Saving & Spending

Twins not the only ones saving and not spending

Even before colleague Phil Miller distilled some of the noise about the Twins’ 2019 payroll into a thoughtful, balanced and nuanced story last weekend, I kept having thoughts about the economics of baseball and the Twins.

So now, with Miller’s story as a backdrop, let’s take a little closer look at one of the key issues at hand.

With no salary cap in Major League Baseball — and more importantly no salary floor, or minimum a team must spend — there is a wide variance in spending whereby teams can spend as much or as little as they want. It might hurt attendance, but they will be cushioned by other increasing revenue streams from massive national TV contracts, MLB Advanced Media and other sources. Even the lowest-revenue team, the Oakland A’s, took in $210 million in revenue according to Forbes and operated at a profit.

In the NBA, by contrast, there is a salary cap AND a minimum of basketball related-revenue that teams must spend on player salaries — set between 49 and 51 percent a year, per the most recent collective bargaining agreement.

Twins officials have long said that their aim is right in that range: 50 percent of revenue going toward payroll. In reality, though, it has often fallen short — as Aaron Gleeman, the locally based editor in chief of Baseball Prospectus, noted in a tweet that started a lot of this conversation over the past week.

Looking at the previous year’s revenue and next year’s (which seems like a good way to do it), Gleeman found that in each of the past seven years the Twins have fallen short of 50 percent. Their collective revenue was $1.621 billion in that span, while their payroll was $723 million — a shortage in spending, he notes, of $87.5 million over seven years, or $12.5 million a year.

But here’s the thing: That doesn’t make the Twins unique. In fact, if we look at the most recent leaguewide example, it makes them average. Expressed as a percentage, the Twins have spent 44.6 percent of previous year’s revenue on next year’s payroll in that span.

Looking at MLB as a whole, the total revenue in 2017 (per Forbes) was $9.46 billion if you simply add up revenue from all 30 teams. And the total payroll in 2018, per Spotrac, was $4.18 billion. As a percentage, MLB teams spent 44.2 percent of their revenue on payroll.

That’s not to say it’s right, or that if everyone is doing it the Twins should, too. But it does suggest the problem is more systemic than specific to one team.

The major point of contention this year is that the Twins aren’t just poised to miss the 50 percent mark by a little. They’re going to miss it by a lot.

Even if revenue was flat and the Twins took in $261 million in 2018 (same as 2017, the last year for which figures are available), they’re on pace this year to have a payroll of about $100 million — Joe Mauer’s $23 million and some spare change less than last year — unless they do some more free-agent shopping.

That would be just 38 percent of revenue, and that’s assuming flat revenue.

That certainly reflects a business/philosophical decision — one that can be justified but one that also has some fans justifiably irked.

The bigger problem, though, goes beyond the Twins.

The disincentive to spend, combined with a salary structure that underpays players early in their careers, combined with a system that doesn’t enforce a spending minimum as a percentage of revenue, is set up in favor of the owners not the players. It figures to be a major point of contention when the collective bargaining agreement expires after the 2021 season.

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Source

neallesh@yahoo.co.uk

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