Reds ownership will cut payroll in 2021

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The painful reality for Reds fans is the club’s ownership will cut payroll in 2021.

That wasn’t always the plan.

The Castellinis committed to spend $147 million in 2020 before COVID caused cancelation of almost two-thirds of the regular season. That salary level would have been a commendable all-time high and a notable jump from $127 million in 2019 and $101 million in 2018. The Reds would have been within a few million of league median payroll.

The 2020 Reds were built not to contend, but to win. Ownership let the front office spend more than $160 million in free agent contracts last offseason. The goal was to prevail in most of those 33 one-run games they lost in 2019, plus a healthy chunk of the 19 others they lost by two runs.

But the attendance revenues to pay for that spending spree never materialized. The vision of Great American Ball Park jam-packed for a championship drive and Cy Young campaign was thwarted by shuttered turnstiles. Same with the idea to slingshot 2020 postseason receipts into another pennant push in 2021.

COVID and those eerily silent bats in Atlanta put an end to those plans.

The full season wasn’t played and that payroll wasn’t spent. Based on a March 2020 agreement, owners instead paid players a prorated fraction of their expected salary. MLB did receive broadcast and streaming revenues for 60 regular season games plus a short extra round of postseason games.

MLB commissioner Rob Manfred says the league suffered a $3 billion operating deficit. League-wide expenses are estimated to have been $6 billion and revenues $3 billion. That works out to an average of a $100 million loss per team. 

The Reds share will be less than that, but because club ownership is private we don’t know exactly how much and likely never will. Safe to say it was several tens of millions. $50 million or a bit north of that is a reasonable guess. 

That said, don’t rush to open a GoFundMe account for the Castellini family. I’ve written before how they have amassed hundreds of millions in wealth from owning the Reds. That central fact hasn’t changed. The franchise has been appreciating in value by $100 million a year. 

Does the Castellini family need to cut payroll?

No. The financial well being of families like theirs, with wealth in the range of $1 billion even before considering the value of the team, isn’t threatened by losses in this range. But in the past, they have made crystal clear they won’t dip into their personal wealth or sustain losses for the Reds. They’ve long maintained the city’s Major League team would be operated as a break-even proposition.

Beyond the 2020 financial losses, the outlook for the first two quarters of 2021 is cloudy. Even accounting for the promising news that at least two COVID vaccines will be widely distributed by mid-year, shoulder-to-shoulder sports crowds will be among the final steps of our journey back to normal times. 162-game schedules will resume in 2021, along with the corresponding payroll expense. How full the revenue-generating seats at GABP will be remains an open question.

Sure, it’s possible Reds ownership will zag while other teams zig and increase payroll yet again, over 2020’s record. But after losing tens of millions and staring down lingering uncertainty in the first half of 2021, expecting that’s plain old wishful thinking. The Castellini family isn’t exactly known for zagging. Retrenchment is coming.  

When asked about 2021 payroll last week, Nick Krall’s answer was part of the pile of vague nothing we got from him on every question. The fact it was Krall answering those questions and not a new President of Baseball Operations is itself a worrying sign Reds ownership has a short-sighted perspective on cost-cutting. If being wise with money is ever more important, don’t scrimp on the smart folks who can figure out the right way to spend it. 

What is the exact payroll situation?

The club owes $102 million in nine guaranteed 2021 contracts (Joey Votto, Mike Moustakas, Nick Castellanos, Eugenio Suarez, Sonny Gray, Raisel Iglesias, Wade Miley, Shogo Akiyama and Tucker Barnhart). Nine other players (Brian Goodwin, Curt Casali, Luis Castillo, Amir Garrett, Michael Lorenzen, Tyler Mahle, Robert Stephenson, Jesse Winker and Archie Bradley) are eligible for arbitration-based salaries, several for the first time. Using estimates from MLBTR, those nine players will earn $29.8 million in payroll. Players in the final eight roster spots would earn pre-arbitration league minimum of about $5 million total.

The baseline Reds 2021 roster costs ~$137 million.

That number happens to be a convenient midpoint between what the club spent in 2019 and the planned-for 2020 number.

Given what we know about Reds ownership, it’s realistic, maybe even optimistic, for the number Bob or Phil Castellini has whispered in Krall’s ear. 

If you’re expecting the departure of Trevor Bauer, Freddy Galvis and Anthony DeSclafani to afford the Reds tens of millions in new spending, think again. As outlined, that money will be eaten up by raises for current players.

For the Reds to add players — say, pick up a proven shortstop — they would have to cut salary elsewhere. If Trevor Bauer had accepted his qualifying offer of $17.8 million (which no one expected him to do) the Reds would have had to shed a huge amount of other salary to afford him.

We’ll consider options for cost-cutting in an upcoming post.

But that’s the clear-eyed reality. Reds fans should set expectations accordingly.

Featured image: https://twitter.com/Reds/status/746790155076304896/photo/1