Correlation between team payroll and making the playoffs

[Chip R]

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.

If the owners really want that salary floor, which I'm guessing they don't, they could sell it to the players with a promise not to put a cap in for the rest of the BA.

[Sea Ray]

If the owners really want that salary floor, which I'm guessing they don't, they could sell it to the players with a promise not to put a cap in for the rest of the BA.

Why would the owners want a floor without a cap? I am against a floor without a cap. One doesn't work without the other.

I'm interested in giving teams like the Reds a fighting chance. Instituting a floor won't help them.

[mbgrayson]

Does anyone know of any web sites where team by team revenue sharing numbers are reported? My quick attempt to find a comprehensive list has not been successful so far. This is itself a problem. If MLB would simply publicize the revenue sharing data more clearly, it would lead to pressure on revenue receiving teams to spend more on payroll. For example, if every January, MLB gave out a press release that stated that the Rays just got $35 million in revenue sharing money, it would be awful hard for them to cry 'poor' when it comes to player salaries or free agent signings.

I don't really see how a salary floor could work in MLB. Lets say the floor was right at the Reds current payroll. For the sake of argument, let's say that was $73 million. What if the Reds want to trade Cordero for a couple of nice minor league prospects. Since his salary is $12 million, and the net result would be dropping the Reds under the floor, wouldn't that tie the hands of salary floor teams (i.e. preventing such a trade) in a way that other teams wouldn't have to worrry about?

Or would the floor only apply to opening day payroll? If so, then teams could just wait till July and trade off their high salary guys....

The current system is deeply flawed, but it is not easy to design a replacement system, at least one that would improve things. To me, there doen't need to be a floor, only an absolute salary cap. And that cap, in today's dollars, probably should be around $100 million or so. It should be low enough to effect more than just the Yankees....

I know the union will be opposed to any cap, but that would at least prevent the Yankees from signing the best 2 or 3 free agents every year, costs and penalties be damned... The cap could gradually rise, to allow for inflation.

As I noted above, the highest payroll team won't always win their division. But when the team payroll is 150% or more of their division average, fair competition breaks down. So to me, that cap needs to be at about that level, so that the disparity between rich and poor teams player payrolls shrinks. Of course then the rich teams will be forced to spend all that money on their minor league and international programs, so those may eventually need to be regulated too....it is tough to start regulating the market without all sorts of impacts that may not be anticipated.

[redsmetz]

I searched some too, but MLB apparently has not released revenue sharing info since 2006. Convenient, no?

[westofyou]

http://www.bizofbaseball.com/index.p...ials&Itemid=39

A funny thing happened starting last year: reports on revenue-sharing in Major League Baseball dried up. While there was plenty of stories dealing with ownership rhetoric (i.e. the Yankees complaining about the system, and low-revenue making clubs calling for a salary cap), there were no stories on the amount of money being transferred from payors to payees.

Since the institution of the system in baseball, you could count on at least one solid story from The Associated Press on the matter. But, over the last two years, there has been nothing. The reason? Sources within baseball appear to have decided not to release the figures.

In the interest of those that look at revenue-sharing in baseball, I have compiled what is believed to be the only years where figures for all 30 clubs were released to the public. Note that the figures for 2002-2003 by way of The Associated Press are the most accurate while the figures from the Wall Street Journal from 2005 are rounded. Partial 2006 figures from Philadelphia Inquirer are provided, as well.

Closing note: with the 2009 season fast approaching the All-Star break, the odds seem exceptionally long that a report on 2008’s figures will be surfacing.

Year                           2003               2002    
Montreal                 29,517,000     28,493,994 
Florida                    21,030,000     20,946,573 
Tampa Bay            20,464,000     14,724,463 
Kansas City           19,042,000     16,629,872 
Toronto                   18,735,000     13,691,953 
Minnesota              17,249,000      12,977,421 
Detroit                     16,738,000      11,615,688 
Milwaukee              16,555,000       8,502,007 
Pittsburgh               13,299,000       6,400,652 
San Diego              13,250,000       6,283,572 
Oakland                  11,756,000       9,201,545 
Philadelphia            9,013,000       9,834,124 
Cincinnati                 6,469,000       9,807,244 
Colorado                  2,469,000     (-5,127,222)
Anaheim                  1,874,000     (-1,303,070)
Arizona                     1,456,000     (-3,255,682)
Houston                   1,182,000     (-4,326,392)
Baltimore                    252,000     (-5,337,479)
Cleveland               (-4,828,000) (-10,612,923)
Chicago W. Sox    (-4,833,000)   (-3,823,142)
Texas                    (-7,162,000)   (-8,205,165)
St. Louis                (-9,202,000)   (-8,385,888)
Los Angeles           (-9,490,000)   (-9,278,555)
Atlanta                (-11,291,000)   (-9,753,575)
San Francisco       (-12,959,000)    (-9,638,790)
Chicago Cubs       (-16,731,000)    (-8,280,260)
N.Y. Mets            (-21,473,000)  (-17,366,067)
Seattle                (-31,023,000)  (-19,877,788)
Boston                (-38,692,000)  (-17,896,820)
N.Y. Yankees       (-52,650,000)  (-26,640,289)
Transfer             $220,350,000   $169,109,108

