Article: Shortcuts

[Major League Ready]

What about when your product is failing, and you are maybe 1-2 more bad years from losing your job? Personally, I might be more inclined to take advantage of that 100M budget.

 

Where did I ever suggest not spending the money?

 

BTW, I am what some of you like to call a turnaround specialist so I have been a year or less away from losing my job for the last 20 years. It has never happened, not even close. Impatience, and subsequent risk taking is the surest way to really screw it up. Some of you do not consider or calculate risk. You are playing with Monopoly money. The people entrusted to manage the teams assets and profitability do not and absolutely should not think this way. There is a very long list of underperforming highly compensated players that demonstrate the risks. The surest way for the Twins, or any other team trying to compete with a fraction of the budget of the top markets, to prevent the retention and/or building a team around the core that is a year away is to get wrapped up in long-term deals right now. This is especially true with players who's hjistory suggests they are a risk from day one, much less in the final years.

[Mike Sixel]

I absolutely consider risk. I have an MBA and have done risk management at different times of my career. There is a bigger risk of a prospect not working out than of a FA being too expensive when you have 50-70MM in your budget. The vast majority of prospects don't work out to be good MLB players. And even if they blow $20MM on a guy, they have 1 player signed for more than $5MM in 2 years. One. And no one in the system needing a big contract in the next 4 or more years. There is really no risk at all to the budget of signing one or even two FAs to 5 year deals right now.

 

There is risk they don't work out, but since they have plenty of budget room, the impact is near zero.

[Winston Smith]

Pohlad: “We’re committed to spending [50-52%] of revenue, and with the increase in revenue from the new stadium, there’s going to be ample dollars to pay players. It will make a huge difference" (STAR TRIBUNE, 9/14/07).

 

Forbes estimates the Twins revenue at around 220m so a payroll budget of 110 is in line with what Pohlad said he'd spend. We are at around 50 right now.

 

Why are people so afraid of the Twins spending money? The Pohlads are one of the richest pro sports owners they will not need to go on food stamps if a free agent they sign goes in the tank. They managed to survive with Blackburn, Morneau, Nathan and many others producing nothing. The Pohlads will be fine, they said they'd spend now prove it. Give us a better product on the field please.

[Nick Nelson]

BTW, I am what some of you like to call a turnaround specialist so I have been a year or less away from losing my job for the last 20 years. It has never happened, not even close. Impatience, and subsequent risk taking is the surest way to really screw it up. Some of you do not consider or calculate risk. You are playing with Monopoly money. The people entrusted to manage the teams assets and profitability do not and absolutely should not think this way. There is a very long list of underperforming highly compensated players that demonstrate the risks. The surest way for the Twins, or any other team trying to compete with a fraction of the budget of the top markets, to prevent the retention and/or building a team around the core that is a year away is to get wrapped up in long-term deals right now. This is especially true with players who's hjistory suggests they are a risk from day one, much less in the final years.

Of course there's risk in signing free agents. That is basically always the case, without exception. What you seem to be saying is, "I'm not against spending, but spend wisely." That's no different from what anyone else is saying. Everyone has their preferences as far as names on the market, but at the end of the day it's up to the Twins -- Terry Ryan, his scouts, his analytical department -- to determine which guys are worthy of an investment. Certainly some guys who are signed this winter will fizzle, or will become liabilities in the latter part of their contracts, but that is by no means a universal truth. I'd like to think the front office has some confidence in its capability to pinpoint the best candidates to perform well over the life of a multi-year deal.

 

The risk that this organization should be more concerned with, at this point, is the risk of sending out the same group of unqualified pitchers (or more similar guys) and getting the same horrendous results.

[nicksaviking]

You are playing with Monopoly money. The people entrusted to manage the teams assets and profitability do not and absolutely should not think this way. There is a very long list of underperforming highly compensated players that demonstrate the risks. The surest way for the Twins, or any other team trying to compete with a fraction of the budget of the top markets, to prevent the retention and/or building a team around the core that is a year away is to get wrapped up in long-term deals right now. This is especially true with players who's hjistory suggests they are a risk from day one, much less in the final years.

 

But they oporate with a fraction of the budget by choice. Their revenue is not a "fraction" of most teams. So if you are against the Twins taking on risks in the form of free agents, can we assume that you disapprove of the risks the other teams make in free agency? Are the Twins right for not taking these risks and all the other teams are wrong? Because the results on the field don't indicate the Twins are right. Unless the goal we are talking about is making money and not winning baseball games.

