Correlation between team payroll and making the playoffs

[mbgrayson]

We need more salary parity between teams in Major League Baseball.
When the Yankees spend $50 million more than the next richest team, the New York Mets, and then win the World Series, it simply amazes me that their apologists can claim that the situation is fair.

I start off with the principle that this is sport we are talking about, and that sports should be fair. There should be a level playing field, and winning should be based on brains, guts, luck, and foresight. Instead, the current MLB situation is based largely on who has the most money.

Winning can also be a matter of luck. There is no doubt that even the best designed plans can be damaged by an injury. "Chance’ also comes into play in things like whether a line drive finds a glove, or whether a bat meets a baseball squarely. Luck is a real factor in baseball.

Lets look back at the last ten seasons in the American League, from 2000 to 2009. Every year there are four teams that make it into the playoffs. We will examine which what percentage of times each team has made the playoffs over the last ten years. We will then rank the teams by payroll, and see which teams fall into the top ten, middle ten, and lower ten in terms of payroll.One would expect that there is a strong correlation between a team’s payroll and it’s chances of making the playoffs. It will not be a perfect correlation (See 2009 Mets....), but it will show that payroll does matter in MLB.

In the American League, the teams most successful in making the playoffs over the last ten seasons were the Yankees (90%), the Red Sox (60%), and the Angels (60%). The middle tier of success is the Twins (50%), the A’s (50%), the White Sox (30%), then the Indians and Mariners (both 20%). The lower tier is the Rays and Tigers (10%), followed by the Blue Jays, Rangers, and Royals (all 0%).

In payroll, we will first rank where each team stands overall, and then within it’s division. We will assign a rank of 1 through 30 showing where each team stood in relation to the other MLB teams in payroll rank. The disadvantage of this method is that it does not show wide payroll gaps.

In the American league, the teams that over the last ten seasons averaged the highest in MLB payroll rank (I took each teams position on overall MLB payroll rank for each season, added up the numbers for 2000 thru 2009, and divided by ten) were the Yankees (1.0), the Red Sox (3.10), the Angels (9.40), and the Mariners (9.9). The middle tier in payroll includes the White Sox (13.4), Rangers (14.5), Tigers (14.6), Orioles (14.8), Blue Jays (16.0) and the Indians (17.1). The lower tier in ten year payroll includes the Twins (23.0), A’s (23.5), Royals (25.0), and Rays (26.1).

When we put the numbers side by side, the correlation is evident:
1. Yankees 90% playoff rate, #1 in salary.
2. Red Sox 60% playoff rate, #2 in salary.
3. Angels 60% playoff rate, #3 in salary.
4. Twins 50% playoff rate, #11 in salary.
5. A’s 50% playoff rate, #12 in salary.
6. White Sox 30% playoff rate, #5 in salary.
7. Mariners 20% playoff rate, #4 in salary.
8. Indians 20% playoff rate, #10 in salary.
9. Tigers 10% playoff rate, #7 in salary.
10. Rays 10% playoff rate, #14 in salary.
11. Orioles 0% playoffs, #8 in salary.
12. Blue Jays 0% playoffs, #9 in salary.
13. Rangers 0% playoffs, #6 in salary.
14. Royals 0% playoffs, #13 in salary.
There are two teams that have clearly out-performed expectations looking solely at payroll; the A’s and the Twins.

The A’s seriously out-performed where we expect based on payroll from 2000 through 2003, and in 2006. This performance is documented in the book Moneyball (Michael Lewis), which was published in May of 2003. Once the A’s methods became well known through the publicity from this book, their ability to beat payroll expectations greatly diminished. Other teams picked up on the value of on-base percentage and statistical analysis.

The Twins have also exceeded payroll expectations. First of all, this is exaggerated to a significant degree by the division in which they compete. The difference from the highest payroll to lowest payroll in the AL Central has often been far less than in other divisions, so it is not as unexpected for the 4th or 5th highest payroll team to win that division. Still, in three of their five playoff year this decade, the Twins had a payroll significantly below their division average.

Finally, a number of teams have greatly underperformed where their payroll should place them. The Mariners, Orioles, and Rangers are the clearest examples, followed by the Blue Jays and Tigers.

The Mariners average being in the top ten in MLB salary over the last ten seasons, and their team salary has slightly exceeded their division average every year in the last ten. Yet they only have two playoff appearances, all the way back in 2000 and 2001. Since 2004, the Mariners have been outspent by the Angels every season, and the Angels went to the playoffs each of those years, except for 2006, when the A’s snuck in.

