AngelsWin.com Today: 2021 Angelswin.com Primer Series: Financials

[AngelsWin.com]

By Robert Cunningham, Angelswin.com Senior Writer

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As we alluded to, in the Introduction article, Major League Baseball (MLB) has taken a financial hit due to the COVID-19 pandemic. Clearly the abbreviated season combined with a complete lack of in-person attendance at ballgames put a big financial hit on the game. Arte Moreno, himself, indicated revenues came in well short of projections. This financial impact is not insignificant and the likelihood that 2021 will take a similar hit is high.

Why?

Well, let us just talk it out here. Assuming President-elect Biden takes office on January 20th and, in a likely scenario, puts the country on a 30-60-day lockdown (or some hybrid mask requirement), that would immediately place us in early-to-late March.

From there, a probable phased opening of non-critical businesses would take place, not dissimilar to what happened in 2020. Basically, a larger subset of businesses would open and the country would test the COVID-19 stress level on the population. If cases return at a rate higher than expected that would have a very negative impact on any proposed baseball season.

However, if the reemergence is successful, stadium play, likely in a limited form, could potentially take place later in the year. Think, absolutely no more than 50% stadium capacity (probably less) in what would likely be another abbreviated regular season. Note this is probably the most optimistic scenario. There is a high likelihood that even if the country successfully reopens that pandemic experts and scientists will almost certainly recommend that large gatherings do not occur within a several month period, even after a clean societal reemergence.

The bottom line is that 2022 will be financially rocky for the country and MLB, which will almost certainly result in low to medium attendance, at best, and possibly another shortened baseball season, based on what MLB decides, and is even allowed to do, in a continuing COVID-19 pandemic environment. It could be a 162-game, televised-only, season or some mashup of televised-only and in-person attendance games, ranging anywhere above 60 games. Basically more significant financial impacts to baseball, which brings us to the Los Angeles Angels financial situation.

Here is a rough snapshot of the projected Angels 2021 payroll situation as of December 7th, 2020:

Table 1 - 2021 Los Angeles Angels Projected Payroll

The Angels current Average Annual Value (AAV) payroll sits at about $181M, which is $29M below the Competitive Balance Tax (CBT) threshold of $210M for 2021. This is in-line with what FanGraphs RosterResource.com and Spotrac.com show, as well. The arbitration salaries, in Table 1, were pulled, as usual, from MLBTradeRumors.com yearly Projected Arbitration Salaries for 2021 series, this year utilizing Method #3 numbers.

Does this mean the Angels can spend $29M?

Based on the current economic environment in baseball and the likelihood of another COVID-19-impacted season, the answer may be no.

First of all most teams keep some sort of reserve cushion of payroll space to start off each season in order to maintain flexibility heading into the Trade Deadline. For the Halos that will likely be about $10M or so, automatically lowering their available payroll space down to $19M.

Moreno’s history shows a trend of modest payroll increases year-to-year, keeping pace with a rising CBT threshold but nothing more or less. During new GM Perry Minasian’s live interview at Angels stadium, Arte did clearly state payroll would not go down, but offered little more. Based on this we will presume the Angels have $19M to spend this off-season for the purposes of the Primer Series, possibly more if the Angels target one or more of Moreno’s aforementioned “impact” players.

Also you can clearly interpret the Angels recent non-tender of several Angels relievers as a sign the Angels will probably be fiscally conservative in 2021, based on the notable impacts to the U.S. economy and MLB. The trade for Jose Iglesias, as an addition by subtraction scenario, in conjunction with the Halos moves to kick Hansel Robles, Matt Andriese, Justin Anderson, Keynan Middleton, and Hoby Milner to the curb, will keep the payroll effectively neutral. As a lone counterpoint, the Angels, just today, executed a trade for RP Raisel Iglesias, who is slated to receive $9.125M in 2020, adding a substantial amount to the payroll, reducing the total projected available payroll space by about 25%.

It is not just the Angels, either, as evidenced by the Indians placing Brad Hand on waivers (and subsequently releasing him), the Reds trading Raisel Iglesias to the Halos, and the apparent financially-strapped Phillies rumored to be shopping Zack Wheeler. Even perfectly viable free agents that you would expect to pursue multi-year deals, such as Robbie Ray, Drew Smyly, Marcus Stroman, and Kevin Gausman, have selected one-year deals and/or accepted the Qualifying Offer, rather than test a clearly weak free agent market for players.

