The Yankees will have to double down on spending, even if they don't want to

There have been a few different schools of thought among Yankees fans as to what type of strategy the team should employ so they can maximize their chances of making the playoffs in 2015, and also so that they can be viable a few years down the road. There are those who advocate to stand pat, those who believe in mid-level signings, and those who think the team should go hog wild once again.

There are certainly merits to each argument. Standing pat wouldn't be the wisest for winning next year, but it would at least leave the team around .500 with a slight chance at making the postseason. To boot, it would eat away at the clock of the many albatross contracts and allow another year for the farm system to grow. Fans advocating for mid-level signings believe relatively the same thing, but feel that they can have their cake and eat it too. If commitments are reduced to under five years, then the team can still compete next year while also maintaining long-term financial flexibility. And for those who advocate for another spending spree, the argument is also valid: it will easily make the team a bona fide playoff contender.

Before the offseason began, I fell into the realm of advocating for mid-level signings. Bringing in Chase Headley and Brandon McCarthy--as well as a depth piece or two--would be paramount; it would maintain short-term playoff viability and would ensure there would be space to breathe in a few years. Well, we have already seen the team balk at the chance to sign McCarthy, have been hesitant to escalate offers to Headley, and they let David Robertson walk. But, Max Scherzer and others remain. There is still a chance to fill some holes in a small way, and there's still a chance for the team to go big. I would argue that they're going to go the latter route, and they don't have much of a choice.

The Yankees have created a monster. They put together a nearly 20-year-long playoff juggernaut, and the cracks have finally begun to appear. Competitive balance is at an all-time high, there is plenty of revenue to go around, and the talent in the free agent pool has significantly declined. The Yankees are not the only game in town, but they get penalized the most for losing. In a graph that I cite every week or so, Vince Gennaro shows why the Yankees "overpay" for players:

The Yankees spend more money because each dollar they spend goes further. And this was back in 2007--I can only imagine what this looks like after the market expanded even further after the team's Championship in 2009. Winning creates this win curve, but it's a double-edged sword because it creates the expectation of winning. And the Yankees find themselves in a precarious position.

In an article at The Fields of Green, Jason Barmasse explains how much a team gains in revenue by moving up the win curve, and how much that gets boosted even more when you make the postseason. For teams that win 87 games and make the postseason, teams experience about a 25% boost in revenue--about $20 million. And if we assume that this shows the average team, the Yankees benefit even more.

All of these figures also account for the attendance and TV revenue, something that the team has seen on the steady decline since 2009. The team got a nice boost from the Derek Jeter retirement tour, but there's no more Derek Jeter in 2015. If the team continues to hover around .500, the team will experience lower attendance rates and lower TV ratings.

So how does all of this apply to roster building strategy? If a team can quantify the created marginal revenue of a signing, then a signing could theoretically offset itself due to a jump on the win curve, or it could pay for itself and then some if it pushes the team to the postseason. That is why I think that the Yankees will, without much choice, sign Max Scherzer (and others).

The team obviously likes Scherzer, so it's no surprise if they signed him just because they thought he was a great player. But the team finds themselves in a tricky position where a major signing would send them into the realm of postseason contention. And as one can see on the above graph, that is the point of the highest slope. It's obviously a massive gamble, but a successful season from Scherzer and other possible signings (like Headley, for example) would pay dividends. If the team was able to make the postseason, then much of their salaries would be negated by the large increase in revenue. While some argue that the team has a relatively hard cap on what they will spend, they also realize that they can't afford not to lose.

I don't necessarily agree with this strategy, and it may fail like it did last year, but it becomes harder and harder for the team to justify pinching pennies when they lose a ton of money from losing, more so than it would cost to sign a Max Scherzer and others. The front office may in fact want to reset the payroll, but they may not have a choice. This team needs to win to be as financially successful as they would like, and that often requires filling spots with pricey free agents. They certainly have the money to do so.