BRADENTON, Fla. – The Pirates were once one of the highest spending teams when it came to amateur bonuses. They spent more money than any team in the amateur draft from 2008-2011. They spent $3 M a year on the international side, and that amount didn’t include special situations like Luis Heredia, Harold Ramirez, or other big bonus exceptions.

This was also during a time when the Pirates were still a losing organization, and on the verge of making themselves annual contenders. The MLB payroll was low, which was justified due to the rebuilding efforts. But this meant we never got a chance to see if they could handle spending at those amateur levels while also maintaining a contending payroll for a small market team.

The reason we never got to see that is because the CBA changes in 2012 lowered the bonus pools for the Pirates on the draft and international side. This year, for example, they had a little less than $7.5 M combined to spend on the draft and international bonuses, after failing to sign their second pick, Nick Lodolo. Putting that in perspective, they spent more than that amount in the draft alone each year from 2008-2011. The last few years have seen their payroll jump to $100 M and slightly above, but their success and the existing CBA rules had lowered the chances to spend on amateur talent.

MLB reached a new CBA this offseason, allowing small market teams to spend more. The Pirates have up to $5.75 M that they can spend internationally, and their draft pool will be one of the biggest in baseball due to multiple high picks, including compensation for Lodolo. They are also still contenders, currently projected for a payroll around $100 M. So we now get the chance to see if they can spend at this level in the majors, while also spending at the old levels for amateur talent.

Bob Nutting met with the media today after he addressed the team, and I asked him if the team could afford their level of payroll the last few years while also spending what they used to spend on amateur talent. He didn’t commit to any figures, but talked extensively about how investing in minor league talent was so important.

“That’s the most importance balance we need to be sure we find,” Nutting said. “We cannot lose sight of how essential it is to bring talent into the organization. That absolutely is why we are where we are today. Whether it’s continuing to be very aggressive in the amateur draft or it’s being very aggressive sourcing and finding talent under the new system — which isn’t quite a draft, it’s still a resource cap but a higher one, but a relatively flat cap among all teams. Not only how do we allocate all of those dollars, but how do we make the maximum impact.”

The Pirates were still able to do some things with the draft the last few years, with their limitation being that they couldn’t sign as many prep pitchers as they did in the past. But their international spending was limited by cutting their budget down a third. Now, the bonus pool will almost be double their old budget. Nutting said that teams might use these budgets to sign one or two players, and other teams might take a broad approach to sign a lot of younger players and develop them, hoping a few work out. It wouldn’t be a surprise if the Pirates went the latter route, which has always led to their best results.

“As we work through those kinds of discussions, what will be most important is we have great leadership — Rene Gayo has run that program for a long time; Neal has been actively, personally engaged in that program for a long time — to make sure we find the right balance of how we’re bringing talent in.”

The draft has led to the most success in recent years. Their top two starting pitchers were drafted. Chad Kuhl has an inside track for the rotation, and was drafted. Tyler Glasnow could play a big part of the rotation in the future. Josh Bell and Jordy Mercer were drafted. Eventual MLB players Kevin Newman and Austin Meadows were drafted.

Andrew McCutchen wasn’t drafted by this group, but came from the draft. He also came from a darker time in the farm system, where the organization wasn’t focusing on the minors. That’s something that Nutting said they wouldn’t return to.

“At the broadest picture of how we allocate dollars, I think we need to have a commitment never to back away on the amateur draft again. That hurt us for years,” Nutting said. “We have a commitment never to back away on sourcing talent from the international market. We have a dominant position we’ve taken, spent 10 years building that presence. We cannot back away. I told the story recently that my first trip down to the Dominican was 2007. It was an eye-opener for me. It was shocking both the level of our facilities but how far the team of Roberto Clemente had fallen behind. It took two years to get a facility built. It took another five years before the first player who had gone through that full program was prepared to play on the major league club — Polanco. To be able to see a seven-year cycle and commitment play out reinforced that you have to be patient, but you absolutely have to commit to talent acquisition when you can.”

