Mailbag: Trade Deadline, Waiver Wire, IFA Money, Clarke Schmidt, Astros Payroll

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Happy Friday, everyone. The Yankees are set to take on Boston for a 4-game set tonight, and you know what? I’m really excited for it. I think even splitting this series all but finishes Boston. I am here for that. Enough with the Red Sox, please. It’s always great when they lose but even better when it’s the Yankees doing it. Let’s just hope our Bombers bring the heat.

It will also be nice to have real games to focus on again, as the last few days have been fairly exhausting. The discourse! Folks, sometimes it gets old. But hopefully not too old: as you can imagine, this week’s mailbag is defined by deadline questions. For good reason! So all 5 chosen questions today focus on the deadline, the new rules, or the fallout from the deadline.

Mark Asks: The Yankees passed on Keuchel, who they could have had for nothing but money (prorated at that, and only through the end of the season) because they wanted to get an impact starter in a trade. But then they refused to pay the price in prospects for an impact starter. The latter is a valid strategy — and I support keeping prospects and bringing in a SP for dollars alone — but you can’t have it both ways. Either you spend the money, or spend the prospects. Instead, the Yanks did neither and let the Astros blow right by them in terms of AL championship odds. I guess I need to ask a question, so here it is: How mad should I be?

It is certainly frustrating, and I think I’ve said everything I can say about their process already on this here website. I do think it’s really annoying, and I spent the 4-5 pm hour on Wednesday extremely irritated. I won’t deny it. It’s clearly true of many Yankee fans, frankly. And for good reason: we all just want the team to put itself in the best position to win.

But I also think that some of the reaction (including from yours truly) was a bit hyperbolic. The Yankees are extremely good and will likely win the division for the first time since 2012. That means no Wild Card game for once. Rejoice! And remember, once you get into the playoffs, literally anything can happen. A dominant rotation like Houston seems impossible to beat, but we know from watching the 2014 Tigers, the Braves throughout the 1990s, and the 2010s Phillies that it really is just a crapshoot. Anything can happen.

I remind myself of this constantly these days. It’s not worth it. The 2019 Yankees are a fun ride, and sports are supposed to be entertaining. We have it really freaking easy as Yankee fans. The last time they were under .500 for a full season was 1992. More than a quarter century of success, and that’s not counting the multiple titles, pennants, division championships, playoff runs, and individual performances that have made this fandom so rewarding. We are extremely spoiled. Can things be better? Of course. Obviously. But as I said, the 2019 Yanks are a fun ride. Just enjoy going on it with them and hope we all get to celebrate in late October.

Matt Asks: What’s the DFA process look like now that there’s no August trade deadline?

This is the first year of the new trade deadline, and it does impact the waiver wire in August. Players can still be placed on waivers/DFA’d, but the process is a bit different. Any team that claims a player on the waiver wire is responsible for a straight waiver claim. In other words, they take on the full remaining salary for that player and they cannot receive financial incentive or send another player to the original team. That’s it. We might see a few of these happen across the league, but I highly doubt they’ll impact the Yankees, who are so far down the waiver wire as to essentially make this irrelevant for their planning.

Paul Asks: Did they at least trade for international money to sign the folks they have a deal with?

No, the Yankees did not trade for IFA money, which surprised me…until I learned that the deadline for that is actually a bit softer. Teams, believe it or not, can still trade players on MiLB contracts. News to me! What does that mean? Essentially, it means that a team could swap a prospect for IFA pool space or something like that. So it’s true that the Yankees used most of their $5.4m allocation on phenom Jasson Dominguez, but there’s still a change to open up more space.

For what it’s worth, it’s really not worth criticizing the Yankees for this–it’s just an interesting observation. They know what they’re doing. If they need more IFA pool space, they’ll get it. You can take that to the bank.

Mark Asks: Why aren’t we talking more about Clarke Schmidt as a possible future rotation piece and/or trade chip? First round pick who would have been top 5 (probably, MLB draft is weird but still) had he not gotten hurt pre-draft.  He’s got a sub 3 FIP, and is striking out 9.5 per 9 at high A. One would think that means he’ll get promoted to AA in the next few weeks. If he continues to pitch well at AA he could be in the major league rotation by next year. Is he just having his shine stolen by Garcia? Does he have flaws we haven’t discussed?

