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Sunday, March 13, 2005


A couple days ago Jayson Stark at ESPN published an article titled "Hope now a widespread reality" in which he says in regard to teams that won't be in contention in 2005...

"It could be as few as four teams. It might be as many as eight. But six is more like it. And that's a long ways from two-thirds, in anybody's math book...To get a clearer picture, we did a recent scout-and-GM survey on this. Shockingly, only four teams – the Rockies, Royals, Pirates and Devil Rays – got a vote from all six of the people we polled."

Setting aside the fact that GMs and scouts may not be overly objective about such a question, Stark contrasts this with the approximately 15 teams that Commissioner Bud Selig was referring to in his November 2000 comment when he said "At the start of spring training, there no longer exists hope and faith for the fans of more than half of our 30 clubs."

Stark cites three lines of evidence to back up his claims:

  • Revenue Sharing. Here Stark notes that the Marlins will receive $27M, the Twins $21M, and the A's $19M to name a few.

  • Sharper General Managers. Particularly Stark calls out strategies of Terry Ryan of the Twins and Billy Beane of the A's along with smarter contracts by other GM's.

  • Luxury Tax. Stark sees the tax as putting downward pressure on salaries.

Is Stark right that there "has never been more hope in spring-training camps everywhere"?

Well, to start we should get right to the bottom line and look at how teams have fared since 2000. Using the same methodology I used in a previous article by calculating the Normalized Payroll (NPayroll) of each team as their payroll divided by the average payroll for the year. As far as division finishes go here is what we find:

Finish Payroll Teams
1 1.25 31
2 1.09 29
3 .97 30
4 .90 30
5 .78 25
6 .74 5

I'm not much of a mathemetician but it appears that there is a strong correlation between the place at which a team finishes and their payroll.

Regarding Stark's three lines of evidence, I fully agree that revenue sharing, smarter management, and the luxury tax are a good thing. However, we're not there yet....

Revenue Sharing
After 2004 the Yankees had to contribute $60M of their estimated $315M revenue to the revenue sharing plan. Combined with the $25M luxury tax (see below) that means the Yankees still had $230M at their disposal while small market teams still have less than 50% of that total. Clearly, the revenue sharing scheme doesn't go far enough. A fair system would split per game revenue 50-50 between the home and visiting teams - after all, it takes two teams to play a baseball game.

Smarter GM's
The increase in knowledge about performance analysis in the post-Moneyball era can indeed give some teams an edge up on others. As I've said before, however, that advantage is fleeting in the big picture since information flows freely and even teams that are fighting and kicking against the new knowledge like the Cubs will eventually succomb as it becomes the new orthodoxy. In short, I don't see this development as any sort of solution to the financial inequities in the game. In fact, the new knowledge may work against the revenue-poor teams as Baseball Prospectus 2005 noted in its comment on the 2005 Pirates and the drafting strategy of GM Dave Littlefield.

"College juniors and seniors don't have alot of leverae, barring another Varitek-style standoff; yet even then, the Pirates apparently have to settle for less...the draft is a second area of player acquisition handicapped by financial limitations. Littlefield isn't merely acceding to McClatchy's (the Pirate owner) oft-stated preference to college talent or following a Moneyball-minded script; he has to worm his way down to signability-inspired choices."

In other words, teams like the Royals and Pirates have to pass on top level talent like Jered Weaver and Mark Prior and instead sign second tier prospects because they cannot pay the bonsues these top picks demand. With better performancing forcasting tools available to all teams it will become less likely that small-revenue teams will steal a pick looked over by richer teams.

Some might argue that smart GM's will continue to innovate through new sabermetric insights, for example by attempting instead to exploit the undervaluing of defense as the value of on base percentage and OPS begins to be understood as pointed out by Peter Gammons and Ken Rosenthal. Billy Beane also pointed this out in a recent interview.

However, as I've said before I think the inherent structure of the game of baseball ultimately limits the possibilities for progress. Using the Batting Runs formula, for example, the value of a homerun or a stolen base or a walk has changed only slightly since 1900. From the offensive perspective it isn't like someone will suddenly learn that stolen bases indeed are more valuable than power hitting. And even in the big picture sabermetricians pretty well understand the relative values of offense and defense (split into pitching and fielding). As a result sabermetrics will become more specialized and so I wouldn't look for "a host" of new sabermetric breakthroughs. In addition, taking advantage of what is currently undervalued can only get you so far if what is undervalued is not as valuable in an absolute sense. Right now we're in a time when some teams can and do exploit the market but with the spread of sabermetrics this advantage will be lessened.

Luxury Tax
I don't think there is any evidence yet that the luxury tax has inhibited spending. After all, in 2003 only the Yankees paid the luxury tax (paying $11.8M) while in 2004 the Yankees ($25M), the Red Sox ($3.1M), and the Angels ($.9M) all paid the tax. However, since the tax is progressive in that it exacts a higher penalty for consecutive offenses - for example the Yankees paid 30% this year while the Red Sox and Angels only paid 22.5% - it may indeed have that effect eventually, we just haven't seen it yet.

So for 2005, who's out and who's not. My estimation of those with no chance at division championships include:

Tampa Bay
Kansas City
San Diego

That's 15. Of those that have a chance at a wild card berth I would include Philadelphia and San Diego. So, rather than as many as eight teams I would say there are more like 13 that have no hope of post season play. And of course, the good fortune of the White Sox, Cleveland, and Minnesota is that they play in a division without the Yankees and Red Sox. A less fortuitous partitioning would include those teams as well while perhaps adding Baltimore as a team with a small chance of getting in via the Wild Card.

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