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Monday, October 09, 2006
Again This Year, High Payroll Does Not Equal Success

At the beginning of the baseball playoffs last year, I compared the payrolls of all MLB teams to see what kind of impact payroll disparity in major league baseball had on overall team performance, and posted the results. Not surprisingly, my report showed that high payroll did not equal success. I decided to do another report this year, so I guess that means I can now officially call this my "Annual MLB Salary Report Card".

The most important category on the report card last year in terms of measuring general manager performance and sound organizational business decisions was the "Spent What Was Necessary" category listing all the teams that made the playoffs last season without breaking the bank: White Sox ($75M), Angels ($98M), Braves ($86M), Cards ($92M), Astros ($77M) and Padres ($63M). Now here's the irony. This season, 4 of these 6 teams actually spent more on payroll this year and did NOT make the playoffs: White Sox ($102M, and 4th highest payroll), Angels ($103M, and 3rd highest payroll), Braves ($90M), and Astros ($92M). Interestingly, St. Louis actually spent less this year ($88M) and DID make the playoffs again, and San Diego, with the lowest payroll of the entire group at $69M, made the playoffs again as well. [See USA Today's Salary Database, 2006 Total Payroll.]

Looking at the other teams making the playoffs this year in addition to St. Louis and San Diego, the Mets spent the same this year ($101M) and made a complete turnaround from last year. The Dodgers spent $15M more this year ($98M) and it paid off for them. The Yankees spent $15M less this year and still made it with a $194M payroll, but got ousted by Detroit who spent their $82M very wisely this year. Oakland ($62M) and Minnesota ($63M) each won their respective divisions this year -- As usual, Beane and Ryan got it all figured out. Whatever those two guys are making, it's just simply not enough. Boston, with the supposed "boy wonder" in charge and the 2nd highest payroll of $120M, can thank Minnesota (who spent half as much as them) and Detroit (who spent about $40M less than them) for not making it this year.

The MVGM award this year has to go to Billy Beane, whose $62M payroll has found its way in the ALCS against Detroit. Hats off to Florida Marlins GM Larry Beinfest, who pulled off a fairly respectable 78-84 record with just a $15M payroll and a roster made up of primarily young minimum salary players. But gosh, who knows what they might have accomplished by just spending another $15M? -- and they still would have maintained the lowest payroll!

Here's an interesting statistic. There are 12 teams that spent between $60M and $89M, and 5 of them (42%) made the playoffs (and as of this date three of them are still in it). There are 10 teams that spent more than $89M, and only 3 of them (30%) made the playoffs (but only one of them is still in it).

Salary caps? Who needs 'em......


I am not sure if your last night is sarcastic or not, but low budget teams do have a salary cap it is called a low budget. So the fact that they are spending more less money and succeeding doesnt mean that you dont need a salary cap. A salary cap will insure the Yankees that they dont need to waste 208 or so million dollars and can still make the playoffs. A salary cap will also make people maybe concentrate more on more bang for the buck instead of just more bang.
Also, just a side point.. In 5 years assuming the Marlins keep all the players that they have now, which is not goig to happen, this will be a team of all stars. The Marlins were an a amazing example of Players beign good before there major contract, and then they will all get traded. Unless there is some form of cap on salaries this rotation of players will conitinue forever.

Anonymous Anonymous -- 10/09/2006 10:07 AM  

Boston's "supposed 'boy wonder'" didn't do too bad two years ago.

Blogger Michael McCann -- 10/09/2006 11:30 AM  

My last point about the salary cap is just that there appears to be competitive balance in baseball without one, which is the primary purpose for having a cap. I definitely don't want to debate whether there should be a cap in baseball. So you think the Yankees want to be prohibited from spending a certain amount?

Blogger Rick Karcher -- 10/09/2006 1:54 PM  

In defense of the Atlanta Braves, this list is not entirely accurate. The list gives full value for Edgar Renteria ($9 mill) when they're really just paying him about $6 per after Boston sent over a heap of money with him. It also gives the full value of Mike Hampton, as it does every year, despite the fact that this is the first year they're paying him more than a couple of million dollars and 3/4 of that they got back in insurance when he didn't play. Chipper Jones restructured at the beginning of the season, dropping his 2006 salary by $6 mill. The team's payroll is limited to about $80 million, which puts them at the middle of the pack at 15th, which is where they were in the standings.

