Money, Cash, Pros: A look at the Phillies' finances
There is no other pro sport in America in which money and performance are so inextricably linked. So it makes sense that over the last week, we have heard a lot about the Phillies payroll, and how it likely played a role in Cliff Lee heading to Seattle and Roy Halladay arriving in Philly. So as we wait for the Phillies' official announcement of the "Deal of the Century" -- I don't expect the press conference to be held until later this afternoon or early this evening, since Ruben Amaro Jr. and several other key figures are participating in a charity event at Noon -- it makes sense to take a look at exactly where the Phillies stand, both this season and in seasons to come.
Money, Cash, Pros: A look at the Phillies' finances
David Murphy, Daily News Staff Writer
There is no other pro sport in America in which money and performance are so inextricably linked. So it makes sense that over the last week, we have heard a lot about the Phillies payroll, and how it likely played a role in Cliff Lee heading to Seattle and Roy Halladay arriving in Philly. So as we wait for the Phillies' official announcement of the "Deal of the Century" -- I don't expect the press conference to be held until later this afternoon or early this evening, since Ruben Amaro Jr. and several other key figures are participating in a charity event at Noon -- it makes sense to take a look at exactly where the Phillies stand, both this season and in seasons to come.
I. Keeping up with the Joneses (and Steinbrenners)
RAJ has all but said the Phillies are operating under a hard cap of $140 million. Many fans are incredulous how the Phillies, who have raised ticket prices this season and are coming off two straight World Series, might be limited in the money department. And, truth be told, we don't know exactly how limited they are, or what their definition of "limited" entails. But keep in mind that $140 million is a sizeable amount when compared to the payrolls of other teams in the league.
Tracking payrolls is a difficult task, since the definition of "payroll" varies from source to source. Last year, for example, Major League Baseball's official figures listed the Phillies' Opening Day payroll at just over $113 million. But for official purposes, MLB does not take into consideration salaries that are owed player who are not on the active roster. So salaries for Adam Eaton, Geoff Jenkins and Jim Thome were not included. Similarly, at least according to my understanding, signing bonuses are spread over the life of the contract. So while the Phillies' budget likely factored Raul Ibanez's signing bonus into his 2009 salary, the "official" figure factored it over the life of his contract.
In terms of true expenses, the Phillies' Opening Day payroll was closer to $132 million. Regardless, we'll stick with the official figures when comparing the Phillies, because while we know the Phillies' true salary expenses on Opening Day, we don't have the figures for the other 29 teams.
As it is, the Phillies entered last season with the seventh-highest payroll in the majors:
- Yankees - $201.5
- Mets: $135.8
- Cubs: $135.0
- Red Sox: $122.7
- Tigers: $115.1
- Angels: $113.7
- Phillies: $113.0
- Astros: $103.0
- Dodgers: $100.5
- Mariners: $98.9
So, as you can see, the only team who entered 2009 with a payroll of larger than $140 million was the Yankees. And the Phillies $140 million figure this season will be composed entirely of money being paid to players on the active roster (the one exception potentially being Jamie Moyer, depending on how the fifth starter spot shakes out). Given Boston's signings of John Lackey and Mike Cameron, they seem destined to eclipse $140 million. But the Phillies would appear to have a very good chance at entering the season with the third-largest payroll in the majors. Obviously, there will still be a sizeable gap between them and the Yankees -- certainly sizeable enough to fit Cliff Lee's salary in. But it's hard to label them "cheap," given the fact that 27 other major league teams will likely be spending less this year.
II. The 2010 payroll
Here is how we project the current Opening Day payroll. With Halladay and the recent signing of Ross Gload, the Phillies have $113.205 million guaranteed to 16 players. After that, a decent amount of projecting is involved. For the Phillies' four arbitration-eligible players, we've estimated salaries of $7.0 million for Joe Blanton, $6.5 million for Shane Victorino, $2.0 million for Chad Durbin, and $1.5 million for Carlos Ruiz. In previous post, we've explained how we reached those figures. I'm pretty confident in the first three, give or take $500,000. In a nut shell, Blanton compares to guys like Doug Davis, Erik Bedard, Nate Robertson, and other pitchers with five-plus years of servce and vaguely similar performance, all of whom eventually signed for salaries in the neighborhood of $7 million. Victorino compares roughly with Kevin Youklis, who ended up with $7 million. The one case I haven't looked extensively at is that of Carlos Ruiz, so there is a chance that he ends up getting more. But for now, we'll stick with those figures.
