When the Yankees won the World Series two weeks ago, the team set a rather dubious record. No longer were the 2007 Boston Red Sox the most expensive team ever to win baseball’s championship. With an estimated payroll around the $201 million mark, the 2009 Yankees shattered the previous record by nearly $60 million.
Of course, with these numbers as irrefutable proof of some devious Yankee scheme to take over baseball, analysts and fans outside of the city have accused the Yankees of buying a World Series championship. The economics of baseball, they say, are broken, and the Yankees are the prime example of it. In New York, we finger teams such as the Marlins ($36 million) who pocket nearly as much in revenue sharing as they pay their team as the real economic villains of baseball, but that just might be wishful thinking.
So for the first post in a series I plan to unveil as the off-season goes on, let’s explore the Yankees’ spending. In an article in the Wall Street Journal, sports economist and Smith University professor Andrew Zimbalist states that the Yankees did not buy a World Series. Noting that 20 of baseball’s 30 teams have made the playoffs since 2004, Zimbalist says that payroll accounts for only approximately 15-30 percent of a team’s success. The other factors, he writes, “include front office smarts, good team chemistry, player health, effective drafting and player development, intelligent trades, a manager’s in-game decision-making, luck, and more.” Many of those factors are related to wealth, but more on that later this off-season.
Even if the Yankees’ payroll helped them this year, Zimbalist says, it might handicap them in the future:
Imperfect though it may be, baseball has a system, and the Yankees play by its rules. Its success this year depended significantly on the acquisition of pitchers A.J. Burnett and C.C. Sabathia, along with first baseman Mark Teixeira. But the Yankees did not sign these players to one-year contracts (though the team did sign pitcher Andy Pettitte to a one-year deal).
Mr. Sabathia was great in 2009, but he is signed through 2015 when he will be 36 years old; Mr. Burnett through 2013 when he’ll be 36; and Mr. Teixeira through 2016 when he’ll be 37. Many of the team’s other stars are also signed to long-term contracts. Third baseman Alex Rodriguez is signed through 2017 when he will be 42 and catcher Jorge Posada through 2011 when he’ll be 40.
It’s possible that the positive correlation between payroll and success the Yankees experienced this year will turn into an inverse correlation. After all, player performance tends to wane with age. But these players have contracts that require the Yankees to increase their annual pay in the years ahead. Those salaries will weigh on the team’s ability to acquire other players.
As you chew on those statements and the aging horrors that may await us, take a peek at this rough sketch of reinvestment strategies among baseball teams. Khoi Vinh of the blog Subtraction has explored the way baseball teams in 2009 reinvested their 2008 earnings on the field and found that the Yanks’ reinvestment rates were near the top and that, especially in the playoffs, reinvestment rates determined success (and winning percentage). Of the eight playoff teams, none reinvested a larger percent of their earnings than the Yankees did, and no other team, obviously, reached that 11-win mark.
And so I leave you with some initial thoughts. Maybe the Yankees’ spending came as close to guaranteeing a World Series win as is possible within the framework of baseball’s economics, but the team may pay a price for it later. Furthermore, the Yanks are simply playing by the rules of the economic game, and if the rest of baseball thinks it is broken, they will have to fix it. For decades, though, baseball has tried to bring down the Yankees, and nothing has succeeded. I wouldn’t put money on an economic sea change any time soon.
