On Payrolls

by Jon Marthaler on Nov 9, 2009 11:00 AM EST in By the Numbers Comment 13 comments

I swear, I didn't want to be the guy that keeps harping on payroll discrepancies in baseball. But then I discovered one of the depressing things about payrolls. And then the great Joe Posnanski got in on the act, pointing out that baseball has a tendency to hide dominance - that even if you put together a team made up of the best players in baseball, that team still might lose 45-50 games during the season, and still might not win the World Series. That's just the way it's set up.

So I went ahead and did some number crunching (well, number adding, at least). Using the USA Today payroll database, I went through a decade's worth of payrolls. (Please, no arguments about whether the decade is over this year or next year. It's 2000-2009 for the purposes of this post.)

You won't be surprised to find out that the Yankees top the list; they had the largest payroll in every single season, and all told spent just over 1.67 billion on player contracts over the decade. Only three other teams (the Red Sox, the Mets, and the Dodgers) cleared the $1 billion mark.

I'm not sure that I'm doing justice to how big that gap is, though. The Yankees spent only $9 million less than the Cubs and the White Sox combined. The Yankees spent more than the Nationals, Pirates, Marlins, and Rays - FOUR OTHER TEAMS - combined.

A little closer to home: take the Red Sox payroll, the second-highest payroll in the league. Now add the Twins payroll. THAT is what the Yankees spent; they could afford to buy the Red Sox roster, and add in the Twins roster, every year.

And now, let me address the "money can't buy wins" argument, which is what Posnanski tackled so ably. No amount of money can buy an undefeated season, and the playoffs are such a crapshoot that the best team doesn't always win.

So I ask you to instead look at it this way. Consider this:

The top 13 teams in payroll over the last decade each won at least one division title. Only six of the other 17 teams won even one.
43 of a possible 60 division titles were won by these same 13 teams.
57 of a possible 80 playoff berths were won by these same 13 teams.
The Mets and the Mariners were the only teams in the top 13 that didn't go to the playoffs at least three times in the decade, going twice each. Out of the bottom 17, only the Athletics, Twins, and Diamondbacks made the playoffs at least three times (and the D'Backs had payrolls north of $85 million two of those years).

What I'm trying to say is this. There are, in general, two ways to compete in baseball. You can get lucky with young talent, like the Twins and Athletics. You can hope for one or two good years, like the Rays or the Marlins or the Brewers.

Or you can spend lots of money.

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Yeah

Here’s the thing: this sort of piece is fine and all, but the problem is it’s the wrong starting point. OF COURSE spending money correlates to wins—that’s how the market works. The best players should cost the most money, and therefore teams that spend the most should have more of the best players, and thus should win more games. I don’t know why we would object to this. The best players SHOULD make the most money, right?

The questions are: is the variance in spending purely an effect of revenue and market quality, or do the owners who spend less make a choice to do so for other reasons? Is the disparity, in either spending or revenue access, something so great that some clubs cannot structurally compete? Do we want a “level playing field” and do we know what that is? What, if anything, should we do about it? There are already significant revenue distribution mechanisms in place. What would be the consequences of doing more? Of instituting a salary floor and/or cap?

I’m not sure what, if anything, should be done. There are always unintended consequences. One the unacknowledged ones of the current system is that some owners are encouraged not to try to win, because the revenue sharing checks essentially guarantee them a profit.

by Eric in Madison on Nov 9, 2009 11:59 AM EST reply actions 0 recs

A few attempts at answers...

is the variance in spending purely an effect of revenue and market quality, or do the owners who spend less make a choice to do so for other reasons?

Obviously, this depends on ownership to some degree. I’d say that, for the most part, it’s a revenue thing – the Yankees have, by far, the largest revenue stream. Teams with more national followings (Cubs, Red Sox, Braves, Yankees) or especially large metro areas (NY & LA teams) have huge revenues because of those things, and they generally have the largest payrolls as well.

Is the disparity, in either spending or revenue access, something so great that some clubs cannot structurally compete?

Any team can compete – the Twins and A’s winning with their paltry revenues proves that, as did the Expos in their last years, when they didn’t even have an English-language radio contract. The problem is that they can’t compete in the same way that the top-tier teams can – the Twins can’t sign whatever top-tier free agent they want to fill holes in their team, and (perhaps more importantly) they can’t easily absorb a financial mistake like the Yanks’ Carl Pavano signing.

Do we want a "level playing field" and do we know what that is?

