2007 MLB Payrolls - Money Doesn't Always Buy Happiness
by Trevor Whenham - 04/06/2007
As we start another baseball season, everyone is looking for every handicapping edge that they can possibly find. One that pops into mind as being worth exploring, if only because it is in the news so often, is the team payroll. When it comes to which teams pay who how much, there are two numbers that put it all into context - 15 and 195. The Florida Marlins had the lowest MLB team payroll in 2006 with just a few dollars less than $15 million at the start of the year. The Yankees were so far to the other extreme that it's almost inconceivable, with nearly $195 million. Steinbrenner and his henchmen were so out of control that they spent $75 million more than the next most foolhardy team, the Red Sox. That $75 million is more than the entire payroll of 16 teams in the league.
So there is a massive disparity in MLB payrolls for different teams. Does that have an impact on the outcome of games? Yes. And no. It's not a simple answer either way - it all depends on how you look at it.
The top six teams in payroll last season - the Yankees, Red Sox, Angels, White Sox, Mets and Dodgers - all had winning records. The point of spending the money, though, is obviously to win the World Series. Of the four American League teams in the group, only the Yankees even made the playoffs, and they didn't get out of the first round. The Mets and the Dodgers both got in, but they had to play each other. The Mets won, and then couldn't get by St. Louis. In other words, money clearly doesn't buy happiness. This truth is further illustrated when you look at the last four teams in the top 10 for team payroll. Only the Astros had a winning record, and at 82-80 they were only barely above .500. Of the top 10, then, seven teams ended up with a winning record from a group with a median team payroll of over $100 million. The next group of 10 teams, with a median salary of $72 million, produced five squads with winning records. Spending helps, but not as much as you would think.
Playoff participation further strengthens this picture. Three of the top 10 teams according to MLB payroll made the playoffs, but so did three of the teams in the bottom half of the league in team payroll. There did seem to be a minimum acceptable spending level - none of the nine lowest payroll teams made the playoffs, and none had a winning record. It's a fine line, though - The A's has the 10th lowest payroll in the league, and they made it to the ALCS.
When it comes to the realm of betting, which is, of course, the most interesting, payroll isn't necessarily an indicator of success. Only three of the top six teams won enough over the course of the season to be profitable on a flat bet. As a general trend that would make sense, since the highest paid teams are going to be the highest profile teams in the biggest markets, so they will get more public attention, and therefore likely worse odds, than the low profile, low payroll teams. In fact, the two most profitable teams, the A's and the Twins, both come from small markets outside on the national eye, and they both had payrolls in the bottom half of the league.
It would seem logical that the teams with the highest payrolls would have considerable success against the teams with the lowest payrolls - The Royals, Pirates, Rockies, Devil Rays and Marlins. We can test this hypothesis out by looking at the top five teams in match-ups against the bottom five teams. The Yankees, which incidentally had a payroll larger than all five bottom payroll teams combined, went 22-8 against the bottom five teams, for a winning rate of 73 percent. The Angels (15-7, 68 percent) and the Mets (21-13, 62 percent) enjoyed similar rate of success. Boston and the White Sox weren't nearly as successful. The Red Sox were just 16-15, and only 14-14 against the American League teams. The White Sox were only slightly better at 12-10. Overall, the top five teams were 86-53 against the cellar dwellers, or winners of about 62 percent of the games.
Betting on the games would have been far less successful. The Yankees won the 22 games at an average lay price of -246, so you would have profited less than $200 on $100 flat bets on all 30 games despite winning almost three quarters of them. The Angels, though they won fewer games, were actually more profitable, with a net gain of $288. This is owing to a lower average lay price, and the fact that they won one game against Tampa Bay in which they were actually the underdog. None of the other three teams came anywhere close to profitability. Overall, with a 62 percent winning percentage, the top five teams would have to face an average lay price of -160 or better against the bottom five teams in order for bettors to blindly make a flat betting profit. You don't have to know very much about betting on baseball to know that that just isn't going to happen.
So what have we learned? Generally, spending more on payroll is good for a team. That doesn't mean, however, that spending a lot is a guarantee of success in any way, or that a team can't succeed if they don't go completely out of control. Most importantly, we've learned that assuming that a lavishly spending team is a good bet to beat a frugal team is a sure way to the poor house.