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Revolutionary Competitive Balance

by Keith Glab, BaseballEvolution.com
January 29, 2007

How competitively balanced is Major League Baseball?  Some people will tell you that because a different team has won the World Series in each of the past seven seasons, that the game is balanced better than ever.  Others will argue that since the New York Yankees had a 2006 payroll more than 13 times a large as the Florida Marlins' 2006 payroll, there is no way that the teams are balanced.

Here is a statistical analysis, courtesy of longtime Baseball Evolution visitor Bob K, that compares how often teams of different payroll rankings made the postseason in the eleven full seasons that the current eight-team playoff format has been in place:

Seasonal Payroll Ranking # of Playoff Appearances % of Playoff Appearances
#1-#10 54 61.4%
#11-#20 26 29.5%
#21-#30 8 9.1%
#1-#15 70 79.5%
#16-#30 18 20.5%

For example, the Arizona Diamondbacks had the fourth highest payroll in 2002 and made the playoffs.  This put one playoff appearance in both the #1-#10 category and the #1-#15 category.  In 2006, the Diamondbacks ranked 23rd in salary and didn't make the postseason - a non-appearance for the #21-#30 and #16-#30 categories.  The % of Playoff Appearances column is simply the number of playoff appearances divided by the eleven-year total playoff spots available, 88.  Bob was meticulous enough to go through all 88 playoff appearances, determine the seasonal salary ranking of each of the seeds, and categorize them.

After examining the table, I think that two things are obvious:

1) Anyone who doesn't see a correlation between payroll size and likelihood of making the postseason is deluded.  In the average season, five of the eight playoff teams will rank among baseball's top ten payrolls.   Having a large payroll by no means guarantees a team a playoff spot, but it does provide a team with drastically better odds of doing so.

2) Any fan or employee of a small market team who complains that it is impossible for that team to compete is full of it.  As everyone knows from Moneyball, the Oakland A's franchise has performed astoundingly well with a low payroll team.  In fact, five of the eight instances of a bottom-10 payroll team making the postseason in this span came courtesy of Billy Beane's club.  Oddly enough, 2004 was the only season in the past 11 in which the A's did not rank among the bottom ten in team payroll, and those Athletics produced their worst seasonal record in five years.

What may not be obvious is that leveling the payroll disparity might not necessarily level the playing field.  The difference in payroll factor between the top and bottom teams has widened significantly between 1996 and 2006, but there hasn't been a corollary separation in the performance of high payroll versus low payroll clubs.

Regardless of whether controlling payroll would aid significantly in fostering competitive balance, it is not likely to happen.  The player's union has too much leverage to allow any kind of a salary cap, and the wealthiest owners will only agree to very minor revenue sharing.  How much baseball would benefit from a different economic system isn't that captivating of an issue only because we are not likely to see a significantly different system put into place during our lifetimes.  

So a more interesting issue becomes, what can small market teams do to to remain competitive within MLB's current economic system?

Last season the Florida Marlins won 78 games despite having the lowest team payroll in baseball.  By simply dividing team payroll by wins, we find that those Marlins spent less than $200,000 per victory, while the New York Yankees spent over $2,000,000 per win.  The Marlins may not have made the postseason, but there's no denying that they were considerably more efficient with their dollars than the Evil Empire was.

In 2001, the Minnesota Twins were rumored to be disbanded if they could not compete with other franchises both economically and talent-wise.  Those Twins ranked last in payroll that year and 27th in 2002, but nevertheless took second and first place in the AL central respectively.  They would go on to win the Central three out of the next four years with a team payroll that never ranked higher than 18th in baseball.

Back in 1997, the Pittsburgh Pirates had the lowest team payroll of this 11-year span at just over $9 million.  The 79 victories that the Pirates notched that year are the most that the franchise has had between 1993 and 2006.             

What do these teams, along with Billy Beane's Oakland A's, have in common?  How were they able to succeed with low salaried players where an overwhelmingly large number of teams could not?

The only answer that I can come up with is youth.  Where most small market teams overpay aging free agent veterans as though they were the Baltimore Orioles, these few successful squads put their faith in young talent, sometimes home-grown sometimes not.  This is not to say that every team that commits to a youth movement succeeds; indeed many do not.  But if you're running a small market team, your odds of putting together a competitive team are much better if you go with a youth movement that if you try to beat the large market teams at their own game.  It really isn't a level playing field if small and large market teams use the same tactics.  But as in the American Revolutionary War, the underdog must undergo a drastic change of tactic in order to compete with the opposing behemoths.

Some would argue that it is impossible for small market teams to sustain success due to their inability to sign their youngsters to contract extensions.  The only example I can think of where this is true would be the early 1990's Montreal Expos, and there's a good reason that they no longer play in Montreal.  The truth is that a team can control every one of its young players for their prime years.  Joe Crede may become a free agent after the 2008 season, but the White Sox will have gotten 6 1/2 years of service out of him, the full seasons coming between ages 25 and 30.  Inking Crede to a huge deal after the age of 30 would be a huge mistake, as players generally decline noticeably in their thirties.  The late-1990's Pirates did not flounder because they could not sign their young players to long contracts; they did sign Kevin Young and Jason Kendall to outlandish deals and supplemented them with overpaid role players such as Ed Sprague, Mike Benjamin, and Pat Meares.  Signing their players to long contracts and trying to maneuver like a large market team was their undoing.

Don't get me wrong.  A team like the Red Sox has a huge advantage over the Pirates, because the Red Sox can make several boneheaded decisions and still have enough financial flexibility to compete.  What I'm saying is that this advantage only exists when small market teams try to use large market tactics.  Trading your homegrown talent for prospects just before they become free agents may not be a popular maneuver with the fans, but it is positively the best strategy for teams with payroll constraints.  Franchises such as the Chicago White Sox, Florida Marlins, Arizona Diamondbacks, Colorado Rockies, Cleveland Indians, and Pittsburgh Pirates appear to now be following this lead set forth by the Twins and A's teams of recent years.  Not all of these teams will succeed in their youth movements, but I can guarantee a better success rate than teams like the Royals and the Reds, who continuously attempt to spend money that they simply do not have.

Do we have a full scale revolution on our hands?  Only time will tell.  But there are several young general managers around Major League Baseball who realize that they can pay young players the major league minimum to perform as well as veterans who earn $10 million a year.  Don't allow your team to be left behind.  If your favorite player only spends five years with your team before getting traded for three new prospects, wish him well and root for the new guys.   Then competitive balance in baseball really could be a reality.    




Disagree with something? Got something to add? Wanna bring up something totally new? Keith resides in Chicago, Illinois and can be reached at keith@baseballevolution.com.

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