Contracts Can Kill: An Introduction

How many baseball players can one buy with $118 million?  In 2012, 23 teams funded their entire rosters for less.  Only seven teams paid more and only the Yankees committed that much to just four players; Derek Jeter, Alex Rodriguez, C.C. Sabathia, and Mark Teixeira.  The previous two World Series champions spent less.  To be fair, the Yankees, when considered within the context of the team’s payroll history, will be slumming in 2014 when the ”Flush Four” will out-salary only seven major league bottom-dwellers at a paltry $83 million.

This year, the Yankees’ payroll is a league-leading $197.9 million.  Last year, the Yankees were assessed $13.9 million for exceeding the salary cap by $32 million. Since the “luxury tax” was instituted, the Yankees have paid $206 million of the $221 million total collected by MLB.  That’s 91% of the total collected over the past 15 years (surprisingly, MLB has opted not to adopt my suggestion and call it the “Steinbrenner tariff” instead).

Hal Steinbrenner indicated that the 15 year spending spree may well be coming to an end, however,  when he told reporters in early March that he is “not convinced we need to be as high as we’ve been in the past to field a championship-caliber team.”  He intends to bring the team’s payroll under the 2014 cap of $189 million which will necessitate two things; first, that the Yankees will continue paying the luxury tax for this and next season and second, that the rest of baseball will need to actually delve into their own revenue streams to fund their payrolls.

There can be little doubt that Steinbrenner the younger is correct.  His father’s spending habits were reckless and though team salaries never exceeded 46% of team revenues, they resulted in a depletion of farm system prospects (a trend only now being reversed) and a “win now” mentality that has fueled an unsustainable (not to mention, exponential) rise in free agent salaries.  The most glaring deficiency of this trend for the Yankees is their conspicuous absence of pitching and infield prospects.  Between 1990 and 2004 (in between the drafts of Andy Pettitte and Phil Hughes), the Yankees drafted 397 pitchers.  Not one developed into a rotational pitcher.  That’s zero for 397.   Since then, the Yankees selected Ivan Nova in 2004 as an international free agent, and then drafted Joba Chamberlain, Ian Kennedy, and David Robertson in 2006.  Hughes and Robertson are the only draft picks who currently pitch for the Yankees.

The “Steinbrenner Tariff”, while undoubtedly good for the bottom-dwellers of major league baseball actually hurts the rest of the league – including the Yankees.  It cost them the salary of an All Star centerfielder in 2011, and over the past 15 they’ve forked out the equivalent of their entire payroll last year.  Neither of the previous two World Series champions exceeded $105 million (Giants at $98 million and the Cardinals at $105 million). In fact, when combined, the last two World Series champs didn’t spend as much as the Yankees did in 2010 on player salaries.

Through 2014, the Yankees have only four players currently under contract (if we include Jeter’s team option) to the tune of $83 million.  Another way of stating this is that they’ve got every position secured in 2014 except middle infield, the outfield, four starting pitchers, a bullpen, and a catcher.  Oh, and Joe Girardi’s contract expires in 2013 too.

Technically at the end of this season, both Curtis Granderson and Robinson Cano could become free agents, though each has a team option for 2013 of $13 and $15 million respectively which makes that unlikely.  Still, by 2014, both would be free agents and both are All Star-caliber players.  Cano is a two-time All Star and one of the two best second basemen in the game.  Curtis Granderson is the American League RBI leader and himself a two time All Star.  If we consider just the past two years (beginning with the “Grandyman’s” signing with the Yankees), the two of them accounted for a combined 656 hits, 102 homeruns, 419 runs and 413 RBIs.  As I write, the “Grandyman” has just hit three homeruns and a single, with one walk, versus the Twins. He and Cano are going to be expensive.  According to MLBtraderumors.com, if current production rates maintain, each could be in line for $20 million per year.

While that may be the worst of it, the remaining decisions aren’t much better.  Brett Gardner is a free agent as of 2013.  Mark my words, he will come back to hurt us if the Yankees don’t re-sign him. He’s got a crazy-good UZR of 25.8 and he stole 93 bases last season on a team that systematically shuns stolen bases (and 101 in 2010).  In my view, he’s being criminally misused by not batting lead-off.  Fellow outfielder Nick Swisher becomes a free agent at the end of the year.  He’s a career .253 hitter and averages 23 homeruns per year but of all the players, he’s easily the most replaceable.

Derek Jeter’s extension expires in 2014 (assuming that the Yankees exercise the team option on his contract – all but a certainty), he will either go gently into that good night, or he’ll go kicking and screaming.  Either way, he won’t be re-signed.  He earned his 3000th hit in pinstripes last season, along with five rings and two pennants, ensuring that he’ll enter the Hall of Fame in pinstripes.

