Payroll disparities, competitive balance and Selig’s legacy

I am rushing so can only comment briefly on this now. But for about the 17,000th time, this morning I heard a sports media type praise Selig for having pushed through greater revenue sharing, thus changing the economics of the game, thus allowing “small-market” teams to better compete. Today it was Mike Greenberg, but it’s just the latest variation on an old theme.

Here’s the argument, in a stylized nutshell:

1) in the late 1990s, when the Yankees were winning the World Series more or less every year, only “big market” teams could compete.

2) then, as now, big market and small market were defined by payroll size. That’s why I put the terms in quotes. No one can doubt that the Royals draw on a smaller market, however you want to measure it, than the Yankees. But one of the false premises of this way of defining market is that teams have no agency – no discretion over how much money they spend. They are bound by their markets. But we know this is false. The Mets, who also play in New York in a fancy new stadium, have had wild fluctuations in their payrolls in recent years. In fact, as recently as 2009, they had the second highest payroll in baseball. Now they are in the middle of the pack. This wasn’t because their market changed appreciably. It’s because they made a decision to spend less money. The Marlins had a high payroll at the beginning of 2012, after an off-season spending spree. Then they sold everyone off (they did this same thing, folks will recall, in the mid-1990s).

The point here isn’t whether these teams should or shouldn’t spend more or less money. But the terminology of big markets and small markets belies the discretion that teams have. Can the Pirates spend like the Yankees? No. But as we’ve learned from some of their embarrassing financial disclosures in recent years, when they claimed poverty to justify miserly payrolls, it turned out they were making hefty profits. In other words, they didn’t *have* to spend as little as they did. They *chose* to.

3) back to the standard account: following the 2002 CBA, tweaked and reformed in subsequent deals, high revenue teams (a better term than big market), started sharing more of their revenue with less flush teams (there is a separate means by which MLB distinguishes big from small market teams, but we won’t get into that).

4) in the past decade, the baseball oligopoly that characterized postseason baseball in the 1990s has been broken.

5) ipso facto – revenue sharing is responsible

There is one wee little problem with this account: payroll disparities have, if anything, increased in the past decade. Relative disparities between top and bottom have fluctuated over the years, while absolute disparities have exploded. For example, in 2000, the last year of the Yankees’ three-peat, they had an opening day payroll of two million dollars more than the second highest payroll team, the Dodgers. By the mid-2000s, there were years in which the Yankees were spending 70 or 80 million more per year than their nearest competitors (in 1998, by the way, the year the Yankees won 114 games and blew the sport away, they began the year with only the second highest payroll in the sport, behind the Orioles). And when the Yankees’ payroll advantage began to explode in the 2000s, another thing happened – they stopped winning World Series.

There are other ways we could go with this. Greenberg cited the Rays this morning (and the A’s, with a comparably small payroll). They are a remarkably good organization, now playing in their fourth postseason in six years. They appear to have a never ending pipeline of great young starters ready to replace whichever one is getting too close to free agency. This year, their payroll is $56 million, according to figures Greenie cited this morning. The Yanks – $228 million. And who would you rather be right now? Everyone in the sport would answer in the same way.

But here’s my question – what does increased revenue sharing have to do with the Rays being so good (or the Yankees being so old and bloated)?

I haven’t seen anyone connect those dots. So that no one misunderstands me – I am not denying that having more money to spend is, other things being equal, an advantage. Or that some teams clearly have way more resources to draw on than others. Both are obviously and uncontroversially true.

But what I don’t get is how increased revenue sharing explains why some teams, operating on very modest budgets, are so successful. More on this soon and I’d like to see someone connect those dots (seriously, if someone can do it, great. But you have to explain how the current payroll picture squares with that argument).

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One comment

  1. Excellent analysis. It’s good to read some well-informed, thoughtful baseball journalism. I realise this piece was in haste, but in future I’d love to see more on this, perhaps with charts / graphs?

    I’m not sure if anyone has tried to chart payroll dollars vs wins to look for correlation? I tried it for the EPL – it worked better as √(payroll) vs wins – reflecting the diminishing returns as the payroll increases:
    http://wp.me/p3Nbnq-1Y

    At least the Greenberg comments being rebutted are interesting. Whereas here in Australia the best pre-season fare is this semi-literate piece, supposedly on why Melbourne Ballpark is a great place to go. *sigh*
    http://t.co/ECh5SG9eLa

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