Funny you mention Clarke Schmidt, because as it happens, people were talking about Clarke Schmidt. And by people, I mean Brian Cashman and Arizona Diamondbacks GM Mike Hazen. According to Jon Heyman, the Diamondbacks requested Schmidt as a part of a package that would have bene headlined by Clint Frazier for Robbie Ray. The Yankees, quite obviously, did not find that deal worth it.

Schmidt is having a good year in the minors, to be sure, but there are still serious question marks surrounding him. He has been plagued by injury his whole career. I mean, he has only thrown 85 professional innings . So, yeah. He’s someone to keep an eye on for sure. The Yankees loved him enough to draft him despite the nasty injury, so definitely keep following him. But we will all need to see more before having a real, honest evaluation.

Jose Asks: In light of the oh-so-relevantly-disappointing trade deadline and constant narrative about the Yankees staying under the second luxury tax tier all while posting historic revenues, I can’t help but wonder about the Astros financial situation. With their recent acquisition of Greinke, Sanchez, and Biagini (not to mention Verlander 2 years ago, Cole, and even signing Michael Brantley this past offseason) I’m curious of what their payroll currently sits at? Are they in a luxury tax tier? If so, which one? And what percentage of their revenue goes to payroll?

Per Spotrac, the Astros now have a payroll totaling $168,256,950, which falls $22,029,310 short of the first luxury tax threshold ($206 million). The Greinke contract is a big one–his annual salary is $32 million–but Houston did get relief in the move and owes Greinke only $53 million between now and the end of his contract in 2021. I don’t think this should take away from the fact that the Astros added a huge contract to their roster, but it’s worth keeping in mind: they have more so-called “flexibility” under the soft cap. They used it. Good for them.

I understand why Yankee fans are frustrated, though, because if you peel back the layers a bit you see that no two franchises are the same. It’s apples to oranges. Percentage of revenue spent on payroll is an imprecise and yet still useful (in my opinion) metric to judge teams’ willingness to spend, but it’s an imprecise science. We have access to rough figures estimating 2018 revenue for the clubs, but obviously not yet for 2019. So if you excuse some back-of-the-envelope math and understand that there are assumptions underpinning all of this, here is how the Astros payroll as a percentage of their revenue compares to the Yankees in 2019 alone:

So, yeah. Again, this is an imprecise science. It’s likely that both teams percentage figures are actually a bit lower than what I listed there. That’s because the trend is that teams are generating more revenue overall and it stands to reason that the two best teams in the AL are among those. It is absolutely fair to say that this is frustrating.

Now, I harp on this constantly, so I do want to say that the Yankees do have a lot of debt and bonds owed to the City of New York. That’s how the team financed the construction of Yankee Stadium. Hal is absolutely, 100% correct when he says so. It is an empirical fact that they took out $1.3 billion to pay for Yankee Stadium. Moreover, in 2017, Crain’s New York Business reported that the Yankees pay $92 million a year to service that debt (and also that they failed to refinance their debt as they’d hoped). That is a lot of money!

As for whether or not the team spends enough money on payroll, well, it’s just another thing to keep in mind. But remember, payroll hasn’t changed in real terms in 15 years. That’s worth keeping in mind, too.


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  1. Bobby,

    The $668 million is NET Revenue – after the Bond interest and revenue sharing.

    It also doesn’t include the $50 million one time gain on the sale of BAM.

    I wouldn’t be surprised if the Yanks had a profit before depreciation/amortization of over $300 million last year.

    Yankees’ 2018 Revenue Build

    Local Revenue $ 712,000,000
    Estimated Gate $ 284,000,000
    YES Rights $ 127,950,599
    Other Local $ 300,049,401
    Debt Service (PILOTs) $ -94,000,000
    Revenue Sharing $ -42,000,000
    Net Local Revenue $ 576,000,000
    Central Revenue $ 92,000,000
    National TV $ 50,000,000
    Other Central Revenue $ 42,000,000
    Net Total Revenue $ 668,000,000

    Here is a link to how the $668 million in revenue was calculated

    • Bobby

      Oh wow this is excellent and probably worthy of a more detailed analysis from me, then. Really fascinating stuff. Thank you so much for sharing.