The Pirates can commit to acquiring that talent, and will have some of the highest resources to spend on amateur talent this year. Nutting was very direct about the importance of spending in this area. Meanwhile, they’re projected for around $100 M at the MLB level. There’s no guarantees, and we’ll see what happens, but it wouldn’t be a surprise to see them spend big on the amateur side while also spending like a small market contender in the majors.

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51 COMMENTS

  1. I try not to complain about the payroll, but it is a little odd to me that with MLBAM* revenues growing by huge amounts, the Pirates payroll is staying flat. Staying flat essentially means you are losing ground.

    I’ve always been ready to accept that there are limits on what the team can afford to spend, but this part of it is perplexing.

    (*MLBAM is growing by $500M per year, which is easy math: $17M per team. And BAMTech spinoffs are generating nearly as much. It’s hard to see where this is being reinvested in baseball.)

      • I am one of the few that think they are saving money for the future, because the current team isn’t calling for TONS of upgrades. They make good moves, and hopefully when someone they believe deserves a long term deal, they do it.

        My first hiccup in this was the Liriano deal. And there was no where (and no one) spending money this off-season, so we couldn’t see that money being put to use.

        But if I’m right, then when its time, they could jump to a much higher payroll very quickly. Although they’ll probably never be in the top half.

        • I’very had the same thinking that only players getting extensions will be when they don’t have a really good prospect ready in waiting.
          J Happ doesn’t count to me anyway because of the age factors. I would’ve loved to seen him sign just not 3 years at his age.
          Cervelli fell into this because of injury to Diaz. Cutch doesn’t because of Meadows, Mercer no……. Cole maybe jury still out

    • There are so many ways to work the books that I find it completely futile to back into what these guys actually do based on what they say.

      And yes, most if not all businesses act this way.

  2. MAYBE THE BUCS SHOULD FOLLOW THE CUBBY MODEL AND SPEND 150m A YEAR AND MAKE STUPID TRADES AND FREE AGENT SIGNINGS AND WIN THE WORLD SERIES EVERY HUNDRED YEARS. EVEN WHEN YOU INCLUDE LAST YEAR, THE BUCS FINISHED BETTER THAN TEAMS THAT PAID MORE ON PAYROLL AND FINISHED LOWER.
    ROOT FOR ANOTHER TEAM.. I LIKE WATCHING THIS ONE

  3. You can understand why the Pirates were inactive in the Latin American market the last few years (broken system that incentivized massive single year expenditure). The organization has shown a consistent reluctance to overspend on talent acquisition in terms of dollars and prospects. You can probably look at Jung Ho Kang as the riskiest move that they’ve made since becoming relevant again, and that was a very light monetary risk in modern MLB terms. I believe with the new international spending budgets, teams should get a lot more return on their investments, and the Pirates should really be using that entire budget.

  4. Gayo should spend big on at least one international signing, at least 1.5 million and then they can use the rest of the money to pick a bunch to other players. they need to hit a home run this year and get at least one of the consensus best players available.

  5. Tim, is comment is completely off topic and probably was addressed yesterday. Did you notice that the Trib had a headline article on Glasnow’s new grip on Monday? Does the writer pay you a percentage of his salary?

  6. Great article Tim! Thank you for discussing the budget not only at the MLB level, but the amateur and international levels. Most, if not all, of the post gazette and trib writers are only concerned about the MLB budget, and the fanbase needs to realize there is much more to budgeting for the entire organization. The amateur and international drafts are vital for a small market team’s survival, and the MLB Pirates have been not only surviving because of it, but also thriving in recent years.

  7. Nutting is terrible. We need to get back to the old days of incompetency and underspending.

    Does any of this make sense? No, but I wanted to attempt to walk in the shoes of the Nutting haters. Shoes that are cheap and poorly made, but have that sweet smell of nostalgic mediocrity.

    • A classic statement.

      And in the process of building a sustainable contender, the Pirates Team Value, according to Forbes, has risen from $292 mil in 2008 to $975 mil in 2016. It is very possible the Pirates will become a $1 Bil Valued Team in 2017, and the new local TV Rights Contract is only a few years away.

