The Kansas City Royals game on Sunday, October 1 was a big deal. It felt like an end of an era, because it was. Eric Hosmer, Mike Moustakas, Lorenzo Cain, and Alcides Escobar played the last game of their careers together. Never again will the four of them take the field as teammates.
What the four of them, alongside other Royals who will likely never wear the blue and white again like Billy Butler, James Shields, Greg Holland, Wade Davis, and Jarrod Dyson, accomplished was nothing short of extraordinary. They turned a team that was a laughingstock of professional sports into a winner. They walked off the field for the last time that Sunday with an array of personal awards in addition to the two most important team ones: the 2014 American League Championship and the 2015 World Series.
With so many of their great players leaving at once, the Royals are a team in chaos. They have a ton of money obligated to players in 2018, and even those in charge admit there may be a step backwards in team competitiveness next year.
The question burning on everyone’s lips is a simple one: can the Royals keep any of their star players? Yesterday, Sam Mellinger at the Kansas City Star wrote that the Royals are pursuing not one, but two of their star players.
Let’s not bury the lede anymore here. Yes, the Royals can absolutely re-sign one of their Big Three, and it is possible they will be able to grab two of them.
In order to find out why I landed on that conclusion, we’re going to go through a bit of a finance and contract trip here. But before we do, I would like to point out that this is not an inquisition into whether or not the Royals should or will re-sign one of their Big Three, but whether they can at all.
And that’s a big deal, because if the Royals decide to go on a rebuild and slash payroll significantly (perhaps if a new general manager steps in), the rest of the article is moot.
So let’s get to it. Here’s how the Royals can keep one (or more) of their Big Three.
How big of a payroll have the Royals committed to in 2018?
The first step of finding out if the Royals can re-sign one of these guys is determining just how much money they are obligated to pay for next year; we need to establish a floor.
If the Royals skipped the offseason and fielded their 2018 squad with players already under their control, the team’s payroll would be at $120 million or so. However, there are non-essential parts that could be traded for salary relief. The Royals have about $28 million tied up in four movable assets if they wanted to shed some salary. They are:
- Joakim Soria - $9 million
- Jason Hammel - $9 million
- Kelvin Herrera - $8 million (projected)
- Drew Butera - $2.3 million
All four of those players are under contract for one year only, and none are prohibitively expensive. The Royals may have to kick in some money to grease the wheels of a trade, but all four can be traded.
Herrera and Soria are the easiest to move, as good relievers are always in short supply. While neither one of them are elite, both of them are still effective, and teams are always interested in acquiring pitching. And while Hammel’s numbers don’t look that great on their own, he was surprisingly average in baseball’s current scoring environment, and again plenty of teams look for pitching depth. Butera will be the most difficult to move, but if the Royals can’t move him it’s not the end of the world.
Let’s say the Royals end up offloading $20 million of that money. That puts a realistic payroll floor at $100 million for next season.
How big will can the Royals payroll go?
Every year, we go through a dance to predict what the payroll will be. Last October, exactly one year ago today, the Kansas City Star published an article by Rustin Dodd on the Royals prospective payroll:
To be specific: Moore said the club had been living above its means in payroll and that the team’s 2017 spending would likely “regress a little bit” after a record high in 2016.
“This payroll was put together with going deep in the postseason (in mind),” Moore said. “That didn’t happen. Again, I’m accountable for that. It’s not going to look very good on the spreadsheet when the bill comes due.
“Last year’s payroll, it was built to go deep in the postseason; that worked out. This year, it didn’t. So we’ll have to re-evaluate that, probably reorganize, take some steps back.”
The Kansas City Royals began 2017 with an Opening Day payroll of $145 million, an eight percent increase on the previous record-breaking year. It did not, as Moore put it, “regress a little bit.”
There’s also this from a Sam Mellinger article published in January, 2016 about the 2016 payroll:
The question: how can the Royals, owners of baseball’s third-smallest market and worst local television contract, afford a payroll close to $130 million including two new $70 million contracts?
Their internal projections are that the club will lose money in 2016 without a postseason appearance, will make a profit with another deep playoff run, or will break even with something in between.
Ever since the Royals’ core started becoming expensive (for Kansas City standards at least), the discussion of the payroll has consistently rotated around the idea of payroll stagnation or contraction.
And while, yes, the Royals haven’t made the playoffs for two seasons, therefore stunting their profitability compared to 2014 and 2015, MLB teams’ values are consistently rising. This isn’t even considering Disney’s purchase of BAMTech, which will send $50 million to each team.
Look: the fact of the matter is that, regardless of the team’s overall quality or postseason revenue, owner David Glass and the front office have raised the payroll each year since bottoming out at $38 million in 2011. Over the last five seasons, the payroll has increased between 8% and 28% each year. This is consistent with the league as a whole, as the average team’s payroll in 2017 ($151 million) is greater than 2013 ($114 million). This balloon in payroll has effected the teams at the top and the teams at the bottom, in addition to the teams in the middle.