If the rumors are true and Mariano Rivera (41) does in fact have human DNA, he likely won’t be able to pitch much longer.  There was talk in 2010, as his strikeout rate dipped to 6.8 per nine innings, that Rivera is in fact a carbon-based life form.  That talk subsided in 2011, when his strikeout rate jumped back up to 8.8 per nine. Whether human or alien, he became the all-time saves leader last season and by the time his extension ends in 2013, he likely will have a saves number the equivalent of DiMaggio’s 56 game hitting streak – a record that will not be broken in my grandchildren’s lifetime (especially since there seems to be growing dissatisfaction with significant investment in closers).  And by that time at age 43, he will retire.  If Hank Steinbrenner is serious about cutting payroll, there’s no way the Yankees can afford to re-sign him.

Between Jeter ($8 million team option 2014 meaning a deduction of $9 million in salary from 2013), Rivera ($15 million), and Swisher ($10.2 million), the Yankees will cut $34 million in player salaries by 2014.  That means, if all goes according to plan, the Yankees will have cut their $197 million payroll in 2012 by $34 million of which $83 million is already spent on Jeter, Rodriguez, Sabathia, and Teixeira.

That leaves the Yankees with a paltry $106 million to spend on player salaries in 2014 – as much as last year’s world champion Cardinals spent in 2011, and $10 million more than the Giants spent in 2010.  There is little doubt that most of the “big market” teams could put champion-caliber team on the field with that money, let alone a team with as much in the way of financial resources as the Yankees have.

Assuming that Hank Steinbrenner sticks with his plan of payroll reduction, he and Brian Cashman would be wise to focus on developing pitching within their farm system and to avoid the really, really, really bad contracts that they are stuck with through the 2017 season.  In my columns that follow, we will examine the contracts of Derek Jeter, C.C. Sabathia, Mark Teixeira, and Alex Rodriguez.  Much of the reason that we are confronted with the prospect of losing so much so quickly is that long-term, must-have, contracts have prohibited player development and induced desperation (never a good position to be in while negotiating). While it’s great to have the resources to sign great players, contracts can kill.

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6 Responses to Contracts Can Kill: An Introduction

  1. Tanned Tom says:

    The real problem is too many guys with access to the check book. A-Fraud's contract is a Randy Levine-Hank Steinbrenner special. Soriano's contract is courtesy of Hal Steinbrenner. Jeter's contract concerns me not at all. Only the Teixeira contract belongs at Cashman's doorstep (well, now that Burnett has been banished). Going forward the challenge is going to be pitching. Sabathia's signed, Nova looks good, but after that? Pettitte is year to year, Garcia will be not last 2012, Kuroda is gone after 2012, Pineda has injury issues, Hughes bites it as a starter. That's 2 starters for 2014, who are the other 3? This team will be betting it's post season chances on being able to develop 3 good young starters over the next 2 seasons. Otherwise Cashman will have to go dumpster diving again.

    • Ryan says:

      Between Pineda and Hughes, 1 of them should get their head out of their butt! Just in case they don't, let's consider the pitchers closest to ready for who can step forward in the next 2 years. Phelps is showing now he's ready. I would drop Garcia and start him right now. At AAA, you also have Mitchell, Warren, and the B's. You also have Wade on the roster now. Find 2 out of those 5. You also get to see if Pineda or Hughes can right themselves as I said before. That's 2 out of 7 pitchers currently ready for the Big leagues or ready in the next 2 years. The rotation looks like it has a bright future. By the way, with the exception of CC, they will all be cheap and under club control for years.

      I do agree with your 1st statement though. If Cashman is your GM, let him be the GM and stay out of the player signings.

      • Mike Sommer says:

        The B's haven't done well so far. Banuelos is on the DL, and even after today, Betances' ERA is 8.83. Who knows how long Pineda is out or what his MRI shows tomorrow. Just giving a status update.

  2. Marit says:

    "the rest of baseball will need to actually delve into their own revenue streams to fund their payrolls" I think you're confusing luxury tax and revenue sharing, they're not the same; the Yankees will still have to pay alimony to poor, small market teams, even if they go under $189 million. Hank and Hal are not the same either, by the way.

    • Mark Panthos says:

      My initial reference to Hal should have been Hank – you are indeed correct, there is a difference. You are also correct regarding the difference between the luxury tax and revenue sharing, but to be fair, a portion of the luxury tax goes to the IGF, which funds player benefits.

  3. Jim says:

    You're looking at this the wrong way. The Yankees need to shed payroll — what's going away by 2014? Well, we'll get rid of Rafael Soriano's $13 million, Pedro Feliciano's $4 million, Mariano's $15 million, Kuroda's $10 million, A.J. Burnett's approximately $11 million they're chipping in to Pittsburgh… All without really needing to get outside replacements, since those should all be either replaced internally or aren't even playing for us. That's $53 million just gone entirely from payroll. Now play around to see how to get to $189.