Add in an estimated $500,000 salary for J.A. Happ (that's what Cole Hamels received after his first full season), and $700,000 for Ben Francisco, and we project the Phillies to be on the hook for $131.5 million for 22 players. So that leaves them with $8.5 million to spend on their three open roster spots -- all relievers -- as well as another starter to compete with Moyer and Kyle Kendrick for the fifth spot in the rotation.
As you can see, money is pretty tight, at least when operating under a hard cap of $140 million. The Phillies still must add another bullpen arm that is capable of pitching in the eighth or ninth inning. They reportedly offered Chan Ho Park $3 million for one season. But the market suggests they will likely have to go higher. Consider: Matt Capps, the former Pirates closer whom the Pirates non-tendered, was planning on asking for $3.4 million in arbitration, the Pittsburgh Post-Gazette reported. And Brandon Lyon, who was one of the Phillies targets, received an average annual value of $5 million a year. So deductive reasoning suggests the Phillies will end up paying somewhere between $3.5 and $5 million at the minimum for one of their bullpen pieces, which would leave them between $4.5 and $5.5 million to spend on everything else. I expect one of these slots to filled by a young guy like Antonio Bastardo, who will be making n the neighborhood of $400,000. But that still leaves another reliever - Scott Eyre, one hopeful, made $2 million last season - as well as a starter.
Long story short, the Phillies certainly can use the $2 million they saved by trading Cliff Lee instead of trading or non-tendering Joe Blanton.
Here is the breakdown of the payroll for 2010:
Starters
Roy Halladay - 9
Cole Hamels - 6.65
Jamie Moyer - 8
Joe Blanton - Arb/7
J.A. Happ - .500
GUARANTEED: 3 players, 23.65
PROJECTED: 2 players, 7.50
Regulars
Ryan Howard - 19
Chase Utley - 15
Jimmy Rollins - 7.5
Placido Polanco - 5.5
Shane Victorino - Arb/6.5
Jayson Werth - 7
Raul Ibanez - 11.5
Carlos Ruiz - Arb/1.5
GUARANTEED: 6 players, 65.5
PROJECTED: 2 players, 8.0
Relievers
Brad Lidge - 11.5
J.C. Romero - 4
Ryan Madson - 4.5
Chad Durbin - Arb/2
GUARANTEED: 3 players, 20
PROJECTED: 1 player, 2
Bench
Greg Dobbs - 1.35
Ross Gload - 1
Brian Schneider - 1
Juan Castro - .750
Ben Francisco - .750
GUARANTEED: 4 players, 4.1
PROJECTED: 1 player, .750
TOTAL: 22 players, 131.500
REMAINING: 3 relievers, 1 starter, 8.495
III. The 2011 Payroll
Here is where the long-term thinking behind the Halladay/Lee swap starts to come into play. The Phillies obviously felt they were more likely to sign Halladay to an extension than they were to sign Lee. Now, they have some cost certainty moving forward. Keep in mind they did not have to sign Halladay or Lee. A guy like Javier Vazquez will be available next year. Brandon Webb might be available too, along with Josh Beckett. But the Phillies have long been infatuated with Halladay -- and why wouldn't they be? In addition to being one of the top pitchers in the game, Halladay has shown amazing consistency over the last four years. He has a huge frame. Thus, the thinking goes, he is less succeptible to a breakdown. That said, the Phillies have a huge amount of money tied up for 2011 -- $99.35 million to 10 players -- when they will either have to re-sign Jayson Werth or find somebody to replace him in right field. Shane Victorino will also likely be due another big raise. Jimmy Rollins, J.C. Romero and Juan Castro also have options for 2011. At this point, Rollins is likely to return (His $8.5 million salary is manageable, and the $2.5 million buy-out he would be due is sizeable). So, after this season, the Phillies will need to find a starting right fielder (Francisco could factor in, along, perhaps, with a platoon-mate), two starting pitchers, and a fleet of relievers. Of course, it is virtually fruitless to project anything other than the guaranteed money this far into the future. So here is where it stands:
Starters
Roy Halladay - 20
Cole Hamels - 9.5
J.A. Happ - (Control or Arbitration)
Relievers
Brad Lidge - 11.5
Ryan Madson - 4.5
J.C. Romero - 4.5/.25
Regulars
Jimmy Rollins - 8.5/2.5
Placido Polanco - 5.25
Chase Utley - 15
Ryan Howard - 20
Raul Ibanez - 11.5
Shane Victorino - Arb
Carlos Ruiz - Arb
Bench
Ross Gload - 1.6
Ben Francisco - .600
Brian Schneider - 1.5
Juan Casto - .75/.05
GUARANTEED: 10 players, 99.35 million
UNDER CONTROL: Ruiz, Victorino, Francisco, Happ
IV. The 2012 Payroll
The only players guaranteed money are Halladay, Utley and Placido Polanco. Hamels will be arbitration eligible one last time (the extension he signed runs out a year before free agency), before becoming a free agent after 2012. Ruiz will also be arbitration eligible with free agency looming. Brad Lidge has a $12.5 million option and $1.5 million buy-out. Here is how 2012 looks at this point:
Roy Halladay - 20
Chase Utley - 15
Brad Lidge - 12.5/1.5
Cole Hamels - Arb/9.5
Placido Polanco - 6.25
Carlos Ruiz - Arb (5 yrs of service)
Ben Francisco - Arb (4 yrs of service)
J.A. Happ - Arb (3 yrs of service)
