Mark Attanasio, lead owner of the Milwaukee Brewers, in his annual opening day press conference at Miller Park called “mind-boggling” and frustrating the skyrocketing payrolls in Major League Baseball that has seen the Brewers fall to 20th from 13th among the 30 teams. The Brewers’ payroll this year is $110 million, Attanasio said. “The widening gap between the large markets and the small markets (like Milwaukee) is a concern.”[1]
According to a study by The Associated Press, the average major league salary in 2015 projects to be around $4.25 million, the first time that figure has ever been above $4 million. The average salary was $3.95 million in 2014 and $3.65 million the season before that.[2] The average salary in 1990 was $578,930, in 2000 it was $1,998,034; 2005 – $2,632,655; 2010 – $3,297,828.[3] “By comparison, the Consumer Price Index for Urban Wage Earners and Clerical Workers has risen slightly less than fourfold since the first class of free agents started negotiations in November 1976. And the average U.S. wage in 2013, the latest figure available, was $44,888, according to the Social Security Administration, up 1.28 percent from 2012.”[4] Topping out the salaries for 2015 is Clayton Kershaw (LAD) at $31 million; Justin Verlander (DET) – $28 million; Zach Greinke (LAD) – $27 million; and Josh Hamilton (LAA) – $25.4 million.[5] “A record 508 players earn $1 million or more. There are 27 players making $20 million or more and 123 at $10 million or higher. Just 46 MLB players are at this year’s minimum of $507,500.”[6] Finally, among the four major North American leagues, the NBA has the highest average salary at $5 million, MLB trailing at $4.2 million, next is the NHL with $2.6 million, and bringing up the rear is the NFL with an average player salary of $2.1 million.[7]
In reviewing MLB 2015 opening day payrolls, 22 teams had payrolls with $100 million or more, according to annual estimates by The Associated Press. As recently as a decade ago, in 2005, the number was three. As recently as three years ago, in 2012, that number was still only nine. 2015 opening day payrolls are as follows:
| Los Angeles Dodgers $272,789,040 | 16. Kansas City Royals $113,618,650 |
| 2. New York Yankees $219,282,196 | 17. Baltimore Orioles $110,146,097 |
| 3. Boston Red Sox $187,407,202 | 18. Minnesota Twins $108,945,000 |
| 4. Detroit Tigers $173,813,750 | 19. Milwaukee Brewers $105,002,536 |
| 5. San Francisco Giants $172,672,111 | 20. Colorado Rockies $102,006,130 |
| 6. Washington Nationals $164,920,505 | 21. New York Mets $101,409,244 |
| 7. Los Angeles Angels $150,933,083 | 22. San Diego Padres $100,675,896 |
| 8. Texas Rangers $142,140,873 | 23. Atlanta Braves $97,578,565 |
| 9. Philadelphia Phillies $135,827,500 | 24. Arizona Diamondbacks $91,518,833 |
| 10. Toronto Blue Jays $122,506,600 | 25. Pittsburgh Pirates $88,278,500 |
| 11. St. Louis Cardinals $120,869,458 | 26. Cleveland Indians $86,091,175 |
| 12. Seattle Mariners $119,798,060 | 27. Oakland Athletics $86,086,667 |
| 13. Chicago Cubs $119,006,885 | 28. Tampa Bay Rays $76,061,707 |
| 14. Cincinnati Reds $117,197,072 | 29. Houston Astros $70,910,100 |
| 15. Chicago White Sox $115,238,678 | 30. Miami Marlins $68,479,000 |
Only six teams have payrolls below $90 million. Three years ago there were 16. Just three teams are under $85 million. As recently as two years ago, there were 13. So even the teams at the bottom of the payroll ladder “are spending enough to win.”[8]
There is no question that opening day payrolls are on the rise. What follows are totals of opening day payrolls for all of the MLB teams from 2009 to 2015:
| 2009 | $2,650,128,599 |
| 2010 | $2,786,243,185 |
| 2011 | $2,789,751,555 |
| 2012 | $2,940,657,192 |
| 2013 | $3,098,746,107 |
| 2014 | $3,453,960,397 |
| 2015 | $3,741,211,113[9] |
The average opening day payroll has increased 27% to $113 million, during the past five seasons. [10]
There are reasons that teams continue to spend on players. The psyche today is that team general managers think they can win, they have a chance, and because they do. Tiger’s President Dave Dombrowski said: “There’s a competitive aspect to it with the competitive balance that we have now … and with the extra wild card, more clubs are in contention. They’re more willing to go the extra mile.” The bottom line is that MLB teams have more reasons to spend money for payroll in times when 28 teams have made the playoffs since the dawn of significant revenue sharing in 2003. [11]
“There have been a number of reforms to promote competitive balance, and in many ways they’ve been a success,” says Smith College economics professor Andrew Zimbalist, who has provided input toward those reforms in his work as a consultant for MLB. “So more and more teams feel like they have an opportunity to go to the postseason. And here’s how that works: Say you’re the Pirates and your revenues are growing. Then that makes [owner] Bob Nutting happy. But you’re not going to spend it on players unless you think there’s a payoff. And now there is.”
