Dollars and Sense Part Three: Outlier Salaries and Rockies ODP Analysis

After looking at MLB Opening Day payrolls by average team salary and then by average player salary, this session of PR Academy will first focus on the high and low salaries in MLB and then will look closely at the Colorado Rockies' payroll distribution in 2009 and beyond.

Once again, the salary data used in this report is courtesy of the USA Today Salary Database. The payroll data does not include money paid or received in trades or for players who have been released, such as Jason Marquis for the Rockies or Gary Sheffield (released by the Tigers) this year. There's a lot to discuss, so let's get right to it!

Outlier Salaries

As Orwell would put it, all animals are equal, but some animals are more equal than others. In the case of baseball, a select few players are much more equal than the mere mortals that occupy the majority of Opening Day roster slots, at least according to salary distribution. The problem with just looking at average (or even median) player salary data is that one misses the outrageous outlier salaries that superstar players in this day and age command. The Biz of Baseball's Maury Brown details in two charts, reproduced here, the top ten salaries in the AL and NL:

† Started season on DL

So what do we learn from these charts? Well, first of all, the Yankees dominate the list of top salaries in the AL, grabbing six of the list's ten spots. In fact, George Steinbrenner's club has three of MLB's five best compensated players this year. They also show just how out of control that salary escalation has gotten in recent years--I mean, $18.5 million for one year of Barry Zito? The world is going mad.

Analysis of these lists shows that the average top 10 player in the AL is paid $19,198,231 while a similar NL player is paid only $18,422,432--a difference of $775,799 (what a travesty!). Of course, these results are largely skewed by the outlier among outliers--A-Rod's obscene $33 million salary for 2009.

In fact, the most richly rewarded of players are being given a greatly disproportionate share of the 2009 ODP pie. As Brown notes, there are 86 players in MLB (about 11% of 818) who will earn over $10 million this year. Adding their salaries up, these 86 players will earn a total of $1,178,536,759 this year! In other words, 11% of players will receive 44% of MLB's total payroll expenditure this year. Unsurprisingly, teams like the Yankees (9), Cubs (6), and Mets (5) have several players on this list.

NL West Outlier Analysis

To put this in context, the Yankees by themselves have more such players than the entire NL West (7)--with the Rockies having Todd Helton as their lone eight-figure earner. The Dodgers have four eight figure earners (Manny Ramirez, Jason Schmidt, Hiroki Kuroda, and Juan Pierre--seriously) while the Giants (Barry Zito), Padres (Jake Peavy) and Diamondbacks (Eric Byrnes) have only one each.

Extrapolating this data even further, these high earners in the NL West earn large portions of their team's payroll expenditure (or in the case of Jason Schmidt, don't earn it). Helton's $16.6 million salary this year is 22.1% of the Rockies' entire ODP in 2009. Manny Ramirez represents 23.7% of the Dodgers' payroll, while Schmidt (15.1%), Kuroda (12.3%), and Pierre (10%) also are significant investments--in all the Dodgers are paying 61% of their payroll to these four players. Barry Zito represents 22.5% of the Giants' ODP, while Jake Peavy's number with the Padres is 25.7% and Byrnes is 15.9% for the D-Backs.

This just proves the point that baseball payrolls are often top-heavy. To invest big money long-term even on a star player means that a team takes on huge payroll risk in future years should that player not perform. For instance, because of his steep decline in production from the time he signed his 9 year, $142 million contract in 2001, Todd Helton's $16.6 million salary for 2009 represents a significant financial albatross for the Rockies. Helton's contract is a perfect example of a team taking on payroll risk and having it coming back to bite them big time. Big market teams such as the Yankees and Mets are willing and able to absorb this increased payroll risk for the high reward that these highly-compensated players can provide to a team.

The Other End of the Spectrum

On the other side of the coin from these high earners, 68 players (8.31%) were compensated at the major league minimum ($400,000). Lower salaried teams like the Marlins (10), Athletics (6), and Padres (5) had a great % of these players. What was surprising to me initially was that the Rockies were one of just six teams to not pay any player the minimum this year. However, I soon realized after looking at the team's contracts that the Rockies were paying ten players on their active roster salaries that barely exceeded the minimum threshold. For example, Dexter Fowler is making $401,000 this year--technically higher than the minimum but in practice much the same.

Join me after the jump as I break down Colorado's ODP distribution in 2009 and beyond.

Colorado Rockies Opening Day Payroll Analysis 

As of Opening Day the Colorado Rockies were paying a major league salary to 27 players (Jeff Francis and Taylor Buchholz being on the DL), totaling $75,201,000 (again, not counting the $875,000 Marquis credit). On a per player basis, the year's edition of the Rockies has an average salary of $2,785,222. In addition to their Colorado Rockies salary breakdown, which I've used in past sessions, Cot's Baseball Contracts once again came through for me here, providing an awesome salary obligation spreadsheet for the 2009-2013 time frame.