This simply means that the Halos are likely to stay within a tight range of $19M. Certainly, Arte can choose to go up or down but, again, history does not support the notion of a spending spree and internal and external economic factors make it much less likely to happen. As much as this off-season might be a prime opportunity for Moreno to exercise the teams financial muscle for a short 1-2 year period, this year is proving to be the most unlikely year in recent history for him to do it. Only time will tell the tale.

One final note regarding MLB and financial expenditures. Despite the clear hits teams are taking due to the pandemic shutdown, there appears to be a collective move by MLB and the owners to take advantage of the situation, making deep cuts to Minor League Baseball (MiLB) team franchises, effectively depressing 2021 arbitration and free agent salaries via these declarations of being in a financial crunch, and cutting out wide swaths of front office personnel and MiLB players.

As an outsider looking in, this seems, to me, to be a self-destructive attitude in a business that makes so much money according to Forbes and other publications. Clearly local revenues, which are a main contributor to individual team revenues, have taken a hit due to non-existent ticket sales in a shortened season but the extensive cuts feel deeper than needed. When you look at the numbers it is clear that not playing a full regular season with no ticket sales does result in large losses. However, a full regular season with, perhaps, at least 40% of a typical season’s in-person attendance would bring MLB, as a whole, to a break-even level, give or take.

The point is that the latter (40% in-person attendance) is probably a less likely scenario based on our earlier discussion, thus MLB will probably struggle again in 2021 and the owners, even in the face of a fight with the Player’s Union, will probably look to make additional cuts when and where they want and can. The near-future of MLB is not particularly bright, so let’s hope cooler heads prevail and a compromise can be reached, not only in entertaining, at least, a full or partial, televised-only regular season, but also with a new Collective Bargaining Agreement (CBA) and continued baseball for the next several seasons. MLB’s image is teetering on a tightrope with little room for error so they need to get this right.

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[Lou]

Ettin is back!

 

(sorry, missed it last time)

[greginpsca]

At this point they only have 8 players making above the minimum.

[Hubs]

To say $21 M is to not understand salaries. The LA times writer said that they were at $171 going into today, so that’s not true either. 
 

They have a bit less than $130 committed (depending on how much the Reds sent in cash) now and the lux tax number is like $127ish. (36+21+35+24+3.5+8)

They have between $16.4 and $26.1 to pay in arbitration salaries according to MLBTR.

There are 14 spots to fill with free agents or guys under club control, and another 14 in minor league salaries. The total here is another $8-$11. 

That’s probably around $154 on Lux Tax and then you have benefits and such so you’re at $169 with Iglesias.

And $40 M left to spend before hitting the tax. (Actually a bit more since every FA they replace will only count whatever his number is over the league minimum, since I already counted that above).

And depending on which site you use, it leaves a bit less like $35M to get to the $190 ish range that they were at for 2020 before the salary compromise. 

[Hubs]

16 minutes ago, greginpsca said:

At this point they only have 8 players making above the minimum.

They have 6 (Trout, Rendon, Pujols, Upton, Iglesias x 2) And 6 under arbitration (Bundy, Heaney, Ohtani, Pena, Mayers, Stassi) Plus 8 guys I’d consider club control locks (Fletcher, Ward, Walsh, Barretto or Rengifo, Bemboom, Canning, Barria, and Buttrey) 

That leaves 6 spots for one or two rotation arms, three or four bullpen arms, one OF and maybe one more infielder).

[ettin]

I will note that due to the peculiar nature of this upcoming season and the fact that several players seem to be leaning toward one-year deals to get past what is likely to be a disruptive, economically-depressed 2021 season, this could turn into a situation where new GM Perry Minasian attempts to acquire more of what we need pre-season, rather than waiting until the Trade Deadline. This could mean foregoing the normal margin of dollars a team would typically retain in favor of spending now and then re-evaluating life prior to the Trade Deadline. Will be interesting to see which way they go, very difficult to predict the paths and outcomes here.

[ettin]

1 hour ago, Hubs said:

To say $21 M is to not understand salaries. The LA times writer said that they were at $171 going into today, so that’s not true either. 
 

They have a bit less than $130 committed (depending on how much the Reds sent in cash) now and the lux tax number is like $127ish. (36+21+35+24+3.5+8)

They have between $16.4 and $26.1 to pay in arbitration salaries according to MLBTR.

