Death to 2018: Future Payroll Implications of a Nightmare Start to the Year

In November I wrote a piece about how important winning in 2017 was to the sustainability of the Blue Jays fan interest and attendance. To summarize:

• The massive increase in Blue Jays attendance from 2014 to 2016 was matched by only 20 teams in the last 40 years. In each case, the teams involved had experienced recent on-field success.^[1]
• Every team that followed up an increase like that with a winning team was able to maintain those fans for several more years, even after they stopped being competitive.
• Almost every team that followed it up with a losing team lost most of their gains over the following two years.
• The piece recommended spending a lot of money last off-season to give the team as much of a chance of winning in 2017 as possible, thus converting recent fans into long-term fans and providing a strong return on investment.

The article suggested a 2017 payroll of $170-180M to get to a high 80s win expectancy, versus the actual opening day payroll of $163M. Given how things have started, would an extra $10-15M have made a difference so far this year? Probably not much. Mike Trout probably wouldn’t have been enough.

For this article I am assuming that the Blue Jays will not contend for the postseason this year and will end the year with a losing record. I’m assuming this because, while it’s baseball and it’s still early, this is the most reasonable assumption for a team with an 9-19 record whose current lineup often includes four or five of: Darwin Barney, Ryan Goins, Ezequiel Carrera, Chris Coghlan, the 2015 version of Steve Pearce, and Justin Smoak.^[2]

Sudden surges in attendance fall off a cliff if the team stops winning

This may seem obvious, but in the past, teams that kept winning for even a couple more years held on to the fans. The 1991 Atlanta team, the 2003 Anaheim Angels, ’87 Giants and ’96 Padres are all examples of teams that won for a few more years, and then held on to their fans even after they returned to mediocrity. It wouldn’t be a stretch to say that once the new fans became interested, if they were kept interested for a few more years they became real fans and attendance and viewership became a habit.  So if the Jays had started 19-9 (or even .500 like last year), hope would likely have abounded, recent fans would likely have remain engaged, attendance would be poised to grow, and both the business case for investing in 2018 and this article would have been very different.

To show what happens when the team stops winning too soon, here’s the complete list of teams in the last 40 years that had a two-year attendance increase over 700K fans, and then were below .500 for the two years following.

On average, the teams lost 69% of their attendance gains two years after the attendance surge. Only one team, Seattle, lost less than 40%.

Can Toronto buck this trend? Walking around the city and seeing everyone in a Blue Jays hat and talking to friends who never cared about the game about how much their kids love Kevin Pillar, you’d want to think so. But if the Jays were going to be the exception to the list of teams above, April’s nightmare is going to make it that much tougher. Because the team is so far behind so early, it’s more than likely that they’ll never be within striking distance of the playoffs at any time this year. People I know are already checked out. If I had to bet, I’d bet precedent will be followed.

So what does this mean for the team? In my previous article I estimated that the 1M increase in fans and 70% increase in TV viewership that happened at the same time was worth about $75M USD in revenue (with limited marginal cost). A loss of 45-65% of that means a loss of about $35-50M USD.

That’s a lot! With a corporate owner, you’d have to believe this will have an impact on the player budget the team has to work with. But that’s not the only problem for next year’s budget.

2018: Free Agents and Arbitration

In the absence of trades, our 2018 player budget picture has four categories:

1. Backloading is complete! All returning veterans come back on more or less the same salaries. So far, so good.
2. A bunch of guys who are replaceable for something close to their 2017 salaries (Grilli, Howell, Smith, Barney, etc.). No problem there.
3. Bautista, Estrada and Liriano are all free agents at a 2017 cost of about $46M. I mean, you could probably get Estrada and Liriano themselves and a power hitting corner OFer with some flaws for about that, right?
4. Donaldson, Sanchez, Osuna, Stroman, Travis and Pillar all due big arbitration raises. Uh, Oh.

I took a stab at estimating how much the arbitration raises will be. I’m no expert, but I looked for comparable players with comparable service times, and assumed all our guys will be healthy at the end of the year and with expected performance this year. Here’s the estimate:

I’m sure this isn’t going to be perfect, but it passes the smell test. And if it’s close, it means a $21M increase in the player budget for those guys.

So, to summarize, the current team without Estrada, Liriano and Bautista is likely to cost about $138M^[3] in 2018, which is about what the playoff-bound 2016 full team payroll was to start the year. And that’s with older versions of Tulo, Martin, Morales and Happ.

