From 1995 to 2012, the New York Yankees missed the playoffs just once. They made the playoffs in seventeen of those eighteen years and won five World Series championships. The Yankees were, and still are, big spenders, and their money was able to keep them winning.
Since 2012, the Yankees strategy has built them two above-average teams (by record, at least). In 2012, the MLB postseason featured the Rays, Indians, Pirates, Athletics, and Braves, but not the Phillies, Angels, Rangers, and Yankees. Younger talent has become more of a necessity, while free agents are just additions to your nucleus, not the nucleus itself.
What really led me to writing this post was the Dodgers hiring Andrew Friedman to be their President of Baseball Operations, even after a season where they won 94 games and won the National League West division. The Dodgers hiring of Friedman speaks volumes on how they're willing to make a culture change in order to catch up with sabermetrics, something that has become very important.
The Yankees, Phillies, and Rangers have not yet to do something like that. Brian Cashman was extended as Yankees GM, Ruben Amaro Jr. is still running the Phillies further into the ground, and Jon Daniels continues to throw money at free agents that still haven't helped. And yet Billy Beane (Athletics), Chris Antonetti (Indians), and Dayton Moore (Royals) are building winning teams with a minimal payroll.
Has the window closed for big market teams?
I don't know. On one hand, you still have the Dodgers winning plenty of games with the highest payroll in baseball. They didn't go anywhere in the playoffs, but still were able to get there. However, on the contrary, the Red Sox won the World Series in 2013. I don't think it is truly a question of having the money, but what you do with the money that you have.
The Dodgers are big in the international market. They signed Yasiel Puig, Hyun-jin Ryu, and Erisbel Arruebarrena to extravagant deals and still have been able to create homegrown talent in Clayton Kershaw, Matt Kemp, Dee Gordon, and others to help take this team far. But they have been able to keep those guys with their big market (See: Kershaw's seven-year, $215 million extension).
I think the window has closed for teams that have built their team around pricey free agents. The game of baseball has turned into one of trades, prospects, and analytics, not free agents that are either on the downfall of their career or are injury prone (See: 2014 Rangers lineup). Since about 2010, teams have been better at signing guys to longterm deals during the prime of their career, rather as they get closer to reaching free agency. While this can only buy out a few free agent years, it will likely be the years that the team did not buy out when the player begins to decline or become hampered by injuries.
Take a look at Ryan Howard. Based on my calculations, through the arbitration process, Howard would have become a free agent following either the 2011 or 2012 seasons. Instead of extending Howard to a five-year deal in say, 2009, after Howard had already been one of the league's most prolific sluggers for a few seasons, the Phillies decided to wait until after the 2011 season.
Put that into prospective. Had Howard been signed to his five-year, $125 million deal back in 2009, he would likely become a free agent at the end of this season (the Phillies have a sixth year as a team option). That means Philadelphia would "only" have to deal with three terrible seasons from Howard. The Phillies did extend Howard following the 2011 season, so he is under contract through 2016, with an option for 2017. The Phillies could perhaps deal with five terrible seasons from Howard, paying him over $20 million in each and every one of them.
In short, the window hasn't closed for big market teams. But big market teams that still rely on old methods of signing contracts, giving extensions, and the traditional method of scouting will have a very difficult time contending in a major league system that has developed into a very analytical organization. So while the forward thinkers continue to thrive, the traditionalists will continue to fall. It is time for the Phillies, Yankees, and Rangers to finally change their ways.