SSTN Weekly Mailbag: Falling Revenue’s Effect On Team Spending, A Trade With The Cubs, and Tan
By Andy Singer
After a short hiatus, we’re back here at the SSTN Weekly Mailbag! Before I get into today’s topics, I hope that all of you have had a happy, healthy, and safe holiday and New Year. Let’s hope for better times ahead in 2021.
I knew this year was going to be slow in terms of Free Agent signings, but I admit to being surprised that a Free Agent of DJ LeMahieu’s caliber remains unsigned. I expected the top 3 or 4 Free Agents to sign by the New Year, but as pessimistic as I was about Free Agent spending, even I underestimated the austerity measures being undertaken around the league. For this week, we’re taking a break from the LeMahieu negotiations. Hopefully we’ll have real news on that front soon.
In this week’s mailbag, we’ll discuss falling and uncertain revenue’s effect on team spending, a trade with the Cubs, and Tanaka rumors! Let’s get at it:
Joel says: I believe that the media has forgotten the ugly way negotiations went in determining last years schedule which portends an almost inevitable repeat of hostilities in 2022. Add to that the uncertainty as to whether covid is a threat to a regular 2021 season with fans attending, all of which would explain the reluctance to jump on top free agent deals by many teams.
There is a lot of truth to Joel’s statement. Certainly, while most MLB teams can withstand one year of greatly diminished revenue, one would expect that multiple seasons of diminished revenue would necessarily mean belt tightening of some form across baseball. However, the devil is in the details, and the details are very different depending on who you are.
For a team like the Rays, mired in an awful stadium and media situation in St. Petersburg that creates a revenue gap even in good years, it is understandable that good players need to be dealt a year early rather than a year late in order to remain competitive in future seasons while shedding salary in a year like 2020. The situation for a team like the Yankees is far less clear. The Yankees have surely run on profit margins that would make other multi-national corporations envious. Relative to the rest of baseball, the Yankees have more revenue streams, and have made it clear that the majority of their revenue does not come from in-person game attendance. Has a lack of fans in the stands, paying for concessions hurt one source of revenue for the Yanks? Certainly, and I won’t argue that for a second. The Yankees would be smart to be cost-conscious given the uncertainty surrounding what the numbers in that revenue facet will look like for the next couple of years, but we need to look at this in context.
MLB ownership and the commissioner’s office has consistently bullied players throughout the last year. More to the point, there is more than a little reason to be suspicious of their claims. A few points:
MLB owners have been the driving force behind shrinking the schedule due to claims that they lose money for every game played without fans. MLB released a statement noting a $3.1 billion loss in 2020.
Keep in mind though, that these numbers include loads of “creative accounting.” TV revenue, widely speculated to be the largest chunk of any real revenue pie across the sport, was not included in MLB’s calculations, and MLB will not be transparent enough to share a full financial statement with the players. We know what the players make based on publicly available data, but we really don’t have a full picture of what the owners have or don’t have in terms of revenues and losses.
The Yankees, in particular, have made it clear since their move to the new stadium that they don’t care if you or I attend a game at Yankee Stadium. Just look at the number of empty seats at most non-rivalry games. The Yankees care far more about their corporate sponsorships and TV deals than they do about the fans, which is how you would expect a business to behave. The flip side to that is that I’m not ready to cry a river for the Yankees when they tell the public that they’re hurting financially because COVID-19 restrictions have made fan attendance difficult or impossible.
The Yankees’ financial situation was largely considered the best in baseball prior to 2020, a situation made even better when you consider their 10-year quest to decrease player salary overhead and the money saved when they reset their tax obligation by falling beneath the luxury tax threshold a couple of years ago. While maybe that doesn’t mean the Yankees have more liquidity, surely a team like the Yankees would be able to leverage their borrowing power to weather the next year or so.
No matter what side of the fence you fall on in this argument, I think we can all agree that while belt-tightening of some form makes sense for most teams across baseball, that is a relative concept for all teams. The Yankees are better positioned to at least maintain previous salary obligations than most other teams, so they should spend a bit more relative to the rest of the league to field a winner. In an offseason like this, that shouldn’t cost much.
Fuster asks: given this deal and given the likelihood that the Cubs are gonna strip out and aim to contend in 4 years or so, what might the Yankees be able to use to pry away Willson Contreras?
First off, as crazy as this will sound, I’m not sure that the Cubs are actually tanking. While they are certainly worse following a salary dump trade of their staff ace, they could still theoretically compete in the NL Central or Wild Card even with a diminished roster. The Cubs clearly want to clear some salary, but the returns do not scream full-blown rebuild. If a multi-year rebuild was the goal, the return for Darvish is a pretty terrible start. If the goal is to free up salary and wait until revenue streams improve, then the Cubs accomplished their mission (sigh). Personally, I have a hunch that Contreras is staying put in Chicago. However, if the Cubs are truly selling off, then the Yankees should check-in.
Willson Contreras is one of the best all-around catchers in the game, though he is likely in the tier below elite. He bats right-handed, has no significant platoon splits, and the acquiring team would retain two years of team control. Contreras is getting more expensive as he enters his final two arbitration years, but his value on the field is still likely to eclipse his salary figures.
Here’s where it gets complicated. After his best offensive season in 2019, which saw Contreras post a 127 OPS+, more power, while playing typically solid defense, Contreras slid offensively in 2020. A lot of players slid in a strange season, so the question is: can we expect Contreras to rebound? The underlying numbers say yes. In 2020, Contreras continued a trend of improving his contact numbers. His exit velocity jumped by more than 1 MPH, he launched the ball a bit higher on average (though not too high, by Yankee standards), his K% and BB% remained stable, and his hard hit rate continued a climb towards elite. Add in Contreras’s improved framing numbers, and Contreras is poised to be nearly elite for the next two years.
The cost to acquire would, and should, be high. It depends on what Chicago’s priorities are, but two blue chip prospects would be required to acquire Contreras. I feel comfortable with that assessment because he is not the same kind of salary dump as Darvish. More to the point, Contreras is a player you trade when you’re rebuilding, not to save salary.
I’d start with a near-ready player like Schmidt, a high-upside player like Oswald Peraza, and a couple of low-minors lottery tickets. That seems light, but I’m offering on a curve based on this offseason.
Jeff asks: Do you believe the Tanaka rumors that he’ll go back to Japan if he doesn’t sign with the Yankees?
I find it hard to believe given the fact that Tanaka is still an average MLB starter who should slot nicely into the middle of the rotation. By all reports, Tanaka would love to finish his career at home, but I don’t think he’s there yet. I’ll believe this rumor when I see it happen. Selfishly, I want to see Tanaka pitch in MLB, even if it’s not with the Yankees.