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Contracts may appear crazy, but teams’ revenue increases vastly outstrip player salary increases

Mar 28, 2014, 11:33 AM EDT

Mike Ilitch

The majority of people weighing in on Miguel Cabrera‘s new deal are going to exclaim how crazy it is and how baseball players are overpaid, but it’s probably worth remembering that since 2002, baseball player total salaries, as a share of new revenue, have declined from 56 percent to 40 percent. And that as average payroll has gone up by 58 percent in that time, team revenue has gone up by 122 percent.

That comes from Matt Swartz of The Hardball Times, who drops some Econ 101 on us about these things — with lots of graphs and data and stuff — concluding that, while eyes continue to pop every time a new contract is signed, baseball players are getting increasingly smaller pieces of the growing baseball revenue pie.

So, lament the “greedy” players all you want. But don’t forget to think about what the owners are making these days. And that’s without even picking up a bat or a glove.

  1. pilonflats - Mar 28, 2014 at 11:36 AM

    Revenue does not equal profit.

    • itinerantpedant - Mar 28, 2014 at 11:56 AM

      Since you say that, I’ll remind you that Profit is Revenue less Costs. What in your opinion, OTHER than salaries (which have been sown to be shrinking relative to revenue) could be a cost driver for the franchises?

      Stadiums? Don’t make me laugh. Tell me a team that HASN’T extorted money from their cities to build a new complex. Since apparently these teams are hard up, please tell me whence their suffering originates. Are hot dog costs so far outstripping vendor revenues that soon the poor owners shall be confined to one condo in Palm Beach?

      • jeffbbf - Mar 28, 2014 at 12:11 PM

        moronic, and overly dramatic response. It was a simple statement: you can’t necessarily say that the players should be getting more of the pie, because nobody knows what that pie is. Let’s take a look at some of the costs that may be a little more prominent than hot dog expense, and have probably changed dramatically since 2002: travel, contract insurance, medical costs and rehab/training facilities, technology, scouting (including international scouting), and executive staff, just to name a few. Nobody is claiming the owners are crying poor – or ever will. And the owners will probably never divulge what their profits are. Suffice it to say that both sides are doing very well.

      • sdelmonte - Mar 28, 2014 at 12:18 PM

        The Mets paid most of the bill for Citi Field. That, more than Madoff, is why they are in debt.

      • pilonflats - Mar 28, 2014 at 1:29 PM

        lol. a bit of a ridiculous and uninformed response, but hey feel free. and you wanted an example of a team that didn’t extort their city? try san francisco.

      • gibbyfan - Mar 28, 2014 at 1:30 PM

        Absolutely agree that both parties are doing very well but Craigs comment …….”.And that’s without even picking up a bat or a glove” and comments of others fail to recognize the investment owners are making as well as the expenses that are incurred………..SO in answer ot Craig’s comment it could be said of the players..”and that’s without investing a dime or putting a penny at risk” Let’s just say maybe theyboth deserve what they are getting.

      • churchoftheperpetuallyoutraged - Mar 28, 2014 at 2:06 PM

        comments of others fail to recognize the investment owners are making as well as the expenses that are incurred

        Like what exactly? Team valuations have increased exponentially even when the product they put on the field hasn’t. If the owner’s fall on hard times, they have a league ready to float them tens of millions of dollars to make bank repayments. They have cities just aching to give them public funds to increase their cash cow (stadiums).

      • jfk69 - Mar 28, 2014 at 5:58 PM

        This is not a pseudo course on economics. It simply another statement on bad long term deals. There is saying in the airline business.
        How do yon become a millionaire?
        Take a billion or two and invest in an airline.
        The same can be said for the next hot new restaurant/club coming to a city near you.

      • jfk69 - Mar 28, 2014 at 6:11 PM

        Players salaries on the books for 2014,including long term deals now total 3.5 Billion dollars. In order to increase fan base and happiness. I feel that should double. Only then can we save some owners from themselves.
        Of course I have never seen an owner declare bankruptcy due baseball operations cost. Parking,beer and food concession costs shall now double. How many years till the next TV/cable contract?
        Don’t worry. The big market teams will pay based on revenue sharing. Excellent! Built in profits.

