20 June 2016

The Orioles Have a Lot of Hard Payroll Decisions to Make

At first glance, it would seem like the O’s have a lot of long term flexibility in terms of payroll.  According to Cot’s Contracts, they are at $87M for 2017, $51.5M for 2018 and then all the way down to $30M in 2019.  That, however, is simply the amount of money we know is already committed, as these numbers necessarily do not factor in arbitration raises. In some ways, this is good: Not having a lot of money committed long term should allow for greater flexibility to sign extensions with current players or to go out and get free agents.
The flip side is that much of the team is only under control for two more seasons.  Here’s a list of current players who will not be under team control in 2019 as of today:

Adam Jones
Matt Wieters
Brad Brach
Zach Britton
Mark Trumbo
Yovani Gallardo
Chris Tillman
Hyun-Soo Kim
Dylan Bundy
Ryan Flaherty
JJ Hardy
Oh, and a guy you have maybe heard of.  He’s having a pretty good year.  Young shortstop, used to play third, punched a guy in the face a little while back…
The point here is not to say that the team will look different in 2019, because that’s obviously true for many teams.  The issue is that the entire core of the current team will not be guaranteed to be in Baltimore in just three seasons.  Even in 2018, the only players who are under team control from the above list are Manny Machado, Jones, and Britton.
So, what’s a road map for the team in terms of payroll going forward?  Everything should start and stop with Machado.  He’s the biggest and most important domino and the future of the franchise is largely based on whether the Orioles can retain him.  Let’s say, for the sake of this post, that the O’s can sign Machado to an extension after the 2016 season.  Let’s also say he gets something similar to what Jon Shepard proposed: 10 years, $400M, with an opt out after year 5.  Assuming there is some money deferred, I'd estimate Machado will be around a $35M per year payroll number.
Under this scenario, a Machado extension would raise the total committed payroll in 2017 to $122M, which does not include salaries for Tillman, Britton, Gausman, Brach, Caleb Joseph, or Jonathan Schoop.  Combined, those players made just over $16M in 2016.  That number could easily double in 2017.  If it does, the payroll would then be at a record high of $150M, and that does not include other, smaller arb raises, not to mention possibly re-signing someone like Trumbo, Wieters, Alvarez, etc.  If the O’s need to make moves in free agency, just inking a big Machado extension will easily push the club into the top 6 or 7 payrolls in baseball (potentially even top 5) with little to no improvement in terms of actual players. Perhaps Machado takes a reduced salary for the first year or two which will be made up in subsequent seasons, but even so, it is very difficult to imagine the O’s not running a $150M+ payroll in 2017 that may not even include their current starting catcher, RF, and DH.  

Things calm down a bit in 2018.  Ubaldo Jimenez’s deal will be off the books, as will Hardy’s and Gallardo’s (though it will require $4M total to buy them out, which is the most likely outcome).  That represents a savings of over $35M.  The problem there is that Tillman will be a free agent and will probably command a $15-20M commitment per season.  If he leaves in free agency, the rotation could be something like Gausman and... well, the rest is unclear.  It also means that the team would likely need a third baseman, a left fielder, a right fielder, and possibly a catcher.  That’s a lot of holes when you consider that, even with some big contracts coming off the books, the payroll will be around $100M (with the theoretical Machado extension) without any of those positions being filled.  This is also not taking into account potential extensions for guys like Gausman, Schoop, Bundy, etc.  

There are, of course, players that could plug these holes that are currently in the system. By 2018, Chance Sisco should be in line to make his debut. Perhaps Trey Mancini moves to the outfield or becomes a DH. DJ Stewart has had a slow start to his professional career, but as a former first round pick there's a chance he is ready to contribute in two seasons. Jomar Reyes will still only be 21 years old, but he is consistently ranked among the team's top prospects and could be in a position to move up to the big club. Pitchers like Cody Sedlock, Chris Lee, Tanner Scott, Hunter Harvey, and David Hess could be knocking on the door for the rotation as well. All of these players, however, come with the inherent risk and unpredictability of being prospects and they will almost certainly not all pan out. The O's will need to rely on their farm system to fill some of the holes on the big league roster for sure, but they will also need to go out of the organization as well.
So, what’s the solution?  It’s honestly hard to see one with the current roster and payroll.  A Machado extension after 2016 (which seems like the most likely time for it to occur, if ever) will require a huge payroll jump in both the short and medium term if the Orioles want to keep the team together.  For a team that, prior to 2016, has traditionally been closer to the middle than the top of payroll rankings this would require a pretty significant shift in philosophy.  Depending on what happens the rest of this season, perhaps they simply throw caution to the wind and go all out for 2017 but the potential repercussions of that kind of approach could be drastic.