[Major League Ready]

Ha, I absolutely consider risk. I have an MBA and have done risk management at different times of my career. There is a bigger risk of a prospect not working out than of a FA being too expensive when you have 50-70MM in your budget. The vast majority of prospects don't work out to be good MLB players. And even if they blow $20MM on a guy, they have 1 player signed for more than $5MM in 2 years. One. And no one in the system needing a big contract in the next 4 or more years. There is really no risk at all to the budget of signing one or even two FAs to 5 year deals right now.

 

There is risk they don't work out, but since they have plenty of budget room, the impact is near zero.

 

I never felt my MBA offered any proof I could run a large organization. And, looking back, the education was helpful but inconsequential in comparison to the actual experience. I am afraid we are just going to have to be two guys with MBAs who disagree.

[Mike Sixel]

Never said it "proved" anything.

 

What is the risk of spending $20MM on free agents for the next 5 years? Who needs to be paid that is on the roster now? How would that stop them from spending another $40MM in years 3 and beyond? Willingham and Doumit and KC come off after this year, that's another $15MM free to spend.

 

No one has offered a sufficient argument that, for this team with this money, signing free agents offers risk to their ability to sign other free agents in 3 years.

[Otto von Ballpark]

There is, by my count, one player guaranteed money after 2014.

 

Not only that, but as it stands now, of the young potential contributors to the next winning Twins team, Dozier has the most service time, and he won't be a FA until after 2018 (the same time Mauer's deal expires). Heck, Dozier won't even see a significant raise (2nd arb award) until 2017. The guys right behind him -- Arcia, Gibson, Hicks, Pinto -- are a year beyond that (no significant raises until 2018), and the "big guns" (Sano, Meyer, Rosario, Buxton, etc) probably won't see a notable MLB paycheck until 2019.

 

Basically, the argument against spending big now (assuming 4-5 year deals) is that it might prevent us from spending big again in 2-3 years. But in 2-3 years, the argument against spending big will be that we have to be able to afford to retain our own players. I'm actually sympathetic to the latter argument. The former? Not so much. It sounds like more of a stalling or delay tactic to save the ownership some money in likely losing seasons of a stubbornly too-long rebuild process.

[cmb0252]

Not only that, but as it stands now, of the young potential contributors to the next winning Twins team, Dozier has the most service time, and he won't be a FA until after 2018 (the same time Mauer's deal expires). Heck, Dozier won't even see a significant raise (2nd arb award) until 2017. The guys right behind him -- Arcia, Gibson, Hicks, Pinto -- are a year beyond that (no significant raises until 2018), and the "big guns" (Sano, Meyer, Rosario, Buxton, etc) probably won't see a notable MLB paycheck until 2019.

 

Basically, the argument against spending big now (assuming 4-5 year deals) is that it might prevent us from spending big again in 2-3 years. But in 2-3 years, the argument against spending big will be that we have to be able to afford to retain our own players. I'm actually sympathetic to the latter argument. The former? Not so much. It sounds like more of a stalling or delay tactic to save the ownership some money in likely losing seasons of a stubbornly too-long rebuild process.

 

Or maybe the argument against spending big now is some of us don't see anyone worth spending big on? I'm all for spending big money but not on this sorry bunch of free agents. I just don't see the love affair with Santana/Jimenez.

[Willihammer]

NBasically, the argument against spending big now (assuming 4-5 year deals) is that it might prevent us from spending big again in 2-3 years. But in 2-3 years, the argument against spending big will be that we have to be able to afford to retain our own players. I'm actually sympathetic to the latter argument. The former? Not so much. It sounds like more of a stalling or delay tactic to save the ownership some money in likely losing seasons of a stubbornly too-long rebuild process.

 

I'll give you a third scenario: In 2-3 years the team is still terrible, the new core doesn't play well enough to demand big arbitration raises/extensions. But by that point the team will have drafted a whole new crop of top 100 specs. And so instead of making a FA splash in 2017, the timing for a big FA push gets pushed back to 2020.

[Willihammer]

Or maybe the argument against spending big now is some of us don't see anyone worth spending big on? I'm all for spending big money but not on this sorry bunch of free agents. I just don't see the love affair with Santana/Jimenez.

 

Who do you like in the 2017 class?

[cmb0252]

Who do you like in the 2017 class?

 

I fail to see what this has to do with anything. Last year I wanted the Twins to sign Grienke, Sanchez, or Jackson. I'm all for the Twins spending money but I just don't like the crop of players. I rather them try to make a trade.

