at “established names”. Is there a team in the majors that wouldn’t want to have Cutch (who may be the best all around player in the game, with plus plus character!) flanked by Marte and Polanco (they haven’t had players who looked so much like the Great One since…the Great One!…and it does look if things pan out the Pirates might just have the best pitching in franchise history (Cole is a Pittsburgh style player if ever there was one, a middle linebacker on the mound!) Who couldn’t love it!!!!!!!!!!!!

    • bert21: Well stated, and yes, for some of us who have been following the Pirates long term, this Management Team has done what others could not, and we are situated very well for the next 10 years at least. The game changes every year and the smart front office folks always manage to stay ahead of the trends, and I think the Pirates have reached that plateau. Drafting, signing International Talent, Player Development, and top notch personnel throughout the system, and the Pirates now have to manage the next portion of the game which is to trade the best at exactly the right time to load up additional prospects. The Hanrahan trade last year was an exceptionally good start, and this year we will have guys like Liriano and Rodriguez, just to name a few, and they will most likely be paired with additional players/pitchers to get the right deal. Now that we will not be drafting until late, this will become an increasingly valuable part of the continued success of the Pirates.

      • Sorry, forgot to add that it becomes very important for our FO to know when to pull the trigger on long term contracts for the younger players, or adding additional years to established stars like Andrew McCutchen. If you look at the Rays and some other clubs, they give long term contracts to players who have not even reached Arbitration – IMO, guys like that on the Pirates are Starling Marte and Gerrit Cole. Guys like Polanco, Taillon, and Hanson could also be considerations if they do as well as expected. The contract with Jose Tabata is an example, and the early signing by the Rays of Longoria is another; and when Longo proved to be even better than they thought, they signed him for additional years.

  • Don’t you mean that Glasnow and Kingham will be up in the middle of the 2015 season, not 2014?