What can this handy and comprehensive spreadsheet tell us about the financial state of the Rockies? While the spreadsheet isn't completely accurate (Manny Corpas, for instance has correct contract details but this is not shown from 2010 to 2013) or exactly up to date, given the constant roster tinkering necessary in MLB due to injuries, the possibilities of this resource are far-reaching and powerful. For instance, from the spreadsheet we can see that the Rockies have already committed $44,058,000 to next year's salary figure--and that's with only five players under contract! That number isn't counting the 13 players on the 25 man roster that will be arbitration eligible next year! Assuming the standard 172% raise per player that came with arbitration filing this year, the Rockies' payroll could balloon even further beyond this year's number (and continue to do so in subsequent years)...without adding any free agent of significance to the team. As the Monforts would tell us, this level of payroll increase is simply not sustainable or practical.

Roster Building, Rockies-Style

It is dilemmas like this that lead mid-market teams like the Rockies to have to make tough decisions about which of their young players and prospects to keep and which they should try to get the most out of before either letting them go elsewhere or trading them for replacement prospects. Over the last few years the Rockies have adopted the strategy of signing several players they saw as key contributors to long-term deals that bought out their remaining arbitration years and even some free agency time--meeting with varying degrees of success.

The inherent risk with that strategy is that situations can change in a very short amount of time. When Jeff Francis signed his 4 year, $13.25 million contract after 2006, it was seen as a very smart move for the team and a bit of a bargain. Francis responded with an excellent 2007 campaign, but after a rocky injury-filled 2008 Jeff may never pitch at a major league level again. Manny Corpas is a similar example of this. When the Rockies signed Corpas to a 4 year, $8 million deal after 2007, they thought they were getting a dominant closer in his prime. Since, Manny has looked more like a middle reliever than a closer. Rockies fans can only hope that Troy Tulowitzki (6 years, $31 million) doesn't become Bobby Crosby and instead fulfills his great promise, or that Ubaldo Jimenez (4 years, $10 million) becomes the ace he is projected to be. Aaron Cook was great last year, but he has 3 years and $30 million left on his contract--a lot can go wrong in that time period.

Another risk to this strategy is getting married to mediocre talent--a phrase that has been bandied around this blog more than once. Just because a player has performed well or memorably for you over a short period of time does not mean that he is the best fit for your team on a long-term basis. There may very well be a player out there who will perform the same tasks better and more cheaply than "your guy". Garrett Atkins is a perfect example of a "your guy"--a player that can be replaced cheaply and with a better overall player within the system, and one that has some value to other teams. Now I'm not exactly saying that Atkins is mediocre, only that he's not the best option for the Rockies at this point.

The same goes for Brad Hawpe and Todd Helton, but we've got them locked into our starting lineup for at least two (Hawpe) or three (Helton) more years. As RMN is quick to point out, Hawpe would fit much better in the Rockies' lineup as a first baseman--giving playing time to the cheaper, more defensively-oriented outfield of Smith, Fowler, and Spilborghs. However, due to this marriage O'Dowd has made with Hawpe (good, patient hitter but horrible fielder) and Helton (great hitter and clubhouse presence, but lacks power at this stage in his career), this idealized lineup is little more than a pipe dream for Rockies fans at this point.

Colorado Rockies Contract Breakdown

Taking all of these roster building risks into account, I've broken down the 27 players on the Rockies' ODP by contracts and what I see for the future. For each player I've included what they're being paid this year and what they're owed after the 2009 season. Remember, this is just the ODP--not including players like Belisle, and Daley who are now on the roster. However, due to the fact that Juan Morillo is no longer on the roster, I'll analyze Jason Hammel instead.

Albatrosses (Contracts that hurt now and in the future)

Todd Helton: $16.6 million (2 years, $35.1 million plus $4.6 million buyout after 2011). This kind of contract absolutely kills teams for years to come.

Jeff Francis: $3.875 million (1 year, $5.875 million for what is likely going to be very little or limited production). Injuries are a fact of life, and it is unfortunate that it happened to the Rockies here.

Brad Hawpe: $5.5 million (1 year, $7.5 million plus a $10 million club option or $500k buyout). As I've stated above, Brad is ill-suited for the duties he's being given as an outfielder and serves as an organizational block to Seth Smith, Matt Murton, and Carlos Gonzalez among others.

Anchors (Expensive this year, but will soon be lifted)

Jason Marquis: $9.875 million (One year deal)--the Rockies are effectively paying $9 million this year for Marquis since Vizcaino is a sunk cost for Colorado. He has provided a good performance this year, but is not worth $9 million.

Garrett Atkins: $7.5 million (one year of arbitration left). Atkins has gone into a pretty steep decline of late at the plate, is blocking Ian Stewart, and is really slow. I hope he's not on the books next year.

Yorvit Torrealba: $3.5 million. Many Rowbots will rejoice once Torrealba has completed his contract. Yorvit is a decent back-up catcher, but he's not worth anywhere close to what he's being paid this year.

Alan Embree: $2 million plus a $250k buyout after the year. Embree is a middle reliever that doesn't qualify as a LOOGY--an expensive replaceable part.