The Orioles have the misfortune of playing in the AL East with the Yankees and Red Sox. Their overall payroll ranks about 15th over the last decade, and they have zero playoff appearances to show for it. This is where the true unfairness of the current system shows itself. A team that finds itself in a division with New York and Boston has a very high bar to making the playoffs.

The Rangers started the decade (2000-2003) with high payrolls, and then dropped way down. The results have not changed: they have finished 3rd or 4th almost each season.

I think that the data shows that there is a correlation between team payroll and the chances to make the playoffs. The relationship is strongest when the payroll exceeds 130% of the division average payroll. That occurred thirty times in the last ten years, and of those 30 teams, 17 made it to the playoffs(57% success rate). When payroll exceeds 150% of the division average, as it did 11 times in the last ten years, those teams made the playoffs 8 times, for a 73% success rate.

On the other end of the spectrum, of those teams that had payroll less than half their division average (which happened 10 times in ten years), only one made the playoffs (the 2008 Rays), which is a 10% success rate.

My conclusion is that while it is possible to win with lower payroll, it is markedly more difficult. The lowest payroll teams have a much lower chance of playing post-season baseball than the highest payroll teams.

For those in the middle, the chances of winning seem to occur when strong young players come up through the minors, and stay under team control, combined with a thoughtful trade or a strong free agent signing. Winning with lower payroll is also more likely in a less expensive division where the payrolls of the top teams are only 20 or 30 percent higher than the middle teams.



What is the answer? That is the subject of another thread....
BTW: Read Joe Posnanski's piece on payroll and the Yankees....it is quite good.

Note: Team payroll data is from USA Today web site. http://content.usatoday.com/sports/b...aspx?year=2009

[blumj]

FYI, I noticed something recently that causes me to wonder if the figures for total payroll that a lot of people have been using lately to make these comparisons are really TOTAL payroll or if they are opening day payroll. Because it's very obvious to me that the figure consistently being cited as the Red Sox 2009 total payroll is not even close. And the only reason it's so obvious is because the Red Sox happened to hand out an unusually large number of incentive laden contracts with minimal guaranteed money last offseason and made several trades that added a significant amount of payroll during 2009, and none of it is reflected in the "total" being used, it's the same amount from opening day.

[Spitball]

Very interesting post, mb. For me, it spotlights a problem as baseball heads into the latest free agent auction. Last season, the Yankees came away with probably the three top free agents and now head into the current market prepared to bid on Holliday and Lackey. I just don't see how that can possibly be good for baseball. They either sign the top players or drive their price tags/the going market up.

[kaldaniels]

There are those among us who have thrown up the argument to the effect of "MLB has had more teams make the WS over the past year than the NFL has had teams make the SB", to claim that baseball has its parity. Does this article not make it clear that there is an enormous problem right now?

[BCubb2003]

I think it also shows to an extent the economic tiers of the teams and what their plyoffs chances would be like if the divisions were aligned according to markets. Megamarkets like New York, Boston, LA, maybe Chicago; major metro areas like Philadelphia, Baltimore, Washington, Toronto; Midwest industrial cities like Pittsburgh, Cleveland, Detroit, Milwaukee, Cincinnati.

[NJReds]

There was an interesting discussion on Mike & Mike (ESPN) this morning about how much money the lower payroll teams actually have. With revenue sharing, some of these teams that spend between $30-$50M on payroll have upwards of $80M from revenue sharing before they even sell a ticket. Where's the money going?

If there was a salary floor of, say, $75M, it would give top free agents more options for signing. And it would keep teams like Cleveland from dealing away Cy Young winning pitchers, and the Twins from giving away Santana for marginal prospects.

[Chip R]

Originally Posted by NJReds

There was an interesting discussion on Mike & Mike (ESPN) this morning about how much money the lower payroll teams actually have. With revenue sharing, some of these teams that spend between $30-$50M on payroll have upwards of $80M from revenue sharing before they even sell a ticket. Where's the money going?

If there was a salary floor of, say, $75M, it would give top free agents more options for signing. And it would keep teams like Cleveland from dealing away Cy Young winning pitchers, and the Twins from giving away Santana for marginal prospects.

Yeah, I heard that too. Makes you wonder if the problem isn't just payroll disparity but what's happening to the money coming in from revenue sharing. I think even the most fervant front office supporter would explode if they found out Castellini was using that money to pay off his loans he took out to buy the team.

