Transaction Analysis: ... (09/17)
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September 17, 2012 BizballWho is Getting the Most Bang for their Buck?
When it comes to running a sports team, there are ultimately several factors that come into play that determine your ability win. Clearly, you have to be able to scout and evaluate talent. After that, getting those players under contract can be tricky. In doing so, it’s critical to make the best use of whatever revenue resources you have at your disposal. Money doesn’t buy championships, but let’s face it, it doesn’t hurt. How effectively one spends money depends on how large those revenue resources are. While I’m sure that they don’t enjoy spending lavishly, the Yankees have clearly decided year-in-and-year-out to pour a league-leading amount into player payroll in an effort to consistently make the playoffs. They may not ultimately be the most efficient, but if you’re giving yourself a shot at a championship and money rolls in via television and the gate, well… so be it. On the other hand, if you’re a low-revenue club, your risk increases dramatically. Clubs (normally) pick and choose very carefully when to spend more on player payroll for a given season to try and make a postseason push. Calculate incorrectly, however, and not only will they miss the playoffs but they could potentially kill their payroll flexibility for next season and possibly beyond. Being effective and efficient is what most clubs shoot for. This year, MLB added two extra wild card teams—one in each league—and with it, playoff odds have increased. You can be double-digit wins out of the division race but be in the hunt for the wild card. (As an example, as of Sunday the Brewers are 13.5 games out of first in the NL Central but just 2.5 out of the NL wild card.) It seems a quick gut-check of who is spending most efficiently is in order. Based on compensation data here at Baseball Prospectus, the following shows each of the 30 clubs by player payroll, with the addition of cost per win, where they sit in the division and wild card standings, and their current odds of making the playoffs.
Believe it or not, the Oakland A’s have been the most efficient club in baseball this season. The club dropped payroll by over $13 million this season and presently maintain a total payroll of just $53.475 million. And yet, here they sit second in the AL West with 84 wins and at the top of the AL wild card standings. Their chances of making the playoffs? 96.3 percent, according to BP’s Playoff Odds Report. How much are they spending per win? An incredible $636,607. To put this in perspective, there are just five clubs that spend less than $1 million per win (A’s, Pirates, Padres, Rays, and Royals). None of those teams (minus the A’s) have better than a 30 percent shot at making the playoffs, and the Rays (26.7 percent) and Pirates (10.6 percent) are the only ones in double-digits. From there, we see a jump in the amount of payroll needed to make the playoffs with the season beginning to run out. The numbers 12, 13, and 14 clubs by player payroll (Orioles: $84,899,000; Reds: $87,826,167; and Braves: $93,529,667) are either a division leader or a wild card team. Just behind the A’s in terms of being most efficient and effective are the Reds. While they’re spending $372,889 more per win than the A’s, Cincinnati is sitting atop the NL Central with 87 wins. Yes, they increased spending 7.7 percent over last year, but an $87,826,167 player payroll still puts them in the bottom half of the league. Their chances of making the playoffs? 99.9 percent. The Orioles, who are experiencing their first winning season since 1997, currently occupy the second AL wild card spot and are making serious noise down the stretch to upend the Yankees and win the AL East outright; they now sit just a game back. At $1,048,136 per win, the O’s have a 59.2 percent chance of making the playoffs. The other feel-good story of the year has been the Washington Nationals. Not since the 1930s has baseball been truly relevant in DC, and with the Nats leading the NL East with a 99.9 percent chance of making the playoffs, that $1,062,567 cost per win is looking pretty doggone good. Of course, for every good, there is a bad. As noted previously, the Yankees have been very inefficient, spending the second-most per win ($2,555,645). Still, they currently lead the AL East and have a 90 percent chance of making the playoffs. Conversely, the Red Sox, who by every measure are experiencing a terrible season, are spending $2,654,588 per win and only have 66 wins to show for it. They have zero chance at the postseason and are 16.5 games out of the AL East lead and 15.5 games out of the AL wild card. This is the place a team never wants to find itself in. Not only will the team be inefficient in its spending, but it finds itself without enough wins to justify such spending. The team to watch, however, is the Phillies. All but written off midway through the season, the team has quietly moved to just three games back in the NL wild card race. At $2,357,442 per win, they are spending the third-most in baseball—highly inefficient—but if they make the playoffs, it could blunt that blow. The real pressure lies just behind the Phillies: the Los Angeles Angels. Boosting player payroll by 6.3 percent over 2011, the Angels are currently spending $1,956,209 per win and are 2.5 games out of the AL wild card. Despite a mere 21.4 percent chance of making the playoffs, anything less than a playoff berth will be a disappointment.
Maury Brown is an author of Baseball Prospectus.
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I think the Red Sox/Dodgers financial data might need tweaking.