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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.

4 comments to Regarding the Yankees’ Payroll

  • Subrata Sircar

    The game is rigged in the Yankees’ favor (and to a lesser extent the Red Sox), and blaming them for exploiting that advantage to the hilt is ludicrous. It is also ludicrous to say the Yankees can buy all the top talent. (They can buy all the top talent that makes it to free agency or chooses to come to MLB from outside the draft zone, but those aren’t the most efficient markets for talent.) To that extent I agree with Gruber (and with Posnanski’s recent clarification).

    (One thing I often wonder is why no one complains about the game being rigged in the Mets favor. I suspect that it’s because a) ownership doesn’t have the 40 years of compounded growth and hence the same ability to exploit their market b) they haven’t leveraged their revenue as efficiently as the Yankees have c) they don’t have the Yankees history, being an expansion team, and hence can’t market themselves as well.)

    That being said, the resources spent on a baseball team are whatever the ownership is willing to pay. Ownership can dip into their own pockets if they wish and spend more for players, but they didn’t get to be billionaires by doing that sort of thing. Most owners will (wisely) spend up to the point at which the franchise is still making an operating profit *and* continuing to grow the franchise’s value. Some will stop short of that. Expecting otherwise is well, doomed to disappointment if nothing else. (I don’t know if there’s a modern owner willing to spend past the operating profit point and be content with the immense growth in franchise values, even for the Royals and Pirates of the world.) The Yankee revenue stream makes that point staggeringly high for their ownership, and their franchise growth makes it possible to spend well beyond that if they choose to do so.

    One frightening thought I’ve occasionally had is that the Yankees might be even more successful than they are if they largely eschewed the free agent market (*cough* Kei Igawa *cough* Carl Pavano *cough*) and instead plowed even more money into scouting and player development (which to a certain extent, they have; they identified the top two free agents in a rich class last year and went all out to get them). The Yankees cannot buy the best players from other teams due to the Finley Rule, but the same isn’t true of those teams’ other assets. I wonder what MLB would do if the Yankees identified the 50 top scouts in baseball and offered all of them a 100% raise and scads of perks? (Could they do anything? Probably not, given that Loria’s actions during the purchase of the Marlins went unanswered.) That would be a frightening leverage of insignificant costs into a potentially huge improvement in their talent acquisition. Or if the Yankees opened a player development academy staffed by the best native talent in twenty countries worldwide – including Japan? Again, an expenditure that’s insignificant to the Yankees, but impractical for other teams.

  • Danil

    I think Subrata is making an error here – part of the advantage that they have is that the trophy, and therefore the revenues, don’t go to the most efficient team. (Can’t you just hear Animatronic Duquette celebrating the fact that the Sox led the league in wins per dollar?)

    I haven’t been able to come up with an answer that I think would work, and is fair. I don’t believe that the Yankees market would notice another team or two being dropped into New York – for example, would moving the Royals to New York make any difference at all if the Royals were run the way they are today?

    Also, it’s not clear to me how much of the current Yankees success is sustainable, in this sense: 95-96-97 was the end of the development of Rivera-Jeter-Posada, and pretty much no matter how you count it, that’s more than NYs fair share of the current crop of HOF candidates. Now, without a doubt, the economic advantage has allowed the Yankees to keep all three of those players (pop quiz: who is the best Yankee farm product that has NOT played the bulk of his career in NY?) but I don’t believe that the economic advantage created that spike (evidence: it doesn’t appear to have been sustained?)

    In other words, the Yankees finally being smart about not buying second best talent is coincident with an usual crop of home grown players. What does baseball look like when that stops being true? How do the lessons of Atlanta and Tampa Bay apply?

  • Subrata Sircar

    The trophy (and its attendant revenues) don’t go to the most efficient team. They also don’t go to the best team, but some combination of the most efficient and most talented team is the way to bet. Some years you win 116 games and don’t make the Series – other years you barely scrape in with 83 wins but win it all anyway. In general it seems like it acts more to keep the Yankees in check than to aid and abet them.

    “[...]but I don’t believe that the economic advantage created that spike[...]”

    Maybe not, but it might create the next one. For example, their economic advantage lets them sign international players – marketing the Yankees worldwide gives you an in, and you can pay more than enough to get the guys you really want. It lets them pick up players who slide in the draft as well (although only one per round, and other teams can do the same thing). It lets them pay scouts whatever it takes. It might be impractical, but the Yankees could hire one scout for every high school in the country, assign them to that school and have a good head start on figuring out who the next Jeter might be. They might not even notice the cost.

  • Too much stuff in the comments for me to respond to every bit of it, but here are some nuggets:

    • It was pointed out to me that the Red Sox actually have the 4th highest payroll in baseball, behind the Yankees, Mets and Cubs, and only slightly ahead of the Tigers and Angels. Interesting, as I’d thought the Sox still had a substantial lead over all non-Yankee teams. (Of course, the Sox might be able to spend considerably more than that and just didn’t in 2009.)
    • I don’t think anyone complains about the game being rigged in the Mets’ favor because it’s not. Even though they, like the Yankees, play in New York City, the Yankees’ effective market size (fan base, TV revenue, etc.) is much larger than the Mets’, for various reasons. (I suspect that fundamentally the reason is that the Yankees didn’t leave New York like the Dodgers and Giants did, and the Mets have been unable to entirely absorb the fan bases of the two NL teams. Secondarily, of course, the Yankees have been a wildly successful since the Mets have arrived; even their years in the wilderness have been punctuated by great success in the 70s and 90s.)
    • A spin-off discussion which I deliberately decided not to go into here is the Yankees’ 2009 roster, and some of their missteps in recent years that Subrata alluded to. The Yankees’ regular line-up had 4 hitters age 35 or older, plus ARod at 33, and their pitchers included 37-year-old Andy Pettitte, and oft-injured AJ Burnett (both of whom were good but hardly dominant). The Yankees got resurgent years from Posada (age 37), Jeter (35), Damon (35), Swisher (28) and Matsui (35), plus what may be Cano’s career year, and a better-than-usual year from Melky Cabrera, and they were a very healthy team considering their age. Were the Yankees lucky? Did they just know something about these players? Some of both, I’d guess. However, if their aging players resume their declines in 2010, and with the thin free agent markets in the coming years, the Yankees may find the going harder.
    • Posnanski’s post that I refer to originally deals in some depth with the fact that MLB has rigged the playoffs so the best and most efficient team doesn’t win every year. It is, of course, the “anything can happen in a short series” phenomenon.
    • Overall I think the Yankees are not as well-run as organization as the Red Sox or Rays (maybe not even the Angels). They’re near the top, though (I can’t think of anyone else I’d put ahead of them), and their money helps compensate for what their front office lacks in skills. And of course it therefore helped a lot that they were able to sign 3 of the best free agents in recent years prior to 2009.

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