The alternative would be to sign Machado and simultaneously rebuild by trading guys like Britton, Tillman, Gallardo, O’Day, and maybe even Adam Jones to get younger and cheaper, and in so doing build around Machado, Davis and a new crop of prospects to go along with what they currently have in the minors.
Of course, the third and most treacherous path (one that many O’s fans don’t want to contemplate) is to trade Machado for a huge haul in prospects.  To me, though, that would only be viable if they also dealt the rest of their core players as well and went into a total rebuild.  Additionally, the longer they wait the less trade value Machado will have.  Teams will certainly line up to try and trade for Machado, but the price tag would necessarily go down the closer he is to free agency and one of the biggest contracts in history.  Essentially, the O’s need to make the decision on Machado by the end of this season in order to put a plan in place to either go for broke or to rebuild and re-tool.
To me, the most viable path forward for the team to remain competitive long term is to sign Machado and rebuild at the same time.  It seems unrealistic to assume that the O’s will spend $150M+ every year, and trying to keep the current team together will absolutely cost that much and is likely to cost more.  The front office has been surprisingly liberal (at times) regarding payroll issues, so perhaps this analysis is not giving enough credit to the idea that the Orioles will do whatever it takes to win a World Series.  It would not be entirely dissimilar to what the Tigers have done for the past five or so seasons, and with some clever contract structuring it might not have to be a long term disaster.  

In the end, the Orioles are going to have to make some very difficult decisions regarding the roster and payroll in the very near future.  I see this as a feather in the team’s cap.  Without spending on ridiculous free agent contracts they have built a team that has become so good that it is almost too expensive, but their success may be the impetus for pretty drastic roster changes.  Just another reason to win the World Series this year.


GRob78 said...

A good and timely post. The Orioles do have a growing quandary on their hands with contracts. If they don't sign Machado to a huge, long term deal and opt to trade him away...it will be very difficult to keep the growing fan base in Baltimore. But I don't think that is necessarily the biggest issue behind all these contract talks. It could be very possible that a major ownership change occurs between now and 2018/2019. The biggest obstacle to success between 1998-2011 was Angelos. If he is no longer the owner, then things might definitely change, substantially, when talking about these contracts.

I don't see the Orioles offering Gallardo a second year on his deal since they accurately predicted his shoulder problems. Hardy probably gets bought out too, he's a solid defender but they need a bigger bat that isn't injured as much. Tillman might get dealt if the rotation can get stocked through the farm system. What will be interesting is the role Kim and Rickard play and if Christian Walker can make the transition to OF. Adam Jones will likely end his career in Baltimore and should. And if the club doesn't sign Britton to a major contract soon they will have to deal him for a bevy of prospects. He's the best closer in baseball.

I doubt Wieters is back next season. He wants good money and will find some it elsewhere, but not as much as it could've been two years ago. If Ubaldo can't find his stuff by Spring Training, he's probably gone before next season starts. Maybe the Orioles start a rebuild around Manny and Chris with some solid players coming from trades and prospect farming. At this point they need to win everything in the next two seasons to make a case for doing something other than that.

Anonymous said...

There are other winnng teams in MLB that don't have machado on their roster. Just saying

None Listed said...

Don't forget to take into account the change in rights fees once MASN and the Nationals come to some agreement. The O's are contractually required to receive the same fees as the Nationals, so in essence the ongoing court battle between those two billionaire entities should ultimately benefit the O's as well.

Or will it? The additional fund to cover those higher fees have to come from somewhere, and that somewhere is deep in the pockets of Peter Angelos. Will paying the O's higher annual broadcast rights fees somehow result in them actually having a lower payroll?!?

Pip said...

Question: on the one hand, Dan is happy trading away draft picks and a lot money so he can dump the insignificant remaining salaries of Brian Matusz and Ryan Webb, and he released Miguel Gonzalez(and his option) so another insignificant amount could be saved, but then he gave the totally unnecessary Pedro Alvarez five million to come and clog the roster.
Not to mention the overspending on Hunter and-arguably-De Aza, and ignoring Steve Pearce, who is inexpensive and excellent in Tampa this year.
Dan is making foolish money-saving moves with one hand and spending foolishly with the other.
It really seems as if he's going to great lengths to save a paltry amount just so he can waste it somewhere else.

Phil said...

I actually disagree with the premise. I think the O's are legitimately a $150MM team for the foreseeable future. I think Davis' money was specially allocated by Angelos.

Salisbury Dave said...

I think the payroll *could* continue to rise. The national TV contracts are structured so that they'll continuously go up each year by 5-10M, plus MASN will renegotiate their subscriber fees soon.

