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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