In Baseball Prospectus 2004, Doug Pappas wrote an essay looking at the best teams from 1995 to 2003 in terms of marginal payroll/marginal wins. Starting today, Doug will look back on prior years using the same metrics. We’ll reprise his introduction from BP ’04 here, then pick up in 1977 for Part I of this multi-part series. You can ask Doug questions about this series, and other business of baseball issues, in tonight’s Chat.
The oft-recited assertion that “small markets can’t compete” in Major League Baseball is usually supported by a table showing that “winners” like the Yankees, Dodgers, and Red Sox spend far more on players than “losers” like the Devil Rays, Pirates, and Brewers. This argument is misleading in at least three respects.
First, “small market” is often mistakenly used as a synonym for “low revenue.” A team’s revenue, and the size of the payroll it can support, is far more dependent on its recent success (and the terms of its stadium lease) than on the size of its market. According to MLB’s official revenue figures for 2001, the Seattle Mariners took in more money than any other club except the Yankees–over three times as much as the Florida Marlins, who play in a larger market. Playing in a 35-year-old stadium, the Cardinals outgrossed Baltimore, Philadelphia and Detroit, all of which occupy markets at least twice the size of St. Louis. Cleveland and Minneapolis-St. Paul are almost exactly the same size, but the Indians grossed $100 million more than the Twins.
Second, a snapshot of one season’s “winners” and “losers” ignores the ebb and flow of team fortunes. If Major League Baseball had proposed contraction 10 years earlier, the Indians and Mariners would have been among the leading candidates for extermination. The Oakland Athletics, heroes of Moneyball for doing more with less, had the majors’ highest Opening Day payroll in 1991, the same year the Pirates won their third division title in a row. Over the past 20 years, the Padres and Twins have played in more World Series than the Dodgers or Red Sox. Most tellingly of all, the original list of eight clubs considered for contraction, prepared in December 2000, included all three of the clubs which have won the World Series since then.
Third, and most importantly, some teams are better run than others. In 2003 only two of the five teams with Opening Day payrolls of more than $100 million made the playoffs. Two others finished last. The world champion Marlins started the season with a payroll of $49 million; that’s less than the Reds or Pirates spent, and even less than the Tigers paid for their 119-loss disaster. If the Marlins can win the World Series with a $49 million payroll, these clubs can’t blame their failure on a lack of resources.
Player contracts are investments. In baseball as in the business world, some investments are better than others. MLB’s three-tiered salary structure makes a strong farm system the best investment of all, because the reserve system and limits on eligibility for salary arbitration ensure that young players are systematically underpaid. The St. Louis Cardinals have paid Albert Pujols just $1.7 million for three seasons in which he finished fourth, second and second in the MVP voting–$100,000 less than they paid Steve Kline to pitch middle relief in 2003. Smart clubs realize that the worst investment of all is an aging or mediocre player, signed as a free agent for top dollar, who performs no better than a prospect or waiver claim can be expected to play.
The easiest way to measure front office efficiency is simply to divide a club’s payroll by its wins to come up with “dollars per win.” However, neither side of this equation reflects reality. The worst team a club can field won’t go 0-162, and despite some owners’ best efforts, it’s impossible to spend $0 on a major league roster. It’s then necessary to look at marginal wins and marginal payroll.
The Marginal Payroll/Marginal Wins (MP/MW) system evaluates the efficiency of a club’s front office by comparing its payroll and record to the performance it could expect to attain by fielding a roster of replacement-level players, all of whom are paid the major league minimum salary. The formula is:
(club payroll – (28 x major league minimum) / ((winning percentage – .300) x 162)
The left side of this formula assumes that a replacement-level club would play .300 ball. That translates to 48.6 wins in a 162-game season, which before the 2003 Tigers was worse than any actual major league club since the institution of the amateur draft. The previous low was the 52-110 (.321) record of the NL’s two 1969 expansion clubs, the Expos and Padres, who began play with no minor league system, no way to sign free agents, and no players any other NL club really wanted to keep. After subtracting the replacement-level .300 winning percentage from the club’s actual winning percentage, the resulting number is multiplied by 162 to calculate the number of marginal wins over a full 162-game season. This adjusts the formula for strike-shortened seasons and clubs which fail to make up a postponed game or two.