    • dparker713 - Mar 28, 2014 at 12:01 PM

      I’m sure the players would love to negotiate profit sharing in lieu of other compensation.

      • pilonflats - Mar 28, 2014 at 1:28 PM

        no they wouldn’t. basic math.

    • gibbyfan - Mar 28, 2014 at 6:05 PM

      ……….Like what exactly? –Well you see Church it’s like this. If you want to buy a baseball team you need like, well let’s say at least 1/2 billion dollars…..or like those who bought the dodgers, even up to two billion. Now, that’s considered an investment. –that’s what

  2. jfk69 - Mar 28, 2014 at 11:38 AM

    Just because you have money does not mean you spend like a drunken sailor. Two years from now another Fielder deal. Maybe not so lucky this time.

    • jcmeyer10 - Mar 28, 2014 at 11:49 AM

      Amen, this is college kid mentality.

  3. sabathiawouldbegoodattheeighthtoo - Mar 28, 2014 at 11:47 AM

    Go 0.1%! You’re doing great!!

    • barrybondsisthealltimehomerunking - Mar 28, 2014 at 11:54 AM

      That’s why they are 0.1 percent. You could have invented the idea of Pizza Pizza but you didn’t. It’s not his fault he’s smarter then you.

      • sabathiawouldbegoodattheeighthtoo - Mar 28, 2014 at 12:05 PM


      • cohnjusack - Mar 28, 2014 at 1:51 PM

        Yes, because most of the 0.1% are there because they were geniuses and not through nepotism…

      • historiophiliac - Mar 28, 2014 at 2:12 PM

        I’m going to object to the idea that Little Caesar’s pizza is genius of any kind.

      • stlouis1baseball - Mar 28, 2014 at 3:14 PM

        You nailed it Barry. When people complain about the cost of a Doctor’s visit I respond “we should have become a physician.” When people complain about insurance costs I respond “we should have gotten into the insurance business.” When my Father complains about the cost of the salt for his water softener I respond “we should have bought into a Culligan franchise.” When he complains about the cost of his trash service ($44 dollars for THREE DAMN MONTHS) I respond…”we should have gotten into the sanitation business.

        It seems 95% of our HBT brethren feel like the Owners (or really anyone with wealth)…should apologize for it. It makes me consider the contempt they likely have for their respective employers.

    • barrybondsisthealltimehomerunking - Mar 28, 2014 at 11:57 AM

      In fact this guy really did it all himself. Son of an immigrant tool worker, 4 years in the Marines, minor league ball player.

      • sabathiawouldbegoodattheeighthtoo - Mar 28, 2014 at 12:05 PM

        Not criticizing Illitch, per se. Merely observing yet one more trend where corporate revenues are exploding while the % that “trickles down” shrinks.

        It does not matter how one reaches the 0.001%. What matters is how one stays there.

      • Old Gator - Mar 28, 2014 at 12:30 PM

        Mitt Romney, pay close attention here….

      • chc4 - Mar 28, 2014 at 1:28 PM

        Trickles down? Just as an example, the Braves operating profit last year was something like $30-40 million. For a business with such high revenue, that’s a terrible profit #. Payroll was about $90 million. If you ever took an econ class you would know there is quite a lot of money “trickling down” to the players in this scenario. Moreso than many other industries.

      • sabathiawouldbegoodattheeighthtoo - Mar 28, 2014 at 2:32 PM

        chc4, the players are both payroll and product for a team. These are not factory workers making widgets. They are the widgets. While calling player salaries “payroll” is correct in a literal sense, it is not apples to apples when comparing to other businesses “payroll.”

    • jfk69 - Mar 28, 2014 at 6:19 PM

      Scott Boras loves to help circulate the money. Stephen Drew…You watching.
      It is not about the money. It is only about finding an owner desperate enough to spend it.
      Nope My 15/20% fee is not negotiable.

      • jwbiii - Mar 28, 2014 at 6:48 PM

        Got a source for that dollop of stupidity?

  4. APBA Guy - Mar 28, 2014 at 12:05 PM

    We shouldn’t lament the size of the Cabrera deal from the standpoint of an owner spending as he sees fit: circulating the money is a good thing. In fact, that’s one of the big drivers of our economic malaise now. Money redistributed upwards tend not to get circulated, unlike with the middle class, which spends it.