MASN is tricky but considering his seemingly conservative stance when it comes to payroll I imagine Angelos has kept payroll at a level that wouldn't be harmed by a bad outcome in the court case. A win and it wouldn't surprise me if more money flowed into the team's coffers, though the most likely outcome is things continue to remain the same with the team seeing a 5-10M increase year over year as long as they continue contending.

Chicago Curmudgeon said...

I don't think that trading for prospects is the way to solve the problem. The Orioles appear to have determined that they are not good at drafting and developing talent. They trade away opportunities to feed their farm system in the form of compensation picks and international signing rights. They sign free agents to dump their first round draft picks. I think this shows recognition of what the organization is incapable of doing.

The Orioles don't have the money to use major-league free agency as a path to success, and don't have the scouting and coaching to do it from amateurs. Until those problems are solved it is only rearranging the deck chairs on the Titanic.

Dave Nesbitt said...

I think the O's are dead in 2 years. No way they pay Machado 35M per year. Neither should anyone else.

Cornell Keith said...

Yeah, the O's have built a team that has become expensive, which is a good thing. The important thing to keep in mind is that 150 mill in 2 years, may still put them as a middle of the pack payroll team. While the O's salary structure increases, so will others, so that figure seems rather high now, but may not be as bad in 2 years. They absolutely must sign Machado. That's the path to take. Hope that you can develop pitcher or 2 for the rotation and make smart trades. The trade I'd look at is trading Britton. I hate to even think about it, but he's an expensive luxury. We still have current in house options to close with Brach and O'day, and we could get a nice return on Zack before he becomes a free agent, so moving him might solve one of those OF positions. I think we're OK long term at catcher and they will be cheaper than our current catchers. I think we're in a good position and I like the guys in charge, so whatever direction they go, I think the O's will be fine for the near future.

Ace said...

They key here is the 2018 season when 35m in salary dumps open up. The voids of Hardy, Jimenez, Gallardo will come as a relief. The O's of course don't have to sign Tillman if a top prospect like Hunter Harvey develops in two more years. Schoop and Gauzmen will be available at least through the 2019 and 2020 season respectively with typical arbitration raises due. A core of Machado, Davis, Schoop, Guazmen, Bundy looks very plausible through 2019, with everyone except Davis expected to improve in production.

As is the case with every team in baseball, it all comes back to the DEVELOPMENTAL process. The O's have two more years before their draft picks over the past few years have to start bearing their fruit: Hunter Harvey, Chris Lee, Chance Sisco, Ryan Mountcastle, Tanner Scott, Trey Mancini. These players must be able to contribute by that time. If you can't develop players to step in at some point, that will sink just about ANY franchise. Go O's.

Roger said...

OK, I've been thinking about this some and if you look at some of the obvious moves that the O's are most likely to make then it doesn't look so hard. First, speculate all you want but Machado is staying (until he starts playing like Nick Markakis). Start there. Trumbo, Wieters, Hardy, Flaherty, Jimenez, and Gallardo are all either going or will be going (with, hopefully, Trumbo and Wieters bringing comp picks). Orioles will keep Jones, Tillman, Brach, and Bundy. With regards to Britton, I think the O's would be foolish to trade him or not sign him. He is not a luxury. He is a once in a lifetime talent uniquely matched to his position because he not only throws hard but induces a huge number of ground balls. Until the O's have the best starting rotation in baseball, they will have to rely on a "light's out" bullpen. We'll have to see if Kim keeps going the way he is. If so, he's a keeper - best #2 hitter in baseball. So that leaves holes in RF/DH, SS/3B, C, and SP. I know that there will be an uproar but P. Alvarez can play third at least until Reyes is ready (you can't have the perfect player at every position). Mancini (DH/1B with Davis at 1B/RF) and Cisco (C) fill the other holes. You may need to find one more good hitter - someone like a Jay Bruce type. That leaves, once again, SP as the big problem. Bullpen and bench pieces are easy to find and DD seems to be really good at finding the power hitter reclamation project (Trumbo/Cruz - maybe the next is Bruce?). The SP at that point would have Tillman, Gausman, Bundy. Chris Lee will fix the hole at LH SP and the O's will need to find one more unless Harvey is ready. And, of course, they get to find middle of the road free agents during that time, too, along with continuing to do what they can to develop prospects. Whatever that team costs is what the O's payroll will be. The O's stocked up this year on pitchers with questionable talent or track records who can start or middle relieve (Worley, Wright, Wilson, Despaigne, McFarland, etc...). That's likely to continue. I think the one thing missing is a good, solid LOOGY. GO GET BRAD HAND!!!! Hopefully, someone like Donnie Hart will step up. The roster outlined here is not perfect but it is affordable and competitive.