Anonymous Jason -- 10/09/2006 2:49 PM  


I'm always willing to defend the Braves. But on the flipside, the USA Today salary database does not include deferred payments, incentive and award clauses and depreciation. I think it probably all evens out in the end, and gets you to a pretty accurate number for the year.

Blogger Rick Karcher -- 10/09/2006 3:57 PM  

In your opinion, from 1995 to 2005, who was better ran – the Braves or the Marlins?

Braves- won the division all 11 years, 1 WS, 3 WS appearances

Marlins- 2 WS and whole lot of self-destruction and rebuilding.

Anonymous Anonymous -- 10/09/2006 6:42 PM  

"My last point about the salary cap is just that there appears to be competitive balance in baseball without one..."

How do you define competitive balance? Without specifying exactly what you mean by this vague term, it's impossible to argue that there isn't competitive balance.

Anonymous PK -- 10/09/2006 9:46 PM  

Competitive balance is not quite the same thing as having "the biggest spending team" lose the championship for the last six years in a row.

The KC Royals are eliminated from the playoffs sometime around April 15 if you allow reality to be your guide to baseball analysis. The same goes for the Pittsburgh Pirates who have now had 13 consecutive losing seasons. BTW, the Orioles have been losers for nine straight years now. That is not competitive balance.

I don't know if a salary cap would usher in an era of "parity", but what we have now is not "parity".

Anonymous The Sports Curmudgeon -- 10/10/2006 12:40 AM  


What I mean is that out of 8 teams that made the playoffs this year, only 3 of them were in the playoffs last year. You may disagree, but I think that is some evidence of competitive balance.


I agree that teams spending below $60M pretty much take themselves out of the race (with some rare exceptions). The point of my post is basically the last statistic I revealed. I'm just a lawyer with some corporate and sports law experience, and played in the best farm system for a few years (the Braves), and I have zero financial/business experience, but if I owned a team right now, there is no way I would spend $90M or more when only 3 of 10 teams that did so made the playoffs! It just doesn't make sense to me -- and much of why it doesn't make sense to me has to do with my views about baseball as a sport as compared with other sports (which would take me all day to discuss). Plain and simple, any team can get to the playoffs in the $60 to $90 range with the right decisions being made (5 of 12 teams did).

Blogger Rick Karcher -- 10/10/2006 7:38 AM  


You just gave what you thought was evidence of competitive balance, rather than a definition of competitive balance. But I think you're saying that competitive balance is a situation in which every team has a reasonable chance of making the playoffs within a relatively short time period, e.g., 3-5 years. In other words, in any given five year span, every team should have a reasonable chance of making the playoffs at least once. If that's what you're saying, then I'd agree.

Does baseball have that? Well, off the top of my head the following teams have not made the playoffs within the last five years: Toronto, Baltimore, Tampa Bay, Kansas City, Philadelphia, Washington/Montreal, Cincinnati, Milwaukee, Pittsburgh, and Colorado. So that's 1/3 of the league. Taking a closer look though, Philadelphia certainly has had a reasonable chance, perhaps Cincinnati as well. So that brings us down to 8 teams. Of those 8, at least 1 appears to be the result of gross mismanagement (Baltimore) and another at least partly the product of the difficulty of winning at high altitude (Colorado). In addition, one has just moved and is getting a new stadium in its new location (Washington), so we don't know what its results will be yet.

That leaves five: Toronto, Tampa Bay, Kansas City, Milwaukee, Pittsburgh.

On this list you have four of the smallest markets in baseball and Toronto. Toronto is on here because it plays in the same division with the Yankees and Red Sox and simply cannot spend with those teams. Tampa Bay has the same problem plus much lower revenue. The other three teams are very low revenue clubs, even with new stadiums in Pittsburgh and Milwaukee.

