I suppose that’s a fancy way of asking “Are astronomical salaries for star players worth it?”
But what I am thinking of is that baseball has embraced statistics more than ever in the selection of players. (see Michael Lewis’ “Moneyball”)
So does this extend to the ‘bottom line’? When shelling out $45M for a multi-year contract, is there first an analysis showing that the team will increase revenue at least that much? Or is it perhaps a matter of 'try to win at any cost, and hope profits follow"?
There’s a lot of research on this - but we don’t know how extensive it’s used in MLB front offices. Here are a couple articles on the marginal value of a win:
Probably the front-runner in determining how to evaluate the relationship of salary to performance to winning is Nate Silver. There’s articles all over the place on his MORP valuation, but the best resource would be Baseball Between the Numbers.
JC Bradbury also does some work on this in Hot Stove Economics, where he provides among other things a method for calculating the marginal revenue product of particular players based on a model where he looks at run differential and theorizes an S-shaped curve for the value of each additional run. That means that over the course of a season, if you start out scoring exactly as many runs as you allow, then scoring one more run isn’t worth much. The runs quickly accumulate in value, so in the thick of competition, marginal (additional) runs are worth quite a bit, and as you approach the top level you’re probably assured of a playoff slot anyway so scoring even more runs starts to pay off much less.
I read the book very quickly over the winter break, so I can’t comment on how compelling his reasoning is.
I heartily second all of Munch’s recommendations. My copy of Baseball Between the Numbers is so dog-eared from re-reading that i might need to buy a new copy soon.
J.C. Bradbury, as Ace309 says, also deals with value not just in terms of performance, but in connecting those things to money generated. If you don’t want to spring for his book, his blog Sabernomics (no longer updated) has quite a lot of entries that talk about player value in terms of actual team revenue.
One thing that a lot of the researchers seem to agree on, and that is illustrated quite clearly by the graph in Munch’s Baseball Prospectus link, is that there is a reasonably narrow number of wins (from about 84 to about 96) where the marginal value of a win is particularly high, with about 90-92 wins being the real sweet spot.
This is during the regular season. There is also the post-season to consider, because if you are successful there, it can also have a knock-on effect in terms of team revenue. Baseball Between the Numbers talks about the way that winning a pennant and especially the World Series really boosts overall team income during the following season, and sometimes beyond.
If you’re looking for overpaid players, the place to begin your search is NOT among the stars.
Last time I looked, major league minimum salary was $400,000 a year. Now, is there ANY chance that the 3rd string catcher of the Royals or the backup second baseman of the Pirates generates $400,000 of revenue for his team? No, no chance at all.
Well, does either guy have skills that would be hard to replace? No- both guys could be replaced by minor leaguer tomorrow, and there would be absolutely no noticeable dropoff in team performance or in attendance.
In other words, Alex Rodriguez MIGHT be grossly overpaid, but a utility infielder for the Brewers IS grossly overpaid.
But the minor leaguer would then have to be paid just as much, for as long as he was on the roster! And if the other guy had already signed an actual major league contract, you’d be paying him too, even if he was then playing (or not playing) back in the minors.
No, the major league minimum salary, and replacement-level performance, is the zero point in these calculations. Literally nothing cheaper is possible.
Ask fans to name an overpaid player, and they’ll often name a star. What I’m saying is, C.C. Sabathia MAY be overpaid. If Albert Pujols gets what he’s asking for, he MAY Be overpaid. There DOES come a point at which even the best player in baseball can’t justify the salary he demands.
But at the very least, Albert Pujols can argue “You HAVE to pay me what I want, because there’s NOBODY else who can put up the numbers I do.”
A third string catcher for the Cincinnati Reds CAN’T claim with a straight face that he’s worth $400,000 to his team OR that there’s nobody else out there who can do what he does. There are LOTS of people who can do what he does. HE’s just extremely lucky to have a strong union, because he’s WAAAAY overpaid even at league minimum. NOBODY who can be replaced in a heartbeat with no negative repercussions is worth $400,000 a year.
Minimum-salary players are “worth” much more than their salaries–not because of who they are specifically, but simply because the job itself, the major league roster spot, effectively brings in a certain minimum amount of revenue regardless of who fills it. A team entirely composed of no-name replacement-level players wouldn’t win many games, or draw many fans–but it would win some, and draw some, just because it’s got a spot in the league. The team has to pay 25 guys at least league minimum to do that. That team is more efficient in wins-per-dollar than the average real major-league team. It may be true that player A on the roster isn’t really any better than player B in the minors–but since player A is on the roster already, replacing him with anybody else does carry an additional cost.
On average, the minimum-salary player gives the most cost-effective performance in the league, at the single season level of analysis anyway. You’d think a real major league organization that actually fielded a minimum salary team repeatedly would see the bottom fall out of their support–though what a few teams have sometimes done is really worse, fielding vastly more expensive teams that didn’t actually play much better.
But baseball players as a group have demanded certain benefits, the minimum salary being one of them. The $400,000 a year can be viewed as a guarantee of security to all professional baseball players.
More money = more people willing to stick it out in the minors. For a journeyman who finally gets a chance to be on the big league roster for a season, the minimum salary is essentially all the payoff he’s going to get for 10 years or more of effort. At $400,000, a ballplayer stands to make a lot of money getting his cups of coffee - that’s about fifteen grand a week - so a 26th-spot guy has a rational reason to stick with it.
The Blue Jays have a guy like this, Mike McCoy. McCoy, this year alone, has made the club, been sent down, been promoted, sent down again, promoted again, and sent down again, and it’s a near certainty he will be promoted again at some point. I have no reason to believe McCoy is a stupid man and knows as well as we do that as a 30-year-old guy who’s been thrashing around in the minors most of this life, being the emergency callup is going to be his station in life for a few years and then his career will end. If the Jays were offering schoolteacher money to do that job, he might well say the hell with it and go find the steady job he’ll have to get in three years anyway. But if he can make $2000+ a day every day he’s with the big league club it makes sense to hang on as long as he can. Without that big league minimum, the Jays might lose McCoy, and other similar players like Chad Cordero, DeWayne Wise, or Jason Lane, as would almost every other team.
So you could argue that the establishment of a minimum salary is worth it in the sense that it provides major league teams with a ready pool of veterans who are available to fill in for injuries, failed youngsters and other such things.
This is a very good point. And it’s applicable not just to the call-ups that the big club will actually use. Major league salaries work as a necessary incentive for guys who will never earn even one day’s worth of the minimum. As I said in another thread,
The whole development system is required to produce modern major league teams, even the bad ones.
In a sense, all of a major league organization’s revenue is dependent on the prospect of a big paycheck to people who will mostly never be paid that much. Because the guys who will be, both stars and journeymen, needed to play with and against all those other guys to get to the point where they could first occupy that major league roster spot.
Now, personally I’d like to see some of the major league revenue pool diverted to actually pay minor league players, so that the system could continue without such a degree of unrealistic optimism, and it would become a reasonable choice for a minor league lifer to stick around as long as he wanted to and could keep up. Let the small towns keep a hero around! They are helping to build the major league organization, even if they never go to Chicago or New York themselves.