“What we see is that the industry is healthy and doing well,” says Tony Clark, the executive director of the baseball players’ union. “I think payrolls have been a reflection of how well the industry is doing for as far back as you’d like to go.”
Of the six teams that still have payrolls under $90 million, four of them—the Pirates, Indians, A’s and Rays—have played in the postseason just in the past two years. But meanwhile, at the other end of the scale …
Of the nine teams with the highest payrolls last year, five missed the playoffs. Three of them finished last. And of the 12 teams with the biggest payrolls, only two (the Giants and Nationals) even won a postseason game. Just one (guess who) won a series.[12]
Baseball is a $9 billion plus industry. That figure is up from $8 billion the year before, a staggering increase of 13%. In 1995, MLB gross revenues were $1.4 billion, in 2000 – $4.87 billion, in 2005 – $6.47 billion, and in 2010 – $7.25 billion. [13] Not only are revenues escalating, the values of the teams are also skyrocketing. The average baseball team is worth $1.2 billion, 48% more than a year ago. The biggest one year increase since Forbes magazine began tracking team values in 1998. A record 15 MLB teams are now worth at least $1 billion up from 5 teams in 2014.[14]
Forbes ascribes the tremendous increase in team value to:
Revenue growth and higher enterprise ratios (enterprise value divided by revenue) account for the rapid escalation in overall team values.
Television money is driving the sport’s top line growth. In 2014, broadcasting and cable money accounted for $2.88 billion, or 37% of baseball’s $7.86 billion of revenue. Just five years earlier, television proceeds were $1.73 billion, or 29% of the sport’s $5.91 billion of revenue. During the past five years, mega cable deals for the Dodgers, Seattle Mariners and Los Angeles Angels of Anaheim have kicked in, and last season MLB began new national broadcasting deals with ESPN, Fox and TBS that will pay a total of $12.4 billion over eight years–more than double the previous contracts.[15]
Forbes also has ascribes an increase in value to “baseball’s unmatched inventory of live, DVR-proof content, real estate development around stadiums, (which reduces the need for capital calls) and the incredible success of Major League Baseball Advanced Media, the sports’ digital arm that is equally owned by the league’s 30 teams. In the 2014 season average revenue per team hit $262 million, 11% more than in 2013 and one third higher than five seasons ago. In 2014 the average baseball team posted record operating income.” [16]
So yes, payrolls are skyrocketing, but so are revenues and values of MLB teams.
Thank you to Brycen Breazeale for his assistance in researching this article.
[1] Kirchen, Rich, “Skyrocketing Major League Baseball Payrolls Frustrate Milwaukee Brewers’ Owner,” Milwaukee Business Journal, April 6, 2015, http://www.bizjournals.com/milwaukee/blog/2015/04/skyrocketing-major-league-baseball-payrolls.html
[2] Fehr, Israel, “MLB Salaries Hit Record High; Average Player Makes More than $4 Million,” April 1, 2015, http://sports.yahoo.com/blogs/mlb-big-league-stew/mlb-salaries-hit-a-record-high–average-player-makes-over–4-million-040530075.html
[3] CBS Sports, MLB Salaries, Average Player Salary, http://www.cbssports.com/mlb/salaries/avgsalaries
[4] Kershaw, Clayton, “Average Salaries Top $4M for 1st Time,” March 31, 2015, http://espn.go.com/mlb/story/_/id/12594216/study-projects-average-mlb-salary-tops-4m-first
[5] Id.
[6] Blum, Ronald, “Dodgers Set MLB Record Payroll at $270M; Average is $4.2M,” The Associated Press, April 5, 2015, http://hosted2.ap.org/APDEFAULT/89ae8247abe8493fae24405546e9a1aa/Article_2015-04-05-BBO–Baseball%20Salaries/id-fb64db7beb0a42269f617a2d05d357d2
[7] Id.
[8] Scherzer, Max, “The Impact of MLB’s Soaring Payrolls,” April 16, 2015, http://espn.go.com/mlb/story/_/id/12697672/the-impact-mlb-soaring-payrolls
[9] Steve O’s Umpire Resources, MLB Team Payrolls, http://www.stevetheump.com/Payrolls.htm
[10] Ozanian, Mike, “MLB Worth $36 Billion as Team Values Hit Records $1.2 Billion Average,” Forbes, March 25, 2015, http://www.forbes.com/sites/mikeozanian/2015/03/25/mlb-worth-36-billion-as-team-values-hit-record-1-2-billion-average/
[11]Scherzer, Max, “The Impact of MLB’s Soaring Payrolls,” April 16, 2015, http://espn.go.com/mlb/story/_/id/12697672/the-impact-mlb-soaring-payrolls
[12] Id.
[13] Brown, Maury, “Major League Baseball Sees Record $9 Billion in Revenues for 2014,” Forbes, December 10, 2014, http://www.forbes.com/sites/maurybrown/2014/12/10/major-league-baseball-sees-record-9-billion-in-revenues-for-2014/
[14] Ozanian, Mike, “MLB Worth $36 Billion as Team Values Hit Records $1.2 Billion Average,” Forbes, March 25, 2015, http://www.forbes.com/sites/mikeozanian/2015/03/25/mlb-worth-36-billion-as-team-values-hit-record-1-2-billion-average/
[15] Id.
[16] Id.