Wednesday, November 20, 2013

Is MLB's spending bubble going to burst?

Major League Baseball is flush with cash and teams are not being bashful with it. Teams are spending loads of money and the big names are not yet off the board. I’m not arguing the value and cost of the deals in relation to gaining wins and I understand teams will receive bumps in revenue from media deals. But, I wonder if there comes a point in time when the owners decide to scale back on salaries?

Here is a list of some signings since the end of the 2012 season through Wednesday's announcements.


Team
Player
Age
Total Salary
Years
AAV
Giants
31
90
5
18
Giants
29
35
2
17.5
Phillies
35
26
3
8.67
Giants
38
23
2
11.5
Phillies
36
16
2
8
Royals
32
13.5
1
13.5
Red Sox
30
13
1
13
Yankees
39
12
1
12
Rockies
33
11
1
11
Padres
30
8
1
8
Note: Salary figures in millions, ages beginning of season

The words and phrases that get tossed around like, “market value,” “safe risk” and “upside” have become commonplace when evaluating contracts. No one says, "Hold on this is crazy!" Per CBSSports.com, the average baseball player made $3.44 million in 2012 when in 1992 the average salary was $1.084 million. A “safe” deal now dwarfs what the top players made in the ‘90s.

It is particularly fascinating to see teams take risks on players like the 38-year-old Hudson, fresh off a gruesome looking ankle injury in late July of the 2013 season. Hudson is no doubt a proven commodity, but coming off the injury and given his age, is a two-year deal worth it? The Giants obviously think so and that either speaks to a lack of talent in the starting pitching market or with the fact that teams simply have a ton of money to spend.

The Giants in particular have already spent $148 million this offseason (including Pence’s late-season deal). They continue to ante up big-time for Lincecum despite recent years of mediocrity. For them, the “risks” are worth the chance to find them back in the World Series in 2014 upon which they can immediately feel a boost of revenue across all facets of their brand.

The Boston Red Sox and the Kansas City Royals made “no-brainer” option signings for Lester and Shields respectively. Two very talented pitchers, but holy cow is pitching expensive these days!

I won't get too much into the free-spending Philadelphia Phillies purchases of Ruiz and Byrd other than to say that their general manager Ruben Amaro Jr. loves old players.

The New York Yankees inked Jeter to a one-year deal when they could have just converted the team option in his contract worth $9.5 million. He played in just 17 games last season. But, he’s Jeter, an icon and the Yankees gave him a “thank you” deal.

But what about teams who don’t seem to be ready to take the next step and make a postseason run? Look at the Padres signing of Johnson, who tossed 81.1 innings in 2013 and is also two years removed from a season in which he made just nine starts. I wouldn't expect the Padres to have a large payroll and after winning 76 games in 2013 they are not likely to find themselves in the postseason in 2014. Yet they felt a deal with Johnson was worth the risk. If the Padres were to raise their total payroll to $80 million in 2013, which would be way up from $68 million in 2013, he'd be making 10 percent of the team’s total salary.

According to the CBSSports.com listing the last time the average salary spend per player shrunk was in 2004 when it decreased by 2.7 percent from 2003. With teams getting more revenue from television deals this season it should not be shocking that some teams would up their payrolls. But, the question remains, will there be a spending bubble burst or will salaries continue to grow without abandon? Let me know your thoughts in the comments.

Photo courtesy of Art Siegal via Flickr

Christopher Carelli is a freelance sports writer/editor and the Director of Content Strategy for Sportsideo. Besides his work here, Chris is a New York Yankees contributor for Yahoo Sports. Connect with Chris on Twitter, Facebook, Google+ and LinkedIn.

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