    Now, as to what this contract does to Detroit’s payroll flexibility and how that impacts their ability to retain Scherzer or make a move at the trading deadline, that’s another set of issues.

    • historiophiliac - Mar 28, 2014 at 2:16 PM

      I think they have the ability to go as high as they offered Max (and they probably figured on Miggy when crunching their numbers). Willingness is another thing altogether. I think they’ve indicated they think anything more for Max is an overpay.

  5. alangyo - Mar 28, 2014 at 12:06 PM

    Players should be paid more. But it’s not the 35 year old Cabrera’s. It’s the minor leaguers and those stuck in service time that should be getting a far bigger piece of the pie.

    In my opinion, the stupidity of Cabrera’s deal has nothing to do with the changing landscape of revenue and salaries. Teams are just locking up young players more now than ever before…

    • infieldhit - Mar 28, 2014 at 12:37 PM

      I wouldn’t mind players getting paid more as a whole if meant the lower-tier guys getting a bump. A single player won’t automatically get you to the World Series, but some of them get (or will get) paid like they will. Cabrera, Trout, Kershaw, Cano, McCutchen et al haven’t been there in recent years, but it’s not their fault. Is a guy making $25M per really worth 50 of some third-year kid making $0.5M?

      And it’s the veterans who have influence on labor talks, so they’d have to be pretty magnanimous to have the pie get sliced a little more evenly for the younger guys next time around.

    • weaselpuppy - Mar 28, 2014 at 12:42 PM

      well, you mean the 30 year old Cabrera…..

    • historiophiliac - Mar 28, 2014 at 1:01 PM

      In 2006, Miggy had a WAR of 5.8 and an OPS of .998. He won a Silver Slugger and was 5th in MVP voting. He made $472,000 that season. It isn’t like he didn’t get screwed by the system when he was younger too. That’s kind of the point.

  6. chip56 - Mar 28, 2014 at 12:13 PM

    I don’t lament greedy players. I lament stupid owners.

    • historiophiliac - Mar 28, 2014 at 1:08 PM

      So, owners collude to artificially deflate player salaries when they are young, and owners who pay them large amounts later (which the players see as compensation for time screwed) are stupid? Personally, I think they keep the system going and allow owners to continue to pay younger guys less. I’m not sure I think that’s dumb.

      • chip56 - Mar 28, 2014 at 2:32 PM

        If your neighbor is trying to cook hamburgers with a blowtorch and burns his house down do you think to yourself “this may not have worked for him, but it’s a tremendous idea anyway so I’m going to try it and get better results?”

        There has been one 10 year contract in baseball that has worked out well for the team that entered into it. That was Derek Jeter’s deal with the Yankees when he was 27. The other deals, Alex with the Rangers, Albert with the Angels, Alex with the Yankees have all been hot messes for the teams. So now you have two owners who decide that even though those deals didn’t work – these two (Cano and Cabrera) will. What’s more, you have a GM in Dombrowski who just shipped Fielder out of town because he was afraid of the declining years of Prince’s contract and follows it up by giving a bigger contract to a player he still had control of for another 2 years.

      • historiophiliac - Mar 28, 2014 at 2:55 PM

        Well, that wasn’t a loaded metaphor…

        I’m not sure why you think they traded Fielder because they are afraid of big contracts in later years. I think the evidence proves otherwise, but you’re entitled to your own mind-reading assumptions (as we all are).

        Also, I’m getting tired of saying (one.more.time!) that there is more factored into a contract/value than a player’s on-field performance. There are subjective factors as well — hence, different owners make different deals. When you’re a GM/owner, you can do whatever you want, though.

      • chip56 - Mar 28, 2014 at 3:51 PM

        From Grantland at the time of the trade: Fielder is owed over the next seven years, minus the $30 million the Tigers are sending Texas to cover a chunk of that contract. The worst part of any big-money, multiyear deal tends to come at the finish, when teams are often paying dead money to a player near the end of the road. Even if you acknowledge that Fielder is younger than Kinsler, and even if you’re willing to overlook Fielder’s physique and the fate that befell big, barrel-chested sluggers like Mo Vaughn or Cecil Fielder once they got past their early thirties, this remains a smart move for the Tigers, who at the very least get out of one big-salary season given that Fielder has three more years left on his deal than Kinsler does.

