What are teams spending on players in relation to revenues?

The MLBPA filed a grievance this week against the Athletics, Rays, Pirates, and Marlins for failing to spend their revenue-sharing money to improve their on-field product. According to the Tampa Bay Times, the Rays receive around $45 million in revenue sharing, but are projected to have a payroll this year of around $77 million. They have raised some eyebrows this off-season by moving some more expensive, but valuable players like Evan Longoria, Stephen Souza, Jake Odorizzi, and Corey Dickerson, saving them around $25 million in 2018 salaries. The Marlins and Pirates have also traded away veteran players in cost-cutting moves, while the A’s are projected to have an Opening Day payroll of just over $50 million, the lowest in baseball.

Absent from the grievance is the Kansas City Royals, and for good measure. The Royals have spent over $300 million over the last two seasons in an attempt to get back to the post-season. David Glass once had a reputation for being stingy - a reputation that was well-deserved at one point - but he has opened the pocketbook once the team became a contender.

The grievance and the spending of the Royals in recent years got me wondering, how much have they spent in comparison other clubs? Who should be the target of the union for failing to invest in on-field talent? I took payroll data from Sportrac, which takes total payroll spent in a season for each team. That data only goes back to 2011, which is where I began. The 2018 data is projected payrolls with current rosters - obviously that will change as more free agents sign.

Here are Royals payrolls, and the percent they have spent compared to league average (so 100% would be league average, anything below is below league-average, above 100% is above league-average).

Owner David Glass promised to spend money as the team became more competitive and he put his money where his mouth was. By the time the Royals were World Champs, they were near league-average, despite playing in one of the smallest markets in baseball with one of the worst television deals. The next two years, they actually went above league-average in an attempt to win with their core players before they reached free agency.

So if the Royals were spending, who wasn’t? I added up all the payrolls from 2011-2017. Payrolls should be put in the context of what teams are bringing in the door. I also used revenues from Forbes estimates over those times to give us an idea of how much teams had to spend. Those values are estimates, not solid numbers. But I wanted to show what percent of those revenue estimates was being spent on player payroll. Finally, I list adjusted market size, as calculated by Baseball Prospectus back in 2007 (so perhaps a bit dated, but still useful), to give us an idea of what kind of market the team plays in.

You can see all the revenue and payroll data here. According to these numbers, players have earned a bit more than half of all revenues, if the Forbes estimates are close to accurate. This corresponds to the data Ben Lindbergh at The Ringer obtained, with the players’ cut of the revenues bumping up to around 56% when you factor in benefits.

The Dodgers and Tigers have been spending like drunken sailors to try to win, but have come up short so far, with the Tigers deciding to scrap it and embark on a rebuild. The Yankees are known for being spenders, but that is only because they make an obscene amount of money, an estimated billion dollars more than any other team over the last seven seasons.

The cheapskate has been the Houston Astros, who despite in the eighth-largest television market in the United States, spent the least amount on payroll in relation to their revenues. The team did attract a lot of flak when owner Jim Crane purchased the team and traded every veteran away, at one point spending just $35 million on players in 2013, just a bit more than what Alex Rodriguez was paid that year. But that frugality has been excused as part of their rebuilding plan, which culminated in a championship in 2017.

But the A’s, Marlins, Pirates, and Rays are also all near the bottom, with the A’s and Rays never once fielding a $100 million payroll. Both of those franchise have been hampered by poor stadium situations, however their estimated revenues have been similar to the amount pulled in by the Royals, at least until the Royals became wildly successful in 2014 and 2015.

The Royals have been one of the higher spenders, as a percentage of their estimated revenues. While most of that was when they were contending, even by 2012, a season in which they lost 90 games, they were spending close to half their revenues on player personnel.

Of course, this covers an era in which the Royals happened to be competitive. Had we looked at the five season prior to 2011, the team would likely seem far more frugal. And if we were to look at the next few seasons, as the team undergoes another rebuild, the Royals may again look cheap.

So does the union has a legitimate beef with some of the smaller market clubs that aren’t spending much of their revenues on player salaries? What is an acceptable amount that teams should be spending on player payroll? Fifty percent? Should there be a salary floor? What if teams are going through a rebuild?

These may be issues the union will want to address in next labor deal. And although players seem to be doing well the last few years, the tightening free agent market - whether through collusive means or simply through a market correction - may end the good times for the players and put their share under 50%. This grievance may be the first strike in a labor war between players and owners. For the fans’ sake, hopefully it is resolved quickly.