[bucksfan2]

Originally Posted by NJReds

There was an interesting discussion on Mike & Mike (ESPN) this morning about how much money the lower payroll teams actually have. With revenue sharing, some of these teams that spend between $30-$50M on payroll have upwards of $80M from revenue sharing before they even sell a ticket. Where's the money going?

If there was a salary floor of, say, $75M, it would give top free agents more options for signing. And it would keep teams like Cleveland from dealing away Cy Young winning pitchers, and the Twins from giving away Santana for marginal prospects.

A salary floor should be in place. I think if you set a cap and a floor any time who wants to operate below the floor should be relocated.

The Twins decided to make a run at Mauer and Morneau instead of paying top dollar to Santana. I can't really argue with them considering that a long term extension for Santana would pay him top dollar as he started to become unproductive.

If MLB takes notes from all professional sports salary cap they can get the best of both world. Put a cap and floor but also make it so there is a vet maximum and a player can make the most money signing with his current team a la the NBA.

[Chip R]

Originally Posted by bucksfan2

A salary floor should be in place. I think if you set a cap and a floor any time who wants to operate below the floor should be relocated.

The Twins decided to make a run at Mauer and Morneau instead of paying top dollar to Santana. I can't really argue with them considering that a long term extension for Santana would pay him top dollar as he started to become unproductive.

If MLB takes notes from all professional sports salary cap they can get the best of both world. Put a cap and floor but also make it so there is a vet maximum and a player can make the most money signing with his current team a la the NBA.

You'll never sell a cap to the Players Association but few would object to a floor except the Pirates and Rays and Marlins.

[Sea Ray]

Originally Posted by NJReds

There was an interesting discussion on Mike & Mike (ESPN) this morning about how much money the lower payroll teams actually have. With revenue sharing, some of these teams that spend between $30-$50M on payroll have upwards of $80M from revenue sharing before they even sell a ticket. Where's the money going?

If there was a salary floor of, say, $75M, it would give top free agents more options for signing. And it would keep teams like Cleveland from dealing away Cy Young winning pitchers, and the Twins from giving away Santana for marginal prospects.

I'd love to know where we can find out how much these teams are receiving from revenue sharing. $80mill seems like a lot to me.

A salary cap with a salary floor is the way to go

[RedsManRick]

Originally Posted by Sea Ray

I'd love to know where we can find out how much these teams are receiving from revenue sharing. $80mill seems like a lot to me.

A salary cap with a salary floor is the way to go

I'll take a salary floor based on industry revenues and then an expanded luxury tax. I certainly don't want to end up in a spot where teams are making more money and simply pocket it because the cap isn't properly pegged.

[bucksfan2]

Originally Posted by RedsManRick

I'll take a salary floor based on industry revenues and then an expanded luxury tax. I certainly don't want to end up in a spot where teams are making more money and simply pocket it because the cap isn't properly pegged.

I would almost make the floor a 3 year moving average. If a team wants to rebuild, which in baseball terms makes sense, you have to allow for that. You have to allow for a team to restock its farm system, trade off their aging vets, and start to get younger. But when you start to get younger you get cheaper. I don't think a club should be punished for trying to rebuild, I think that in a given amount of time the club should be required to show that the club is willing to invest in its club.

If clubs don't want a cap then increase the luxury tax. Make it $1 for $1 tax on anything above the set rate. Make it so if the Yankees go after Lackey this off season and sign him to a 4 year $75M contract they have to pay $150M over the life of that contract. If they want to do that, fine, at least make it a costly endeavor.

[BCubb2003]

I wonder what the payroll of the proverbial all-replacement-level team would be?

[NJReds]

Originally Posted by Chip R

You'll never sell a cap to the Players Association but few would object to a floor except the Pirates and Rays and Marlins.

Buster Olney was the guest. He said the union was against a hard salary floor because the feeling would be that it would eventually lead to hard cap as well.

His suggestion was a penalty tax (like a luxury tax) for those who didn't meet a certain minimum payroll.

[NJReds]

Originally Posted by Sea Ray

I'd love to know where we can find out how much these teams are receiving from revenue sharing. $80mill seems like a lot to me.

A salary cap with a salary floor is the way to go

That was a point of their conversation this morning. Nobody knows where the money is going. Bud Selig has said that MLB looks at all of that info, and that they're fine with how teams are using the money, but MLB will not give out details.