April 2013

In an interview with Chicago's The McNeil and Spiegel Show earlier this week (hat tip to Bleacher Nation), Cubs president of baseball operations Theo Epstein addressed several pertinent topics. In particular, Epstein sought to answer the question of why the Cubs seem unable to contend while they rebuild.

Epstein's long answer was interesting, even as he largely kept on message about the need to drive new revenue through a renovation of Wrigley Field, new television deals, and the like. He said that, until, the club can generate new revenue, it is placed in an "untenable position": the Cubs are "fighting upstream" against division competitors that get competitive balance draft picks, but are simultaneously unable to increase payroll to keep pace with the top of the division.  

On the question of payroll level, Epstein was seemingly quite revealing. His quote is lengthy, but worth repeating in full (transcription courtesy of Bleacher Nation):

“It’s not a choice. We are not making a fundamental choice to only focus on the future. We’re not withholding dollars from this year’s team. We are spending every dollar that we have on this baseball team. We maxed out our payroll last year and we maxed out our payroll this year. It’s not a choice. It’s not like we’re making a conscious decision to say, ‘Hey, let’s withhold $15-20 million from the 2012 or 2013 payroll because we don’t think we’re quite good enough or it’s not worth it to spend it there. Let’s save it for a rainy day. Or let’s save it so we can get that free agent in 2016.’ The baseball department is spending every dollar that is allocated to baseball operations. Yeah, we’re spending it in the draft and we’re spending it in the minor leagues. There’s only so much you can spend there. We’re also spending every dollar we have available on the Major League payroll."

Of course, read carefully, Epstein's statements only go to the question of whether the Cubs are spending up to the payroll limits the club set. He did not address the core concern that some have raised: i.e., whether management has set a sufficient payroll in the first place. Epstein has previously indicated that revenue would drive payroll growth. But observers like the Chicago Sun-Times' Gordon Wittenmyer have suggested that more aggressive payroll expansion should be economically feasible now, or at least in the immediate future.

Putting that question aside, Epstein seems right in insisting that the Cubs have stuck to a budget — whether or not that budget is justified — over these last two offseasons. The club's 2012 opening day payroll shows $109.3MM. The 2013 opening day payroll, in turn, stood at $106.8MM, after the club extended Starlin Castro, signed international free agent Jorge Soler, and inked Edwin Jackson. Of course, as MLBTR's Tim Dierkes noted in his review of the Cubs' offseason, the team also agreed to several short-term deals with free agents who provided some performance upside. Those deals held out at least some hope that the team could remain in contention and also provided the possibility of turning into trade chips. In sum, while bearing in mind the limits on the amounts that can be spent on draft or international prospects, the team seems to have spent up to its budget on a mix of players that would deliver some reasonable level of present performance while also paying future dividends.

The signing of Jackson, in particular, is telling. While there were plenty of good reasons for the Cubs to sign him, those reasons seem to apply just as well (or better) the year prior. Before 2012, Jackson reportedly turned down a three-year offer for around $30MM from the Pirates to sign with the Nationals on a one-year deal. (Twitter links.) He had reportedly been seeking in the neighborhood of five years at $12MM a year. Meanwhile, the Cubs were, in Dierkes's estimation, modest players in the free agent market. While there were whispers of the team going after big-ticket players like Albert Pujols and Prince Fielder, that did not materialize. And the Cubs were never apparently in on Jackson.

Fast forward to this past offseason. The Cubs not only seriously pursued Anibal Sanchez, but ultimately signed Jackson to a four-year, $52MM deal. What changed? The Cubs were coming off of an abysmal season, and looked no closer to immediate contention despite some nice development from young stars Starlin Castro and Anthony Rizzo. Jackson was now coming off of yet another very Jackson-esque season, with consistently solid, if unspectacular, results. If anything, Jackson's relatively uninspring year with Washington, along with increased age and potentially worrisome velocity decline, should have made him less attractive. 

Most likely, it seems, the thing that changed was simply the fact that the Cubs could fit Jackson under the team's self-imposed salary budget. With Ryan Dempster off of the books, in particular, there was room for the $14MM promised Jackson for 2013 (and beyond). Of course, while Jackson brought both present and future value to the club when he signed this year, it is reasonable to wonder whether he might have provided more value at a cheaper price had the club pursued him before 2012. Jackson's then-agent Scott Boras did say that he "felt it was best for him to do a one-year contract rather than a three-year deal" at that time. But a four-year offer from the Cubs might have allowed the team to control Jackson over a more favorable age band (28-31 rather than 29-32), possibly even at a lower price.

The Jackson question is relevant looking forward because of what it means for the Cubs' future spending plans. Whether or not the team is spending at the levels that it can or should, it appears that Epstein should be taken at his word when he says that "it comes down to revenue." Importantly, he did not say that the club is holding back because it does not believe it is at the right point on the rebuilding curve to make a substantial investment in free agent talent. Instead, he said that the club would do so, "once we generate enough revenue to be able to afford" such a player. "Revenue has to come first," Epstein says, and at the moment the Cubs maintain that they simply "don't have the flexibility to do something like that."