        According to ESPN’s Buster Olney, the Tigers soured on Fielder after the first baseman’s miserable performance during the 2013 playoffs, along with what they perceived to be his excessively nonchalant comments about his struggles.

        As to the metaphor – 10 year deals have proven to be as smart for baseball teams as cooking a hamburger with a blowtorch. It is what it is the Mariners and Tigers are going to get to pay premium dollars to watch stars decline for 5 or 6 years.

      • historiophiliac - Mar 28, 2014 at 4:10 PM

        Well, then, you can have the pleasure of feeling smug about your position the whole time. Have a nice day.

      • chip56 - Mar 28, 2014 at 9:19 PM

        Not smug, just right.

      • historiophiliac - Mar 28, 2014 at 11:09 PM

        I’m glad you’re the random arbiter of that. It works for you.

      • chip56 - Mar 29, 2014 at 10:10 AM

        hahaha – I don’t think you quite know the definition of “random.” Feel free to list all the 10 year contracts that have worked out well for the team? Derek Jeter’s with the Yankees is the only one. What’s that you say. it’s too small a sample size to judge? Ok fine. How about all deals longer than 7 years given out to players over 30. Show me the ones that have turned out well for the teams that have entered into them. Is it more than 3? You can even back the age up a couple of years…Teixeira, Vernon Wells, Manny Ramirez, Alex Rios – all signed under 30, how did those work out? Tex is in steep decline, Manny went nuts and forced his way out of Boston and Wells and Rios were disasters in Toronto. Yet owners continue to make the same mistakes with different players. The definition of insanity is doing the same thing over and over again and hoping for a different result.

        You want a smart ownership move, the contract Moreno just signed with Trout. That’s smart business.

  7. bravojawja - Mar 28, 2014 at 12:20 PM

    The big problem here isn’t just that the megastars like Cabrera and Pujols and Fielder are getting paid far more than they’re going to be worth, it’s that despite the huge jump in team revenue the young players like Trout and Strasburg and Harper aren’t making what they should*.

    Worse, Minor Leaguers are making less than minimum wage (practically, or whatever – I’m too lazy to look up actual numbers). Maybe that’s part of why established Major Leaguers are demanding so much money – they didn’t get enough while they were under team control.

    I’d suggest the MLBPA negotiate a huge jump in the ML minimum for the next CBA. Better yet, protect the kids who will become members of the union pretty soon and get Minor Leaguers a decent salary, too.

    Now if you’ll excuse me, I’m looking at brochures for bridges in Kansas. I’m gonna make a mint!

    * Let’s leave the whole “entertainers don’t deserve to make so much more money than cops and nurses and teachers” argument for a world where people are paid by their value to society and not the revenue they bring their employers.

    • historiophiliac - Mar 28, 2014 at 1:11 PM

      I like your plan, communist, but Americans like to believe in meritocracy. You’re not going to get rid of inequities in pay.

      • bravojawja - Mar 28, 2014 at 4:04 PM

        I’m not suggesting rookies get paid like elite guys in their prime, just more than they’re getting now. The money is there to do it. The merit is making the big leagues.

    • chc4 - Mar 28, 2014 at 1:37 PM

      It’s called a Collective Bargaining Agreement, which the players all approved. There is no way the PA would ever go for increasing pay for minor leaguers. It would take $ out of their own pockets. That’s not the owners fault.

      • churchoftheperpetuallyoutraged - Mar 28, 2014 at 2:10 PM

        Players in the minors, while subject to the CBA, aren’t part of the union so they get zero say in what happens. However you’re right, there’s little doubt the current union would do anything to help the MiLB players because it’s just money out of the MLB player’s pockets.

  8. andreweac - Mar 28, 2014 at 12:20 PM

    Considering how much my cable TV bills have gone up since 2002 I know exactly how much sports owners and the corrupt NCAA board are making.

  9. scoutsaysweitersisabust - Mar 28, 2014 at 12:30 PM

    The average yearly salary does not shock me nearly as much as giving a 10 year contract to a player over the age of 30 does.