[Boom Boom]

Or maybe the argument against spending big now is some of us don't see anyone worth spending big on? I'm all for spending big money but not on this sorry bunch of free agents. I just don't see the love affair with Santana/Jimenez.

 

I don't think anybody here is in love with Santana or Jimenez. But those guys are leaps and bounds better than anybody the Twins have, and they're available. You can hold on to the money until next offseason I guess, but there's no guarantee that anybody better will be available then.

[Nick Nelson]

Or maybe the argument against spending big now is some of us don't see anyone worth spending big on? I'm all for spending big money but not on this sorry bunch of free agents. I just don't see the love affair with Santana/Jimenez.

People say this every year. And every year there are numerous free agents that prove to be quite effective. It'll happen this year too.

 

For what it's worth, the lack of talent in FA is probably only going to get worse going forward since new revenue streams will make it easier for clubs to retain good players.

[cmb0252]

People say this every year. And every year there are numerous free agents that prove to be quite effective. It'll happen this year too.

 

For what it's worth, the lack of talent in FA is probably only going to get worse going forward since new revenue streams will make it easier for clubs to retain good players.

 

While numerous prove to be quite effective a majority don't. That's fine. That is what free agency is. The problem is when fans, on message boards, here, don't like specific free agents people act like we don't want the Twins to spend money. We just don't want them to spend money on certain players. It is nothing more than our personal opinions.

[Mike Sixel]

What is short term? They have no money set aside for the next 5+ years. There is no downside risk here. None. They can not spend the money, and get nothing but profit. Or they can spend some money and maybe get better. From a fan's perspective, and from a baseball operations perspective, I fail to see the downside risk.

[goulik]

Two words: Tanaka, Garza. We have the money and they are the quality everyone is wanting. I want us to finally go for it! Send Zygis Jet and pick them up!!

[twinsnorth49]

I fail to see what this has to do with anything. Last year I wanted the Twins to sign Grienke, Sanchez, or Jackson. I'm all for the Twins spending money but I just don't like the crop of players. I rather them try to make a trade.

 

As opposed to the current crop of players the Twins curently have? Who would you trade and who do you suppose would want said player and for whom?

[Major League Ready]

What is short term? They have no money set aside for the next 5+ years. There is no downside risk here. None. They can not spend the money, and get nothing but profit. Or they can spend some money and maybe get better. From a fan's perspective, and from a baseball operations perspective, I fail to see the downside risk.

 

There are number of reasons only a very small segment of skilled / educated professionals are entrusted with P&L responsibilty. Most of the reasons are a lot more complex than recognizing the downside risk of long-term contracts and why a rebuilding team that is close to have a very good core would not burden themselves with those risks right now. It is also not all that complicated to understand that a mid market team has to get more production per dollar spent. The implications of the salary imbalance in MLB are also core considerations GMs of small and mid market teams need to follow to the dismay of fans.

[TheLeviathan]

There are number of reasons only a very small segment of skilled / educated professionals are entrusted with P&L responsibilty. Most of the reasons are a lot more complex than recognizing the downside risk of long-term contracts and why a rebuilding team that is close to have a very good core would not burden themselves with those risks right now. It is also not all that complicated to understand that a mid market team has to get more production per dollar spent. The implications of the salary imbalance in MLB are also core considerations GMs of small and mid market teams need to follow to the dismay of fans.

 

All of that's fine and good, but there is also a delicate balance in mid-markets (which, we're on the upper end of, not the lower end as you seem to be implying) in maintaining the fanbase. At this point, the Twins are risking losing fanbase support if they continue to rake in TF revenues and not do more to improve the team going forward.

 

No one disagrees the Twins need to be cost conscious - all teams do to varying degrees - but there are real costs to doing nothing as well. At this point, if there are significant risks doing too much and there are significant risks to doing nothing - I don't think there should be any disagreement about which side we're far too close to. It'd be nice to see SOME risk taken.

[Major League Ready]

All of that's fine and good, but there is also a delicate balance in mid-markets (which, we're on the upper end of, not the lower end as you seem to be implying) in maintaining the fanbase. At this point, the Twins are risking losing fanbase support if they continue to rake in TF revenues and not do more to improve the team going forward. No one disagrees the Twins need to be cost conscious - all teams do to varying degrees - but there are real costs to doing nothing as well. At this point, if there are significant risks doing too much and there are significant risks to doing nothing - I don't think there should be any disagreement about which side we're far too close to. It'd be nice to see SOME risk taken.