      I think they will try to hold at the $100 mil player salary level for as long as possible, but seeing a jump to $130 mil in the near future is not unrealistic.

          • Because the tv ad model is declining. Buying up spots on local tv doesn’t have the same kind of value it did several years ago. The Dodger deal is sort of an albatross and will probably not end up a good deal for the broadcaster.

  8. The Pirates absolutely need to remain steadfast, driven and focused in looking for talent in Latin America, especially the Dominican and of course in Puerto Rico too, where the Great One of course came from. Look no further than Marte, Polanco. Elias Diaz and Alen Hanson for proof positive. And a strong commitment to the draft in the US of course remains essential: Cole; Taillon; Keller; Meadows; Hayes; and Glasnow. Note by the way that the Red Sox’ investment of over $70 million in Rusney Castillo seems to have been a complete and total bust, and it won’t make the slightest dent in that organisation. That one horrid contract would have put the Pirates in the class of the Reds and the Twins for years. So they need to find a balance and spread the risk. Excellent scouting from Rene Gayo has really helped them! Hard to measure his value to the organisation. And by the way: Tim for the next GM!

  9. The Pirates need to be more active in Latin America and start targeting and signing the top prospects, instead of their “quantity over quality” approach.

    It would also be nice if they would notice that a lot of good young players have been coming out of Cuba of late.

    The Kang signing was a great move and signing – despite Kang’s off the field issues.

    • Did you notice in the article that the 2 they spent the most have been a bust while Polanco was a cheaper sign. Boston spent all that money on 1 Cuban player that sucks. The White Sox’s spent big on their Cuban star & he’s been average at best. L.A. would love to unload Puig. Big $ players guarantee nothing.

      • Well they did also sign Moncada who is pretty widely considered either #1 or #2 prospect and they turned him and others into Chris Sale. Your point is still valid though.

      • Gregory Polanco was signed *eight* years ago. Starling Marte was signed before the Great Recession.

        They’ve literally signed more than a hundred kids since then who’ve failed to develop, most of them so miserably you’ve never even heard of them.

        There’s absolutely no question that high-dollar LA signing are also risky, but this narrative that the Pirates have built a sustainable stream of Latin American talent through cheap signings is absolutely false.

        • On the other hand, the kids are so young, the big money guys aren’t that much surer of bets. They’re considerably more likely to succeed than any individual small dollar guy, obviously, but I think the approaches, year to year, give roughly equivalent chances of producing a Major Leaguer, with the risk of dead years being spread considerably in the quantity approach.

          With a doubled budget, though, they could take a hybrid approach, and I kind of hope they do. Sign one big money kid, and then spread the remaining budget over several others.

          • Absolutely!

            But the Pirates set themselves up with a false choice. An either/or. With the same budgets they had in the past, they could’ve easily done both.

            Make pointed, specific expenditures on high-end talent identified by their supposed top-notch scouting department led by Rene Gayo *and* signed a bunch of low-dollar kids. There was absolutely nothing in the soft cap preventing them from doing both.

          • I also think we’ll look back and see a notable curve on the success of these high-dollar LA signings.

            There’s simply far more attention – more scouting, and more development – on these kids now than a decade ago or even five years ago. More scrutiny before signing, and more help once they’re in the fold.

            Now these deals often happen before they actually turn 16, but is a 16 yo kid from Latin America who’s been in a development academy since he was 10 actually that much more risky than a 17 yo kid from New Jersey? With the same, or close to the same, attention given to Latin America, I think you see this gap close awfully fast.

        • I’ll admit up front I’ve done 0 research on this & maybe this could be a future article Tim.
          How many teams have signed & developed & produced more then Marte & Polanco. Some people act like every team has 5 LA stars on it. Off the top of my head not many have more then 2 LA stars on them that they signed & developed.
          Plus Dillon Herrea brought us Marlon Byrd.

