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Follow the money: How efficiently MLB teams spent money this season

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Major League Baseball

It's one thing for a Major League Baseball team to spend money in pursuit of wins and, presumably, a robust box office. Success can be elusive, however, as our rankings of how efficiently MLB teams spent money indicate.

With the 2012 season completed, it's time to look at how well MLB did in translating payroll to win. Despite what many fans think, there's not necessarily a correlation between payroll and winning: as any Chicago Cubs fan knows, spending money doesn't guarantee a winning percentage. The more important measure is how efficiently a team managed their resources: coaxing the most wins for the least amount of money.

A very crude measure of this is cost per win, as presented here with payroll information from USA Today (playoff teams in bold):

TEAM PAYROLL WINS CPW
Oakland Athletics $55,372,500 94 $589,069
Tampa Bay Rays $64,173,500 90 $713,039
San Diego Padres $55,244,700 76 $726,904
Pittsburgh Pirates $63,431,999 79 $802,937
Washington Nationals $81,336,143 98 $829,961
Kansas City Royals $60,916,225 72 $846,059
Cincinnati Reds $82,203,616 97 $847,460
Baltimore Orioles $81,428,999 93 $875,581
Atlanta Braves $83,309,942 94 $886,276
Arizona Diamondbacks $74,284,833 81 $917,097
Toronto Blue Jays $75,489,200 73 $1,034,099
Seattle Mariners $81,978,100 75 $1,093,041
Houston Astros $60,651,000 55 $1,102,745
Los Angeles Dodgers $95,143,575 86 $1,106,321
Chicago White Sox $96,919,500 85 $1,140,229
Cleveland Indians $78,430,300 68 $1,153,387
Milwaukee Brewers $97,653,944 83 $1,176,554
Colorado Rockies $78,069,571 64 $1,219,837
San Francisco Giants $117,620,683 94 $1,251,284
St. Louis Cardinals $110,300,862 88 $1,253,419
New York Mets $93,353,983 74 $1,261,540
Texas Rangers $120,510,974 93 $1,295,817
Minnesota Twins $94,085,000 66 $1,425,530
Chicago Cubs $88,197,033 61 $1,445,853
Detroit Tigers $132,300,000 88 $1,503,409
Miami Marlins $118,078,000 69 $1,711,275
Los Angeles Angels $154,485,166 89 $1,735,788
New York Yankees $197,962,289 95 $2,083,814
Philadelphia Phillies $174,538,938 81 $2,154,802
Boston Red Sox $173,186,617 69 $2,509,951

Not a bad measure: put together a young team with a low payroll, add a savvy older manager to the mix, and you've got a pretty good shot at making the playoffs. Conversely, if you're a major-market team, you have a pretty good shot at spending enough to be competitive. Despite this year's results, the Angels, Phillies and Red Sox are annual playoff contenders, so the cost-per-win numbers probably aren't causing any loss of sleep for executives from those teams.

But there's a better way to evaluate how well MLB spent their money. The late Doug Pappas put together a formula to measure Marginal Dollars per Marginal Win. The assumption is that a terrible team in baseball, made up entirely of minimum-wage players, would still manage to win a third of their games, so the true measure of success is how efficiently a team spent to procure wins past that minimum. In short, a successful team would spend the fewest marginal dollars to procure the most marginal wins; conversely, an unsuccessful team would overspend to procure a relatively few number of wins. They wasted their money.

Here are the numbers for the 2012 season. The formulas are not too complex, but they bear some explanation.

We begin with payroll numbers from the USA Today database, considered to be the most reliable out there. We then list the team's winning percentage. MWs refers to Marginal Wins: the assumption is that a terrible team made up of minimum-wage players would win a third of their games, and both the Houston Astros and Chicago Cubs came dangerously close to this baseline. We're calculating 25 players on an active roster plus three on injured reserve, with an MLB minimum salary of $480,000. MP refers to Marginal Payroll; the amount a team spends beyond the MLB minimum of $480,000 per player on a 25-man roster with three on injured reserve. CPMW refers to cost per marginal win: marginal payroll divided by marginal wins. In this ranking, the poorest-performing teams are at the bottom; the better-performing teams are at the top.