A “level playing field”, in my eyes, is a situation in which all teams have basically equivalent access to top talent. Whether we want that is open for debate – you can make a decent argument that it’s in the best interest of a league for the most popular team in the largest city to be dominant. I don’t think that a level playing field is ever truly possible (even in the more socialist NFL, richer teams have more money for staff, facilities, and maintaining payroll closer to the cap), nor do I know exactly what the best way to achieve it would be.

What, if anything, should we do about it? There are already significant revenue distribution mechanisms in place. What would be the consequences of doing more? Of instituting a salary floor and/or cap?

I don’t know what to do about it, or whether anything should be done. I certainly wouldn’t mind some sort of salary cap, not that MLBPA would ever agree to something like that; they’d form their own league first, I think.

"There are only two things that are infinite, the universe and human stupidity, and I'm not sure about the former." - Albert Einstein

by BeefMaster on Nov 9, 2009 2:36 PM EST up reply actions 0 recs

MLB

needs tweaking, but I am bored with the NFL gloating about their “any given Sunday” approach. That’s how you get mediocre teams and hapless franchises like the Arizona Cardinals in the Super Bowl. Ish.

by wcooley on Nov 9, 2009 3:00 PM EST up reply actions 0 recs

Not unique to football

The NFL has had a lot of lower seeds in the Super Bowl lately, but there hasn’t been a ton of that historically, any more than you have teams like the 2006 Cardinals in baseball. For all the “any given Sunday” talk, too, football is probably the most predictable major sport – even the best MLB teams are lucky to win 60% of their games, while the NFL routinely features teams that win better than 80% of theirs.

I think the big thing that the NFL offers (or purports to offer) over MLB is not parity within a season but parity from season to season. A team that is successful enough to go 15-1 likely had a lot of players break out, and they’re going to be hard-pressed to afford to retain all those players within the constraints of the salary cap. Obviously, long-term excellence or futility is still possible (e.g. New England, Indy, Detroit), but it requires much better management (or much worse mismanagement).

Funny that the worst regular-season teams to take part in both MLB and the NFL’s title games were named the Cardinals.

"There are only two things that are infinite, the universe and human stupidity, and I'm not sure about the former." - Albert Einstein

by BeefMaster on Nov 9, 2009 4:31 PM EST up reply actions 0 recs

Year to year

It is the year-to-year swings that bother me. Basically the NFL rewards bean counters rather than scouting and development.

by wcooley on Nov 10, 2009 10:16 AM EST up reply actions 0 recs

Amen brother.

The NFL has so much parity it bores me to death.

by cubsforever on Nov 10, 2009 12:21 PM EST up reply actions 0 recs

I used to think you could do it with great talent evaluation and thrifty signing

Thing is, the Yankees don’t just spend 10 times more than the Twins in player salaries. They spend that in all areas. They have four scouts to the Twins one. Before this year, they typically spent 10 times what the Twins spent on drafting and signing international players. They spend 10 times what the Twins spend on international and minor league facilities. And they have more minor league teams than the Twins. By all rights, they should win just with their minor league system. But they also sign the best free agents every winter. It’s a miracle they don’t win every year.

"You're thinking too much. Just have fun." -- Bennie "The Jet" Rodriguez in Sandlot

by cmathewson on Nov 9, 2009 2:03 PM EST reply actions 0 recs

The bullet points are interesting to see.

What scares me about the idea of a salary cap, the kind of thing most people want in baseball, is that it’s just more money the Yanks could pump into their system. They abuse their system now but with a salary cap they’d immediately become the best system in baseball. Okay maybe not immediately, but in a span of two or three years.

by Jesse on Nov 9, 2009 2:37 PM EST reply actions 0 recs

Perhaps it should be a cap the whole baseball operations budget

But, even so, there’s only so much you can spend money on in the minors. You can have more teams (the Yankees do). But each team costs the big club on average of $1million. And there are only so many slots in the existing leagues. They could sign more minor league free agents. But that stifles their talent and minor league free agents want opportunities more than money. Plus, if they pumped more into the minor league system, they’d just be more susceptible to the Rule 5 draft, which would help the little teams. Come to think of it, the CBA accounts for minor league parity.

It’s just that $206 million that needs to be cut down by, say, 30%.

"You're thinking too much. Just have fun." -- Bennie "The Jet" Rodriguez in Sandlot

by cmathewson on Nov 9, 2009 3:23 PM EST up reply actions 0 recs

Great research Marthaler and Posnanski

The consistancy of winning is the problem that small market teams face. I would love to see an NFL style cap, but that is rather unrealistic.