 

I am not implying that the Twins position among mid market teams matters. There are other financial factors that have more influence than the Twins specific revenue rank.

 

1. There is $40-50M delta between the Twins and the lowest revenue teams in the entire league. The difference between the Twins and the next 8 teams below them is less than $20. How many of those teams have resigned their star player to a $23M/yr contract. Are those teams signing the 5+ year 75-100M FA? The one team that has taken on some of these contracts is Toronto. They went for the quick fix. How did that turn out?
   
2. There is a $250M differential between the Twins and the Yankees/Dodgers. Two teams are not enough to completely shape how the Twins and other similar teams spend. However, when the Dodgers or Yankees decide they want Sabathia, Grienke or Tanaka, the problem is not a cheap FO, it’s a very unrealistic fan base.
   
3. The top 10 teams all have 20M+ more revenue than the Twins but that is not in itself tremendously impactful. It is the aggregate incremental revenue of the top 10 that has the most impact on free agency and how lower revenue teams have to construct a roster. After those ten teams spend an amount equal to the Twins revenue, they have another $700M in revenue. If you have had economics 101, it is really easy to figure the top free agents are going to consumed with that $700 most of the time.
   

[Guest USAFChief]

As it turns out, I have had Econ 101 (I do admit it was a few yrs ago) and from what I remember, the important "delta" here seems to be revenue to expense, not revenue compared to competition.

 

And that "delta" seems to indicate any argument against signing free agents based on revenue would have earned me a failing grade from my Econ 101 professor.

[Major League Ready]

As it turns out, I have had Econ 101 (I do admit it was a few yrs ago) and from what I remember, the important "delta" here seems to be revenue to expense, not revenue compared to competition.

 

And that "delta" seems to indicate any argument against signing free agents based on revenue would have earned me a failing grade from my Econ 101 professor.

 

You remember wrong. Revenue to expense ratio is a measure of efficiency which has very little to do with any of the points made earlier. The premise of all of the points was incremental dollars available to spend on Salary. That number is not and never would be published so I used revenue. We would have to have full access to team financial records to have the actual number which is much more a product of variable expense. In other words, how much of the additional $700M goes to expense and what would be available to salary.

 

On the surface, you would assume that the teams with a decided revenue advantage would have an even higher percentage of total revenue available for salary or profit based on variable cost. Forbes numbers suggest there is variable cost or the additional is being paid to team owners. What variable costs do teams have? I am sure there are some expenses I am not aware of but any significant cost that would go up as revenue increases other than taxes if they don’t spend the money on players is not obvious without access to financials. What about fixed expense? Rent and salaries are obviously higher in NY or LA but this really a minor component of total expenses. Do the top teams spend significantly more on scouts, their minor league system, advertising, etc? Yet, when you look at Forbes, the ratios all look fairly similar. So, I am not sure what portion of the incremental $700M/yr is available for payroll.

 

We can test this theory by looking at the 48% the Twins target for all non-player expense.

$215M * .48 = $103.2M The Yankees have revenue of $479M. I am sure they have more cost than the Twins but are their non-player expenses really $229.9M? We could also ask what variable expense is associated with the new TV revenue.

[TheLeviathan]

If you have had economics 101, it is really easy to figure the top free agents are going to consumed with that $700 most of the time.

 

Well, the funny part is you decided to take a dig like this while entirely missing the point of what you quoted. Can a fanbase be unrealistic? Sure. It can also become apathetic when it sees tens of millions of dollars being raked in in revenues for a subsidized stadium while fielding a god awful team. My post was stating the need for mid-markets to remember that their bread is often buttered not by media contracts, but by attendance.

 

If the Twins are wise they'll realize that a significant investment, even a bad one, may end up being more profitable in the long run because it will keep fans engaged and less apt to grab pitchforks and torches about management.

 

More nothing has a much higher likelihood of harming revenues long term than a fixed cost contract (even one to a flop of a player) IMO.

[Mike Sixel]

So we agree, they have something like $120MM to spend on payroll if htey spend the mythical 52%. We also know what the current payroll is. We also know what commitments they have, and will likely have, to current players. Not sure how we can look at that gap (which will be more than half of their available payroll), and conclude that there is significant risk in spending money on free agents.