The right side of the formula assumes a 25-man active roster and three-man disabled list. It uses Opening Day payroll numbers where available, because these are the best measure of a team’s expectations entering the season. Once the season begins, payrolls vary with the club’s performance: Bad teams trade away their higher-salaried players, while contenders add payroll for the stretch drive. Opening Day payrolls are available for most seasons since 1986; for the others, I’ve used payroll figures reflecting rosters as of Aug. 31. Either way, the formula multiplies the major league minimum by 28, then subtracts this number from the club’s actual payroll to yield its marginal payroll.
Finally, the MP/MW formula divides a club’s marginal payroll by its marginal wins. The resulting figure reflects how much money a club has spent, per win above the theoretical minimum. The lower the number, the more efficiently the club spent its cash. Comparing this number to the club’s actual winning percentage provides another way to evaluate teams:
Low MP/MW, good record: Efficient ballclub (2003 Marlins, Athletics)
Low MP/MW, bad record: Not spending enough to compete (2003 Devil Rays)
High MP/MW, good record: Spending its way to the top (2003 Yankees)
High MP/MW, bad record: Poorly-run club (2003 Mets, Rangers)
The following presents MP/MW results for every team from 1977 through 1979, together with commentary on each season. Over the next few days, we’ll run teams’ MP/MW for the years 1980 to 1994.
Table 1. Marginal Payroll/Marginal Win, 1977
Team W L Pct Marg 8/31 Marg Marg $/
Wins Payroll Payroll Marg Win
Baltimore 97 64 0.602 49.0 $1,774,800 $1,242,800 $25,362
Boston 97 64 0.602 49.0 $1,907,350 $1,375,350 $28,067
Cleveland 71 90 0.441 22.8 $1,719,600 $1,187,600 $51,994
Detroit 74 88 0.457 25.4 $1,166,625 $634,625 $24,985
Milwaukee 67 95 0.414 18.4 $1,360,875 $828,875 $45,048
NY Yankees 100 62 0.617 51.4 $3,474,325 $2,942,325 $57,244
Toronto 54 107 0.335 5.7 $858,000 $326,000 $56,840
California 74 88 0.457 25.4 $2,415,050 $1,883,050 $74,136
Chi WSox 90 72 0.556 41.4 $1,630,500 $1,098,500 $26,534
Kans City 102 60 0.630 53.4 $2,399,050 $1,867,050 $34,963
Minnesota 84 77 0.522 35.9 $951,850 $419,850 $11,688
Oakland 63 98 0.391 14.8 $1,142,500 $610,500 $41,274
Seattle 64 98 0.395 15.4 $954,025 $422,025 $27,404
Texas 94 68 0.580 45.4 $2,099,825 $1,567,825 $34,534
Chi Cubs 81 81 0.500 32.4 $1,725,450 $1,193,450 $36,835
Montreal 75 87 0.463 26.4 $1,645,575 $1,113,575 $42,181
NY Mets 64 98 0.395 15.4 $1,469,800 $937,800 $60,896
Phldelphia 101 61 0.623 52.4 $3,497,900 $2,965,900 $56,601
Pittsburgh 96 66 0.593 47.4 $2,485,475 $1,953,475 $41,213
St. Louis 83 79 0.512 34.4 $1,782,675 $1,250,675 $36,357
Atlanta 61 101 0.377 12.4 $1,714,175 $1,182,175 $95,337
Cincinnati 88 74 0.543 39.4 $2,759,800 $2,227,800 $56,543
Houston 81 81 0.500 32.4 $1,399,325 $867,325 $26,769
LA 98 64 0.605 49.4 $2,444,700 $1,912,700 $38,719
San Diego 69 93 0.426 20.4 $1,846,500 $1,314,500 $64,436
San Fran 75 87 0.463 26.4 $2,204,500 $1,672,500 $63,352
Nineteen-seventy-seven was the first season played under the modern rules governing free agency. Although player salaries jumped almost 50%, the average salary was still only four times the major league minimum…and for all their cries of poverty, the owners reported smaller losses in 1977 than in either of the two previous seasons.
