Two decades ago, payroll disparity was the hot-button issue in Major League Baseball off the field. And given this winter's odd polarity -- some teams have spent big, and others very little; with huge contracts for some free agents, and with long waits on the market for others -- it's fair to wonder whether we are seeing a move back toward that level of discord.
This offseason, we have one 2023 National League playoff team that has committed more than $1 billion in free agency (the Los Angeles Dodgers) and another (the Miami Marlins) that has yet to ink a single big league free agent. We have two division champions -- the Minnesota Twins and Milwaukee Brewers -- who are likely to enter the new season with markedly lower payrolls than a season ago, even as four of the top seven free agents have yet to sign.
While it's always been true that some teams are more willing to spend than others, this winter some of the more reluctant clubs are ones that in normal circumstances would be trying to maximize a contention window. And it's particularly odd at a time when franchises are so valuable and baseball's top-level annual revenues keep setting new records. We're less than two years removed from the ratification of the most recent collective bargaining agreement, which not only adjusted the calculations around luxury tax thresholds but also changed the competitive landscape with the expansion of the playoff format.
Baseball has disparate levels of team-to-team revenue, and unless that changes, we are unlikely to ever see true payroll parity in the game. From a competitive standpoint, it might not really be necessary. But too much disparity causes problems. Avoiding it is no small issue -- for those who don't remember, things got so bad in the prior era that baseball's owners made a frightening effort to contract two franchises.
After that, the scale of payroll disparity began to decrease in the latter part of the 2000s, and the trend continued until 2019.
Now the trend is moving back the other way -- but how much has it increased? And what is driving it?
Here's a deeper look into the numbers and factors behind this latest wave of big league polarization -- and what it might tell us about the health of the game.
How polarized is baseball right now?
To investigate this question, I created what I'm calling the polarization index. What this does is simply look at the top-to-bottom spread in projected opening day payroll levels, adjusted to a common season-to-season standard so we can compare current trends to those from the recent past. The average yearly polarization index since 2000 is 37.5.
The 2023-24 offseason is still a work in progress, but based on at-the-moment opening day payroll projections from Cot's Contracts, here are polarization indexes for the three seasons since the new CBA went into effect:
We need some context for those numbers: For the three-year period ending in 2021, the rolling three-year average index was at 32.0. Through 2019, it was 27.2. So while there is always going to be year-to-year variance that is nonlinear, the recent overall trend has been toward more top-to-bottom payroll spread. That, in turn, reverses what had been a consistent trend toward less spread.
For now, this isn't a sharp spike, but it's the kind of trend that becomes problematic if it keeps heading in the wrong direction. And even if a couple of the more passive teams in the current market suddenly spring for Cody Bellinger and Blake Snell, it's very unlikely that would change the trajectory.
Keep in mind that the index, while up from a few years ago, is not remotely out of whack with the past few decades of MLB. Remember those references to the squabbles from around the turn of the century? Well, the index was considerably more pronounced back then, topping 40 (in terms of three-year rolling average) in each season beginning in the 2000s, all the way up until 2007. The apex was 46.2 for the 2005 season. (The aforementioned 27.2 figure for 2019 was the nadir.)
The worst of the skew fell in the 2001 and 2002 seasons, the era of baseball chronicled in "Moneyball." Not only was the overall polarization index high, but there was a really pronounced stratification between classes of franchises. In 2002, there were seven teams that spent at least one standard deviation above the MLB average in opening day payroll, but there were also seven that spent at least one standard deviation below.
The current landscape does not approach that level of stratification. Last year, there were four teams at one SD above: the New York Mets, San Diego Padres, New York Yankees and Philadelphia Phillies. Six were at one SD below: the Baltimore Orioles, Cincinnati Reds, Cleveland Guardians, Oakland Athletics, Pittsburgh Pirates and Tampa Bay Rays.
There are always going to be divisions in spending because teams will have different contention windows on top of the varying levels of team-to-team revenue. The spenders noted above were all teams very much trying to maximize (through spending) a win-now opportunity. The non-spenders were a group of rebuilding clubs, or those just emerging from a rebuild, and the always-perplexing Rays. It might not be ideal, but at least there is some internal logic to the variances.
What's up in the Centrals?
This is another way of asking what effect the new playoff format might or might not be having on spending, but this question particularly hovers over the Centrals. As we've seen the past couple of years, if you have a team hovering in the .500 range by the trade deadline, you are more or less a playoff contender, even if you are in an unusually strong division.
Unusually strong is not how you would describe the Central divisions of the past two years. The high-water mark for any team in the Centrals over that time has been the 93 games the Cardinals won in 2022. Teams not in a Central division are 200 games over .500 when playing teams that are.
On one hand, you'd think that some team in one of the Centrals would see this as an opportunity to mash the competition with an all-in approach. Instead, it appears nothing of the sort is happening. Here is a look at the division-by-division changes in revenue-adjusted opening day payroll from 2023 to where things stand for the coming season.
