Tigers payroll looking ahead: 2014 and beyond

If the Tigers wish to contend beyond their "win now" window of 2011 through 2014, they need to make some moves that sell high on some key players and bring in some major league ready prospect replacements at key positions.

Regardless of the outcome of Max Scherzer's arbitration decision this spring, the Tigers will look to open 2013 with a payroll slightly over $150 million. In my last article, I reviewed the Tigers approximated payroll sustainability and determined that the break even payroll for 2013 would be about $143 million. This means that, Mr Illitch is likely taking a hit this year to win it all, again. Obviously as long as the city of Detroit's most loved billionaire keeps writing the checks, payroll deficit is not an issue. But as much as everyone doesn't want to think about it, there may come a time when the books MUST be balanced. On the Tiger's current revenue, the sustainable payroll level is projected to be around $165 million in 2014 and going forward, thanks to a new TV deal kicking in league wide in 2014. If the Tigers want to retain the services of the best hitter and the best pitcher in the game beyond 2014, as well as many of the other key parts of the team, such as Austin Jackson, Alex Avila, and Doug Fister, they are going to need to find some cheap long term solutions to fill out the rest of the lineup starting around 2014 or 2015, and they should look to deal Max Scherzer and Rick Porcello to accomplish it. Here is how it breaks down. 

First, lets start with the big two, Miguel Cabrera and Justin Verlander. Let's assume the Tigers will offer each an extension going into the final year of their contract. Recent comments from Justin indicate he wants to remain a Tiger for life. To do this, it will likely require an extension in the range of 8 years and $205 million. For the sake of this analysis, I'll assume the contract is fairly evenly distributed, but slightly front loaded. That works out to a tad over $25 million per year. Cabrera will likely require a deal equal to or above what Albert Pujols received, I'll say around 10 years and $264 million. I'm going to front load this deal, starting at 2 years of $30M in 2015 and dropping $1 million each year after. The Tigers would be wise to do this as well. To make this all work, it will require some creativity from the Tigers in order to stay competitive beyond 2014 in regards to the rest of the roster. 

In addition to those two, Austin Jackson, Alex Avila, and Doug Fister all would become free agents in 2016. Lets say the Tigers would want to keep all three. First the easy two. Doug Fister can probably look to get a deal very similar to what Anibal Sanchez just received, 5 years and $75 million. Avila is harder to project as what he could earn will depend on how he performs in the next year or two. If he hits like he did in 2011, he could easily get a deal similar to the deal Miguel Montero just received, 6 years/ $65.9 million.  If he hits closer to what he did in 2012, he likely will only get a 2 or 3 year deal in the $15-$21 million range. I'll choose the former for this example and say he gets the 6/$66MM deal. Now that brings us to Austin Jackson.

Jackson is a Scott Boras client. He won't come cheap, and the Tigers would have to lock him up soon (start of 2014) if they hope to avoid free agency. To do that, I'm thinking he will require a deal like the one Adam Jones signed, 7 years/ $91.65 million. But, with Boras as his agent, and a lack 5.0 WAR center fielders in the game, outside of LA, he could easily get more than that (think Jayson Werth here), or he might be headed to free agency. I'll go with slightly more than the Jones estimate for this analysis, 7yrs/$93M.

This means the key members of the team who will be under control through 2016 are:
Justin Verlander
Doug Fister
Anibal Sanchez
Drew Smyly

Bruce Rondon
Al Albuqureque
Brayan Villarreal

Miguel Cabrera
Prince Fielder
Austin Jackson
Alex Avila
Andy Dirks

For the analysis, I am figuring that the players who have received extensions in the above scenarios received contracts structured closely to the the actual player contracts I compered them to. Players currently on the roster but still under team control beyond 2016, receive arbitration raises modeled after current raises given to similar players over the past few years.

I'm going to assume the Tigers keep Nick Castellanos and Avsail Garcia and they become our eventual everyday 3B and RF respectively around 2015 or so. The logic here is that when Torii Hunter and Victor Martinez depart after 2014, Garcia takes over in RF, Castellanos takes 3B, Cabrera moves to 1B, and shares turns there with Prince at DH.

This obviously leaves some holes on the roster and some guys out of the future picture, namely Max Scherzer, Rick Porcello, Phil Coke, and Brennan Boesch. Everyone else is either a guy still under control until 2017 or beyond, or a prospect that hasn't arrived, or been acquired yet. The bullpen can, for the most part, be filled out by 3 or 4 really good guys, and either a vet signed for a few million each year, or some up and coming prospects. Same with the bench. This leaves 3 key holes. Second base, shortstop, and a 5th starter. 