Can trades or the farm fill the holes?

This $138M 2018 team has holes at RF, LF, two SPs and still has Justin Smoak at 1B.

The experts all seem to believe the farm system is improving. But other than the post-post-post-hype Dalton Pompey and the lottery ticket that is Lourdes Gurriel, the Jays’ main prospects are still a couple of years away. Can Rowdy Tellez help at age 23? Maybe, but scouts don’t love him and he’s struggling in AAA. Sean Reid-Foley? Jon Harris? Anthony Alford? Vlad Jr.? Great prospects, but it’s hard to picture them being MLB impact players in 2018.

That leaves the almost certain trades of Estrada, Liriano and Bautista, especially if the team is out of contention through the summer. One would certainly expect a decent-but-not-amazing return here,^[4] but there’s not much precedent for trading for players that are likely to be better then the ones you’re trading away the very next year. It doesn’t make much sense for a contender to trade a useful MLB piece, so you’re looking at a return that may eventually be better than what you’re trading away, but not likely in 2018.

A bad business case for free agency

The business case for investing in the team last off-season was really, really strong. Huge increase in attendance and attention and a very good team with clear needs. But even with that strong case, the investment last year was underwhelming. The $27M or so increase in payroll from 2016 to 2017 included about $20M in back-loaded increases to Martin, Happ, Estrada and Donaldson and an arbitration increase to Stroman. So very little went to actual improvements to the team. We now know that the offer to the most perfect fit on the market, Dexter Fowler, was $64M over 4 years.^[5] That’s a decent enough offer, but not one that was likely to get him to move off of CF, onto turf, and into Canada. And we all know the Edwin story.

So, when you combine a team that’s harder to believe in, revenue that’s almost certain to be quite a bit lower and a higher starting payroll base, how active do you think this team will be in free agency next year to fill those big holes? Especially after it wasn’t all that active last season? How many long-term commitments are they likely to make given the age of some of the team’s core players? Even if we bring back exactly the same team, it would cost about $185M.

It’s just not a compelling case. With little help coming from the farm, from trades, or from the free agent market, my way too early call is that 2018 is looking pretty grim, indeed.

A Note about the 2008 Milwaukee Brewers

There’s one team in the list above that deserves a bit more discussion before we get to some good news. Two things about their experience may be instructive. First, while they did lose a lot of fans over two years, they didn’t lose many when they went 80-82 in 2009 (30,000, or about 1%). Second, after a rough 2010 they were really good again in 2011, winning 96 games. And the fans came back! 2011 attendance was more than their previous high in 2008, and then they were able to more-or-less maintain it for the next three years despite fielding a .500 team and never finishing higher than 3rd. A few things about that team:

• It obviously provides a reasonable road map. If the Blue Jays need to take a step back for 2018, but can make good trades both this year and next year to be good again in 2019, it may be soon enough for the team to reclaim the lapsed new fans. I’d argue this is especially true if those teams are able to retain the players that the new fans first got to know: Pillar, Osuna, Sanchez, Stroman, etc., and if they were to dive into the 2019 free agency pool. This approach also probably means that if you can’t extend Donaldson soon, it makes sense to trade him this year when the opportunity to get helpful 2019 assets is greater then it will be next year.
• The Brewers’ 2009 performance underscores the relevance of the terrible April the Blue Jays just completed. That year the Brewers started OK, then had a terrific May and remained in contention until the All-Star break, spending 45 days in first place in May and June before fading terribly down the stretch. I expect that pattern was much more conducive to keeping the fans interested than having to claw back to .500 all year long. Not every 80-82 year is created equal.^[6]

Before we leave the Brewers, there’s another important similarity. Prior to hitting just under 2.9M fans in 2007, in their first year in contention since 1992, they had exceeded 2.4M fans only once in their history: when they opened Miller Park in 2001. From 2007 to 2009 Milwaukee fans proved they’d back a winner, which ownership wouldn’t have known prior to that (and Cleveland ownership is still waiting for – “winning = fans” is not always true). Ownership responded by backing the team financially (in the context of a very small market), running payroll up to $109M in 2014, after running consistently league-bottom payrolls prior to 2007.

We will revisit this when we talk about…

Some good news!