Some simple things that should be done have been alluded to. If I am way off-base with these comments, please point them out so I can better understand the situation.

A mandatory minimum 60% reinvestment rate from revenues toward payroll. Right now there is nothing and teams like Pittsburgh and even our darling Twins for the last few years seem to be pocketing cash (reinvestment rate below 50% I believe) rather than reinvest.

Another item I would like to see would be a system similar to the NBA (I think this is the only thing they ever did right) where a player is more easily signed by his current team than to a new team. MLB could set up a more thorough revenue sharing system, where MLB holds onto the revenue. In this system, any player that has spent 5 years with the same team becomes a restricted free agent. Team B can than offer a $160 million contract to star player and Team A, which star player has played for for 7 years, has the chance to match it. The MLB rev share comes in here in that it subsidizes Team A at 20% (or whatever the CBA terms are) if they agree to the contract.

This would create more sign and trades so teams would get proper compensation for their stars or those stars will stay in their current market. I’m not sure how or even if this would all work, but it would be worth exploring. It is obvious with so much international money being spent by the Elites that losing a draft pick or two is nothing since they can just sign the two best international players to take their place. This would also eliminate draft pick compensation for signing a Type A/B player, since that rating system would no longer exist.

This is certainly something the players union could get behind as it does nothing to impede contract values and owners would probably get onboard as it would help with parity. The biggest concern is creating a compensation system that does not have more problems than the current one.

by PinkiePinkerton on Nov 9, 2009 5:25 PM EST reply actions 0 recs

NBA-style "max salary"

along with giving an existing team an advantage to re-sign its players would be a very effective change, IMO. If there was a max contract, say 5 years / $100M, we might have seen more teams in the mix for Mark Teixeira or C.C. Sabathia last offseason. As it stands, when one team can simply up the bidding another $30M, you’ll see the Yankees grab whomever they want.

by Adam Peterson on Nov 10, 2009 2:50 PM EST up reply actions 0 recs

The Biggie.......

Being able to “eat” mistake contracts, which are guaranteed in baseball….

plus having the revenue to add quality players at almost anytime during a season….

That’s where money plays an important factor (not to mention the ability to overbid, say, a year or two and $10-20 million more on a contract than the next closest suitor).

The Twins in 2009 were still paying Mike Lamb, basically what they paid Joe Crede. To the Yankees, this was a drop in the bucket.

Visit www.TwinsCards.com and check out "rosters" to see my collection!

by rosterman on Nov 9, 2009 8:33 PM EST reply actions 0 recs

Baseball is life.....

Rosterman I think you have the hit the main point about “being able to eat mistake contracts”. That the Yankees and Red Sox can have $10m players on their payroll who give them absolutely nothing (Pavano) and still compete gives them a huge advantage. They can overpay draft picks, foreign unknown free agents, and MLB free agents and these mistakes do not impact the caliber of talent they can put on the big league roster year in and year out.
I was just reading a Forbes 2008 list of rankings for revenue to payroll ratios and the Twins were 13th ahead of the Phillies (14) and Rays (30). They can also take more risk extending a deal longer to a player who may not perform in the final year of two of a contract that the Twins cannot.

The smaller market teams are supposed to be able to compete through controlling players and salaries via the arbitration process but the Yankees, etc., skew the arbitration process so players like Kyle Lohse continue to get raises beyond what their performance warrented in my mind and the Twins were forced to continue to pay speculative wages to him on the hopes someday he would be worth it. Of course by the time that might happen he would then be free agency eligible and the Twins. I guess the point of the system is that a small market team gets lucky and the player performs above his arbitrated salary for a couple of years before they lose him (Ryan Howard) or at the very least they get a discount for a few years so they can afford some complimentary players.

It seems the systems MLB has in place to help the smaller market teams may not be as big a help as was hoped for and some changes need to be considered. Perhaps allowing a team to designate a couple of its own Type A free agents might work. But that might not be fair to the players involved.

To me however the bottom line is that life isnt fair and neither is baseball. If your not born into money you have to work for it….or get lucky. The Yankees are in NY with a huge market and they have done well with it. We don’t have that market but we have done pretty well with what we have and so have some others. While it would be entertaining to put the Yankees 09 team in Twins unis for a year to bash the AL Central would they really be Twins or would they be imposters of what we know really are Twins?

by Twinsfan1977 on Nov 10, 2009 11:43 AM EST up reply actions 0 recs