Baseball Economics: The Haves and the Have Nots

The Current State of Things

The past few weeks have shown that the winter is always an exciting time for baseball fans, even if no games are being played (in the major league ballparks anyway). The events of the past few weeks have been exciting, surprising, predictable and questionable. The state of baseball clearly has the blogosphere buzzing. We won’t really know how these moves pan out though until the season gets underway in the Spring.

What we do know though, is that the landscape of baseball may never be the same. Rumors swirled before the offseason that “The new TV money” could give free agent salaries a nice nudge into the absurd. That hasn’t really happened to a great degree, and arguments about whether or not Zack Greinke should be the highest paid RHP in baseball will have to wait for another day. While Josh Hamilton signed for $25 Million a season, the Angels also kept his contract to 5 years, likely paying a premium to do so.

Kansas City is making a push by acquiring Major-League tested talent like Ervin Santana, Wade Davis, and most importantly James Shields. These players, Dayton Moore hopes, will lead the Royals to the playoffs for the first time since 1985. The question is, did they give up too much young controllable talent for a shot at October (November)? The Rays used this a chance to stock the farm system even deeper, bringing back multiple former top prospects, as well as the best hitting prospect in baseball.

Another year, another Marlins firesale. This time they shipped their entire team up to Toronto. Despite Miami coming in last place in the NL East and losing 93 games, Toronto is expected to do well with half of Miami’s team now playing in Canada. Say what you want about Jeffrey Loria and Miami, but they’ve realized there’s only two ways to compete in baseball, and they weren’t prepared to do either. Maybe Toronto can cobble together a competitive team out of their Miami transplants and their current roster. Perhaps adding R.A. Dickey and his enigmatic knuckleball will be all they need to make the playoffs.

Cincinnati decided to bring in another key piece via a three-way trade that saw Arizona firmly plant itself in the “middle tier” that I’ll describe later on. By adding Choo, Cincinnati has given itself a chance at making a few postseason runs in the next few years

I would be remiss if I didn’t talk about the two Los Angeles teams in some depth. Jerry Dipoto is making the most of his tenure with the Angels by signing free agent after free agent. Now he’s expected to deal from depth to further improve his roster.

Two Types of Wealth

Dollars

There are two types of wealth in baseball, and as a result two ways to compete given the new landscape. Some teams have chosen to use vast financial resources to bring in talented players in the prime of their careers. This approach has been taken by the Yankees for years, with the Red Sox adopting the methods in recent years.

However from 2012 to 2013 two Los Angeles teams have embraced the dollar as a means of building their teams. New Dodger ownership has made it clear that they intend to win and win now, by investing vast sums of money in last year’s superstars (Hanley Ramirez, Adrian Gonzalez). They’ve traded prospects for players with big contracts, and now given Zack Greinke the biggest contract ever for a Right-Handed Pitcher.

The Angels have added massive contracts by bringing in Albert Pujols, C.J. Wilson, and now Josh Hamilton. Hamilton joins an outfield headlined by the talented Mike Trout. Don’t forget Jered Weaver who’s been one of the better pitchers in the American League for a few years. The Angels hope that by adding highly talented players in the prime of their careers they can bring back a World Series.

Prospects

The other type of wealth is young talented players. Some teams are not as flush financially as teams that hail from New York, Boston, LA, or even Toronto. For these teams, the only way to compete is to keep cost-controlled players through the first 6 years of their major league career. Perhaps some of these players can be extended (like the Rays did with Evan Longoria). For the most part though, guys like BJ Upton or Andrew Bailey have to move on when they become too expensive.

The Rays have perfected this model by moving guys that are drawing near free agency, just as they did with James Shields. This in turn brings back more prospects that they can repeat the process.

Where Does My Team Fall?

One should consider where their team fits in the spectrum of team wealth. The Rangers, Rays, Athletics are among those whose prospect wealth will ensure their contention for many years to come. The Yankees, Red Sox, Detroit, and both LA teams are certain to spend their way into contention. Will the Blue Jays join them or will their experiment end the same way Miami’s did?

Has Kansas City done the right thing by trading one of the best prospects in the game for a playoff run in 2013? Perhaps. Tampa Bay however will use Kansas City’s predicament to improve its position among the most wealthy teams in baseball.

The Indians have added Trevor Bauer for Shin-Soo Choo which nudges them closer to the wealthiest, but for now are still well placed in the mediocre tier of teams. The Astros, they’re not, but they certainly aren’t ready to be among the perennial contenders in baseball.

The Orioles? Well the O’s are firmly placed in the upper tier of mediocre. There are some prospects, but the farm system is not flush with the kind of players Tampa Bay or Texas have. Beyond Bundy, Gausman, and Schoop there’s not the kind of prospect depth in Baltimore that can ensure the team competes for the next few seasons. The O’s can move into the grouping of wealthiest teams by doing one of two things:

1. Trading veterans that they can replace for prospects. Even if they’re not the type of prospects that people write home about.

2. Opening up the coffers a bit more. This is significantly less likely though because to be among the wealthy teams in baseball we’re looking at an annual payroll around $150 Million.

In reality, the Orioles have a chance to be like the Rangers. They can support a higher payroll than the Rays or Athletics giving them more options. Being smart with their money & the players we have will allow the team to support a young, cheap core of players with free agents who can push the teams to the next level. Texas built a strong team, and then supported it with the money needed to bring in guys like Adrian Beltre and Yu Darvish. This, is the model of wealth that the Orioles and many teams in baseball should follow.

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About the author


Jeff Long  

Orioles Analyst

Jeff was the owner of the Orioles blog Warehouse Worthy, which focused on making advanced statistics a part of the conversation for the average fan. Outside of baseball, Jeff is a graduate of Loyola University where he received his Bachelor’s and Master’s in Business Administration. The Maryland native currently works for an Advertising Agency in downtown Baltimore.


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