Starting with Brock Holt likely gone.
Not happy. I like Brock. I have a feeling it will be a sad off-season for Joolz.
Agreed. Lots of the greats I like will be gone. Huge Holt fan as well
JD or Mookie will be gone too, can’t see us keeping both. And porcello will be gone. Even though he had a down year I really like him. I always hate this time of year.
I liked your post, johnlocke, not because Brock is leaving but for starting the thread
So JD just posted this article on FB.
Hmmmm. That’s sad.
Today the Boston Red Sox announced that Dustin Pedroia and Chris Sale have been reinstated from the 60-Day Injured List, and that Catcher Juan Centeno was outrighted from the MLB roster, electing free agency.
Dustin Needs to retire and coach
John Henry, Boston Red Sox owner: ‘I don’t think of it as a business. This is not the business I would choose to go into’
Updated 2:33 PM;Today 5:01 AM
Red Sox principal owner John Henry speaks at a news conference at Fenway Park, Monday, Oct. 28, 2019, in Boston. (AP Photo/Elise Amendola)
BOSTON — The Boston Red Sox led Major League Baseball in payroll both in 2018 and 2019, spending approximately $480 million combined.
Add another approximately $24 million in tax penalties for exceeding the Competitive Balance Tax threshold both years, and the organization topped a half billion dollars in spending.
Outspending the other 29 clubs resulted in a franchise record 108-win season and World Series championship in 2018, then an 84-win, third-place AL East finish in 2019.
The Red Sox now plan to slash their payroll below the $208 million Competitive Balance Tax threshold in 2020 to reset their tax penalties. Taxes increase when a team exceeds the threshold a second and third consecutive year.
Boston’s 2020 payroll already is at an estimated $222.22 million. Why would a big-market team want to subtract? Why not just spend?
“We’re going to spend over $200 million (in 2020),” principal owner John Henry told MassLive.com on Oct. 28, the day the Red Sox introduced new chief baseball officer Chaim Bloom at Fenway Park. “A team spending $200 million is generally competitive. I think we’ll be competitive. I know it’s a little bit lower than we spent last year. It’s just the way it works in baseball.”
It is the way it works in baseball, like it or not. Call it a self-imposed salary cap or call it whatever you want. The 2017-2021 Collective Bargaining Agreement provides significant financial incentive to stay under the tax threshold. Teams also avoid Rule 4 Draft penalties.
Henry, chairman Tom Werner and team president Sam Kennedy have stressed staying under the $208 million CBT in 2020 isn’t a mandate, but it is a goal.
Slashing payroll to reset tax penalties is a common business practice among major market teams. The Yankees and Dodgers — who have enjoyed greater yearly revenues than the Red Sox — both slashed payroll to stay under the Competitive Balance Tax threshold in 2018.
Multiple financial incentives exist when big-market clubs stay below the CBT. It’s not only about avoiding tax penalties. Boston would receive its full revenue sharing market disqualification refund in 2020. Its refund would increase because it would include the Oakland Athletics’ forfeited proceeds. The 2020 season marks the first year the Athletics will be disqualified fully from receiving revenue sharing.
Revenue sharing payor clubs such as the Red Sox, Yankees, Cubs and Dodgers will share the A’s proceeds.
Baseball is a business. It’s about both winning and maximizing revenue.
“I don’t think of it as a business," Henry said. “This is not the business I would choose to go into if you call it a business. But it’s a competitive challenge. And we’re doing everything we can every year to maximize our resources. Other than the Yankees, we’re probably second among the 30 teams in spending in the last decade; maybe over the last two decades. For me, it’s about competitive advantage. You need to manage your resources properly."
Would the Red Sox be doing everything possible to win a World Series in 2020 if they slashed their payroll under $208 million? That’s an important question, especially if Boston trades 2018 American League MVP Mookie Betts this offseason.
Betts is eligible for free agency after the 2020 season. The Red Sox still need to add a fifth starter, reliever and first baseman. Bloom, therefore, must dump approximately $25-30 million in salaries to get under the CBT and acquire/sign the players still needed to fill out the roster.
Betts is set to earn approximately $27-$30 million in salary arbitration for 2020.
The Red Sox must weigh the importance of “managing resources properly,” maximizing revenue and winning baseball games in 2020 (and beyond) as they approach this offseason and Betts’ pending free agency.
Trading Betts certainly is a possibility. Werner said on Sept. 27 about Betts’ situation, “Obviously there will be a point where hopefully we can make a deal. Or we’ll decide at that point what is Plan B or Plan C?”