V. And beyond. . .
With a No. 1 starter (Halladay) and No. 2 starter (Hamels) locked up for the next three seasons, the Phillies are in a position that few other teams in the majors can claim. Of course, this is assuming Halladay continues to pitch as he has throughout his career, and that Hamels rediscovers the form he displayed in his first two big league seasons. Having two stud starters atop the rotation is an excellent way to re-build a once power-heavy roster on the fly. Of course, this is where the debate over the merits of the deals come into play. Will Halladay remain dominant? Will Hamels re-discover his swagger? Will trading away guys like Taylor, D'Arnaud, Drabek, Knapp, Taylor, Donald, Carrasco and Marson hamper the Phillies' efforts to surround those two stud pitchers with cost-effective talent? Will guys like Tyson Gillies and Phillippe Aumont, acquired for Lee, prove to be cost-effective major league talent that will off-set the loss of some of the aforementioned Phillies prospects? Will the boost in long-term sustainability that Aumont and Gillies provide off-set the decision not to keep Lee and dramatically increase their chances at winning a World Series in 2010?
None of these questions will be able to be answered until years down the road. One thing is clear: it will be fascinating to watch both the finances and talent of this Phillies organization evolve.
Letting Werth go cannot be an option now that Taylor is gone. Dom Brown is a left-fielder in the bigs.— gulls3012
Comment removed.
i don't see the figure estimates for how much they're making. i've seen figures like 4.2 million in attendance. the average price per ticket is what? $60? plus luxury boxes, concessions, parking, tv, merch. i figure the team earned anywhere from $650m-$1bil. no? overhead costs, minus payroll leaves a tidy profit of maybe $300mil take home, no?— Evilvet- Murph: you are the greatest!! There is one unknown variable, however, in all this analysis: we know the Phillies hard cap (in a capless system), but we have no real idea of their revenue streams. Right now, for example, they are the apple of the eye for Comcast, who, with the deal for NBC-Universal, reportedly wants to take a run at ESPN for top spot in sports entertainment. Clearly, the Sixers and Flyers are not valuable commodities for Comcast in that regard, but the Phillies are valuable and could bring in top advertising rates, even in a down economy. Thus, the Phillies could negotiate a much better TV package. What revenue did the Phillies get from two World Series runs, in terms of parking and concessions (I believe the players association and the teams share revenue from attendance, but the home team gets parking and concessions, or at least a lion's share of both), as well as from total attendance? How much revenue went into the pockets of the various and mysterious owners, how much went into operating the Minor League system, how much went into operating the major-league system, minus players' salaries, how much went into reducing the debt for the stadium, how much went to the city in taxes? We are told what the Phillies are willing to spend, but until all Professional Sports Teams open their books (which will never happen), that is all we, as fans, know. Oh, we also know our season-ticket and individual ticket-prices will go up, yet again. Baseball is a business and we are the customers; if we don't like the manner in which the Phillies operate, we can always stop shopping with them. Of course, there is no competition at the major-league level here in Philadelphia. So much for capitalism.— chuckw
- Best title post ever.— MH
- Nostrarollins: The Phillies could of had two great pitchers but they decided to be cheap over a matter of 8% of the payroll. The prospects they got from Seattle aren't good enough for a pitcher of Lee's talent. I guess the other pitcher you were referring to is Cole Hamels. He's been too inconsistent so far to call 'great'. I hope he gets back to his 2008 form but you can't assume he will. I can see limiting payroll but when you're talking about a great pitcher like Lee, you break the bank (at least a little bit and 8% doesn't seem like a lot)>— James TL
- Apparently they could not trade Blanton. If they could have, perhaps they could have had Lee for at least 2 years. Can you imagine? I think this blog was wonderful. Thanks. But, it showed me that some of these guys are way over-paid, especially the relievers. Capps at 3.4 million? Why? His ERA is horrid. So is McDougels. Oh well, let us see how the magician Amaro does in getting the team settled.— KGKoons
