Friday, March 14, 2008

Reason #10: The Money.

In case you’ve missed the news, Major League Baseball is awash with cash. The game is healthier financially today than it has ever been before. You were probably aware of that. You might not be aware of the implications: namely, that all this extra money is a very pleasant development for small-market teams.

Let’s start with the facts, all of which come to us courtesy of my friend and colleague at Baseball Prospectus, Maury Brown, who also runs the bizofbaseball website (along with the rest of the business of sports network).

The combined revenue of all 30 MLB teams last season was $6.075 billion. By comparison, the NFL was at $6.3 billion, and several projections are forecasting that MLB will overtake the NFL in revenue in 2008. Furthermore, as Maury points out, the MLB Network hits the airwaves in a year, and as baseball has already very sensibly worked out contracts with the major cable and satellite providers to ensure most of the country will have access (unlike, say, the NFL Network), there’s likely to be a further bump in revenue over the next few years.

Baseball, unlike football, has the unique advantage of providing daily content. My brother Roukan can sit in front of the TV for three hours watching coverage of the NFL draft combine, but the majority of us would rather rearrange the lint in our pockets than watch the NFL Network in the off-season or on a Wednesday evening. If MLB does it right, if they have wall-to-wall highlights and in-game break-ins for four hours every evening for six months, they’re going to have a weekday audience the NFL can only dream of.

Even with the new network, it’s hard to imagine that MLB revenues can continue to go up at the same breakneck pace they have over the course of this decade. In 2003, MLB’s revenue was $3.7 billion, meaning revenue has gone up 64% in the last four years. Revenues have gone up so fast, in fact, that payrolls simply haven’t been able to keep up.

At the beginning of the decade, payrolls represented around 60% of MLB revenue, peaking in 2003 at 63%. But while revenue has gone up 64% since then, player salaries have only increased by somewhere between 35 and 40%. Last season, player salaries as a proportion of revenue were somewhere between 51 and 55 percent (MLB, shockingly, is reluctant to give out exact figures.)

This figure is actually the lowest of the four major sports, which is fascinating given that the MLBPA, alone among the sports unions, has refused to accept any kind of hard salary cap. The players’ union has always argued in favor of an unfettered and free market, which they have every right to do. But when teams have the freedom to spend whatever they want, they also have the freedom to not spend that money.

In the NFL, when revenue goes up, the salary cap goes up accordingly. And while football teams aren’t forced to spend up to the salary cap, the cap gives every team a figure to shoot for, and inevitably all but a few teams use up every inch of space they have. This guarantees that unexpected windfalls (like the exorbitant amount of money DirecTV was willing to pay to keep the NFL Sunday Ticket package exclusive) trickle down to the players immediately. By contrast, while MLB teams have been willing to share some of their new-found fortune with their players, they’ve kept a far greater share for themselves.

There are a lot of reasons for this, but an underplayed one is that just as teams are getting smarter about baseball analysis, they’re getting smarter about economic decisions. Almost all teams now understand the concept of replacement level, and have an understanding that talent in baseball is not distributed on a bell curve – for every star player there are maybe 10 average ones, and it makes no sense to spend big cash on an average player given that you have so many alternatives if you don’t sign him. Understanding those alternatives is the key to leverage, and over the past few off-seasons that leverage has started to swing towards the teams. Once upon a time, Scott Boras got Darren Dreifort a 5 years, $55 million deal. Later on he got Chan Ho Park 5 years, $70 million. This year, he got Kyle Lohse one year, $4.25 million.

(As an aside, how is it that Lohse got one year and Carlos Silva got 4/$48? Gun to my head, I’d rather have Lohse in 2008 than Silva. PECOTA has them in a dead heat – Lohse with a 4.81 ERA, Silva at 4.82.)

It’s not just that revenues have gone up faster than salaries. What should matter to Royals fans is that the bulk of those increased revenues have come in the form of shared revenue, the kind that gets distributed equally to all 30 teams. MLB Advanced Media, the corporation that baseball created to run their website, is already considered one of the great internet investments of the decade, in any industry – is by far the best web presence of the four major sports. The live games on the computer are fantastic enough; I remember my eyes almost popping out of my head the day I learned, over six years ago, that you could search for video clips of, say, every Mike Sweeney double off a left-handed pitcher that year. (Joe Posnanski had a fantastic column on this back in 2001, which I’d link to except the Star makes it very difficult to access archived columns.)

When MLBAM was created, Bud Selig had the vision to insist that all 30 teams agree to share equally in the company and that all revenue would be shared alike. At the time there was some talk that this decision might one day prove to be as wise as the NFL’s decision back in the 1960s to share all TV revenue equally. Some day in the distant future, you know, 20 or 30 years later. Instead it took about five. Last year MLBAM’s revenue clocked in at around $400 million, and while not all of that was profit, in 2007 each team received close to $3 million in dividends alone. By comparison, in 2003 MLBAM’s revenue was $91 million; in 2001, it was $36 million.

