The Payrolls

The Payrolls
No look at the unfolding 2011 season would be complete without taking into account the payrolls of the 30 Major League Baseball Teams. While the actual finances of the teams are closely held, the payrolls are public knowledge (the owners don’t mind if you know how much the players make, but they’re not letting on as to how much they make! No surprise there).

As is customary, the New York Yankees lead the pack, at $202,689,028. Yes, that is a lot of money for a 25-man team, though it’s probably less than what the top 25 people at say Goldman Sachs or CitiBank make (and no one in those jobs can hit a slider, much less throw one; then again no one in the Yankees’ lineup can bankrupt the nation but I digress).

What’s maybe a surprise is that the Yankees have actually been trimming their sails the last few years; they were a bit over $209 million in 2008 (the only Yankees team since 1994 not to make the playoffs), but they’re a bit over the $201 million they were at in 2009. The Yankees are the one team that consistently pays the so-called “Luxury Tax”, to the tune of around $25 million annually (see the link below). The Yankees enjoy enough cash flow to factor in the Luxury Tax as a cost of doing business; they must figure they can’t field a competitive team for, say, $170 million.

Aside from the Yankees the Red Sox have been dunned several times since 2003 but not the last few years, flying just under the radar. They’ve been usually second in payroll amount, but this year, just when you thought they would have to be up there after signing Carl Crawford and trading for Adrian Gonzalez, they are third at just under $162 million; keep in mind, though, AGon’s extension has not been figured in to this number. The Red Sox have made some adjustments in their desire to avoid the Luxury Tax.

So second, and no one should be surprised, are the Philadelphia Phillies, at just under $173M, and keep in mind their mega-deal with Cliff Lee pays him a relatively modest $11M in 2011 before accelerating in 2012 to $25M. The Phillies will have some substantial contracts coming off the books after 2011; they are also dead set against tripping the Tax threshold. No one knows yet where it will be for 2011, but likely it will be north of $175 million.

What surprises me is how many clubs now poke their heads over the $100 million mark, which once was the preserve of only a handful. This year fully twelve teams will be over the mark, while only five teams will be under $50 million and only seven are under $60 million; the Royals are the only team under $40 million.

Baseball’s economics are such that enough revenue is shared, not counting the Luxury Tax, that the small-market, low-payroll teams are quite profitable. We’ll investigate that phenomenon next time.

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