      • You bet Bobby.

        My guess in re why Forbes reports such a small profit for these teams is many of the teams hit these financials with a huge Management Fee or some sort of paper expense that has the effect of transferring the bulk of the profits to another entity.

        As long as the partners pay taxes on their proportionate share, it doesn’t matter what entity shows the income.

        Some teams definitely have debt and the associated costs though. Can’t see how the Yanks are one of them.

        The author of the link posits that maybe the operating income was so low because they are paying interest on another leveraged investment/subsidiary, but I can’t think what that would be. The 20% of YES (didn’t repurchase until 2019)? Doubtful. The concessions partnership with the Cowboys? Again, doubtful.

        My total wild guess is that all the other expenses of the Yanks are probably not double the payroll. Maybe they are, but I can’t see how. With the exception of Tampa, all the other minor league franchises are owned and operated by others.

        The draft bonuses, minor league salaries, the international academies, the support staff, stadium and network expenses – another $200 mil would seem to cover that. Even make it $300 mil bringing total expenses to $500 million, that leaves operating income of $168 plus a $50 mil below the line gain for total profit of $218 mil for 2018.

        Not bad for one year’s earnings. Still couldn’t have signed Corbin, DJLM and Ottavino though…?

    • Wire Fan

      Also does this include non baseball stadium revenue? Soccer, pinstripe bowl, etc. While not a huge amount this is found revenue, and is obviously not part of revenue sharing either. Hard to imagine they are doing those events if they aren’t turning a profit on them. Also not sure if Forbes includes stuff like the Ellsbury insurance (which is reportedly ~75%, or another 15-16M). I think the Tex insurance a few years back was public domain because the WBC picked it up.

      Also the YES profits are separate. The Yankees didn’t buy a bunch of it back because they think they will lose money on it. Also separate is any non-baseball revenue that is part of the YES global entity.

      Forbes is doing the best they can with the info publicly available, but as you mention, you have to think real revenue is much higher (and thus operating income).

      • Yeah Wire Fan, everything you said.

        The Stadium was built because the Yanks could make a ton more money – it’s a year round shopping mall and event house that the Yankee partnership leases from the taxpayers.

        Hal himself never said Forbes Revenue estimates were high or inaccurate. He complained about his “expenses” and he looked incredibly uncomfortable and annoyed (though he always looks that way to me).

        The only guy who very smugly scoffed at the Forbes Revenue numbers was Ken Davidoff. He’s got a journalism degree and he never offered reasons why or a better set of numbers so I don’t know what to make of his opinion. His dad I believe is or was a fx broker and his wife is a securities and tax attorney, so maybe he has some financial insight we aren’t aware of.

        I wouldn’t be surprised if we could see all the affiliated businesses (the entire Yankee financial empire) that the numbers would be staggering.

        MLB has done an incredible job at finding new revenue streams and curtailing expenses…along with a constant push towards expanding its market and reach.

        I’ll leave you with one more set of numbers and another great link.

        In 2003, Net Revenue was $238 million and payroll was $184 million.

        • Quick correction, the Yanks don’t pay a penny to NYC for the stadium. They pay the debt service only (principal and interest on the loan). NYC floated the loan and they get nothing from the Yanks for use of the Stadium.

          See the article linked above.

        • Coolerking101

          I’ve never seen any of these links before. Thank you for posting them.

          • You bet.

            They were not easy to find. I knew what I was looking for and I searched for many hours to find these things

            So many journalists out there and not one mainstream, experienced guy or gal has ever written an in depth story on this stuff that would make it interesting and intelligible to the average fan.

            A lot of fans really don’t care, many are envious of the players. I also think a msm guy would be afraid of losing access and privileges if they really lifted the curtain on this. That’s all jmo.

            The thing I find most amusing is MLB never had to disclose any of this info. I guess they did because it’s part of a marketing effort to show how popular they are and it helps with advertising, licensing and other deals.

  2. Jim

    This is a good mailbag and will hopefully help our fanbase with some perspective.

    If the new YS and the 92m payments a year is what has kept this team from signing Scherzer, Corbin, Machado, or Bryce…then I want a time machine to convince George to never build NYS.