The Tigers will need to find a way to either internally develop, or deal Scherzer, Porcello, Coke and Boesch for top prospects at shortstop, second base, and starting pitching, who are nearly major league ready. I think that it should be easy to acquire at least two of these needs though trades, and maybe take a chance on the third either by getting a more marginal prospect, or drafting a well developed player and hoping they move quickly. If they cannot accomplish either of these, they will have to look to fill the voids with cheap stop-gap veterans, until they do, which will of course, cost more to bring in.

So, now for the projected payroll totals.

2013 - $151,220,000
2014 - $142,110,000
2015 - $136,450,000 
2016 - $157,940,000
2017 - $170,975,000

A link to the full spreadsheet containing all the values can be found here:

As can be seen, initially, things aren't so bad, and there is room to bring in solutions on short contracts in 2014 and 2015 while waiting for talent to develop. The Tigers may choose to just resign Omar Infante and Jhonny Peralta to two more years, and bring in a veteran 5th starter, or use whomever is hot in the minors that year and wait on the future solution up the middle and in the rotation. But by 2016, that talent MUST be here, or things will get ugly fast, as all the prospects and younger people currently on the roster start to go through arbitration, and key parts will have to be shed to balance the budget. 

Another thing to consider in all of this is that by 2017, the Tigers will be near the end of their TV deal with FOX Sports, and will be looking to renegotiate  Judging by current rates, they stand to at least double their current revenue. That will push sustainable payroll up to around $190 million, easily covering expenses. 

But, as one can never anticipate with the possibility of new owner ship, is just how much and owner is willing to contribute from his own paycheck. Should the ownership of the team change over this time, the team may see payroll be cut, drastically.

What is clear though, there isn't much room to keep everyone AND Scherzer or Rick. And certifiably  baring a huge boot to payroll, add an outside superstar. Not without sacrificing Cabrera and/or Verlander, or another key piece.

Tigers TV revenue and payroll sustainability

In this edition of Eye on the Tigers, I want to take a look at the projected revenue increase the Tigers are reported to be in line for.

The Tigers are projected to get a hefty increase in TV revenue that can sustain this increase in  payroll and also be used to extend some of their superstars for a long time. But how much is it set to increase, and when? To answer that, let’s take an in depth look at what we are dealing with.

From the figures listed in the above article, the Tigers currently bring in about $64 million in TV revenue. $40 million from FOX Sports Detroit, and $24 million from a shared deal from TBS, FOX, and ESPN for all of MLB. With the new shared deal, they will gain about $26 million in 2014, pushing TV revenue up to about $90 million.

In addition to that, it been reported that the Tigers can renegotiate their current deal with FSD at the halfway point of the contract, which would be this year as it was signed in 2008 for 10 years. The Tigers currently make $40 million per year from this deal but it is speculated that they could see that figure double based on the size of other recently negotiated contracts. It should be noted though that FSD has refuted the Forbes article about the Tigers being able to renegotiate as inaccurate.

So, how much payroll could the Tigers sustain?

Well according to Forbes (from Crain):

"The Tigers had $8.2 million in operating income last season on revenue of $217 million, Forbes.com estimated this year. That was after three straight seasons of operating losses."

That means the Tigers cost $208.8 million last year to operate.

In 2011 the Tigers payroll was approximately $110,935,181.

I have a feeling I may be overestimating by a million or so as I filled in the salary amounts for players whose totals weren't listed with the following method. $200k for call-ups, regardless of actual time up in Detroit, and half of the 2011 salary listed on Baseball-Reference for players acquired through trade.

Moving on though...if the cost to operate the Tigers in 2011 was $208.8 million and they had about $111 million in payroll to players, that means it cost $97.8 million in overhead to pay for the stadium operation, travel, workers salaries, coaches, taxes, ect...

Now lets break down the revenue. The Tigers made $217 in revenue. If they were getting $64 million in TV deals, that means they made $153 million on tickets, concessions, merchandise, and selling ads in the stadium. With 2,642,045 fans through the gates in 2011, they made roughly $57.91 per head (Mr Illitch thanks you very much).

Now to begin the 2012 and beyond calculations.

To keep things simple, we'll assume they make the $57.91 per head in 2012 and to 2014 (though they probably will make more as ticket prices and other prices go up over the next year or so). They sold 3,028,033 tickets last year, so that gives them an approximate income of $175,352,444 in tickets and concessions and merchandise. Combine that with the $64 million they get in TV revenue, the Tigers likely made more than $239.35 million in 2012.

