Yankees Editorial: Why Yankees Changed How They Sign Players

By Lionel Olivo | Mar 31, 2015

There are so many things wrong in the world today; however, the New York Yankees isn’t one of them. Many pundits and professionals alike have blasted the Yankees for the player movements they’ve made during the last two seasons, specifically allowing Robinson Cano and David Robertson to depart. However, they’ve failed to consider the finer points in baseball, in Cano’s case, The Competitive Balance Tax.

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The Competitive Balance Tax also known as the luxury tax or the ‘Yankee Tax’ is a mechanism adopted to maintain the competitive balance and give low revenue teams a chance to compete. Since its inception in 2003, the Yankees have paid 271 million to the commissioner’s office. The Yankees paid 28.1 million and 18.3 million in 2013 and 2014 respectively due to that tax.

In other words, the Bronx Bombers are bleeding money without any return on investment. In both seasons they failed to reach the postseason. Their saving grace those years, revenue-wise, was that Mariano Rivera and Derek Jeter were retiring in 2013 and 2014 respectively, boosting gate revenue (revenue from tickets sold).

Had the Yankees signed Cano to a 240 million – 10 year contract, it would have increased their luxury tax liability by at least 10 million dollars, without any guarantee of reaching the postseason.

For the Yankees, the postseason is more than part of their brand. It’s one of their financial cornerstones. Missing the Postseason comes at a substantial cost. In 2012, when the team last made the postseason, ticket and suite revenue were 353 million. In 2013 that same revenue stream slid down to 295 million. The reason? No post-season.

In Robinson’s case, he priced himself out of the Yankees interests. Andrew Miller had a comparable record to Robertson’s and was 10 million dollars cheaper. Every dollar shaved off payroll reduces their luxury tax liability. Aside from that, the compensatory draft pick they team receives can help it bolster its farm system.

We won’t know how the moves made the team pan out until the end of the season. However, one thing is certain: the Yankee Way is changing. Hopefully they can adapt and continue their winning ways.

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