How long can the Yankees maintain austerity?

There’s an increasing sense among some writers that the Yankees may not make the playoffs this season. For my part, I disagree. Anything is possible, but the Yankees still have excellent pitching and a solid lineup. If postseasons were decided in March the 2011 Red Sox would have won the World Series. Could the Yankees miss the playoffs? Sure. Then again they could also take home the crown. This is why we play the games.

But, imagine for a second that the Yankee austerity budget backfires. Imagine if the Yankees don’t make it to the postseason this year. How long would that be sustainable? The organization has made no secret of its desire to get the team’s payroll under $189 million to gain the 2014 luxury tax benefits. The purpose of this is to make money, lots and lots and lots of money.

It makes sense as a business strategy. The Yankee payroll tax will reset at a lower level. That would allow the team to spend far, far more for a few seasons, before being forced to replay the austerity game. If it works, the strategy will pay dividends.

No one seems to consider what if it fails. There’s no doubt in my mind that the strategy will work if the Yankees want to lower payroll at all costs. That is almost entirely within the team’s control. However, what if the strategy fails in a different fashion?

For many years now the Yankees have (ill-advisedly) marketed themselves as “the home of champions” or “where legends are born”, and other such nonsense. I’ve said to anyone who will listen that this is poor marketing. The Yankees weren’t minting championships from 1979 through 1995. I was following the Yankees in 1990. If the team tried to sell me tickets then based on the tradition of winning, I would have fallen on the floor laughing.

We all know the history of how the Yankees once again emerged as the most dominant franchise in the game, but that status needs to be maintained if the team wants to use its current marketing tactics. It’s one thing to sell tickets to the home of champions when your squad is a perennial AL East champion and going deep into the playoffs. It’s another thing entirely when management puts the breaks on spending and you miss the playoffs.

The question is therefore what if the Yankees miss the playoffs, ostensibly due to austerity, and revenues fall. A baseball season is a long time. Two is an eternity. How many fans would continue to spend lots of money to watch a multi-season loser? How much lack of interest would it take before austerity becomes self-defeating? A 20% drop in interest? 30%?

Some will argue that the 2008 Yankees missed the playoffs and the team’s bottom line didn’t miss a beat. That season doesn’t compare well to this one. In addition to opening a new stadium in 2009 the Yankees also responded by spending a fortune on the best crop of free-agents in the game. The fans were rewarded with a World Series. If the Yankees miss the postseason this year the reward to the fans may be more austerity.

The Yankees are betting that big budgets in baseball don’t matter as much as the team once seemed to think. Sure, the Yankees have an insane payroll, but that money reflects past decisions, not recent splurges. The team is banking that it can succeed with speed (Ichiro Suzuki, Brett Gardner), solid pitching (CC Sabathia, Hiroki Kuroda, Mariano Rivera) and good hitting (Robinson Cano, Derek Jeter), but no longer great hitting, that it can win without making a multi-year commitment to new superstar talent. This is probably a safe bet, but one of the business of baseball story lines I’ll be following is how the team’s bottom line holds up. The decision to cut costs now is about making money in the future. That decision only makes sense if today’s cost cutting can take place without eroding today’s revenues. If it can’t, the team may do a 180 on austerity, and that right quick.

5 thoughts on “How long can the Yankees maintain austerity?

  1. hawaii dave

    Any baseball team can sell a lot of seasons tickets with the signing of a 1 or 2 superstars. If the Yankees miss the playoffs this year and fail again in 14….all they need to do is spend the new money, sign a few big names, and everything is back to normal. The Yankees are too big to fail. The only thing that can derail them is if a corporation buys them and runs the team into the ground over a decade. But certainly not for 2 missed playoff years, especially if the luxury tax money gets pumped back in.

    • chris

      Could not agree more Dave. All the bandwagon fans that came on board since 1996 will disappear for a year or two and be back out in droves in 2015 with a youthful(ish) team and addition of a few stars at that point. If the Yanks don't play in October this year or 2014 the fans need to be ok with that given the outfield, catching and pitching depth in the minors.

  2. Professor Longnose

    Is there any indication that sticking to the budget is not only about saving money, but in part specifically about not giving money to the small-market owners who drove baseball toward this CBA? I think I’ve read hints about this, that it bugs the Steinbrenners to be paying these guys millions.

    • chris

      Probably. Hal must fume at the very idea of knowing that $%^^head at the Marlins is going to get money from Hal after having a fire sale.

    • Michael

      Hey prof! Good to see you made the switch. Guess wel be watching the games and chatting it up on this site. Gonna be an interesting season coming up, im actually eager to see some of the minor leaguers.

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