No doubt in response to the “They bought the championship” cries that have been ringing throughout Philadelphia, Red Sox Nation, and every other part of the country not named New York, Connecticut or Northern New Jersey, renowned designer Khoi Vinh has done some research on the business of Major League Baseball.
Vinh did some great work digging into teams finances and comparing the money each team brings in each year as compared to their payroll, resulting in what he’s dubbed their “Investment Rate”. According to his findings, on average MLB teams put 45% of their 2008 revenue towards their 2009 payroll. Vinh’s New York Yankees by comparison tied for the 4th-highest investment rate at 54%.
While I think he’s trying to show that an organization’s dedication to win and willingness to spend money is what the Yankees should be commended for, it still completely glosses over the fact that even if a team like the Florida Marlins had a 100% investment rate, meaning every single dollar they brought in was spent on their payroll, they could still only afford 69% of the roster that the Yankees have. A willingness to blow cash only gets most MLB franchises so far. In fact, there are only six MLB teams that had 2008 revenues that were greater than the Yankees 2009 payroll. That’s right, 23 of the 30 MLB teams had 2008 revenues that were smaller than the Yankees 2009 payroll. Meaning that without the assistance of a sizable loan, even with a 100% Investment Rate those 23 teams could not pay for the Yankees 2009 roster. Not surprisingly, four of those six wealthy teams made it into the playoffs this year.
And chastising other major league owners for taking profits instead of investing more money into their team is not a fair position either. By and large the majority of MLB franchises appear to spend approximately $100,000,000 less on their payroll than their revenue. For example, the Cleveland Indians brought in $181,000,000 in 2008 and their 2009 payroll was $81,579,166. Likewise, the Pittsburgh Pirates brought in $144,000,000 in 2008 and their 2009 payroll was $48,693,000. On the other hand, the New York Yankees had 2008 revenues of $375,000,000 and spent only $201,449,189, presumably netting ownership roughly $173,550,811 (this doesn’t account for other operating expenses). So while the Yankees organization spends more than any other team, and has one of the top five investment rates in the league, they also keep more revenue than any other team in the league.
The one bright spot in the data that Khoi uncovered was the comparison of the playoff teams. Their final position was almost a direct correlation to their comparative ranking on investment rate. The data appears to display that despite the amount of a team’s payroll, the greater amount of revenue they put back into their payroll the more playoff success they can expect. The sadder point is that with the exception of the Red Sox, total payroll amounts trended downward corresponding to the teams post-season success. Once again showing that the more you spend, the more you win.
Vinh admits that one year’s worth of data isn’t really enough to identify a lasting trend. But I think in attempting disprove the point that they Yankees won the championship by buying more talent than most teams could afford, he also proved that very point. Pointing out that one teams willingness to spend the GDP of entire nations to pay their players may give the appearance that they’ll do anything to win. But it doesn’t mean that their ownership wants to win any more than any other team in the league. It just means they can afford to win at literally, any cost.
To me the more important question, which these numbers don’t really address, probably because the truth won’t fit the desired perception of Yankee greatness, is how well teams spend their money. Ben Fry has created a nice chart for each of the past few years correlating a teams record and their bankroll. But for me this falls short of the “dollars spent per win” that I think is the best measure. More to come on that at a later date.