There are 14 spots to fill with free agents or guys under club control, and another 14 in minor league salaries. The total here is another $8-$11. 

That’s probably around $154 on Lux Tax and then you have benefits and such so you’re at $169 with Iglesias.

And $40 M left to spend before hitting the tax. (Actually a bit more since every FA they replace will only count whatever his number is over the league minimum, since I already counted that above).

And depending on which site you use, it leaves a bit less like $35M to get to the $190 ish range that they were at for 2020 before the salary compromise. 

Hubs it is just an educated guess, based on the team retaining some margin heading into the Trade Deadline. You can make arguments and cases for a multitude of payroll scenarios, so to each their own. The first comment was quite unnecessary if you read the article. The number represents an educated guess, nothing more, nothing less. If you feel we have more money, great, I hope that is the case, but based on history and typical team actions it is a number that I do not believe is that far off the mark. Could be wrong and I hope I am, but in a positive way for the Halos.

[Hubs]

@ettinTo be clear I wasn’t calling you out as I know how much work goes into these types of posts because before you did it, I did. For several years. Mainly on salaries, not a whole series like you do now. 

Every time you do these posts, I do find things that don’t add up, and numbers that don’t match other sources. You do so much work on other articles, which I respect, but often, your Salary numbers are just plain wrong. You’re definitely an expert, but even experts make mistakes. 

We can disagree on how much they’ll spend, but you one point I always see is you putting full major league minimum salaries for all of the guys on the 40, which is just not correct. 

Anyway, agree to disagree. I didn’t mean to be hostile but just to disagree with you. Keep up the good work. 

[BTH]

I have no idea how much the Angels will spend the rest of this offseason. I generally tend to think that they will spend less money than fans expect, which is why I chose less than $19M, but the Iglesias trade today showed that they are willing to take on some salary.

I am very interested to see how much money the Reds are giving the Angels though.

[ettin]

16 minutes ago, Hubs said:

@ettinTo be clear I wasn’t calling you out as I know how much work goes into these types of posts because before you did it, I did. For several years. Mainly on salaries, not a whole series like you do now. 

Every time you do these posts, I do find things that don’t add up, and numbers that don’t match other sources. You do so much work on other articles, which I respect, but often, your Salary numbers are just plain wrong. You’re definitely an expert, but even experts make mistakes. 

We can disagree on how much they’ll spend, but you one point I always see is you putting full major league minimum salaries for all of the guys on the 40, which is just not correct. 

Anyway, agree to disagree. I didn’t mean to be hostile but just to disagree with you. Keep up the good work. 

Sorry didn't mean it quite like that. This is a very nebulous off-season full of a lot of uncertainty, particularly with a new GM on top of that. I checked FanGraphs and Spotrac, again today, and they both have the Luxury Tax at about $178M, just a $2M below me so I don't feel I am that far off the mark but again it is a fog of war. Even the normal arbitration numbers from MLBTradeRumors.com have a greater margin of error this off-season. Again, just a giant crap shoot...

[Hubs]

On 12/7/2020 at 2:57 PM, ettin said:

Sorry didn't mean it quite like that. This is a very nebulous off-season full of a lot of uncertainty, particularly with a new GM on top of that. I checked FanGraphs and Spotrac, again today, and they both have the Luxury Tax at about $178M, just a $2M below me so I don't feel I am that far off the mark but again it is a fog of war. Even the normal arbitration numbers from MLBTradeRumors.com have a greater margin of error this off-season. Again, just a giant crap shoot...

Players on the 40 man have a minimum salary of 46,000. Once they’ve played one day in the majors, their salary minimum jumps to around 125,000 or so.

You have the entire 40-man listed above as for real payroll it’s just the 26 guys that make the team and any major league salaries that are guaranteed.

For luxury tax, you should list the 40-man, their minor league salary and the benefits. Don’t list benefits on the real payroll.

Get rid of the 2.5 million minor league salaries too, those don’t count on real payroll just on the luxury tax calculation. 

My real salary figure right now is 155.7, leaving them with $35 to spend before they get to last seasons 190ish.

My luxury Tax number is 170.136. This leaves almost 40 to the 210 threshold.

Spotrac and Fangraphs likely have higher numbers, because they also sum up all of the 40-man contracts but that actually doesn’t count that high. Chris Rodriguez is gonna make around 50k for his first year on the 40 man and not 600k. He like every player with options will make more if he’s added to the big league club roster, which is a prorated portion of the major league minimum.