So I'd say that the lack of a salary cap has not destroyed competitive balance for most teams, but it has left a handful of teams without any real chance of making the playoffs.

Perhaps the best solution to this is not a salary cap but realignment. Instead of having Tampa Bay and Toronto in the same division as the Yankees and Red Sox, why not move the Mets and Phillies in there? As for Pittsburgh, Milwaukee, and Kansas City, why not group them in a division with two other low-revenue clubs, such as Minnesota and Cincinnati? I realize this would break up the integrity of the National and American leagues, but it certainly seems to make more sense that having the players bear the burden of ensuring competitive balance through a salary cap.

Anonymous PK -- 10/10/2006 8:45 AM  


I'm not saying that every team should have the opportunity to make the playoffs within a 3-5 yr. period. Why should we feel sorry for the small number of teams you mentioned that choose to spend in the $30 to $50 range? So I guess I'm willing to say that every team that spends in the 60 to 80 range should have a reasonable chance of making it at least once in a 3-5 yr. period -- and I think that's exactly what you have right now when 42% of the teams that spent in the $60 to $89 range made the playoffs this year.

Blogger Rick Karcher -- 10/10/2006 9:42 AM  


I'd take issue with you saying that small market teams "choose" to spend in the $30 to $50 range. These teams are businesses and a run for profit. Unless you want to claim that these teams should be run at a loss, teams will only incur expenses that have a positive expected return. I think teams like KC argue that they simply cannot turn a profit if they spend $60-70 million a year because they don't have the revenue streams to justify that kind of spending.

Of course, there's a chicken and the egg problem here in that you can argue that if the teams spend it the fans will come. But I think in certain markets that may not be the case.

What should be done about these markets (and I'm thinking Tampa Bay, Kansas City, Pittsburgh, and perhaps Milwaukee)? Contraction is an option, but that's going to be very difficult to achieve. Other than realignment or a salary cap, how will these franchises become competitive? Or do you feel that the real problem with these teams is incompetent management in that you can be competitive at $45 million a year if you know what you doing, see, e.g., the Marlins?

Overall, however, I do generally agree with you that the competitive balance problem in baseball is overblown.

Anonymous PK -- 10/10/2006 3:51 PM  

I agree with Rick that a Salary Cap is NOT really needed and the proof is that the Yankees haven't even made it to the WS lately.

Boston, with the 2nd highest payroll finished behind the Toronto Blue Jays ; Oakland with a relatively small payroll keeps winning year after year.

Don't tell me the Pittsburgh Pirates and Kansas City Royals are doomed to failure every year because of the rules of baseball. They are doomed because of their own poor scouting, poor trades, poor player development and so forth.

Just look at what the Cleveland Indians did last year with a $42 mill. payroll. They spent more this year and were dreadfully lousy.

The Angels this year spent over $100 mill. and look where it got them. Seattle 2 years ago went out and got Richie Sexson and the 3rd baseman from the Dodgers. Where has it gotten them !!?

Anonymous Dave Burkey -- 10/10/2006 8:02 PM  

PK and Dave,

Thanks for the great comments. I don't think we can say whether the smaller market teams "can't afford" a $60M payroll. But does it really matter whether they can afford it or not? I mean, it's their decision what they want to do from a business standpoint given the landscape of the industry they are in. If they can't compete economically, then, like any business, they need to decide what they want to do (sell, increase expenses, reduce expenses, etc.). I'm definitely not willing to say they are mismanaged from a player personnel standpoint when the owner is only giving them $30 to $50 to work with. If we are going to say that they are mismanaged, then I think we definitely need to say the Yankees and Red Sox are mismanaged too. In any event, it's impossible to say whether any team is doing well from strictly an economic standpoint because there are so many variables involved (including the appreciation value of the franchise). The purpose of my post is really just to demonstrate that, as you both noted in your comments, the competitive balance problem in baseball is overblown.

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Anonymous Anonymous -- 11/17/2006 7:54 AM  

In my opinion, sometimes players do worser if they have high payroll because they care about money more than their talent.

Jimmie Menon
payroll providers in guelph .

Blogger Jimmie Menon -- 6/01/2014 3:44 AM  

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