Updated: March 7, 2014
We all know that, in general, Major League Baseball teams with the big payrolls win more games than the teams with small payrolls. We also know that payroll alone does not determine success. The big market Yankees and Red Sox have won a lot of games in the past ten years but the big spending hasn't really helped the Mets and Cubs. Meanwhile, the Rangers, Rays and Rockies and Marlins have gone to the World Series will small payrolls. The question is: what is the expected return (in this case, wins) of an extra million dollars of team payroll?
To answer this question, I did a simple regression analysis using wins and adjusted payroll for 2004-2013. I adjusted the payroll based on the average team payroll for 2013. For example, let's say the average 2013 payroll was 25% higher than the average 2010 payroll. If Milwaukee's actual payroll was $80 million in 2010, their adjusted payroll for that year would be $100 million (25% higher). I looked at 10 years of data for 30 teams so that gave me 300 records to analyze. The regression gave me the following formula:
Expected Wins = 70 + 0.107 * Adjusted Payroll in Millions of Dollars
This means that each additional $9.4 million in payroll resulted in one extra win. This may not seem like a great return on investment until you know that the top 5 teams in terms of payroll spent $88 million more on average than the bottom 5 teams. With this formula, I was able to calculate an expected win total for each team and year. For example, the 2013 Red Sox had an Opening Day payroll of $151 million (actual payroll = adjusted payroll in 2013) so their expected wins based on that payroll would be:
Expected Wins = 70 + 0.107 * 151 = 86
The Red Sox won 97 games last year so they were 11 games better than expected based on their payroll. By contrast, the White Sox spent $119 million and won only 63 games (20 games worse than expected).
I then averaged each club's wins and expected wins for the last ten years. Below is the final tally. The St. Louis Cardinals were the best team dollar-for-dollar, closely followed by the Oakland A's. The Cardinals were third in average wins despite being 11th in spending. The A's were tied for 9th in wins with an average payroll that ranked just 24th among 30 MLB teams. The worst team, dollar for dollar, in the past ten years is the Seattle Mariners. The M's are in the middle of the pack in terms of payroll but are nearly 200 games under .500 since 2004. The Mets were the weakest big market club. They had the fifth highest payroll in the 2004-2013 time period but have lost more games than they have won.
|Rank||Team|| Average |
| Expected |
Click HERE to see a similar 2001-2010 analysis.