Talking Payroll Structure Part II or Why Giving CC A Big Contract is Dangerous

A while back, I took a rudimentary look at the Brewers payroll structure in terms of the implications of contracts that take up a large percentage of the total payroll. There is recent news that the Brewers may be looking to offer CC Sabathia something in the range of 4 years and 100 million dollars. Given the rising cost of the young hitting core and the few multi-year contracts on the books at the moment, that means that the Brewers would almost certainly be committed to having to support a 90+ million dollar a year payroll in the next 4 years if they plan on competing. They have talent in the minors, but not so much that they could afford to go all Florida Marlins and start dumping most players the minute they hit arbitration and aren't working for slave wages.

The Brewers, as an organization, are particularly tied to their ability to draw people to the park to sustain payroll. Like every other team, the Brewers do get money from MLB from it's overall TV contract, MLB.com and, like all small market teams, they get some revenue sharing. Where they fall very short of many (all, in fact) other teams, is they have the worst TV contract in baseball through 2012. That's right, the worst. Without a big fat cushion of guaranteed TV money to fall back on, the team has to draw fans to the seats to sustain payroll. What's more, the fact that they play in a small market means that even when they are drawing fans, they cannot squeeze as much revenue out of the fans as their competitors. The fact that they had the 21st most expensive ticket prices in 2008 (and 28th most expensive overall park experience) is great news for fans trying to take a family to the park, but limits the amount of money the team can raise.

One thing about attendance is that fans are fickle when it comes to supporting their team. People who are interested enough to be reading this will probably get out to the park much more than most of their neighbors anyway. We all know, however, that when a team is doing well, a lot of people who wouldn't be there otherwise start showing up. Those people go away when the wins start going away.

So what does this mean for the Brewers? In short, it means they would not be able to afford any bad luck what-so-ever without feeling a major budget crunch should they decide to give CC that money. As talked about in part I, signing CC would mean that the Brewers would have a lot less room to do other things. They would have to cut the budget significantly in areas like the bullpen and the bench to make ends meet, which means a lot of "ready or not" guys from the middle levels of the farm system filling in key roles because there wouldn't be money to pay much more than major league minimum. Basically, they would have to get a big number of wins over replacement (different than the traditional "win-loss" record for pitchers) from CC Sabathia because they're going to have a hard time finding money to buy them elsewhere.

If that works out, then the Brewers will almost certainly be a perennial contender in the NL Central for the life of the contract. If, however, Sabathia begins to feel the effects of being pitched very heavily the last two years and having pitched a large number of innings at a tender age overall, then the Brewers will have a very big problem because they will almost certainly have trouble competing.

This brings us back to the consequences of not being able to compete in a given year. If the team is counting on needing to compete to remain financially solvent (as would almost certainly be the case should they take on CC's contract) then they cannot afford to not compete. That means that if a situation calls for taking a step back in say 2011 or 2012 and reloading for 2013 and 2014, they will almost certainly not be able to make that decision and instead probably be forced to do things like trade prospects for marginal players to try to eek out every extra win possible to contend or even just maintain the illusion of "trying to win now." A situation like that would almost certainly not only fail to produce wins in the short term, but also limit the ability to win for several years down the road as a result of giving up prospects out of necessity.

Most Brewer fans rightly seem to realize that giving a contract to Sabathia would represent a big risk. It's important to realize just how large a risk that really is, especially when you consider that the current state of the economy makes any large commitment of money particualrly risky. Of course, it is probably no more than an extreme long shot that CC comes back at anything close to those terms anyway. Still, the organization's willingness to at least consider the possiblity says that they have a good amount of gamble in them. Hopefully they are going into this with their eyes completely open.

Comments

 

radio silence said:

Great post, Ryan.

How do we weight the potential that Sabathia gets injured, or pitches ineffectively.

I understand that if Sabathia is, say, 30 runs above average at his best, that justifies the price of the contract for that year.

But what if Sabathia only pitches one exceptional season? Does 30 runs prevented in one season cover the life of the contract?

I'd be interesting to find a breaking point between a valuable contract and a poor contract in terms of runs prevented....

October 31, 2008 9:01 AM

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