The best predictor of a club’s 1977 payroll was its 1976 record. Three of the four 1976 winners led their divisions in payroll; the fourth, Kansas City, finished a close second behind California, where Gene Autry had signed free agents Don Baylor, Bobby Grich and Joe Rudi in hopes of winning the AL West. When the Angels actually won two fewer games in 1977, they finished with the AL’s worst record of payroll to wins. Division rival Minnesota achieved the near-impossible: Calvin Griffith actually fielded a cheaper team than the expansion Seattle Mariners.
In the NL, Ted Turner spent the Braves’ money like a drunken sailor. Turner spent the summer of 1977 winning the America’s Cup, having been suspended from baseball for publicly coveting San Francisco’s Gary Matthews before his contract expired. The previous October, Turner had told Giants owner Bob Lurie at a World Series cocktail party that the Braves would outbid the Giants for Matthews. Accused of tampering, Turner explained, “I had had about six vodka and tonics and I was feeling no pain. It was all in fun.”
Table 2. Marginal Payroll/Marginal Win, 1978
Team W L Pct Marg 8/31 Marg Marg $/
Wins Average Payroll Marg Win
Baltimore 90 71 0.559 42.0 $82,660 $1,726,480 $41,147
Boston 99 64 0.607 49.8 $147,803 $3,550,484 $71,305
Cleveland 69 90 0.434 21.7 $77,013 $1,568,364 $72,269
Detroit 86 76 0.531 37.4 $61,012 $1,120,336 $29,956
Milwaukee 93 69 0.574 44.4 $91,986 $1,987,608 $44,766
NY Yankees 100 63 0.613 50.8 $188,880 $4,700,640 $92,557
Toronto 59 102 0.366 10.8 $63,593 $1,192,604 $110,770
California 87 75 0.537 38.4 $141,814 $3,382,792 $88,094
Chi WSox 71 90 0.441 22.8 $81,321 $1,688,988 $73,945
Kans City 92 70 0.568 43.4 $106,532 $2,394,896 $55,182
Minnesota 73 89 0.451 24.4 $51,317 $848,876 $34,790
Oakland 69 93 0.426 20.4 $49,258 $791,224 $38,785
Seattle 56 104 0.350 8.1 $58,484 $1,049,552 $129,574
Texas 87 75 0.537 38.4 $121,244 $2,806,832 $73,095
Chi Cubs 79 83 0.488 30.4 $96,222 $2,106,216 $69,283
Montreal 76 86 0.469 27.4 $105,589 $2,368,492 $86,441
NY Mets 66 96 0.407 17.4 $86,235 $1,826,580 $104,976
Phldelphia 90 72 0.556 41.4 $159,039 $3,865,092 $93,360
Pittsburgh 88 73 0.547 39.9 $127,852 $2,991,856 $74,896
St. Louis 69 93 0.426 20.4 $89,333 $1,913,324 $93,790
Atlanta 69 93 0.426 20.4 $69,699 $1,363,572 $66,842
Cincinnati 92 69 0.571 44.0 $132,847 $3,131,716 $71,222
Houston 74 88 0.457 25.4 $70,558 $1,387,624 $54,631
LA 95 67 0.586 46.4 $135,884 $3,216,752 $69,327
San Diego 84 78 0.519 35.4 $106,759 $2,401,252 $67,832
San Fran 89 73 0.549 40.4 $106,346 $2,389,688 $59,151
Before the 1978 season, Bowie Kuhn lamented that the players were now receiving 26.3% of MLB’s total revenue. He warned that “as these numbers move up toward 30%, in my judgment the game could be in a position of having some difficult problems.” After the season, MLB’s financial statements showed continued improvement even though salaries rose another 30%.