          • I take absolutely nothing away from Dave Littlefield for signing Marte or Huntington for signing Polanco. That happened, and it’s worked out great. They’ve also had near-misses like Herrera and Hanson. Elias Diaz (signed in 2008) still may be a contributor.

            My point is that the success they’ve had hasn’t continued, and I don’t believe what they’ve accomplished is *proof* that their strategy is infallible.

            Dave Littlefield also drafted Cutch and Walker, but nobody in their right mind would argue that he had a good draft strategy.

            • There simply is no possible way of doing anything that is infallible. Every signing whether it’s a 16yo from the DR or an 18yo from HS or a college JR. They’re all lottery tickets. I personally would like to see them spend 80% of their draft picks on HS arms. If you have an overabundance of pitching you can get anything you need. But that approach isn’t infallible either.

    • Excellent point! They were able to scout and sign Marte and Polanco, they need to keep digging. Would have been awesome if we could have landed Jose Abreu. He originally signed for a reasonable deal.

  10. And the $100m approximate ceiling on payroll will turn this franchise back into a loser shortly. Well unless you believe they can be about perfect in the draft, in the cheap free agent market, and then in player development. Good luck with that model.

    • Same old broken-record sentiment. Good luck with your suggested model of expenses > revenues. They are spending what they can spend to make it a sustainable business, and yes that includes a reasonable profit. Small market revenue- deal with it.

      • I guess you guys all know what the P&L looks like. Drink the koolaid, as this is a team making like $20m a year. My model is to spend what you bring in….not to pocket a significant profit. A franchise that has gone up in value like fivefold doesn’t need short term profits. You are foolish if you think they are just eaking out a profit…..

      • Well, there *is* the mystery (I mentioned further down) of why they aren’t spending the the extra MLBAM revenue on the payroll. Leaguewide it’s up $1B over two years, that’s $34M per team. Why is payroll flat?

    • Only in your mind is their a $100 mm ceiling.

      It was only a few short years ago people like you said if only the Pirates would spend $100 mm on payroll…

    • I know that logic won’t work with the “Nutting’s wallet” crowd, but here is a try: “100MM Payroll” refers to MLB payroll. If you read his comments above, and follow along, the Pirates have been a dominant player and spender in the amateur acquisition arena. They spend millions in development programs and facilities. Also: When has anyone said their MLB payroll has a ceiling? They only just hit 100 a year ago. With a steady increase year over year, not just at MLB level but also amateur development- it’s actually illogical to believe they self imposed a cap. Rather, this team is run by solid business principals of budget discipline, commitment to win, and establishing a great culture (starting with amateurs). Just enjoy what he’s built for the city!

      • They spent less on payroll in 2016 than they did in 2015, and have shown no signs of going beyond 2016 spending in 2017.

        • The also didn’t make the playoffs last year. But which was the chicken and which was the egg? To quote the sage, Forrest Gump, “maybe both”.

          • Sorry, you’re right on that part. I got a little too “You didn’t build that” on the topic.

            Nutting has leveraged family wealth and massive subsidies from local taxpayers and the league to hire competent management that’s turn the franchise around. Absolutely.

            • Were a person with lessor intellect than yours replying we’d detect an odor of damning with faint praise. But you of course recognize how difficult it is to hire great people who win consistently, like the Rooney’s demonstrated for many decades before they hired Chuck Noll. Or actually most franchises demonstrate by their repeated firings of staff and starting over. So Nutting’s accomplishment is no small feat.

      • NH has stated he has a cap of a little over $100m numerous times over the last couple of years. How many times has he mentioned “financial constraints”. Sports franchises are not normal business, and you have no idea what he has budgeted when you talk about budget discipline. If they are budgeted a $20m yearly profit, shame on them. That is not a commitment to win, but a commitment to make money in the short term(and we know they are making a ton load in the long term).

        • I truly feel sorry for fans like you who let money get in the way of the enjoyment of rooting for the team to win.

          For logically it stands to reason, the more the team wins, the more revenue the owner takes in, and the more profits are realized. And as you have clearly stated, profit in sports business is bad.

          Does that mean winning is bad, too?

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