MLB Offseason Spending: A Tale of Two Major Leagues
The 2022 Major League Baseball (MLB) offseason has been ultra-competitive and exciting for fans to follow along. The New York Mets are currently leading the entirety of Major League Baseball in offseason spending and player acquisitions after signing nine free agents for a contract total of $806 million (pending full confirmation of Carlos Correa’s deal). Two notable contracts for the Mets are those of Max Scherzer and Justin Verlander, who are the co-highest paid players per year in the MLB as of 2023. Their combined contracts alone account for approximately $86.7 million of the Mets’ salary expenses for 2023.
Meanwhile, the Mets’ New York neighbor, the Yankees, reportedly have spent $584 million so far on the acquisition of just four free agents, one of whom is Aaron Judge. Based on this data, both the Yankees and Mets are expected to be among the list of teams paying the MLB luxury tax once again next season. Clubs that exceed the predetermined acceptable payroll threshold are subject to the “luxury tax” -- an additional expense incurred on each dollar above the threshold by the organization as punishment for carrying a payroll above the permitted amount. The 2023 luxury tax threshold according to the current Collective Bargaining Agreement (CBA) is $233 million.
Another top spender garnering off-season attention is the Philadelphia Phillies. After major spending last season by the World Series runner-up, the club has spent $388 million on the acquisition of three free agents thus far, one most notably being Trea Turner who agreed to an 11-year $300 million contract ($27.2 million annually). Hoping to continue to have postseason success this upcoming season, Philadelphia is among the top spenders so far this offseason and Turner’s contract is one of the largest contracts in MLB history. Interestingly, each of the high-spending teams mentioned (Mets, Yankees, and Phillies) were also among the record-tying six teams paying the luxury tax during the 2022 season.
While there are a few high spenders, there are also a few stand-out low spenders, one being the Pittsburgh Pirates. The Pirates have spent only $17.3 million in acquisitions of four free agents so far this off season with no announced plans for any further acquisitions. The Cincinnati Reds and Seattle Mariners are in the same spending category as the Pirates. All three teams were well below the luxury tax threshold for the 2022 season, and importantly, were not a major contender for the 2022 World Series playoffs.
The astronomic organizational spending exhibited this offseason is unprecedented for the MLB and the world of sports in many ways. However, the massive spending sprees garnered by the wealthiest organizations in the league illuminates a trend many have been reluctant to recognize in past years – there are two sectors within the MLB. There are the high-spending, high capital teams, and the lower-spending teams who are unwilling to spend over the amount deemed reasonable by the MLB in fear of paying the luxury tax. Seemingly as a result of previous exuberant capital expenditures, most of the high spending organizations capturing headlines this offseason also performed exceptionally well during the 2022 season. These high spending teams were dominant forces in the 2022 playoffs, and not-so-coincidentally were also among the organizations who paid the luxury tax in 2022.
The pattern observed by many MLB fans is that the teams who can afford to shell out several long-term multimillion-dollar contracts are the teams that can afford and acquire the most in-demand talent. Therefore, the top spenders are expected to perform at the highest level. This new MLB model arguably harms the competitive values and overall unpredictability of the sport of baseball. Ironically, these values were exemplified by the Philadelphia Phillies, the “underdog” of the postseason this past year, despite being one of the teams on the list to pay the luxury tax in 2022. To preserve competition amongst the 30 MLB teams, the inequity in capital and spending allowances between organizations in the league needs to be addressed and rectified in some way – whether it is through an administrative move on behalf of the MLB or an updated clause in the next collective bargaining agreement.
Loss of competitive balance within the MLB is leading to potentially lower viewership throughout the league, which could have future adverse effects on individual team capital and league profits should the downward trend continue. For example, executives are concerned that the past three World Series Championships have had the lowest viewership in postseason history. Should the spending habits of the high-capital organizations further lend to the building of “powerhouse” franchises, there is an argument that the MLB and some of the clubs could lose millions of dollars due to disinterest in the sport and overall low viewership.
This potential decline could result in the lower-capital teams, who cannot shell out millions above the luxury tax threshold to acquire needed depth on their rosters (or simply refuse to) to suffer even more, further hindering the overall “fairness" of the game. Something needs to be done to restore some fairness to the sport of baseball. Within the eyes of many American sports fans, the question is whether a legal remedy or hard cap on spending independent of the luxury tax could be the answer needed to foster fair competition and bridge the gap between the two separate “worlds” within Major League Baseball.
 Matt Musico. Yankees, Mets are still not done spending this offseason. (21 December 2022) https://elitesportsny.com/2022/12/21/yankees-mets-are-still-not-done-spending-this-offseason/  Id.  Id.  Id.  MLB. Competitive Balance Tax. https://www.mlb.com/glossary/transactions/competitive-balance-tax  Id.  Id.  Tim Kelly. Revealed: Full contract details/incentives for Trea Turner. (9 December 2022) https://www.philliesnation.com/2022/12/revealed-full-contract-details-incentives-for-trea-turner/  Id.  Joel Sherman. Mets are the premier spenders atop MLB’s two-tier reality. (19 December 2022) https://nypost.com/2022/12/19/mets-are-the-premier-spenders-atop-mlbs-two-tier-reality/  Dorney supra.  Sherman supra.  Josh Sim. MLB World Series scores second-lowest TV ratings ever. (9 November 2022) https://www.sportspromedia.com/news/mlb-world-series-2022-astros-phillies-tv-ratings-fox/?zephr_sso_ott=GXHzQP#:~:text=The%202022%20Major%20League%20Baseball,than%20a%20college%20football%20game.  Id.