    I do think Boone and Cash were unfairly treated about the deadline. It’s all out of Boone’s hands, and being positive about his current group of players is much better than the alternative. Whether we as fans like it or not, Cashman has done a really nice job at knowing the difference between which prospects are suspect, and the guys we should keep. He’s the guy that rightfully held onto Sevvy, Judge, Gary, and Gley, but traded Sheffield, Montero, sonny gray package guys. I think Cash still deserves the BOTD given his worst trade arguably is trading tyler clippard for albaladejo before ’09? Maybe melancon for fat elvis?

    All that being said… the man holding the purse strings is likely making it very difficult for Cash to do what us fans (and likely Cash, too) want to do. Corbin was likely axed by Hal, Keuchel too (maybe not directly, but probably indirectly through a clearly strict budget). And if the yankees don’t win it all, I hope Hal gets it from every direction – including players, front office, coaches, and the fans (he will hear it from fans even if we win the WS lololol)

    I think sticking with Bobby’s stoic theme, there is nothing we can do about it now, so might as well enjoy this team. The pitching isn’t nearly as bad as it showed in Minny or Bos, nor is it nearly as good as it showed earlier in the year. Probably somewhere in the middle. But are guys can bash. We’ll have a healthy Gary and G this month (hopefully), Judge will improve as the oblique starts to heal up even more (even though he is already perpetually the most underrated dude on the team), Sevvy and Dellin will bolster the pitching depth (even if that’s not what we wanted to hear). I’m not sold on Loasigia being any help, but might be a useful up and down arm with cortes. The Ray’s didn’t go out and get a 2015 David Price or Tulo. The division is ours. HFA could even be ours too if we keep the pedal to the metal and bury teams.

  3. ΣδυG 。・ 』

    Bobby, i admire the positivity you spread even while acknowledging what’s wrong. We as sports fans (or Baseball Fans) tend to forget we play 162 games and get emotional and overreact over every game. Part of the game and joy of being a fan.

    But you’ve done a wonderful job in spreading positivity regardless of the team’s run, usually when blogs/sites get all negative and let their emotions think irrationally the website becomes toxic, and so far you’ve done a wonderful job here. Keep it up, posts like these in this blog is why we’re here!

  4. Coolerking101

    Let’s not forget that around 80% of Elsbury’s contract is being reimbursed by insurance….so this year the actual player salary cost is going to be less than what the Yankees paid for player salary a DECADE ago.

    As to that servicing debt crap…let’s not forget, the Yankees didn’t build a new stadium for their health. They did it because they understood it would INCREASE revenue. How much is anyone’s guess, but I think it is more than fair to assume, the Yankees knew when they signed the deal what the annual debt service would be and would NEVER have agreed to it if they believed it would hinder profits.

  5. mikenyc

    While I wanted the Yanks to get another starter, and while I also recognize their path to a championship just got a lot harder because of their lack of improvements ( and the Astros doing their thing), we as fans have to realize that winning the championship isn’t the express goal of the Yankees – its to field a consistent, top-tier team which will be involved in the playoffs annually, which will keep ticket sales and TV revenue high.

    Within all of Cahsman’s and Hal’s messages is this point, and its clear if you listen for it – in a sense, they will not sacrifice tomorrow for a better shot today, because a competitive tomorrow has more value than a better today and a less competitive tomorrow.

    Thus, they set up a strawman argument – because they could literally and figuratively afford to do both – but we as fans have to learn to live with it…there is no “putting chips on the table” anymore….and while most teams are acting just like the Yanks, its just more painful as we as fans understand ( and have experienced ) the difference that makes.

    In truth…the Yanks picked up Tauchman, Maybin etc for a song, and there are likely 10 OF who will not be signed thru next spring training who could be on the roster…Doesn’t everyone agree they could replace Frasier with an Adam Jones-type next year and be in basically the same situation with a Gardner replacement? Of course – so don’t try to sell us that another right-handed outfielder with occasional power and poor plate discipline is a trade-barrier to improve our championship aspirations this year.

    Yet that’s what they have convinced us fans – yes Devi is the new Pedro….Betances will be back…but like Bobby said above, just sit back and enjoy the team because it is a game after all.

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