MLBAM has even branched out into non-baseball content, hosting concerts and whatnot. The company purchased, and as anyone who has ever paid $23 ticket convenience fees on a $12 ticket from Ticketmaster knows, cutting out the middleman on ticket sales is incredibly lucrative.

Then there are the national TV contracts; between TBS, ESPN, and Fox, MLB earns about $660 million a year, or about $22 million per team. As recently as 2000, the total revenue from Fox, NBC, and ESPN was (assuming all my numbers are correct) $283 million per year. That’s an extra $12.6 million per team per year.

I don’t have access to information on every revenue stream the teams are swimming in. But just from the information at hand, we know that every team in baseball was cut a check for over $25 million last season before the first ticket was sold. In other words, over the last two years the Marlins (with a combined payroll of $45 millon the last two seasons) would have been profitable if they had shut the stadium down, blacked out local TV and radio, and played in an undisclosed underground bunker somewhere.

Suffice it to say that 1) teams are significantly more profitable than they used to be; 2) small-market teams have seen their revenues rise, on a percentage basis, even more than large-market teams; 3) the players are not seeing most of that extra money.

What this means, in essence, is that the Royals can afford a MUCH larger payroll than they could have even two or three years ago. According to this database, in 2003 the Royals nearly won the division with a payroll of barely 40 million dollars. Two years later the payroll had actually dropped to just under $37 million; at that point not even David Glass could keep a straight face about losing money, claiming that the Royals would break even or, possibly, make a profit of under a million dollars.

(As a general rule of thumb, whenever an owner talks about how much money he’s making or losing in a given year, tack on an additional $10 million in profit. If he claims he lost 5 million dollars, he’s probably about 5 million in the black. Unless and until said owner is willing to open up his books, claims of profit or loss are a pure fiction. Never forget Paul Beeston’s famous statement: “I can turn a $4 million profit into a $2 million loss and get every national accounting firm to agree with me.” It’s instructive to note that as Sam Mellinger points out, recently the Mariners had to file financial data with the state, and that data showed a $17.86 million profit last year – with a payroll of over $106 million.)

David Glass has received a lot of attention for being willing to increase payroll, which hit $67 million last season. Fair enough – I’m happy Glass is willing to reinvest his profits in his team. But don’t get the impression that the Royals are just about tapped out – far from it. They may not be able to compete with the Yankees and Red Sox in terms of payroll, but they can come a lot closer than they used to.

As revenues between the teams have compressed, you would expect that payrolls would compress as well. You’d be right. Let’s compare the fifth-highest and fifth-lowest payrolls (eliminating the outliers on both sides) in baseball going back to 2000. (Many thanks to poster Brett for his help in formatting these tables - assuming they finally look okay.)

YearBig SpenderPayrollLittle SpenderPayroll%

$94.9San Diego$41.4129%
York (NL)
$101.1Kansas City$47.3114%

Since 1999, the ratio between the big spenders and the little spenders has dropped nearly in half. In 1999, the Yankees had a payroll more than five times the Royals, and no less than 13 teams had payrolls that were more than triple Kansas City’s. Last season, even though the Royals only moved from 27th to 22nd overall, no team tripled the Royals’ payroll, and only two (the Yankees and Red Sox) were even twice as high.

Maybe the Royals will continue to linger at the bottom of baseball’s standings. But if they do, at least they can’t blame the game’s economics anymore. And that, my friends, is a beautiful thing.

Wednesday, March 12, 2008

Reason #11: The Park.

Kauffman Stadium is older than I am, and a lot better looking. Between 1970 and 1973, 4 new major league stadiums opened their doors, all of them round, symmetrical fields with artificial turf, the sort of place for which the term “stadium” was somehow more appropriate than “park” or “field”. Riverfront Stadium, Three Rivers Stadium, and Veterans Stadium have been long since retired, as has Busch Stadium (which originally opened with grass in 1966, but switched to turf a few years later.) And this doesn’t even count places like the Metrodome, which opened in 1982 and is already slated for destruction, or the dearly imploded Kingdome, or Jack Murphy Stadium, or the monstrosity that was Stade Olympique.

Only Kauffman Stadium remains. Only Kauffman Stadium, among the parks of its era, was built solely for baseball, with proper sightlines and seats pointing the right way and that enormous crown which focused all your attention towards centerfield. Once the A’s, Mets, and Yankees move into their new ballparks, Kauffman Stadium will be the fifth-oldest park in the majors.

Fenway Park: 1912
Wrigley Field: 1916
Dodger Stadium: 1962
Angel Stadium: 1966
Kauffman Stadium: 1973, the Rogers Centre, which opened in the middle of the 1989 season, will rank sixth.