    But then again, when you look at the total value of the contract, it wasn’t very long ago that entire TEAMS were purchased for that much. That’s just coo-coo for co-co puffs.

  10. missingdiz - Mar 28, 2014 at 12:56 PM

    I’m not going to fault the players and I understand that the owners are just taking care of business as they know it. But there are limits to everything. When I was in college–i.e. low income–I could go to the ballpark whenever I could find the time. Time was the constraint, not money. Now I’m better off financially, but I only go a couple of times a year. It’s a big treat for me. But more than that would seem crazy to me. I don’t think I’m unusual. Can people who work for wages take the family to the ballpark? They used to. How often can middle-class families drop hundreds of dollars for a ballgame?

    • historiophiliac - Mar 28, 2014 at 1:15 PM

      I think that’s true of most things now though. I’m stunned at how much it costs to send a kid to public school these days. But, people buy a lot of crap anymore. The things they have to spend money on is unbelievable. I wonder how they do it.

    • stlouis1baseball - Mar 28, 2014 at 3:19 PM

      Diz: Wonderful post with sound logic and excellant example with regards to your college days.
      Yet…it’s gonna fall on deaf ears here.

  11. schlom - Mar 28, 2014 at 1:07 PM

    I’m not sure we should be using such hard percentages (players salaries down from 56% to 40% of the total revenues) when the revenue amounts are total estimations. Related to that I thought that some of the cable tv contract amounts were grossly exaggerated. We also don’t know if non-salary spending has grown – if the reason for the drop in salary percentage is simply because the owners are spending money in other areas (player development, increased non-player salaries, non-salary benefits, etc.) than the drop isn’t necessarily bad, is it?

  12. lks311 - Mar 28, 2014 at 2:06 PM

    People want to complain about this contract but, it’s really nobody’s business but Cabrera’s and the Tigers. Also, no one talks about the added value of Cabrera to the Tigers in attracting Latin talent. Seriously, no decent player would even consider the Tigers ten years ago and now it’s a destination. In my my mind money well spent.

    • churchoftheperpetuallyoutraged - Mar 28, 2014 at 2:12 PM

      Also, no one talks about the added value of Cabrera to the Tigers in attracting Latin talent.

      What talent can Cabrera attract? With all the draft/international signing regulations in place, it’s not like the Tigers can sign all the amateur players.

      • historiophiliac - Mar 28, 2014 at 2:21 PM

        No, but we do get a steady stream from Venezuela these days. I’m sure Miggy’s reputation back home helps with that.

  13. ahenobarbuso - Mar 28, 2014 at 2:57 PM

    I think all the players should all get the national salary average of ~$45,000 a year and the rest should be donated to charities and improving the states the clubs reside in.

    The last thing we need is more grown up children getting paid $30+ million a year to play around all day and act like conceited idiots who think they are better than everyone else. As far as I’m concerned professional athletes have never truly worked a day in their lives.

    • jrbdmb - Mar 28, 2014 at 4:19 PM

      And you sir are a moron.

  14. nicofthenorthstar - Mar 28, 2014 at 3:33 PM

    In other words, it is beyond crazy how much money pro sports make. And yet every year they jack up the prices on everything from tickets to cable subscription costs to the hot dog at the stadium that was built with tax payer dollars. I, for one, will withhold my dollars where I can.
    Cut the cable.
    Don’t go to the games until they reduce ticket prices to reasonable levels.
    Accept that a sports team may move to a new town from time to time, but that that would be a tiny price to pay to stop the wealth-fare that is tax payer funded stadiums.

  15. sfm073 - Mar 28, 2014 at 8:01 PM

    Not sure why anyone would blame any player for getting as much money as they can. People need to realize that it’s us the fans that are paying these ridiculous contracts.

  16. maximus929 - Mar 29, 2014 at 12:31 AM

    Smart baseball decision to pay Cabrera for what he’s already done instead of he won’t be able to repeat. sigh.

  17. 11stanleycups - Mar 29, 2014 at 1:15 AM

    Not sure why anyone cares what Miggy is being paid. The Tigers are very profitable, Miggy is the best player in baseball, and Mike Illitch is one of the best owners in professional sports.

    How many guys own 2 successful professional teams let alone 1.

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