Source: The Associated Press 

2005

Payors

Team                  Amount paid (millions)
New York Yankees          $76
Boston Red Sox              $52
Chicago Cubs                  $32
Seattle Mariners              $25
New York Mets               $24
Los Angeles Dodgers       $20
St. Louis Cardinals           $19
Chicago White Sox          $18
San Francisco Giants        $14
Houston Astros              $11
Los Angeles Angels         $11
Atlanta Braves               $10
Texas Rangers               $.035

Payees

Team                 Amount received (millions)
Tampa Bay Devil Rays    $33
Toronto Blue Jays         $31
Florida Marlins               $31
Kansas City Royals         $30
Detroit Tigers              $25
Pittsburgh Pirates         $25
Milwaukee Brewers       $24
Minnesota Twins          $22
Oakland Athletics          $19
Cincinnati Reds             $16
Colorado Rockies          $16
Arizona D-Backs            $13
Cleveland Indians          $6.0
Philadelphia Phillies        $5.8
San Diego Padres         $5.7
Washington Nationals   $3.9
Baltimore Orioles          $2.0

Source: The Wall Street Journal 

2006

Payees
Devil Rays $36 million
Marlins $33.4 million
Royals $33.2 million
Phillies $4.8 million

Payors
Yankees ($78.7 million)
Red Sox ($59.7 million)
Mets ($30.9 million)

[mbgrayson]

It is very interesting to see that the last three seasons of revenue sharing numbers are effectively being kept secret.

It would seem to me that just releasing the numbers would put some pressure on revenue receiveng teams to use the money for payroll. Letting them get the money and keeping it secret is wrong, dumb, and typical for the monopoly that is Major League Baseball.

[TheNext44]

I think that just a "Yankee Cap" would do wonders for parity.

The Yankees $210M payroll creates two big problems:

1) It allows them to hoard all the good players. They can have any free agent that they want, as long as the player is willing to play for them. They can outbid any team, including the Red Sox, Angels and Dodgers by obscene amounts, CC's, Tex's and AJ's contracts are perfect examples of this. They can also act as vultures and devour any big contracts that other teams can't handle. Swisher and Nady are perfect examples of this.
The reason why they can do this is because money is never an issue for them. They could have a $400M payroll and still make money overall. They could not sell a single ticket and still sustain a $250M payroll from media revenue alone. If there is a player that they need or want, they can get him. Always.

2) #1 leads to other teams like the Red Sox, Mets and Angels, pushing the envelope on their payroll, overpaying for players, just to keep up with them. This raises salaries to the ridiculous levels they are at now. It also means that these teams, along with the Yankees, will have most of the great players. It is highly likely that the Reds will not be able to keep Votto, Bruce, Cueto and Volquez longer than a few years. Most likely two or three or all of them will end up a Yankee, Red Sox, Dodger or Angels in a few years. All because the Yankees drive up the price of all players with their hoarding and over paying.

And when the economy is bad like it is now, all the other teams have no shot. They have to reduce payroll while the Yankees can keep theirs three to four times as big as most teams.

So if the cap was set at $175M, which seems like it would not be effective, it would actually have a huge effect.

It would force the Yankees to choose between CC, Tex and AJ, between A-Rod and Jeter, between Posada and Mastui, between Damon and Pettitte. They would not be able to afford them all. They would have to be wise with their money, and could not overpay to get whomever they want.
That would allow the Red Sox, Angels, Dodgers, and others to slow down their overpaying. Most likely, these big market teams would still end up with most of the best players, but it would lower salaries in general, and allow teams like the Reds at least to keep the players that they develop longer.

It wouldn't make everything right, but I think it would go a long way to making things better. And it would be really hard for the Union to fight a $175M salary cap, since it would only effect one team.

[BCubb2003]

Trouble is, they'd pay Derek Jeter $15 million for The Derek Jeter Show on the YES Network, and Alex Rodriguez would get $20 million for Life With A-Rod, and C.C. Sabathia would get $10 million for Sabathiagraphy.

Once it gets in the Yankees' pockets, it's hard to get it back out.