Henry also pointed to the importance of staying under the threshold in certain years because of the MLB Draft.
Staying under in 2020 also would allow the Red Sox to avoid more severe draft pick penalties in the 2021 MLB June Draft if they sign a qualified free agent — potentially a replacement for Betts — during the 2020-21 offseason. An MLB team that stays under the CBT also receives a higher compensation draft pick if one of its own qualified free agents signs with another club.
“Teams reset (their tax penalties), right?” Henry said. “This is the way it’s been for a while. You have to reset every once in a while. We don’t really have a choice.”
Henry added, “Every team, even the Yankees, have constraints. And it’s probably not possible for us to continue to outspend the Yankees every year. But I don’t think that’s what the fans are looking for. I think what the fans are looking for is us to win. And you win with a strong organization from top to bottom. Having the brightest people.”
‘Payroll’s not the be-all and end-all’
Forbes has the Red Sox as MLB’s third most valued franchise at $3.2 billion, behind only the Yankees ($4.6 billion) and Dodgers ($3.3 billion).
The Yankees netted an estimated revenue of $668 million in 2018, including $284 million in gates receipts, according to Forbes’ April 2019 estimations. Forbes estimated the Dodgers with a $549 million revenue and $195 million in gate receipts. It had the Red Sox’s revenue at an estimated $516 million, including $221 million in gate receipts.
The Red Sox and Washington Nationals were the lone two teams to exceed the then-$197 million threshold in 2018. Nationals ownership set a goal entering 2019 to stay below the CBT, which increased to $206 million this past season. The Red Sox, meanwhile, previously reset their tax penalties in 2017 (and as mentioned above, they would like to reset again in 2020). The CBT increases to $208 million in 2020.
“Payroll’s not the be-all and end-all,” Henry said. “That said, we have nothing to hang our heads over. We’re going to outspend probably 25 or 26 teams again next year.”
Henry pointed out that the Tampa Bay Rays — who finished ahead of Boston in the AL East standings in 2019 despite spending approximately $177 million less — have averaged only two fewer wins per season than the Red Sox the past 12 years. Tampa has averaged 86.8 wins compared to Boston’s 88.5 wins per season since the beginning of 2008. But Boston has won two World Series while Tampa hasn’t won any. Payroll advantages certainly can help push a team over the top for a championship.
Los Angeles slashed payroll $96 million from 2015 to 2018. The Dodgers set an MLB record with a $291 million payroll in 2015 after previously setting the record in 2014 ($257.283M), according to the Associated Press.
Their payroll dropped to $195 million by 2018 — and they have won more games spending less. The Dodgers have averaged 100.7 wins the past three seasons (2017-19) while making two World Series appearances. They averaged 92.3 wins in the previous three years (2014-16) and made it beyond the National League Division Series only once.
The Yankees led Major League Baseball in payroll each year from 1998-2013. But under the leadership of George Steinbrenner’s son Hal Steinbrenner, New York has taken a different direction since 2013.
“I’m a finance geek,” Hal Steinbrenner said in 2012, per CBS New York. “I just feel that if you do well on the player development side, and you have a good farm system, you don’t need a $220 million payroll. You don’t. You can field every bit as good a team with young talent.”
The Yankees’ 2018 payroll came in at $192.98 million — $4.02 million below the then-$197 million CBT.
A yearly luxury tax penalty can be compared simply to an extra player’s arbitration salary. But the penalties certainly add up. The Yankees incurred $341.1 million in tax penalties from 2003-17 and the Dodgers received a $149.6 million tax bill from 2013-17, per the Associated Press.
Spending down, wins up
The Yankees and other big-market teams certainly are profiting greatly because of lower payrolls, especially thanks to the current Collective Bargaining Agreement.
Forbes outlined how the 30 team payrolls in 2018 showed its second highest decline since 2004.
Captainsblog.info provided a detailed chart that shows the Yankees’ revenue increase and payroll decrease this decade. William Juliano, who authors the blog, wrote, “The team now sits near the bottom of the league in terms of revenue spent on players. The numbers don’t lie. And, if you’re not a finance geek, forget about the math. The ring on Justin Verlander’s finger and the pinstripes that aren’t on his back tell the same story.”
Fangraphs.com’s Craig Edwards explained the revenue sharing plan in the 2017-21 Collective Bargaining Agreement is more beneficial to big-market teams than revenue sharing in the previous CBA because "it takes less money away from the richest teams by eliminating the supplemental pool.”
As mentioned above, big-market teams receive a larger refund in revenue sharing when they stay below the CBT.
This business model of spending less also has resulted in wins.
