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The financial impact of a playoff berth

The Mets and the Astros are virtual locks for the playoffs, despite opening day payrolls well under the league average. What might the impact be of their playoff berths on their future spending?

Brad Penner-USA TODAY Sports

The playoff picture is starting to crystalize. Over at FanGraphs, eight teams have playoff odds of over 95 percent, and only three teams have odds between 10 percent and 50 percent. The site recently introduced graphs of the playoff odds over the course of the season, and the picture is one of certainty emerging from uncertainty:

While it isn't a guarantee teams will keep their place in the standings, we can at least start to talk about what's going to happen to the apparent playoff teams. Predicting the playoffs is a crapshoot, and I'm not a complete fool, so I'm going to turn to what happens after the playoffs. As an example, see the following table retrieved from Cot's Contracts at Baseball Prospectus (where all of the enclosed financial info can be found) :

Royals Opening Day Payroll in Millions
2001-2014 Average $58.8
2015 $112.9

This is clearly an oversimplification of many years of gradual change, but it's also an illustration of the kind of dramatic shift that a playoff berth can bring to a team's finances. Teams not only benefit from a portion of all playoff gate receipts in which they play, but the money resulting from increased attendance in the latter portion of this season and all of next season provides an ancillary benefit ---- and this does not even consider the increased revenue from the indirect media driven revenue streams that modern teams rely on so heavily.

Now, obviously, this matters more to some teams than others. The Royals were set up perfectly to see fan interest skyrocket, and they were also lucky enough to make it all the way to the World Series after earning a Wild Card berth. (This is not to say baseball in Kansas City wasn't coming back if they got eliminated, however; there was a ton of interest throughout the second half of 2014. Please don't shout at me, Royals fans.) As a counterexample, if the Yankees make the Wild Card game, as seems likely, and get to the World Series, I highly doubt we'll see a substantial impact on their payroll.

With that in mind, there are two teams that seem potentially close to the 2014 Royals model of "low payroll, long-suffering fan-base, potential for explosion of interest" and are almost guaranteed to make the playoffs: the Astros (85.7 percent to make at least the Wild Card) and the Mets (99.8 percent). This year, their respective opening day payrolls were 62 percent and 87 percent of the median, or the second- and tenth-lowest in the league.

Both teams could use a public relations boost and a financial windfall pretty badly. The Astros payroll (and performance) has been in the basement of the league for several years, and their regional sports network has been awash in difficulties that have prevented a percentage of the small group of fans that have wanted to watch them from doing so in recent years. The Mets have a similar host of problems, starting with Bernie Madoff's ponzi scheme and cascading onward from there.

A lot of fans in both Texas and New York are paying a lot more attention than they have in the past few years, and they're going to expect more than the status quo next season. What has happened to the payrolls of other teams in similar situations?

From 2001 through 2014, twenty-seven teams with opening day payrolls less than 90 percent of the median made the playoffs. One won the World Series (the 2003 Marlins), four were champions of their respective leagues, four more made it to the LCS but lost, and 15 lost in a divisional series. Additionally, in the last two years, three teams have made it to the new Wild Card game and lost.

The teams in this sample had an average payroll 72 percent of the median in the year they made the playoffs, which translates to about $84 million in 2015. The following year , the average payroll was 82 percent of the median, or about $96 million in 2015. That's not a small difference! Among the players in the last few years who have signed for roughly that amount in average annual value: Chase Headley, Brandon McCarthy, Andrew Miller, Nick Markakis, Nelson Cruz. This kind of money won't solve every problem, but it'll fund a very talented player, if a team is looking to build on the success that earned it.

The picture gets even rosier for the teams that make some real progress in the playoffs, too. Eighteen of these twenty-seven teams didn't make it past the divisional series; their payrolls averaged 72 percent in the first year and 79 percent  in the second. The teams that made it to at least the LCS saw a much larger shift, from 71 percent  to 89 percent , or about $21 million in 2015. That's getting into the premium free agent level, or multiple solid regulars. That'll buy you a whole new bullpen!

Still, this feels like it's dancing around the real questions, which is what happened to the teams that broke true playoff droughts. I identified a few teams that definitively qualified, with low payrolls and the first playoff berth in many years: the 2003 Marlins, the 2007 Diamondbacks, the 2007 Indians, the 2007 Rockies, the 2012 Orioles, the 2013 Pirates, and the 2014 Royals. Those teams also saw a fairly large jump into the next year, of about 13 percent. Considering that only two of those teams didn't make the LCS, however, it's unclear if droughts going into the playoff year really lead to a bigger bump in the following years.

As to what will happen to the Astros and Mets, it's difficult to say. They both are in unique situations that might make them behave in completely different fashions than the above their comps. While the Astros financial situation hasn't seemed great, the last few years have been a controlled burn, rather than the raging wildfire of misery that characterize the, say, early-2000s Pirates.

All along, 2016 was supposed to be Houston's grand entrance into contention; their payroll might have spiked this offseason whether they made the playoffs or not. Now, however, it seems like a virtual certainty that some real free agents will supplement the young core they've so painstakingly developed, but predicting what Luhnow and Co. will do has been a losing proposition in the past.

The Mets, though, are inscrutable for an entirely different reason. The Wilpons appear to be swimming in debt, and there's long been a sense that the team's payroll has been impacted by matters beyond how much money the team is generating. In 2011, when finances came crashing down, the Wilpons had to raise capital fast to pay debts that were coming due.

This New York Times article reports that they ended up selling twelve chunks of the team totaling 48 percent of the total shares, for a total of $240 million. Four percent ownership stakes aren't exactly a hot commodity, however, and this other article mentions the main sweetener they added to those stakes. Investors have the opportunity of selling their shares back to the Wilpons after six years, with 3 percent annual interest added on top. In other words, in two more offseasons, the Wilpons could potentially owe more than $300 million to those investors.

Now, that assumes they all want to back out, and keeping these vanity owners interested is a major potential benefit of this magical Mets' season. It's also a major damper, as the Wilpons might be feeling the impending pressure of the 2017 buyout. If cash is getting stockpiled rather than reinvested, even a deep playoff run might not bring New York's payroll up to the levels fans expect from a 'big market' team.

Obviously none of this matters in the playoffs. Fans of these teams aren't worrying about money; they're worrying about the games being played in front of them and the potential for postseason glory. That said, after the dust settles and the winter begins, the success of the Mets and Astros thus far and their potential success in the playoffs could have lasting implications for both franchises.

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Henry Druschel is a Contributor at Beyond the Box Score. You can follow him on Twitter at @henrydruschel.