How well did MLB teams spend their money this season? Here’s a look at how well or how poorly teams did with their payrolls this season in an attempt to translate dollars into wins — and why the Houston Astros, even with a low payroll, overpaid their players this season.
With the 2011 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 fans 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. The formula is simple: divide the payroll by the number of victories. The payroll information comes from USA Today; playoff teams are in bold.
|1||Tampa Bay Rays||41,053,571||91||451,138|
|2||Kansas City Royals||36,126,000||71||508,817|
|6||San Diego Padres||45,869,140||71||646,044|
|7||Toronto Blue Jays||62,567,800||81||772,442|
|16||St. Louis Cardinals||105,433,572||90||1,171,484|
|20||Los Angeles Dodgers||104,188,999||82||1,270,598|
|22||San Francisco Giants||118,198,333||86||1,374,399|
|23||New York Mets||118,847,309||77||1,543,472|
|24||Los Angeles Angels||138,543,166||86||1,610,967|
|25||Chicago White Sox||127,789,000||79||1,617,582|
|29||Boston Red Sox||161,762,475||90||1,797,361|
|30||New York Yankees||202,689,028||97||2,089,578|
No surprise that Tampa Bay would top this list; the team is notable for combining a low payroll with a winning record, thanks to a shrewd front office, a posse of young stars (Evan Longoria, David Price) and the managerial skill of Joe Maddon. And no surprise that both Arizona and Milwaukee would rank in the top 10: both teams are built around youth and inexpensive pitching. It’s also no surprise that the Yankees and the Phillies would be in the top five: both teams invested heavily in payroll and compiled the most wins in baseball this season.
As a measure of success and failure, though, this ranking is less useful than you’d think. If you think about it, the ranking above is also a measure of market size, with smaller-market teams spending less than big-market teams. Here’s your tautology for the day: Small-market teams spend less because they have less to spend. Large-market teams with robust revenue resources are always going to spend more because they can — or, more importantly, because their fans expect them to spend big bucks on players. We saw that in Minnesota, where the Twins spent a lot of money on Tsuyoshi Nishioka; in recent Metrodome days the Twins front office simply didn’t the resources to sign a big-buck free agent. The positioning for next season already started: witness the large number of Chicago Cubs fans assuming Tom Ricketts will spend huge money to sign both Prince Fielder and Albert Pujols.
So what makes for a more useful measure? 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.
We’ve applied this formula to this year’s teams, using the same payroll numbers from USA Today. In the following table, we have winning percentages, MW (marginal wins: winning percentage * .3), MP (marginal payroll; the amount a team spends beyond the MLB minimum of $414,000 per player on a 25-man roster), and CPMW (cost per marginal win: marginal payroll divided by marginal wins). In this ranking, the poorest-performing teams are at the top; the better-performing teams are at the bottom.
|5||New York Yankees||202,689,028||0.599||48.4||192,339,028||3,970,829|
|6||Chicago White Sox||127,789,000||0.488||30.5||117,439,000||3,856,022|
|7||New York Mets||118,847,309||0.475||28.4||108,497,309||3,827,066|
|9||Boston Red Sox||161,762,475||0.556||41.5||151,412,475||3,650,957|
|10||Los Angeles Angels||138,543,166||0.531||37.4||128,193,166||3,425,610|
|13||San Francisco Giants||118,198,333||0.531||37.4||107,848,333||2,881,950|
|14||Los Angeles Dodgers||104,188,999||0.509||33.9||93,838,999||2,771,546|
|15||St. Louis Cardinals||105,433,572||0.556||41.5||95,083,572||2,292,717|
|23||Toronto Blue Jays||62,567,800||0.500||32.4||52,217,800||1,611,660|
|24||San Diego Padres||45,869,140||0.438||22.4||35,519,140||1,588,797|
|28||Kansas City Royals||36,126,000||0.438||22.4||25,776,000||1,152,979|
|30||Tampa Bay Rays||41,053,571||0.562||42.4||30,703,571||723,390|
There’s a general correlation between the rankings in each measure, but we’d argue that results are considerably more refined in the second, particularly when it comes to futile spending. No surprise Tampa Bay, Arizona and Milwaukee would be near the bottom: they’re low-payroll teams who were winners this season. And although Pittsburgh, Cleveland and Kansas City weren’t above .500 this season, you could argue they spent their money well, not overpaying for wins while still building a solid platform for the future.
It also places the Philadelphia Phillies in an interesting position: still in the top half of MLB teams in buying wins, but not excessively so, and certainly within what you’d expect for a large-market team. The Phillies raised a lot of eyebrows when they invested even more in payroll this season after signing Cliff Lee to a contract, but the increased payroll seems to have paid off with a season-long set of sellouts at Citizens Bank Park and a playoff appearance.
More telling, however: this list pretty clearly shows the teams that ended up spending inefficiently. Houston spent a whole lot of money to gain just seven wins above the baseline, while Minnesota suffered through a miserable season redeemed by three-million fans going through the turnstiles of Target Field. It also shows that a low payroll doesn’t equal success: Houston and Seattle both trimmed payroll and still managed to spend a lot per marginal win. Baltimore, too, went cheap and still paid a lot per marginal win. So while big spending doesn’t automatically success, lower payroll don’t automatically mean success, either.
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 (i.e., Minnesota going up the last two years and the Dodgers going down the last two years). Of course, that’s a whole other can of worms.
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