Sure, the Yankees have failed to win a World Series championship since 2009, but they posted 103 wins in 2019 after again taking a conservative approach in free agency last offseason.
Steinbrenner received criticism last winter when the Yankees chose not to pursue star Manny Machado. But signing DJ Lemahieu for $276 million less proved to be the right move ultimately.
Lemahieu finished with a .893 OPS in 145 games. Machado posted a .796 OPS in 156 games with the Padres who won 33 fewer games than New York.
The Yankees likely will pursue top starting pitching free agent Gerrit Cole this offseason. It’ll be a fascinating storyline to watch.
Henry’s Red Sox best team of the CBT Era
The Red Sox have exceeded the Competitive Balance Tax threshold in 10 of 17 seasons since MLB implemented a CBT in 2003.
Boston incurred a luxury tax penalty in 2004, 2005, 2006, 2007, 2010, 2011, 2015, 2016, 2018 and 2019.
Three of the Red Sox’s four World Series titles, therefore, came in years they exceeded the threshold. But only five championship teams have paid the tax: (2004, 2007, 2018 Red Sox, 2009 Yankees, 2016 Cubs), per the Associated Press.
Should fans and media criticize the Red Sox for wanting to stay below the $208 million CBT in 2020? After all, the Red Sox have won more World Series than any other team during the CBT era. What they have done since 2003 obviously has worked.
But were the Red Sox doing everything possible to win a World Series in 2017 when they failed to replace retired David Ortiz at DH? The Red Sox stayed under the CBT, refused to pursue then-free agent slugger Edwin Encarnacion and scored 93 fewer runs in 2017 than they did in 2016. Boston’s OPS also dropped 74 points.
Big-market teams likely will continue to place their own constraints on spending even if the next Collective Bargaining Agreement is more friendly to MLB free agents. After all, the advanced metrics show pre-arbitration and arbitration players are more valuable than players who are eligible for free agency after six seasons of control.
“Twenty years ago, roughly I think 45 percent of wins above replacement (WAR) were due to players that were beyond six years of service,” Henry explained at last offseason’s Winter Weekend. “And that number now is 25 percent. So I think clubs, including the Red Sox, have been slow to sort of adjust. I think the price of a win above replacement, which is what a lot of clubs look at. Some clubs, including us, look at much more than that. But if you just look at that as one thing that a number of clubs look at, I remember five years ago I think that number was something like $5 or $6 million. Maybe as much as $7 million per win. Now it’s $10 million per win.
“We have a lot more production coming from younger players, for whatever reason.” Henry added. “So I think that has negatively impacted free agency."
The 2020 payroll and the Mookie Betts dilemma
Seven guaranteed contracts to David Price, Chris Sale, J.D. Martinez, Xander Bogaerts, Nathan Eovaldi, Dustin Pedroia and Christian Vazquez count for a total of $135.62 million toward the Red Sox’s 2020 Competitive Balance Tax.
The Red Sox’s 10 arbitration-eligible players — Jackie Bradley Jr., Sandy Leon, Mookie Betts, Brandon Workman, Eduardo Rodriguez, Matt Barnes, Heath Hembree, Andrew Benintendi, Marco Hernandez and Josh Osich — will combine to count for approximately $65.6 million toward the CBT, per MLBTradeRumors.com’s arbitration estimations.
That brings the 2020 payroll to approximately $201.22 million. Add another $6 million for pre-arbitration salaries and $15 million for medical costs, health benefits, spring training allowances, moving and traveling expenses, etc. That’s all included in the CBT, and it brings the early payroll projection to approximately $222.22 million.
The Red Sox will face criticism if they trade Betts, a franchise, generational talent, and stay below the $208 million threshold in 2020. Rightfully so. It wouldn’t be in the best interest of winning in 2020.
But the decision with Betts extends far beyond the 2020 CBT. The Red Sox first must determine whether Betts is worth the contract he thinks he’s worth. If not, they must determine whether they want to do everything possible to win in 2020 (which means keeping Betts for one more year) or trade him with a more longterm approach in mind.
Longterm contracts often don’t work out. Betts likely will ask for a contract between Bryce Harper’s 13 years, $330 million and Mike Trout’s 12 years, $430 million.
“There’s a strategic argument as you look out for the next couple of years that getting under the CBT could help you because of the financial penalties but also the baseball penalties. Where you pick in the draft, and some other penalties that hurt you if you stay over one year, two years, three years in a row," president Sam Kennedy said Sept. 30. “But there may be strategic reasons this offseason to be over that we might not be aware of yet.”
I agree Mike. He would be an excellent coach.