[mbgrayson]

Lets now examine the last ten seasons in the National League, from 2000 to 2009, and see if there is a similar correlation. We will examine what percentage of times each team has made the playoffs over the last ten years. We will then rank the teams by payroll, and look for correlation between how often each NL team makes the playoffs and their rank in payroll.

In the National League, the teams most successful in making the playoffs over the last ten seasons were the Cardinals (70%), the Braves (60%), and the Dodgers (40%). The middle tier of success was the Phillies, Cubs, Astros, Giants, and D-Backs (all at 30%), then the Mets, Padres, and Rockies(all at 20%). The lower tier were the Brewers and Marlins (10%), followed by the Nationals/Expos, Reds, and Pirates (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 16 showing where each team stood in relation to the other NL teams in payroll rank. The disadvantage of this method is that it does not show wide payroll gaps.

In the National League, the order of the teams with the highest to lowest total payroll (from 2000 thru 2009) were the Mets, Dodgers, Braves, Cubs, Cardinals, Phillies, Giants, Astros, D-Backs, Rockies, Reds, Padres, Brewers, Nationals/Expos, Pirates, and the Marlins. (See spreadsheet for details).

When we put the numbers side by side, some correlation is present:
1. Cardinals 70% playoff rate, #5 in salary.
2. Braves 60% playoff rate, #3 in salary.
3. Dodgers 40% playoff rate, #2 in salary.
4. Cubs 30% playoff rate, #4 in salary.
5. Phillies 30% playoff rate, #6 in salary.
6. Giants 30% playoff rate, #7 in salary.
7. Astros 30% playoff rate, #8 in salary.
8. D-Backs 30% playoff rate, #9 in salary.
9. Mets 20% playoff rate, #1 in salary.
10. Rockies 20% playoff rate, #10 in salary.
11. Padres 20% playoff rate, #12 in salary.
12. Brewers 10% playoffs, #13 in salary.
13. Marlins 10% playoffs, #16 in salary.
14. Reds 0% playoffs, #11 in salary.
15. Nationals/Expos 0% playoffs, #14 in salary.
16. Pirates 0% playoffs, #15 in salary.
The NL team that clearly out-performed expectations looking solely at payroll; the Cardinals.

One team has greatly underperformed where their payroll should place them. The Mets have spent over a billion dollars this decade, and only have two playoff appearances to show for it.

Divisional payroll competition is also very interesting. While the entire league competes for the wild card, division payroll comparisons are interesting to see how each team’s payroll stacks up to it’s divisional rivals.

I think that here the divisional data shows that there is a stronger correlation between team payroll and the chances to make the playoffs. A total of 31 of the 40 NL teams that made the playoffs had a payroll in excess of their division average. Of the nine teams that made the playoffs with below division average payroll, five had payrolls between 90% and 99% division average. Only four out of forty playoff teams won with a payroll of less than 90% of their divisional average.


On the other end of the spectrum, of those teams that had a payroll less than 60% of their division average (which happened 22 times in ten years), none made the playoffs.

The Reds are an interesting case here. Their payroll was never above divisional average for any year in the decade. Cincinnati was over 90% of division average four times, and they were never less than 60% of divisional average.

The NL Central is really two divisions: the upper tier which had a decade total payroll from $771 up to $908 million (Astros, Cards, Cubs). This tier made 13 playoff appearances this last decade. The lower tier had payroll totals from $435 to $584 million (Pirates, Brewers, and Reds), and made just one playoff appearance (2008 Brewers wild card). There seems to be a clear divide both in payroll, and playoff success rate. The difficulty for the lower tier teams like the Reds is that there have generally been three higher payroll teams ahead of them in any given year. Even if one high payroll team suffers from injuries, or below expected performances(ie 2009 Cubs), there are still two other teams with significantly higher payrolls to contend with.

A similar situation exists in the NL East. The three high payroll teams(Mets, Braves, and Phils) have made eleven playoff appearances, while the two low payroll teams(Nats and Marlins) have only one playoff appearance in ten years (2003 Marlins).

The NL West shows the most parity over the last decade of any division in baseball. Part of the reason is the wide fluctuations in payroll for several teams. The D-backs went as high as 137% of their divisional average payroll in 2002, and as low as 72% in 2007. The Padres were as low as 53 % in 2001, and as high as 97% in 2006. The Giants ranged from 79% in 2000, up to 130% in 2005. The Rockies went from 57% of average in 2006, up to 100 % of average in 2009. This is the only division where each team made two or more playoff appearances over the last decade.

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.

I think that it is also fair to say that teams with better management are more likely to exceed expectations. Whether it is Bobby Cox or Tony Larussa, the teams that excelled beyond their payrolls were often led by strong management.