2017 and even 2018 will probably suck, but let’s not forget how lucky we are. The “all-in” trades of the 2012/13 off-season were supposed to open a 2-3 year window. And for the first two of those, it was a total disaster. Then, due to the miracles of the 2014 off-season and 2015 trade deadline,^[7] we enjoyed two years of incredibly exciting baseball played by a very lovable team. The window should have been closed, the back-loaded contracts we traded for should have been killing us, and we should have been well into a sad rebuild. But we got to put it off for a while, and it was glorious.

Even better, the surge in attendance in 2015/16 should really help when the team is in its next competitive window. After 1995, the Blue Jays never hit 2.6M in attendance until 2015, including the hope-filled 2013 season. It had been so long since the heady days after the Dome opened, there must have been real doubt at Rogers that the team could ever draw well again, even with a winner. Filling the stadium game after game last August and September shows how profitable owning a Toronto baseball team can be.

I can understand the baseball logic of Shapiro not investing heavily in this team given how late it is in the window, even if I don’t like it. But, if the Jays get to the stage the Cubs were in a few years ago, they should be able to sign their own Jon Lester and Jason Heyward early in the window. Toronto should be able to do what Houston did in bringing in McCann, Beltran and Reddick, or what Washington did in signing Scherzer. And there’s certainly hope that with the young core of the team under control through 2020, some clever moves can get the Blue Jays back to contention early enough to talk about long-term extensions rather than trades.

The business case for piling payroll (read: $175M+) into a young team with high potential will be much stronger than it would have been before the last couple years, and that suggests a really bright future.

Just not next year.

Lead Photo © Tom Szczerbowski-USA TODAY Sports

FOOTNOTES

^[1]I excluded increases that happened after a team moved into a new stadium to focus on increases driven by winning.

^[2]I know. Injuries. I’m sure the Blue Jays will be better when Tulowitski, Donaldson, Happ, and Sanchez come back. But how far back will the team be by then? And also. Injuries! There’s no evidence yet that Happ will be OK and veteran fans of the Jays know how hard blisters can be to overcome. Maybe they will be amazing when everyone gets back healthy, and maybe they won’t all get back healthy. The most reasonable case is that the Blue Jays will not be in contention this year. I’ll say one thing – I really, really hope this looks very dumb after an 11-game winning streak and getting everyone back healthy. If that happens I will gladly post a picture with egg on my face in the comments.

^[3]My simple math is to start with the $163M payroll from this year, subtract the $46M for the three big free agents, and add $21M in arbitration increases to get to $138M. There’s small other adjustments, including small raises for Loup, Goins and Gurriel and elimination of the Upton contract, but this math is more-or-less right.

^[4]Interesting recent story from Buster Olney at ESPN [Paywall] suggesting the market may be flooded with SPs this summer. Not great news if you have two to sell that aren’t aces…

^[5]Referenced in the same Buster Olney piece in Footnote 4.

^[6]We only need look to the 2013 Blue Jays to recall a terrible pattern for fan engagement. There was so much excitement before the year, a similarly terrible start, an 11 game-winning streak once most had given up, followed by a slow painful fade to the end.

^[7]The number of incredibly unlikely things that went right in 2015 doesn’t get discussed enough. In my view, in order of importance, they are:

1. The Josh Donaldson trade, which has been talked about a lot, and is crazy.
2. Roberto Osuna coming from absolutely nowhere.  He was a good prospect, sure. But coming out of spring it seemed like Osuna made the team to translate for Miguel Castro. Becoming an ice-in-his-veins closer was not only unlikely, but also underrated for its importance. If not him, who would have closed for the Blue Jays the last couple of years? There is literally no one and it came at a time when the cost of late inning relief sky-rocketed on the open market to a price the Jays were very unlikely to pay, either in cash or prospects.
3. Marco Estrada becoming Marco Ace-strada. Would the hopes for him have been markedly different than the hopes for Jesse Chavez? It took forever for the team to trust him as an actual starter even though he kept doing whatever it is he does. A miracle.
4. Kevin Pillar, known for a relatively empty batting average while playing mostly corner outfield in the minors, becoming one of the best defensive centrefielders in the world.  It makes no sense, but it’s incredibly important.
5. The Devon Travis trade.
6. The Troy Tulowitski trade, especially in light of what happened to Jose Reyes afterward.

Sure, strange things go right for teams all the time.  But all of the above happening within 9 months?  A miracle to be thankful for. (Sorry – went a bit “Bill Simmons” on that footnote…)