The bond measure which passed a few years ago all but assures it will remain the Royals’ home for another quarter-century, for good reason: it’s a terrific ballpark. It’s easy to get to, the parking lot is the biggest this side of Great America, and the fountains are one of the most distinctive flourishes for any stadium in baseball, if not all of sports. Once they ripped out the turf a decade ago, you really could not file an aesthetic complaint against the place. The one legitimate gripe was that the sports complex, set off from Kansas City proper at the confluence of two major highways, was impossible to reach on foot and was not integrated into the natural rhythms of the city at all.

But today, when more than half the teams in baseball play in a mallpark that’s less than two decades old, and almost every one of them has been wedged into an urbanized downtown setting where you can walk from the business district to your seat, then stop at a bar on the way out – Kauffman Stadium feels almost delightfully retro. The ballpark isn’t a way station between dinner on the waterfront and a nightcap at a piano bar. It’s a place you go to watch a baseball game, and it was designed for that singular purpose. I love it. And I can’t wait to see what it looks like when all the ongoing renovations – an enormous jumbotron, an even larger crown scoreboard, wider concourses, more food options, etc. – are completed by Opening Day 2009.

Tuesday, March 11, 2008

Reason #12: The Epic.

I have to be honest here: I never expected Gil Meche to pitch as well as he did last year. Hoped, yes. Thought it was within the realm of possibility, sure. But I didn’t expect it. No one did. How could I, when PECOTA was projecting Meche for a 5.40 ERA, and Rob Neyer was openly wondering if the signing of Meche was “dumber than anything Allard Baird ever did” – let us not forget, Baird once traded Jermaine Dye for Neifi Perez?

But Meche pitched like an ace for six weeks – he had a 1.91 ERA in his first nine starts – and was a still-better-than-league-average pitcher after that, with a 4.36 ERA and strong peripherals the rest of the way. He never tired, he never turned into a pumpkin, he never gave an opening for his detractors. His season totals wouldn’t look out of place in Kevin Appier’s prime, right down to the lousy run support. Compare these two seasons:

Year Pitcher  GS   IP    H   BB   K  HR   W  L  ERA    RS

1997 Appier 34 235.2 215 74 196 24 9 13 3.40 3.92
2007 Meche 34 216.0 218 62 156 22 9 13 3.67 3.84

(RS is run support.)

Appier would hurt his shoulder the following winter; the official story was that he fell off his sister’s porch carrying her wedding presents, but there were a lot of unofficial stories out there. In 1997, though, he was continuing an eight-year run as one of the five best starting pitchers in baseball. Meche wasn’t that good, but then, no one in Royals history was as good as Kevin Appier.

I’m not going to be able to just let that comment hang out there, so…let me say it again: Kevin Appier is the best pitcher in the history of the Royals’ franchise. In terms of overall value, he was more valuable than the legends before my time (Dennis Leonard, Paul Splittorff, Larry Gura), or the heroes of my youth, the Leibrandts and the Danny Jacksons. He was better than Bret Saberhagen.

Yes, he was better than Bret Saberhagen. Saberhagen won two Cy Young Awards; Appier won none. But Appier, by any reasonable measure, was the best pitcher in the American League in 1993, and that Jack McDowell won that season was a crime – a crime aided and abetted by the local writers (I don’t know their identities, though I have my suspicions) – as only one of the 28 BBWAA voters that year put Kevin Appier at the top of their ballot. Twenty guesses and you’ll never guess right…it was Phil Rogers, then of the Dallas Morning News. Rogers has gone to bigger things and has become a frequent target of the sabermetric movement, but I’ve always had a soft spot for him because he was the one guy who managed to figure out that the pitcher with a 2.46 ERA was better than the pitcher with a 3.37 ERA.

McDowell won because he went 22-10; Appier went 18-8. But if you simply look at their team’s overall record when each pitcher started – what Joe Posnanski calls “True Wins” – both pitchers were 23-11. And while Appier’s run support was 4.52 per game; McDowell’s was 4.97.

Saberhagen’s 1989 is the best single season by a pitcher in team history; by WARP1, he was good for 12.4 wins over replacement that year. He was also over 10 wins in 1985 (10.3) and 1987 (10.1). Appier’s 1993 scores at 11.1, the second-best season by a Royal; he was 10.0 in 1992 and 9.3 in 1996.

The problem for Saberhagen is that those three years are pretty much all he’s got. He was at 8.1 WARP in 1991, but was pretty much a league-average pitcher in all the even years in between (1984, 1986, 1988, 1990). And then he was gone. Appier was at 8.0 in 1997, 7.6 in 1995, 7.2 in 1990, and 6.7 in 1992. In 1994, he only had 5.2 WARP, but was on pace for about 7.4 before the strike. Appier was an elite starter for eight consecutive years. Saberhagen was a Cy Young contender for three years, very good for one year, and then either blah or injured in the other four.

