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Friday, July 19, 2002

Who are Baseball’s Smart Shoppers?

Even WorldCom’s accountants couldn’t make the Devil Rays’ purchases look good.

At the end of the season, it is reasonable to argue that just about every marginal dollar spent on a team that made it into the playoffs was a dollar well spent; and for a team that failed to make it into the post-season, every marginal dollar was wasted.

But that’s not the only way to look at the issue of how wisely teams spend   their money. And it is not the end of the season. So, for now, I want to take   a look at how much each club is paying for a victory. Well, actually, that’s   not precisely what I want to see. I want to see how many marginal dollars each   club is spending on each marginal victory.

What is a marginal dollar? Because the minimum a club can spend on player payroll   is $5 million - 25 times $200,000 - every dollar above $5 million counts as   a marginal dollar.

And what is a marginal victory? That is a bit subjective, but I have set the   number at every win above a .300 winning percentage. Why? Because .300 is about   the worst winning percentage any major league club could conceivably have, this   year. No team in the last 40 years has been lower than .300. (The last was the   1962 New York Mets, 40-120, .250.)

Here are how the teams come out, in order of paying the least per marginal   victory to paying the most:

Oakland Athletics - $1.309 million
  Minnesota Twins - $1.310
  Montreal Expos - $1.642
  Cincinnati Reds - $1.925

Anaheim Angels - $2.093
  Florida Marlins - $2.241
  Pittsburgh Pirates - $2.362
  Seattle Mariners - $2.468
  Atlanta Braves - $2.748
  St. Louis Cardinals - $2.832
  San Francisco Giants - $2.875

Baltimore Orioles - $3.189
  Colorado Rockies - $3.201
  Chicago White Sox - $3.274
  Houston Astros - $3.284
  Philadelphia Phillies - $3.351
  Los Angeles Dodgers - $3.391
  Arizona Diamondbacks - $3.557
  Kansas City Royals - $3.581
  Boston Red Sox - $3.679
  San Diego Padres - $3.717
  New York Yankees - $3.839

New York Mets - $4.596
  Cleveland Indians - $5.356
  Chicago Cubs - $5.842
  Toronto Blue Jays - $6.474
  Detroit Tigers - $7.360
  Texas Rangers - $8.500
  Milwaukee Brewers - $8.710

Tampa Bay Devil Rays - $26.709

A few notes and observations:

1) The player payroll figures used in this analysis are based on payrolls at   the start of the 2002 season. Although a few clubs have added payroll (and others   have dropped some), most of the marginal wins to this point were taken with   each team’s starting payroll in tact;

2) The wins per team was based on the standings listed by at 5 pm   on July 18;

3) The D-Rays horrible winning percentage makes them look especially bad. But   the $16.75 million they are paying to Greg Vaughn and Wilson Alvarez is 48.72%   of their team payroll. Had Tampa Bay been wise enough to eschew just those two   contracts (replacing them with league minimum salaries), their team payroll   would drop from $34.38 million to $18.03 million, and their dollars per marginal   win would drop by $14.635 million;

4) This kind of break-down demonstrates just how smart Billy Beane is. I have   not done the calculations, but I am quite certain that the Athletics have spent   the least amount per marginal victory every year for the last 3 years;

5) All of the teams that are spending more than $4 million per marginal victory   are the teams that are trying to or have been dumping salary; and

6) Though it is true that the Yankees are blowing everyone else away this year   in terms of total payroll - they currently have a $24.1 million edge on the   Red Sox, having added Jeff Weaver and Raul Mondesi - New York is not spending   much more per marginal win than the Royals and the Padres, and the Yanks are   paying much less per marginal win than the Cubs, Tigers, and Brewers.


Rich Rifkin Posted: July 19, 2002 at 06:00 AM | 5 comment(s) Login to Bookmark
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   1. tangotiger Posted: July 19, 2002 at 12:36 AM (#605580)
Voros, Vinay, and I had a discussion on this matter a while ago.

Salaries and wins

The back and forth between Voros and I that looks confusing is that our basis for discussion was slightly different. He was talking about causative effects, while I was looking at relationships (not necessarily effects).

What is interesting also about Rich's article and using .300 as a baseline is that it's exactly what I used, and exactly what Doug Pappas used in his series of articles several months ago.

Rich correctly shows that we want marginal wins to marginal dollars relationship, and not total wins to total dollars.
   2. Devin has a deep burning passion for fuzzy socks Posted: July 19, 2002 at 12:36 AM (#605583)
Interesting. The only objection I'd make is that $5 million is too low for the minimum payroll. It essentially assumes that the entire team consists of rookies, which I think is a bit unrealistic. (And I don't know if that team would go .300) Off the top of my head, I think a more realistic floor would be $8-$10 million.
   3. Rich Rifkin I Posted: July 19, 2002 at 12:36 AM (#605590)
Did you prorate the payrolls for games played?

Yes, I did that for every team.

How did I handle deferred salaries?

I used the current salary information available. That is, those are the actual checks that are being cut this year.

I realize (upon thinking about your question) that in the case of a team like the Diamondbacks (who have deferred quite a lot of salary) it makes sense to charge them more for this year. Nonetheless, the Diamondbacks will ultimately pay the piper. And so in a few years, their "current" player payroll expenses will seem unusually high per marginal victory.

Also, when a team is paying a rookie $200,000 per year, his actual benefits for this season may be much higher. That is, he may have received a $5 million signing bonus paid all at once a few years before his rookie year. That compensation was, in effect, money that the team hoped would go to a player who would help their major league team. However, draftee signing bonuses (unless they are paid out over a number of years) don't make it onto major league payrolls. In this regard, I was thinking of players like Barry Zito and Mark Mulder, both of whom now make very little in salary, but when they signed received millions of dollars to ink their contracts.
   4. Marc Posted: July 19, 2002 at 12:36 AM (#605596)
This seems like another tailor-made opportunity to "sing the praises" (pardoning my sarcasm) of Bud Selig's big brainstorm of last fall, contraction. You've got two teams that "can't compete" but that are competing. They're not raking in the big money and they're not spending the big money. They're just spending smartly and competing.

Now, why the hell would you want to contract teams that are conducting business smartly, competing, and not losing money? Only in MLB could this pass for wisdom!
   5. Walt Davis Posted: July 20, 2002 at 12:36 AM (#605601)
I think we can say that the D-Rays are the marginal team, as their winning percentage is just 309. As Rich notes, take away Vaughn and Alvarez's salary and their payroll is about $18 M. Take away Vaughn and Alvarez's contributions, and the team would be no worse. So I'd say the payroll of a .300 baseball team is somewhere right around $18 M, maybe a little lower assuming the D-Rays are overpaying 1 or 2 other players.

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