2012 payroll was a little over $138 million, so combining that with the $97.8 million in overhead, that means the Tigers cost to operate in 2012 was roughly $235.8 million.

$235.8 million to operate.

$239.35 million in revenue.

They made at least $3.55 million, and likely several million more when you count in the profits from the playoffs.

I will revisit this in March when Forbes comes out with their estimates on the value of the Tigers based on the 2012 calendar year.

Now how about 2013...

Their payroll currently stands at $143 million. That would give them a total cost to operate of $240 million this year. That is probably very close to the amount they made last year in revenue.

Knowing that there is a large margin for error, I'm going to say that what their payroll is right now is probably the maximum sustainable level for their current TV and operating deals (i.e they operate with minimal gain/loss).

So, what about the new TV deals?

In 2014, they will gain $26.5 million from the shared TV deals. Most of that will (hopefully) go towards extending Miguel Cabrera and Justin Verlander as well as extending some other key Tigers like Austin Jackson, Max Scherzer, and Doug Fister. They will have some room to work beyond that after Torii Hunter and Victor Martinez come off the books ($25 million total)

Anything beyond that will have to come from and increase with FSD. If they renegotiate this year and get a modest $25 million, they could have a sustainable 2014 payroll of $194 million (assuming the increases in ticket prices at least match the increases in operating costs, and they stay around 3 million fans per year).

They will be just over the luxury tax threshold in 2014, which would have to be factored in if they exceed it.

So there you go. The Tigers should be operating close to break even next year, and depending on if they negotiate a new deal with FSD, they could easily make Verlander and Cabrera Tigers for life and still push payroll even higher.

2013 Payroll: What it is and what it could be.

Now that the off-season is underway, I would like to take a look at some payroll scenarios for the Tigers in 2013.

Based on projected salary values and arbitration projections from Baseball Reference and MLBTraderumors, here is how the Tigers 2013 roster looks as it stands right now, if they go with these 25 guys out of spring training.

Player	2013 Salary
Prince Fielder	$23,000,000
Miguel Cabrera	$21,000,000
Justin Verlander	$20,000,000
Victor Martinez	$13,000,000
Torii Hunter	$13,000,000
Jhonny Peralta	$6,000,000
Joaquin Benoit	$5,500,000
Omar Infante	$4,000,000
Octavio Dotel	$3,500,000
Ramon Santiago	$2,100,000
Max Scherzer	$7,500,000
Rick Porcello	$4,700,000
Phil Coke	$1,700,000
Alex Avila	$2,500,000
Doug Fister	$3,800,000
Brennan Boesch	$2,100,000
Austin Jackson	$3,100,000
Al Alburquerque	$510,000
Daniel Schlereth	$510,000
Andy Dirks	$485,000
Brayan Villarreal	$485,000
Drew Smyly	$485,000
Quintin Berry	$485,000
Bruce Rondon	$480,000
Bryan Holaday	$480,000
Brandon Inge	$500,000* option buyout
Arb Costs - Total	$29,320,000
Pre-Arb	$3,920,000
Arb Costs - 1	$11,500,000
Arb Costs - 2	$13,900,000
Arb Costs - 3
Payroll	$143,420,000
Diff from 2012	($6,920,000) increase

Again, this is how it would look, if we make no further moves.

Now lets have some fun...

By some recent projections of TV contract increases, it has been suggested the Tigers could sustain a payroll of around $160M. So we'll keep that as our upper limit

Say the Tigers sign Anibal Sanchez. I think the likely result would be that Rick Porcello gets traded, instead of Smyly going to the bullpen or back to Toledo.

By recent rumors, Sanchez is asking for 6 yrs/$ 90M. So, at $15M per season, minus Porcello's expected arbitration salary, total payroll would increase by $10.2M to $155M.

That leaves $5M to make more moves to bring in a LF to platoon with Dirks. But WAIT, there's MORE!

Say they do bring in a RH outfielder, who gets the axe from the projected roster I outlined? My guess, its Boesch. He still carries some trade value and is set to make $2.1M So if they dump him, the payroll space increases to $7.1M. That's enough for a substantial upgrade in the OF, or a RH platoon LF and maybe even another bullpen arm.

Or... Stephen Drew. According to recent rumors, the Diamondbacks have interest in Jhonny Peralta, and the Tigers have interest in Stephen Drew. Dombrowski said they would not move Peralta unless they could upgrade at SS. The Tigers might see Drew as such an upgrade. So, Drew at $10M (3yrs/ $30M) minus Peralta ($6M) leaves the total payroll at $159M.

Just some interesting possibilities that could happen in the next few months.