The 2007 MLB Team Payroll Report Card

At the end of each regular baseball season, I compare the payrolls of all the teams to see what kind of impact payroll disparity had on overall team performance for the year. [See my 2005 annual report card and 2006 annual report card.] This year's report card, once again, reveals that high payroll simply does not equal success. For purposes of this report, I measure success by which teams make the playoffs because I truly believe that each playoff team has an equal chance of winning the World Series. Once you get to the playoffs, it becomes a matter of timing, luck, molecular attraction and star alignment (in support of this proposition I cite to Annie Savoy from Bull Durham).

Here are this year's results (using the USA Today salary database and rounded to the nearest million):

1. Most Valuable General Manager. The MVGM award this year goes to Mark Shapiro of the Cleveland Indians. With the eighth lowest payroll in all of baseball ($62M), Cleveland breezed through the AL Central by an 8-game margin and tied Boston for the best record in all of baseball. By the way, Shapiro also received the MVGM award in '05 with a $42M payroll and 93-69 record.

2. Underpaid. The teams with the lowest payrolls in all of baseball -- Tampa ($24M), Florida ($31M) and Pittsburgh ($39M) -- all finished lowest in their respective divisions. By the way, Tampa and Pittsburgh made this category on my '05 report card.

3. Overpaid. A lot of clubs made this category this year.
The White Sox, with the fifth highest payroll ($109M), finished 24 games behind Cleveland in the AL Central. As they spend more each year, they do worse. In '05 they won it all with a $75M payroll. Last year they spent $102M and didn't even make the playoffs.
The Dodgers, with the sixth highest payroll ($108M), finished eight games behind Arizona in the NL West and then watched Colorado and San Diego battle it out last night for the remaining playoff spot in their division. The important piece of data here is that the Dodgers spent twice as much as all three of them! Arizona spent $52M, Colorado $54M and San Diego $58M. Last year, the Dodgers spent $10M less than this year and made the playoffs.
San Francisco, with its $90M payroll and finishing 19 games behind Arizona, made the overpaid category and watched the game last night too.
Baltimore spent $94M and finished 27 games out.
Seattle broke the $100M mark ($106M) and didn't make the playoffs.
St. Louis ($90M) and Houston ($88M) had really mediocre seasons finishing third and fourth, respectively, in the NL Central.
The Mets ($115M) had the third highest payroll in all of baseball and didn't even make the playoffs. Last year, the Mets spent $15M less than this year and made the playoffs.
Finally, I'm going to put Detroit in this category. They spent $13M more than last year, but made the playoffs last year and were not even in the race this year finishing eight games behind Cleveland.
By the way, the Dodgers, San Fran, Baltimore, Seattle and the Mets made the overpaid category on the '05 report card.

4. Made Good Use of Their Money. This category represents those teams that did not make the playoffs but came real close, without breaking the bank. San Diego ($58M) made this category, and so did Milwaukee which finished just 2 games behind the Cubs in the NL Central with a $71M payroll.

5. Spent What Was Necessary. This category represents those teams that made the playoffs without breaking the bank. This year, half of the teams making the playoffs fall into this category: Arizona ($52M), Colorado ($54M), Cleveland ($62M) and Philadelphia ($89M)

6. Spent More Than Was Necessary. The Yankees ($190M) and Boston pretty much own this category. Boston, with its $143M payroll, spent $23M more than last year to increase its chances of making the playoffs this year. Keep in mind that these numbers don't reflect the additional money paid in luxury tax.

I walk away with the same conclusion each year. The $50-$70 million range seems to make the most business sense. Looking at the salary data on an aggregate basis, only four of the eight teams in the playoffs are in the top 1/3 in payroll (more than $90M). And three of the eight teams actually fall in the bottom 1/3 in payroll (less than $70M).

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