The Royals owner needs to abandon his Wal-Mart philosophies and spend aggressively to position the Royals for contention.
We are just a few days away from the deadline to tender arbitration eligible players. As the Royals position themselves for the upcoming season, talk turns to budgets and payroll for 2013. The Royals currently have nine players under a signed contract for the 2013 season.
Now lets turn to the players eligible for arbitration. The following estimates are from MLB Trade Rumors.
That pushes the payroll to $58.65 million for 12 players. (Yes, I know the Royals should non-tender Luke Hochevar. Yes, he's the most frustrating starting pitcher since Kyle Davies. Yes, I turned down free tickets to a game last summer for the sole reason Hochevar was starting that night. No, I don't think the Royals non-tender him. I just don't.)
Finally, we turn to the guys with less than three years service time who are still entirely under club control. This is still a young team, so it's not surprising nearly half of the team falls into this category. Minimum salary for the 2013 season is $490,000. Not everyone under club control will make the minimum. Eric Hosmer, with just under two full years of service time, earned $502,500 last year. Yes, he had a dreadful season, but under baseball economics he will get a modest bump. Maybe around $510,000. Among the young guys, Hosmer is likely going to be the top earner. His agent, his tenure and his upside give him that early earning power. (Yes, I'm aware his agent doesn't really have anything to do with the contract negotiations at this point in Hosmer's career. The Royals will submit a number and if they don't sign, they will just go ahead and automatically renew his deal. However, I'm surmising that a slightly higher offer will be provided as a gesture of good faith. Without pushing the limits of the salary structure in place. David Glass certainly doesn't want to revolutionize salaries for pre-Super Two players.)
With the minimum and maximum pretty well set for this group, I feel comfortable estimating an average of $500,000 for this set of players. However, we can't forget Aaron Crow, who signed a major league deal after the 2009 draft. His contract called for $1.6 million for the 2012 season. When Crow signed, it was a three year, $3 million contract with a $1.5 million signing bonus. Without a solid number to work with here, I'll estimate his 2013 salary at $1.6 again.
With Crow and the minimum wagers, that works to a total of $7.6 million for the kids.
Add everything together and it brings our total, current outlay to $67.25 million. No one from the Royals has come forward and actually presented a budget for 2013, but it's believed to be in the current fiscal neighborhood. That's if the Royals don't add anyone between now and Opening Day.
"The truth of the matter is if we add another pitcher through free agency, which we're still contemplating - still looking and pursuing - there wouldn't be room to add that individual unless we got rid of somebody else."
-- Dayton Moore, KC Star (11/20/12)
"Money talks. Bullshit walks."
-- Bobbi Fleckman
The idea the Royals have to clear payroll to add a player at this point in the offseason is questionable. According to Forbes, in 2011 (the most recent year where data is available) the Royals as a franchise are worth $354 million. The percentage of debt the Royals carry is around 15 percent, which is fairly low. Their revenues in 2011 were $161 million. Attendance was up marginally last year and throw in the windfall from the All-Star Game and you're looking at a nice increase for the just completed 2012 season.
We all know about the profits. Oh, the profits. The Glass family banked over $28 million dollars in 2011. That was built on the back of an insanely low payroll, thanks to the largesse of Gil Meche and a youth movement wholly supported by the fans.
According to the numbers obtained by Forbes, in the Dayton Moore era, the Royals have been operating at an annual profit of around $8 million. (2011 was certainly the outlier, buffeted by that low payroll. At least we hope it was an outlier.) While the cash registers have been ringing, the value of the team has gone from $282 million in 2006 to $354 million in 2011.
In other words, this franchise is in strong fiscal shape.
The idea that the Royals are up against their payroll ceiling for the 2013 season is complete and utter bullshit. It's insulting. It is a slap in the face of a fanbase that has, by and large, remained patient throughout The Process. Those who bought tickets. The ones who purchased merchandise. They attended FanFest. (Remember FanFest?) It is a mockery of an electorate that approved hundreds of millions in stadium renovations. If David Glass pushed his payroll to $80 million for next year, he would still make money. Would he make his normal $8 million? Probably not. But I would wager fielding a competitive team would boost attendance that could help absorb some of the cost. And with the success of other outlets, such as MLB Advanced Media, revenues are in fine shape.
In 2010, the Royals had a record Opening Day payroll of around $75 million. They still made $10 million on the season. They wouldn't - and shouldn't - have a problem with an $80 million payroll. But with an increase in revenue streams, really, a $90 million ceiling feels about right.
Yes, $90 million. The Royals are absolutely built to absorb that kind of payroll.
"Ever get the feeling you've just been cheated?"
-- Johnny Rotten
As Sam Mellinger points out in his "put up or shut up" column on David Glass, the owner has indicated in the past he is willing to operate at a loss if it means putting a competitive team on the field. That doesn't mean he would strip everything bare in a desperate attempt to overhaul the roster. What it means is, he has spoken of a willingness to push the payroll past a set budget if it means acquiring a player (or two) who could move this team on the path to contention in the AL Central. Indicated is the key word here. So far, his words are all we have to go on.
