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Regarding the Yankees’ Payroll

A couple of sharply contrasting articles about the New York Yankees and their payroll coming in the wake of their World Series victory: Sportswriter Joe Posnanski believes it’s an unfair advantage, somewhat obscured by baseball’s 3-tier playoff structure (some follow-up comments here), while Apple blogger Jon Gruber thinks the Yankees are just trying to win, which is more than can be said for some teams. My own opinion is closer to Posnanski’s than Gruber’s, although Gruber has a few good points.

(It’s very hard for baseball fans to objectively discuss this issue. Anti-Yankee bias is extremely strong throughout baseball – as a Red Sox fan, I admit to chortling gleefully whenever their season comes to a premature end. I suspect Posnanski has some of this bias, and that Gruber is colored by bias as a Yankee fan; indeed, his gloating at their championship and his past comments on sports makes me think he can’t really assess his team rationally. Then again, it’s sports; rationality isn’t required.)

I think the Yankees’ market and payroll do represent an unfair advantage, but they don’t give the Yankees a “pat hand” as Posnanski puts it. You also have to try to win, as Gruber says (and I do think there are teams that don’t try seriously to win), and you have to be skilled in your trying. The Yankees’ days in the wilderness in the 1980s were because they had fallen behind other teams in collecting talent and assembling their roster. Their approach changed in the early 1990s, which laid the foundation for their run of success since then. But once you have all three elements – a huge payroll, a desire to win, and the skills to assemble winning talent – you’re going to be a winning team most years.

There are teams which have two components, but who lack the large payroll, and they are simply and clearly at a significant disadvantage compared to the Yankees (and to a lesser extent the Red Sox). The Athletics are a popular example. The Angels are a well-run team which have been regularly run over by the Yankees and Red Sox since they won their 2002 championship. And the Rays are one of the best-run teams in baseball (a few years ago if I’d said that you would have asked me what I’ve been smoking), but not only are they at a payroll disadvantage, but they’re in the same division as the two richest teams in baseball and so were on the outside looking in coming the 2009 playoffs. (The Blue Jays are in some ways the Rays writ small.)

To look at it another way, you could be the best-run team in baseball, but given their financial resources, if the Yankees and Red Sox are among the top five best-run teams, then their payrolls give them a huge ability to cover for their mistakes and outbid other teams for the top free agent talent, that they’ve just got a huge built-in advantage over you.

Revenue and payroll are not the whole story, but they’re a significant factor.

There have been some interesting articles about market size written over the years. The seminal work, by Mike Jones, seems to no longer be available. Nate Silver wrote some articles in 2007 keying off of that work, but you have to be a Baseball Prospectus subscriber to read them. (If you are, you can find them here: One, two, three, four.) One point I recall from Jones’ original article was that the New York City area is a large enough market to support four teams, maybe as many as five or six, teams, each with a revenue stream competitive with other Major League teams. NYC is a really big market, folks.

And that’s kind of Posnanski’s point: You can’t really underestimate how big the New York market is, and how much that plays into the success of the Yankees. The Yankees have been a well-run franchise for nearly 20 years, and that counts for a lot, but their market counts for an awful lot as well.

I agree with Gruber that the Steinbrenners’ drive for success and excellence is admirable (is it, though, any more admirable than Oakland Raiders owner Al Davis’ stated desire to win?). Also admirable is the fact that they put their revenue back into the team, creating a feedback cycle of economic and on-the-field success. Not every team does this. (Gruber seems to imply by omission that the Yankees are special in this way, which I think understates what many other teams have done with much less.) And I’m certainly in favor of putting the earnings of baseball back into the game, and ultimately funneling much of it to the players who are, after all, where the true value in the game is created.

It’s not that I blame the Steinbrenners or the Yankees for this state of affairs. I do believe there are some structural problems in the business of baseball, for which the Yankees are somewhat culpable as co-owners of Major League Baseball (how much they specifically are culpable I can’t tell). But having purchased the most lucrative property in baseball and owned it for nearly 40 years now, I can’t fault them for exploiting what they’ve got for the greatest gain and success possible.

But I don’t think we can or should paper over the fact that the Yankees do have a large built-in advantage over every other team in baseball. (And I readily admit that the Red Sox have the second-largest built-in advantage, although the margin between #2 and #3 is much smaller than that between #1 and #2.) I think this is unfair, and it does make the Yankees’ successes less impressive by comparison with those of other teams. (I wonder who the team of the decade would be if you somehow adjusted for market and/or revenue stream? The Cardinals?)

I don’t know of a solution to this problem. Revenue sharing will never be big enough to have an impact. MLB isn’t going to put 2-3 more teams in New York City. (Look at how difficult it’s been just for the Athletics to move to a county which doesn’t even have another Major League team, since the Giants ostensibly claim the San Jose area as their market.) A salary cap would punish the players unfairly. What else is there?

In any event, complaining about the Yankees’ built-in competitive advantage will never go away, and that’s because it really exists.