If you arrange their seasons from best to worst, here’s what you get:

 Saberhagen Appier

1989 12.4 1993 11.1
1985 10.3 1992 10.0
1987 10.1 1996 9.3
1991 8.1 1997 8.0
1988 6.9 1995 7.6
1990 5.2 1990 7.2
1984 4.5 1992 6.7
1986 4.5 1994* 5.2

Saberhagen wins the top four seasons, by narrow margins. Appier wins the bottom four seasons, by big margins.

By career WARP in a Royals uniform, Appier wins, 68.2 to 62.0. No one else comes close; Paul Splittorff had 54.6 WARP (despite a career high of 6.4; his best season was not as good as Appier’s worst), Quisenberry had 53.6 (amazing for a reliever), and Dennis Leonard was at 52.8.

Actually, there is one other pitcher I haven’t mentioned who I’m amazed to say had the exact same WARP as Appier – Mark Gubicza. Gubie really had two careers, one as a power pitcher and one as a garbage/finesse guy, sort of the Royals’ version of Frank Tanana. From 1987 to 1989 he was as good as Saberhagen; his 1988 WARP of 11.0 is third all-time. He hurt his arm after throwing about 770 innings over three years – imagine that – but after a period of adjustment to losing his fastball, he settled in as a league-average pitcher for a few years, capping it off with a very fine 1995 when he managed to throw 212 innings in a somewhat strike-shortened season because Bob Boone had the audacity to try a four-man rotation for half the year.

I think the tie clearly goes to Appier ahead given that his value was almost entirely packed into eight seasons, whereas Gubicza’s value was spread out over 13 years. Peak value means something – a team is more likely to win a pennant with a pitcher who’s brilliant for a short period of time than with a pitcher who’s simply good for a longer period of time. On the other hand, when Appier’s time was up, the Royals dealt him for three piles of dung (or, if you prefer, Blake Stein and two piles of dung, which isn’t much better.) Gubicza, on the other hand, somehow fetched Chili Davis, who gave the Royals a fantastic season as a DH in 1997.

If I had to subjectively rank the best starters in team history, it would like this:

1. Kevin Appier
2. Bret Saberhagen (that World Series performance counts for something)
3. Mark Gubicza
4. Dennis Leonard
5. Paul Splittorff

Anyway, we got off track here…while Meche is no Kevin Appier, he has an excellent shot at becoming the Royals’ best starter since Appier. This is partly because the Royals have not had any good starters since Appier. Since the 1994-95 strike, only three Royals than Appier) have amassed even 15 WARP, which equates to about three seasons of league-average pitching. Those three are Jose Rosado (21.3), Jeff Suppan (20.4), and Tim Belcher (17.8). Belcher departed in 1998, Rosado’s arm went boom in 2000, and Suppan left after 2002; things have only gotten worse since then.

Since 2000, what pitcher has the most WARP in a Royals uniform? Would you believe Zack Greinke? On the basis of a good year in 2004 (for four months), a good year in 2007 (as a swingman), and a disastrous 2005, Greinke has 14.7 WARP. Suppan has 14.4, and then the list goes Darrell May, Paul Byrd, Jeremy Affeldt, Jason Grimsley…you know what, I’ll stop there. Once you reach Jason Grimsley, there’s really no point in going on.

Meche is already in 11th place, with 6.9 WARP; he had the second-best season of any Royals’ starter this decade, behind only Paul Byrd’s 2002 (7.7).

I see no reason why he can’t do it again. PECOTA is unrepentant, predicting Meche to finish with a 4.47 ERA. His top comparable is last year’s version of Vicente Padilla, followed by the immortal Roger Pavlik of 1997. I’ll remember to slap Nate Silver upside the head the next time I see him, though in the meantime a dose of humility is warranted: pitchers who have a sudden breakthrough in performance, as Meche did last season, don’t always hold onto it.

I’m confident Meche will, though. His performance spiked corresponded to a specific event, the change in his delivery that had him land on his toes instead of his heel. His injury woes, the ones that kept him off a mound entirely for all of 2001 and 2002, seem long behind him. His control dramatically improved last year, and walk rate is perhaps the one category where a sudden improvement by a pitcher is most likely to be sustained.

It’s too early to say he can make the mid-career leap from solid starting pitcher to Cy Young contender that Jason Schmidt and Chris Carpenter made. But Schmidt and Carpenter both made their leaps when they were 29. Gil Meche is 29.

So long as Meche gives us four more years like his last one, he’ll be an enormous free agent bargain. Who would you rather have over the next four years, Gil Meche or Carlos Silva? Keep in mind, Silva will make a million more per year than Meche.

The Epic of Gil Meche has yet to be fully written. But whereas a year ago I thought it would be a tragedy, today I’m hopeful that it will be a resounding and heart-warming triumph.