Words. Except this is a man who famously doesn't do interviews. And when he does speak, it's briefly, as he walks away in the middle of a line of questioning that he finds distasteful. Or at a press conference the end result is a pair of media members losing their credentials when tough questions are asked. Or it's in a controlled environment, such as the final television broadcast of another lost season.
He is the invisible man. He has done nothing to build goodwill.
David Glass' word doesn't mean a damn thing in this town.
"You go through The Sporting News for the last 100 years, and you will find two things that are always true. You never have enough pitching, and nobody ever made any money."
-- Don Fehr
There is a new national television contract that kicks in for the 2014 season. Estimates put the additional revenue for teams to be in the neighborhood of $20 million. It's extremely possible that in the coming weeks as the free agent dominoes begin to tumble, that we will see some creative contracts that have a low initial number and then balloon in the second season. (The Jeremy Guthrie deal is a template. Although I question the Royals motives. As I pointed out last week, the $11 million he is due for 2014 isn't a built in escalator for when the TV revenue kicks in. It's a replacement for when Ervin Santana is off the books.)
The Royals can still get creative with a free agent signing. We are entering our third season of The Process at the major league level. We have a fairly good idea about the first wave. We know the strengths and weaknesses. There are gaps to fill. David Glass and Dayton Moore had to have known there were going to be gaps. They had to have known that when the window of opportunity opened, they were going to have to act, separate from the draft and separate from player development. Yes, it stinks that every single pitching prospect has stalled. Yet, there absolutely had to have been a contingency plan in place to supplement The Process. To not would be akin to baseball malpractice. Sadly, it wouldn't be the first time such an act was committed in Kansas City.
"While fans have been asked for their patience through "the process" and have been told success is coming, teams in similar situations not long ago, such as the Baltimore Orioles, Tampa Bay Rays, Washington Nationals, Cleveland Indians and Pittsburgh Pirates have, in the same timeframe, begun to win and stay competitive. Suffice it to say, Royals fans have grown more weary, jaded and frustrated with each passing season despite a promising young crop of players."
--2013 Kansas City Royals Situational Brief
The quote above comes from a brief the Royals provided to advertising agencies to provide them insight into how to pitch for the team's business following the failure of the "Our Time" campaign. You may think the team doesn't know our frustration. Believe me, they know. They know we as fans are at the end of our collective rope. The time for promises is over.
Personally, I have waffled back and forth on the "David Glass as a villain" meme. Yes, it appears he has been a model owner since the arrival of Dayton Moore. He has allowed the team to rebuild a scouting department. He has approved increased budgets for the draft. He has committed to supporting player development. These things are all good. But they are only part of the picture. Besides, the new collective bargaining agreement effectively caps his draft spending. A limit such as this - where the Royals were free spenders in the past - only serves to underscore that this team should be shifting more funds to payroll at this point of The Process.
So now it's time to draw that line in the sand. To paraphrase Ronald Reagan, "Mr. Glass, open up that checkbook."
The first wave of The Process has taken us as far as we can go. That seems to be about 78 wins. If we're lucky. But in the AL Central, that number is actually OK. That puts us to the edge of competitiveness. We need that extra push to move us over the edge and into the arena.
I've written before about how the Royals' window of opportunity is open. It doesn't feel like it, but with the service clocks ticking on Mike Moustakas and Eric Hosmer while Alcides Escobar, Salvador Perez, Alex Gordon and Billy Butler are signed to club-friendly deals, the nucleus is in place. The Royals can't afford to stand around and wait (and hope) for their pitching to develop. Now is the time for David Glass to spend the money to position this team as a competitor. Failure to do so cheats a fanbase. It cheats taxpayers who funded their renovations. It cheats the players who have committed to the Royals because they believe in The Process.
The gap between my estimated ceiling of $90 million and the Royals projected Opening Day payroll is massive. Prince Fielder huge. If, for the 2013 season, the Royals don't significantly open up the payroll, not only is it a missed opportunity, it's a sign that David Glass just doesn't give a damn about this team.
This team has money to spend. If David Glass or Dayton Moore says otherwise, they're lying.
The funny thing is, the money has always been there. Really. Except for the last couple of years, it made sense to keep the payroll limited. Young players and all that. Now, it makes sense to spend. Besides, there's just something unseemly about an organization struggling to compete while the owner puts a wad of cash in his pocket and other teams in similar situations find ways to win games. It's just dirty.
The next couple of months will tell us everything we need to know about David Glass and how he views his stewardship of the Kansas City Royals. The Process was the beginning. Glass bought into that. Now, he needs to show he has the fiscal stomach to see it to it's conclusion.
I hope I'm wrong, but I'm not optimistic.