John Sherman opened his wallet and it paid off.
The Royals surprised the baseball world last off-season by spending over $100 million on free agents, among the highest-spending teams in baseball. The additions significantly upgraded the starting pitching to give them one of the best rotations in baseball, and added enough to the roster to improve the team by 30 wins, earning their first playoff appearance since 2015.
What was most surprising about the Royals’ spending is their status as a small market team. Kansas City has a fraction of the people that markets like New York and Los Angeles have, and the Royals have had to settle with a local television deal that pays them much less than larger markets (and now has an uncertain future). Despite that, ownership splurged in free agency to improve one of the worst teams in baseball.
Travis Sawchik at The Score was curious about which owners are most generous when it comes to reinvesting revenues into winning on the field. In an article this week, he examined 2024 player payrolls compared to 2023 team revenues (the most recent complete year) to determine which owners were generous, and which were the most Scrooge-like.
The most generous owner in baseball? It’s Steve Cohen of the Mets, who fielded a team with a $450 million payroll to get his beloved team into the playoffs.
Mets owner Steve Cohen’s 2024 payroll bill is $9.2 million greater than the team’s most recent full-year revenues. The Mets are willing to spend at a deficit like no other club. Cohen is the anti-Scrooge.
Following behind them are the Dodgers, who are on the verge of winning their second title in five seasons. The Diamondbacks and Blue Jays are the next two big spenders – Arizona won the pennant in 2023, but the Blue Jays haven’t had post-season success despite developing a core of young hitters.
Sitting in fifth for most-generous-spending teams is your Kansas City Royals. According to Sawchik, the Royals took in $276 million and spent a total of $162 million, or 59 percent of total revenues. This doesn’t even factor in the mega-deal handed out to Bobby Witt Jr. that will keep him in Kansas City through at least 2030, since Witt only made $2 million this season.
Which team was the stingiest? The Rays spent just $89 million on players, or 32 percent of revenues, followed by the A’s, who are now relocating to Sacramento. The Tigers were the third-stingiest, although they were undergoing a rebuild and were better than they expected, making a late run at the playoffs.
Five of the top ten “generous” clubs made the playoffs – the Diamondbacks missed by just one win. Just two of the ten most “Scrooge-like” teams even had a winning record – the Tigers and Orioles.
Some may question how the Royals are able to spend so much of their revenues, but a better question may be why aren’t more owners willing to spend? Other fanbases of perennial winners like the Red Sox and Cardinals looked on at what the Royals did with envy. Sawchik’s analysis shows that many teams are leaving money in ownership’s pockets.
The MLB average for player payroll, including the luxury tax, stood at $203 million, according to Spotrac. The average gap between last year’s revenues and this year’s payrolls was $191 million.
Without knowing the associated costs of running a baseball team – debt payments, stadium costs, and other employee expenses – this still suggests that many owners could spend more to be competitive. It also shows how the beefed-up luxury tax is a drag on large-market teams’ spending.
That last point is a reason why teams like the Yankees don’t fare better in this index. Although they do spend a lot, the risk of incurring penalties like draft pick forfeiture is inhibiting them from spending up to their massive revenues.
But in addition to winning, there are other more tangible benefits to spending. According to Maury Brown at Forbes, teams that win net better sponsorship deals, bringing in even more money to the club.
In a clear indicator that clubs that invest in winning and reach the postseason reap rewards, teams that miss the postseason for three consecutive season see one-third the number of sponsorship growth. That three year gap is important as most sponsor deals are of the multi-year variety. So, while a team may miss the playoffs the year after making them, many of the deals from the prior season continue to garner success. With this data, it’s clear that successful clubs that invest in winning reap the long term rewards.
It remains to be seen whether Royals spending last off-season will be a sustainable approach they copy again this off-season, or if it was a one-time splurge to try to win over voters in a public vote for a new downtown ballpark. Hopefully seeing the ballpark fill up with loud fans in October, combined with greater season ticket sales and sponsorship deals next year are enough to convince owner John Sherman to continue spending on the team.