Not that this trend was visible in Queens, where for the second consecutive season the New York Mets finished with the NL East’s lowest payroll. Club president M. Donald Grant, whose M almost certainly does not stand for the 12-letter name I gave him at the time, stubbornly adhered to his own notions of Fiscal Responsibility, spending both cheaply and poorly as the crosstown Yankees won the loyalty of countless fans who had grown up with the Amazin’ Mets. (No, I’m not bitter or anything.)
The AL East looked much as it would 25 years later, with the free-spending Yankees and Red Sox locked in an epic struggle that extended beyond the last day of the regular season. Division rival Detroit was the majors’ most efficient spender, thanks to great young talent like Alan Trammell, Lou Whitaker, Lance Parrish and Jack Morris. The Kansas City Royals again showed California why it’s better to build a team than buy one.
Table 3. Marginal Payroll/Marginal Win, 1979
Team W L Pct Marg 8/31 Marg Marg $/
Wins Average Payroll Marg Win
Baltimore 102 57 0.642 55.3 $101,266 $2,247,448 $40,623
Boston 91 69 0.569 43.5 $145,692 $3,491,376 $80,192
Cleveland 81 80 0.503 32.9 $98,023 $2,156,644 $65,545
Detroit 85 76 0.528 36.9 $63,377 $1,186,556 $32,132
Milwaukee 95 66 0.590 47.0 $137,309 $3,256,652 $69,305
NY Yankees 89 71 0.556 41.5 $199,236 $4,990,608 $120,219
Toronto 53 109 0.327 4.4 $67,044 $1,289,232 $293,007
California 88 74 0.543 39.4 $155,564 $3,767,792 $95,629
Chi WSox 73 87 0.456 25.3 $74,673 $1,502,844 $59,372
Kans City 85 77 0.525 36.4 $91,583 $1,976,324 $54,295
Minnesota 82 80 0.506 33.4 $70,703 $1,391,684 $41,667
Oakland 54 108 0.333 5.4 $41,220 $566,160 $104,844
Seattle 67 95 0.414 18.4 $61,830 $1,143,240 $62,133
Texas 83 79 0.512 34.4 $128,806 $3,018,568 $87,749
Chi Cubs 80 82 0.494 31.4 $104,116 $2,327,248 $74,116
Montreal 95 65 0.594 47.6 $142,829 $3,411,212 $71,683
NY Mets 63 99 0.389 14.4 $93,607 $2,032,996 $141,180
Phldelphia 84 78 0.519 35.4 $197,926 $4,953,928 $139,941
Pittsburgh 98 64 0.605 49.4 $174,439 $4,296,292 $86,969
St. Louis 86 76 0.531 37.4 $116,628 $2,677,584 $71,593
Atlanta 66 94 0.413 18.2 $90,366 $1,942,248 $106,571
Cincinnati 90 71 0.559 42.0 $165,144 $4,036,032 $96,190
Houston 89 73 0.549 40.4 $73,660 $1,474,480 $36,497
LA 79 83 0.488 30.4 $134,305 $3,172,540 $104,360
San Diego 68 93 0.422 19.8 $103,819 $2,318,932 $116,986
San Fran 71 91 0.438 22.4 $120,737 $2,792,636 $124,671
After the 1978 season, Bowie Kuhn was not happy to see Luis Tiant and Tommy John sign with the two-time defending champion Yankees. Kuhn warned: “It’s inevitable that this process will lead to a group of elite teams controlling the sport.” Thirteen other clubs would win the World Series before the Yankees’ next title.
The first of these clubs was Willie Stargell’s Pittsburgh Pirates, who held off the Montreal Expos to win the NL East. In the NL West, Cincinnati’s aging Big Red Machine held off a surprising challenge from the ultra-efficient Astros, who boasted the division’s lowest payroll.
In the American League, Toronto, Oakland and Seattle were so bad that 10 of the 11 other clubs finished above .500. Detroit and Toronto occupied opposite ends of the efficiency scale: The Tigers, with their nucleus of promising young talent, won 32 more games than the Blue Jays, who outspent them while hoping that Danny Ainge and Alfredo Griffin would become their Whitaker and Trammell. Gene Autry’s free-spending Angels finally won their first division title, but fell to Earl Weaver’s Baltimore Orioles in the League Championship Series.
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