Glendon Rusch: $750k. He's not actually too expensive, but his role as a long man is fungible and he will probably be with the Rockies for this year only.

We'll See (Payroll risk in play, but reward potential)

Aaron Cook: $9.583 million (2 years, $20.5 million plus $11 million mutual option or $500k buyout). Again, Cookie was great last year, and if he could sustain that level of production over the life of the contract he'll be worth it. However, with that high of a salary comes a bunch of payroll risk.

Troy Tulowitzki: $1 million (4 years, $27.25 million plus $15 million club option or $2 million buyout). While Tulowitzki is young, provides excellent defense, leadership, and a big bat--he has been a slow starter this year and last, while having some nagging injuries leading to the inevitable Bobby Crosby comparisons. Most likely this contract will be just fine but the bust potential is still there for the Rockies.

Manny Corpas: $800k (2 years, $6.25 million plus club options of $6 million and $8 million--or buyouts of $250k and $500k). The Rockies' financial commitment into Corpas isn't that significant, but if Manny keeps pitching ineffectively, the Rockies may have to send him back to AAA.

Ubaldo Jimenez: $750k (3 years, $8.25 million with $5.75 and $8 million options, each with a $1 million buyout). I'm not too worried about this contract, as the financial outlay isn't too significant and I think that Ubaldo will pitch well above his salary, but the Jeff Francis corollary is still in effect here.

Short-term Arbitration Eligible (Young players who, while fairly cheap, are on their way out soon--no long term deal--or should be, in my opinion)

Clint Barmes: $1.625 million (2 arbitration years). Deer meat is bordering on being overpaid now. While nice to have as a bench/utility player, he is miscast as a starter (outside of Coors Field) and should be paid as a bench/depth guy.

Jason Grilli: $800k (2 arbitration years). Middle relief performance is fungible, as well as highly variable from year to year. This year, Grilli has been good, but at any time he could turn into Matt Herges 2008 edition.

Long-Term Arbitration Eligible (They could, and should, factor into the team's future plans)

Huston Street: $4.5 million (1 arbitration year). I was flipping back and forth on Street, as he will be compensated pretty well this year and likely next. He does provide a proven end of game reliever--though in my opinion the closer position is severely overrated. The PR hit the Rockies would take for dumping Street after one year would also be pretty damaging (perceived return on Holliday). This one could go either way.

Jorge De La Rosa: $2 million (1 arbitration year). De La Rosa shows great promise, and thus far has harnessed his fantastic stuff pretty well this year. Lefty starters throwing in the 90s don't grow on trees, you know.

Taylor Buchholz: $1,055,000 (3 arbitration years due to his Super Two status). Remember what I said about middle relief and Jason Grilli? Well, Buchholz is a more valuable set-up man that I can see having value for the long term.

Not Arbitration Eligible (Soon to be--or should be--gone edition). These players all have three arbitration years remaining.

 Jeff Baker: $415k. Baker does bring some good things to the table (power bat off the bench, can play several positions), but he is not only a very streaky player but also is taking a roster spot that could be given to a more consistent contributor.

Ryan Spilborghs: $415k: This was a very tough decision, but Spilly has been cast as a fourth outfielder despite his excellent play. It will ultimately come between him and Seth Smith for a place in the future roster due to the expected emergence of Carlos Gonzalez in the near future. I believe that the Rockies will choose Smith as he is younger  by a couple of years and doesn't have Scott Boras as an agent.

Omar Quintanilla: $408k. Omar is a slick fielder at three positions, but he is very replaceable as a player and doesn't pull his weight offensively.

Ryan Speier: $407k. See Grilli, Jason--middle relief is fungible

Keepers (Young players with three arbitration years remaining that are part of the Rockies' long term plans)

Jason Hammel: $422k. Depending on how Hammel pitches in his next few starts, he could really go either way here. If he develops into a durable starter then he should definitely be in the Rockies' future plans.

Chris Iannetta: $415k. No debate here, CDI is a stud and should be locked up for several years--with an eye on an eventual move to first base. 

Ian Stewart: $404k. Stewart is a dynamic player on offense and should be the Rockies' third baseman for the next several years.

Seth Smith: $403k. See Spilborghs, Ryan--Smith is a good, patient bat off the bench as well as a more than adequate outfielder.

Franklin Morales: $402k. If Morales can harness his stuff and show some consistency, I can definitely foresee a Ubaldo Jimenez-type deal in the near future for Morales.

Dexter Fowler: $401k. Dexter is everything you want to see in a center fielder, and the Rockies would do well to lock him up early and for several years.

That's all I've got for now--I've run out of steam after 3000 words--but in the future I'll expand my analysis past the surface-level financial impact of the Rockies' ODP.

Sources and Additional Reading

USA Today Salary Database, USA Today

Individual Player Salary Analysis, the incomparable Maury Brown

Team ODPs by Player, Maury Brown (pdf)

Cot's Contracts, Jeff Euston

Rockies Payroll Obligation Spreadsheet, Cot's Contracts

Post-Arbitration Salary Analysis, Bob Warja (Bleacher Report)