Steve Cohen changing how big business is done in MLB
New York Mets owner Steve Cohen at spring training in February. Credit: Newsday/Alejandra Villa Loarca
Two decades after the concept of “Moneyball” was introduced to describe a frugal, analytics-driven approach to winning — the original how-to manual for penny-pinching franchises — it’s time for a new buzzword to describe what’s happening now among the industry’s upper-crust franchises.
Maybe we should label the prevailing trend “Billions-ball.” That's more indicative of the arms race occurring among MLB’s superpowers, as the most deep-pocketed owners are writing big checks with the goal of buying a World Series.
This is hardly a new concept. The late George Steinbrenner didn’t invent the idea, but he made the Yankees synonymous with the practice, as well as hated by everyone else for acting like a baseball Rockefeller. The Boss’ reign basically led to establishing the competitive balance tax (CBT) — also known as the “luxury” tax — and if all this sounds familiar here in 2023, it should.
Because baseball’s new boss, from a financial perspective, is the Mets’ Steve Cohen, whose combination of mind-boggling wealth (roughly $18 billion) and unbridled fandom is taking MLB to a place that the majority of his colleagues don’t want it to go. So much, in fact, that the CBT had to be modified last spring in an effort to slow him down.
News flash: it didn’t. The so-called Steve Cohen Tax, which carries the highest surcharge on all expenditures over $293 million, barely amounted to a speed bump for its namesake as he blew past that whopping sum en route to his current $374 million tab for the 2023 season (according to FanGraphs). To date, Cohen is the only owner to do that this year, as Yankees owner Hal Steinbrenner has warily stayed roughly $1 million below for now.
Steinbrenner famously said a while back that he shouldn’t have to spend more than $200 million to build a championship team. But the Yankees have soared beyond that number, as have 13 other clubs, recognizing that it’s merely the jumping-off point for doing business in baseball these days.
“I had to change my whole $200 million thing to $300 million thing, right? In the last couple years, really,” Steinbrenner said earlier this month at the Tampa spring training complex that bears his dad’s name (along with a statue). “Look, an owner is going to pay what he feels a player’s worth. Some others may not agree, some may. But all boats rise on a high tide, right? One player gets a big contract and that’s going to bode well for others. And that’s kind of the way it’s been the last five years.”
Forget five years. How about nine months? That’s how long it took Aaron Judge to turn the Yankees’ Opening Day offer of $213 million into a record nine-year, $360 million deal by mid-December. Crazy thing is, Judge reportedly had a $400 million-plus deal on the table from the Padres, but he admitted later that he never wanted to leave the Bronx.
We’re not sure what the market value is for a Yankees captaincy these days, but maybe that saved Steinbrenner a few bucks in the Judge negotiations. The dizzying rise of salaries this offseason, however, should be a warning to owners about slow-playing these contracts. Every passing minute, the price only goes up.
“Quicker than inflation or anything else,” Steinbrenner said.
Four years ago, in the last winter before the COVID-19 pandemic, MLB teams spent a total of $2.2 billion on free agents, with an average salary of $11.24 million for those contracts (according to Spotrac.com). This offseason, the total payout was $3.78 billion, for an average of $14.6 million.
Remember, this is just for free agents. It doesn’t include the extensions to the Padres’ Manny Machado ($350M) or the Red Sox’s Rafael Devers ($313M), just to name the two biggest from this offseason.
There’s no question the pandemic put a serious dent in baseball’s revenue streams — a shortened season and empty stadiums will do that — but the sport’s top spenders didn’t stay down for very long. And some roared back with unprecedented shopping sprees, with the New Yorkers leading the charge during the holidays like some kind of Black Friday bender for billionaires.
Cohen especially behaved as if he were out of Picassos to buy, spending nearly $800 million on players, including extensions for Brandon Nimmo ($162M) and Jeff McNeil ($50M). He also had a handshake deal with Carlos Correa for another $315 million, but the Mets walked away after red flags on the physical regarding his surgically repaired ankle.
When you reach Cohen’s stratosphere, however, it’s not only about paying the players. He gets a sizable luxury tax bill from MLB, too. According to the CBT penalty calculations for a $374 million payroll, Cohen would owe approximately $100 million in tax alone — more than the entire payrolls of seven teams — for a total layout of $480 million in this year’s club.
“I made a commitment to the fans,” Cohen said. “And it wasn’t a short-term commitment. And when I do something, I don’t do it halfway. When I’m in, I’m all-in. I don’t accept mediocrity well. I have certain high expectations. And if it requires me to invest in this club, then I’m going to do it.”
Cohen is like someone from your fantasy league who just won the Powerball jackpot. But aside from that other guy in the Bronx, along with the Padres, Dodgers and Phillies, there’s precious few owners who even approach Cohen’s “all-in” mentality when it comes to spending on their franchises.
Scott Boras, baseball’s most influential agent, understandably has been singing Cohen’s praises since he purchased the Mets, and we wouldn’t expect their little disagreement over Correa’s ankle to keep them from doing more business in the future. At the news conference for the signing of Nimmo, a Boras client, the agent affectionately called Cohen “Steve Kong” — a tribute to him as the big gorilla owning New York, hanging from the Empire State Building.
“Our game needs Goliaths,” Boras said. “We have to have Goliaths.”
Boras also referenced the Cohen Effect around baseball, and how his impact as a market-maker should, at the very least, guilt his tighter-fisted colleagues into spending more to win. Of course, MLB has a difference of opinion, and it remains concerned that Cohen’s spare-no-expense pursuit of players is damaging to the competitive balance of the sport. That’s what led, in part, to MLB’s February launch of an economic reform committee, which is likely to begin exploring ways to more strictly limit payrolls, such as the salary caps used in other pro sports leagues.
With four years left on this collective bargaining agreement, nothing can be done to the current economic model anytime soon. So you can expect baseball’s tycoons to continue flexing their financial might, buying up all the priciest players like so much Park Avenue real estate.
As for the price of winning a World Series? Those that have to ask probably can’t afford it anyway.
David Lennon is an award-winning columnist, a voter for baseball's Hall of Fame and has covered six no-hitters, including two perfect games.