 

Either the $40-60MM is pocketed, or it is spent. On three year deals, not one person on this roster needs a real rasie, and they lose Willy and Doumy in that time frame. heck, on 5 year deals I can't see a guy that needs a real raise. Not to mention it is likely revenue will go up, not down, over time.

 

It isn't a question of "can they spend as much as other teams". It is a question of "can they afford to spend more, and still have room to add other guys later". Not sure how that answer is anything but yes.

[Willihammer]

Heh

 

What is an example of a variable cost in a major league baseball franchise

[Major League Ready]

Well, the funny part is you decided to take a dig like this while entirely missing the point of what you quoted. Can a fanbase be unrealistic? Sure. It can also become apathetic when it sees tens of millions of dollars being raked in in revenues for a subsidized stadium while fielding a god awful team. My post was stating the need for mid-markets to remember that their bread is often buttered not by media contracts, but by attendance.

 

If the Twins are wise they'll realize that a significant investment, even a bad one, may end up being more profitable in the long run because it will keep fans engaged and less apt to grab pitchforks and torches about management.

 

More nothing has a much higher likelihood of harming revenues long term than a fixed cost contract (even one to a flop of a player) IMO.

 

Fans will show up if they win. Therefore, the best spending policies are those that promote this highest probability of putting a winning team on the field.

 

We also should not complain about inability to win in the post season and then suggest they should appease the fans. Giving up draft picks or trading good prospects diminish the future for the sake a putting an average team on the field now. The odds of any of the trades an acqusitions suggested producing a team that can beat Detroit are remote. And they get even more remote if the goal is to go on and beat the Red Sox / Rangers / Athletics, and extremely remote to then beat the Dodgers or Cardinals.

[Guest USAFChief]

You remember wrong. Revenue to expense ratio is a measure of efficiency which has very little to do with any of the points made earlier. The premise of all of the points was incremental dollars available to spend on Salary. That number is not and never would be published so I used revenue. We would have to have full access to team financial records to have the actual number which is much more a product of variable expense. In other words, how much of the additional $700M goes to expense and what would be available to salary.

 

On the surface, you would assume that the teams with a decided revenue advantage would have an even higher percentage of total revenue available for salary or profit based on variable cost. Forbes numbers suggest there is variable cost or the additional is being paid to team owners. What variable costs do teams have? I am sure there are some expenses I am not aware of but any significant cost that would go up as revenue increases other than taxes if they don’t spend the money on players is not obvious without access to financials. What about fixed expense? Rent and salaries are obviously higher in NY or LA but this really a minor component of total expenses. Do the top teams spend significantly more on scouts, their minor league system, advertising, etc? Yet, when you look at Forbes, the ratios all look fairly similar. So, I am not sure what portion of the incremental $700M/yr is available for payroll.

 

We can test this theory by looking at the 48% the Twins target for all non-player expense.

$215M * .48 = $103.2M The Yankees have revenue of $479M. I am sure they have more cost than the Twins but are their non-player expenses really $229.9M? We could also ask what variable expense is associated with the new TV revenue.

Or we could just ask why the team doesn't honor the public statements they've made regarding player salaries as a percentage of revenues.

[Major League Ready]

Or we could just ask why the team doesn't honor the public statements they've made regarding player salaries as a percentage of revenues.

 

Completely different topic. We were discussing the economic and finacial implications of the market. So, when you realize you don't really understand it, you go back to but you promised. Never mind what is smart. You promised me a shiny new FA.

[Otto von Ballpark]

Are those teams signing the 5+ year 75-100M FA? The one team that has taken on some of these contracts is Toronto. They went for the quick fix. How did that turn out?

 

Why are we using $75 million as the benchmark? The Twins aren't just conservative on those -- in fact, I doubt they've ever even considered or made such an offer. They've never topped $21 million total / $7 mil AAV for an outside free agent ($10 million total / $5 mil AAV for pitchers). I'd be delighted if they simply topped those numbers and got some quality assets for it this offseason.

 

If you include Asian/Cuban free agent signings, only two franchises (Pittsburgh and San Diego) have historically given less to their biggest outside free agent signing, although Pittsburgh's actually had a higher AAV (Russell Martin).

 

Pittsburgh also traded for Wandy Rodriguez and picked up a higher AAV on his remaining deal than the Twins ever have, and San Diego extended Carlos Quentin to a deal even greater than Willingham's (both total and AAV) months after trading for him.

 

The Astros and Marlins are cheaper at the moment, but historically, overall, the Twins are probably the most conservative at handing out ANY outside free agent money, much less $75 million.