Sports Analytics: The Road to $1 Billion (Predicting the first $1 Billion Dollar Salaried Athlete)

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In the past 10 years, or more specifically since the new television deals were inked, Professional Sports Athletes have seen dramatic increases in salaries, signing bonuses and overall cash compensation. In the last year, we’ve seen a $300 million contract in Baseball (Giancarlo Stanton), and 3 $200 million contracts in Basketball (Steph Curry, James Harden, Russell Westbrook). As of 2017, we had only 3 athletes in history that earned over $300 million in their careers (Kevin Garnett, Kobe Bryant, Alex Rodriguez), yet Stanton will earn $300 million on one contract.

What has caused this dramatic increase in athlete salaries? Well, there are a couple. Most notably there has been a significant increase in payrolls and salary caps over the last couple decades due to the increased popularity of the NBA, MLB and NFL. More revenue and TV deals equals more money to spend on players.2

 

The efficiency of the Player Associations (NFLPA, NBAPA, MLBPA) getting fair deals and rights for athletes has also played a huge role in getting a share of the increased revenues. So this begs the question: With the consistent salary cap increases and increased popularity in these major sports, when will we see an athlete earn $1 Billion in salary? Currently, the #1 athlete in total compensation is Alex Rodriguez with over $425 million. When might we see someone surpass this number?

Before getting into the specifics of how we are going to project salaries, and before there are people telling me “No one is going to pay $65 million a year for Mike Trout or Lebron James”, let’s look at some salary stats over the last 30 years.

Projecting salaries for professional athletes is extremely complicated, so we have to set some constraints. For this analysis, I will not be taking into account performance, like WAR, PER, or MVPs. This can and should be included in future analysis, but it takes a significant amount of time to pull for players and even more time to add in my model. In addition, because we are only looking at the top ~100 players over the last 3 decades in each sport, we must normalize their salaries before using current dollars to project future salaries. Finally, we are not going to include any non-sport compensation in this analysis. No sponsorships, outside businesses or commercials. Not all of this is documented, and even less has compensation attached.
With that, here is the methodology to project future salaries:

  1. Average [top 20] salary by position for each sport over the last 5 years (Pitcher, 1B, Outfield, Quarterback, etc.). This gives us a good basis for what the top salary in a given year should be.
    • MLB Outfielders Avg Salary: $10.05M
  2. Average [top 20] salary for each experience year by position
    • MLB Outfielders with 12 years experience Salary: $13.73M
  3. Create a multiplier (or growth rate) by looking at the average salary in a given year to what the average for a particular years experience is. For example
    • MLB Outfielder’s with 12 yrs exp. will be multiplied by (13.73M/10.05M) = 1.27
  4. Apply an annual payroll growth rate increase to salary. (Even if we extend our time period to 2000-2017, the growth rate is still 4-7% annually for each sport)
    • The annual growth rate for MLB Payrolls over the last 20 years was ~3.5%
  5. Analyze the average career length for each position and league
    • MLB Outfielders max career length for top players is 23 years
  6. Based on where a player is in their career, along with their last documented salary, apply the multipliers to generate an estimated salary
    • Mike Trout in Year 2022: $33.25M [Last Documented Salary] * 1.52 (MLB Outfielder Year 10 Multiplier) * 1.17 (MLB Payroll growth rate compounded 2018-2022) = ~$59M in 2022

With this methodology, there are some flaws. Obviously a player who is a “bust”, yet got a huge contract, will have large projected salaries. For this analysis, Jordan Zimmerman fits that bill. On the flip slide, Bryce Harper is still in arbitration, and therefore is significantly under-projected due to his last documented salary. All this being said, our first $1 Billion dollar athlete will be none other than Mike Trout, projected to get there in 2035, his projected final year playing Baseball professional.

Take a look for yourself below:


2www.spotrac.com