TEAM PAYROLL WIN  MWs MP CPMW
Oakland Athletics $55,372,500 0.580 45.4 $41,932,500 $924,438
Tampa Bay Rays $64,173,500 0.556 41.5 $50,733,500 $1,223,319
Washington Nationals $81,336,143 0.605 49.4 $67,896,143 $1,374,138
Cincinnati Reds $82,203,616 0.599 48.4 $68,763,616 $1,419,621
San Diego Padres $55,244,700 0.469 27.4 $41,804,700 $1,526,945
Baltimore Orioles $81,428,999 0.574 44.4 $67,988,999 $1,531,698
Atlanta Braves $83,309,942 0.580 45.4 $69,869,942 $1,540,343
Pittsburgh Pirates $63,431,999 0.488 30.5 $49,991,999 $1,641,450
Arizona Diamondbacks $74,284,833 0.500 32.4 $60,844,833 $1,877,927
Kansas City Royals $60,916,225 0.444 23.3 $47,476,225 $2,035,161
Los Angeles Dodgers $95,143,575 0.531 37.4 $81,703,575 $2,183,303
Chicago White Sox $96,919,500 0.525 36.5 $83,479,500 $2,290,247
San Francisco Giants $117,620,683 0.580 45.4 $104,180,683 $2,296,752
Texas Rangers $120,510,974 0.574 44.4 $107,070,974 $2,412,160
Milwaukee Brewers $97,653,944 0.512 34.3 $84,213,944 $2,452,072
St. Louis Cardinals $110,300,862 0.543 39.4 $96,860,862 $2,460,521
Toronto Blue Jays $75,489,200 0.451 24.5 $62,049,200 $2,536,555
Seattle Mariners $81,978,100 0.463 26.4 $68,538,100 $2,595,550
Detroit Tigers $132,300,000 0.543 39.4 $118,860,000 $3,019,357
New York Mets $93,353,983 0.457 25.4 $79,913,983 $3,142,014
Cleveland Indians $78,430,300 0.420 19.4 $64,990,300 $3,343,122
Los Angeles Angels $154,485,166 0.549 40.3 $141,045,166 $3,496,583
New York Yankees $197,962,289 0.586 46.3 $184,522,289 $3,982,610
Colorado Rockies $78,069,571 0.395 15.4 $64,629,571 $4,199,452
Minnesota Twins $94,085,000 0.407 17.3 $80,645,000 $4,652,417
Philadelphia Phillies $174,538,938 0.500 32.4 $161,098,938 $4,972,189
Miami Marlins $118,078,000 0.426 20.4 $104,638,000 $5,126,298
Chicago Cubs $88,197,033 0.377 12.5 $74,757,033 $5,993,028
Houston Astros $60,651,000 0.340 6.5 $47,211,000 $7,285,648
Boston Red Sox $173,186,617 0.426 20.4 $159,746,617 $7,826,113

The lesson: spending on payroll certainly doesn't equal success. Five of the top seven teams on the list made the playoffs; committing to youth and keeping payrolls down made the teams financial successes when it came to performance on the field. Six of the seven teams managed to notch more than 44 marginal wins and spent less than $1.5 million per marginal win. (San Diego is the outlier; it's on the list only because its payroll was the lowest in baseball.)

In this case, the clear leader is the Oakland Athletics, as GM Billy Beane managed once again to put together a winner with limited resources. But we'd argue the clear winner is Washington, where the Nationals front office managed to spend relatively little on marginal wins while at the same time boosting attendance by 21 percent.

At the bottom of the list, the 12 teams spending the most per marginal win had to be disappointed with their seasons, save the Yankees and the Tigers. The Yankees really are impervious to analyses like these; the team's payroll is what it is and the team's revenue structure makes spending on marginal wins a meaningless number. The same goes for Philadelphia, the Red Sox and the Angels: fans cram their home ballparks and view their broadcasts no matter what.

But for the Twins, Marlins, Astros and Rockies, these numbers are deadly. All four teams had disappointing seasons at the box office, and all four team are in markets where there's lot of competition, so efficient spending on winning is all.

Obviously there are limits to this kind of analysis. Payroll is a crude measure; just as important, we'd argue, is revenue, but MLB teams zealously guard revenue data, so we can't throw it into the equation. In general, a large-market team will generate more revenue than a small-market team -- duh! -- but there are many shades between a New York Yankees and a Kansas City Royals when it comes to revenues, and there's some fluidity in where a team ranks in revenue production among its peers. Of course, that's a whole other can of worms.

RELATED STORIES: Measuring the 2011 financial winners and losers in MLB

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