AL East: plus-$51.5 million
AL West: plus-$34.0 million
NL East: plus-$21.6 million
NL Central: minus-$0.9 million
NL West: minus-$15.6 million
AL Central: minus-$40.7 million
The NL West figure is driven by the major payroll retrenchment of the Padres, whose year-over-year opening day payroll decline is likely to be easily the highest in baseball, unless they go on a sudden spree. The Central figures are more head-scratching because of whose payroll is decreasing and whose is not. In the NL, the Cubs, Reds and Pirates all have modest increases, and Chicago, if it re-ups with Bellinger, could put the division in the plus category.
But the defending champ Brewers have gone the other way and now project to be a considerably younger and less expensive team in 2024. The same holds true for the defending AL Central champ, Minnesota, which is on target for the biggest payroll reduction in its division. On the other end, the 106-loss Royals are on target for the biggest increase. This is, to put it mildly, counterintuitive.
We can't get ahead of ourselves in racing to conclusions. We're going to need to see a lot more than two years' worth of data, especially as there's an interesting possible explanation we'll address next. For now, let's put a pin on this trend of rushing toward the middle, and keep it as a thing to watch.
What we don't want is for the current low bar for playoff entry to make the .500 barrier a source of attraction for teams -- whether they are above or below that mark. We want a dynamic in which every team is incentivized to make itself better, with clubs in need of a reset serving as the exceptions.
How are RSNs impacting payrolls?
The ongoing saga surrounding the regional sports network model is almost certainly a factor in spending across the game over the past couple of seasons and over this winter in particular. That isn't something directly related to the CBA and is the biggest reason any conclusive assessments of the new CBA have to be put off or at least softened until this situation is resolved. Which, alas, might not happen as soon as baseball would like.
For now, consider a simple grouping of the revenue-adjusted opening day payrolls with which I've been working. One group is the list of 16 teams mentioned as being in some sort of RSN-related limbo, whether it's for this season or beyond. The other group comprises the 14 clubs who are not currently dealing with any urgent form of that particular headache.
Projected total payroll increase by non-RSN limbo teams: $100.5 million
Projected total payroll decrease by RSN limbo teams: $50.6 million
All of the biggest payroll step-backs, except for one, have come from clubs with some kind of RSN-related limbo. The exception is the Chicago White Sox, whose payroll drop can clearly be attributed to an old-fashioned roster reset for competitive reasons. The San Francisco Giants are also looking at a fairly large reduction, but that very well might change soon, as they seem to want to spend -- if only they can get top free agents to take their money.
But the Padres, Brewers and Twins are teams ostensibly in contention that have nevertheless taken a step (or more) back in spending. Other teams looking at significant decreases are the Colorado Rockies, Detroit Tigers and Los Angeles Angels, all in the same overarching RSN boat, though the individual stories vary.
Not every team associated with the RSN tangle is cutting spending. The Texas Rangers, Arizona Diamondbacks and Atlanta Braves have added significant opening day payroll over last season, behaving like teams that are in contention windows. The Rangers added a lot of salary during their title run last season, and you could argue that they might have been more aggressive this winter without their own RSN-related anxieties. Again, though: The winter isn't over, and one of the key unsigned free agents is Jordan Montgomery, one of the Rangers' own, and someone they'd surely love to return to the fold if they can. The Royals have spent despite the uncertainty and despite, well, not being very good.
Obviously, this is a major line item to be solidified for every franchise. Eventually, MLB and its partners will figure out a revised mode of distribution, but it's going to take time to untangle this current mess. Until we do, it's going to be hard to look at any spending-related trend without taking this limbo under strong consideration.
So what does this all tell us about the health of the game?
In a way, if RSN-related uncertainty is the primary factor in the uneven offseason, this is good news for baseball. One way or another, the distribution model was going to evolve, and such transitions are rarely smooth. That the overall health of the game remains so strong (did we mention that the Orioles were valued at $1.725 billion?) is a good thing. That it might get even better is exciting. That very well could happen if the RSN/broadcast distribution issue is resolved and the stadium situations in Tampa Bay and Oakland/Las Vegas are shovels-in-the-dirt solidified and if, just maybe, baseball adds another couple of teams.
That admittedly rosy-eyed vision of the game's near future would include a reality in which the payroll polarization that has crept back into the sport proves to have been only temporary or at least has settled at a healthy level. Maybe then we'll even get to the point where we're talking about only, you know, baseball.
Baseball has never really been a sport in which you'd enter a season by saying "everyone has a chance," and it never will be. But it's closer to that than it ever has been, especially if you widen your lens from any one season to that of a decade.
The longest playoff drought in the majors is just nine years, a mark held by the Tigers and Angels. While those have surely felt like nine long years for fans of those teams, think about what that means: Every single MLB franchise has made the playoffs during the past decade. Whatever you think about team spending or the playoff format, that's something.
This offseason has been a little weird, one that has featured the landmark contract in sports (Shohei Ohtani) but has also seen defending division champs tightening their proverbial belts. If you feel like the game has become a little more polarized, it has. But that polarization is not historically extreme, not yet. Even better, as things progress, it might not last.