At some point, somebody in the Royals top brass will say to a reporter that Kansas City will look to ‘scale back’ their payroll.
EDIT: It happened, as predicted. This is Dayton Moore talking to Kansas City Star writer Rustin Dodd:
But Moore expects a payroll decrease in 2018, in part because of an infusion of younger, cheaper players; in part because of the failures of the last two seasons.
“When you look at our payroll in ’16 and ’17, it was at an all-time high,” Moore said. “We were 81-81 and 80-82.”
I just don’t buy it, and neither should you. Next year’s average MLB payroll will be higher than it is this year, just like it has happened every year in recent memory. While it’s perfectly reasonable to guess that the Royals payroll is at the upper end of their budget, Glass has been more than comfortable with fielding a competitive payroll in recent years.
So next year’s payroll capacity floor is about where it is this year: $145 million or so. But even a modest increase would bring it to $155 million, which is still going to be a below average payroll next season.
The price is right: what will the free agents be able to command?
Hosmer, Moustakas, and Cain will all command multi-year deals. Hosmer and Moose will certainly sign a contract of at least four years, and though Cain’s age is a factor for him, he will probably sign a contract of at least three years (and probably four or more).
None of the three players will sign a gargantuan deal, as all three have some issue to prevent that. Moose has lost some steps at third base due to major reconstructive knee surgery and may not ever get those back. Cain will be entering his age-32 season, and a blindfolded dude could throw a dart and hit somebody in their mid-30s underperforming a big contract. Hosmer has famously inconsistent offense from year-to-year, and advanced defensive metrics evaluate his defensive skills harshly.
But you’ll be able to do similar nitpicking on any free agent, and the fact of the matter is this: all three of those guys are going to get paid lots of money. Moose and Hosmer are both particularly young for free agents, and the multi-talented Cain has quietly performed as a top-20 player in baseball over the last four years.
I’ll go out on a limb that Hosmer is going to average $20 million in average annual value (AAV), while Moose and Cain will be somewhere from $15-$18 million or so. Those may be a little off, but without knowing how the market will play out even more advanced analysis is unlikely to give a significantly more accurate number.
So while Hosmer and either Cain or Moustakas would likely accrue close to $40 million or so in combined AAV, that’s not the most important number.
Teams have a varying grab bag of trickery full of quirks and tricks when offering contracts. Moore is famous for including ‘mutual options’ on contracts, for instance. Mutual options are almost never picked up (they require both the team and player to select the option), but are a good way to spread money over more years in the form of a ‘buyout’ that is triggered should (and when) the mutual option is declined.
There’s other ways of getting tricky, too. Teams can always resort to ‘deferred money,’ which is just spreading a contract’s value out over years after the contract ended. Most recently, the Baltimore Orioles signed Chris Davis to a seven year, $161 million contract in 2016, but of that a whopping $42 million will be spread out from 2023 through 2039.
But there’s a simpler trick the Royals can use: backload the deal.
In fact, it’s not even really a trick. MLB contracts are almost never even. Most are what is termed ‘backloaded.’ Backloaded contracts, as you might imagine, are contracts that are more expensive on the back end than the front end.
An example: a player who signs a five-year contract for $100 million could be paid 20-20-20-20-20. But it’s more likely he’s paid something like 16-18-20-22-24 or 16-19-22-22-22. Alex Gordon’s four-year deal was valued at $72 million, and it was structured 12-16-20-20, with the last $4 million coming from a buyout attached to a mutual option.
While next year’s payroll obligations are sizable, it starts to fall off quickly. In 2019, the Royals are only obligated to $83 million, regardless if they trade Hammel, Soria, Herrera, or Butera or not. And in 2020, the Royals are only obligated to $55 million, as the majority of Gordon’s contract comes off the books. In 2021, the Royals are only obligated to just under $30 million, as Ian Kennedy’s contract comes off the books. By that point, some of the younger Royals will enter arbitration, but the majority of the team will be inexpensive.
While this is not an ideal situation, the Royals aren’t in a bind for years and years. Check out the St. Louis Cardinals for comparison, who in 2020 are obligated to $80 million even before a hefty payout for arbitration eligible players.
So, let’s go over what we have here:
- The Royals can reasonably get their payroll down to $100 million in 2018
- While payroll ceiling is in flux, it can easily be $150 million
- Hosmer and either Moose or Cain should cost a combined $40 million AAV
- There is enough room to backload contracts
While it’s gonna be close, the Royals can absolutely re-sign two of their Big Three. Whether or not they will is a different story, and whether or not they should is another different one.
Regardless what happens, this will be a bumpy ride.