- This is the only clear analysis of what the Phillies look like going forward that I have seen. Great work!— Dbenson
- After all is said and done,since you only figured in the extra salaries the Phillies are paying for players like Thome,Eaton,etc.,I'm sure the other teams on that MLB list are also paying salaries that aren't included in the official stats.Everything being equal we're still probably 7th on that list after corrections for the other teams are added in.We reside in the 5th largest sports market,with the nations largest cable companies home base in town.The hard cap is a figure given to the press by the owners,it doesn't show actual profit margins.With a beautiful new stadium selling out every game,National exposure in the last 2 World Series,anything with Phillies on it is being sold to a much larger fanbase the more successful we become.For a chance at keeping 2 Cy Young award winners on our staff for this year,seemed a no-brainer.We could have let Lee go next year,since ESPN is saying he would have stayed for alot less than the smokescreen that was quoted.With 2 World Series Wins in about 120+ years,our fans deserve more than a shot at winning,for all the 50-70 win seasons in the past we've stuck with this team thru.— MJOLLNIR HAMMER
- I agree with the first two posts. Amaro must have budgeted in a new contract for Werth if we are letting Taylor go...uh, at least I hope so. And nostrarollins is right, Ruben has the necessary cojones to make big moves, ya gotta like that. Besides, we all agree Taylor and Drabek is fair for Halladay. So the other end of the deal boils down to Carrasco, Donald, Marson and Knapp for the 3 Mariners prospects and a half year of Lee. Not so lopsided when you look at it like that.— sla6yer
- Instead of trading for Halladay they could have signed Lackey for slighly less money per year or upped the ante to extend Lee and they would still have had a cheap RF replacement for Werth in Taylor and a cheap starting pitcher in Drabek. Now they have to look to expensive free agents to fill those positions. So how does this deal save them money in the long run?— JeffR
- James TL - Hamels is inconsistent but Lee is great? Don't just look at 2009 but look back to 2007 and you'll see that Hamels has been much more consistent. Hamels may have had an off year last year but it was much better than Lee was in 2007 and better than his 2006. As for being "cheap", I wouldn't say that of any team increasing their payroll 24% (113 to 140).— rudeman
- Evilvet - It's tough to estimate what kind of profit they are turning. There are so many expenses outside of payroll, and so many revenue streams outside of ticket sales. Salaries and benefits for the rest of the organization, for starters. Travel expenses, scouting, player development, charitable endeavors - the list goes on. The only thing we can say is that a $140 million payroll is in the upper echelon of MLB. But what the Phillies are spending on payroll as a percentage of their expenses, revenue, profit and how it compares to other teams in the majors is the great unknown.
- Forbes had the Phillies ranked 7th in its annual analysis of the value of professional sports teams, published in April '09. Here's the snapshot of the Phils: http://www.forbes.com/lists/2009/33/baseball-values-09_Philadelphia-Phillies_335119.html Interesting to note that revenue and player expenses have risen at more or less similar rates. Here's magazine's thumbnail analysis: "After winning the World Series last year (2008) and booking record attendance and revenues, team owner William Giles used the cash to keep the team's best players. During the off-season the team locked up Ryan Howard when the slugger agreed to a three-year, $54 million deal and ace Cole Hamels for three years at $20.5 million. With Chase Utley, Brad Lidge and Ryan Madson also signed through 2011 the Phillies should be contenders for the next few years (Jimmy Rollins has an option for 2011). Give Giles credit for increasing his opening day payroll from $104 million to $132 million despite the recession." While it would have been nice to have Halladay AND Lee this year, this confirms what I've been thinking: That the Phillies are doing a pretty good job balancing the need to pay for quality players and be competitive every year with the need to manage the business for the long term.— df817
- mlb trade rumors reporting one of the minor leaguers not named aumont failed his physical... paging philly writers??? at least we got the scoop that ross gload signed... really, now... andy, murphy, beuler??? beuler??— terryharmon
