Let’s start our examination with the American League East, a division with universally acknowledged payroll imbalance.
This is part of what payroll imbalance looks like: a couple of teams at the top of the chart, the rest of the teams bunched at the bottom of the chart, and a lot of white space between the top teams and the bottom teams.
To give a better picture of this imbalance, let me introduce another kind of chart: a stacked chart. A stacked line chart shows a picture of the percentage of total division payroll represented by each team.
In the stacked chart, the Yankees’ payroll is represented as the blue line towards the bottom of the chart. The Red Sox payroll is the red line above the Yankees’ payroll; the white space between the Yankees line and the Red Sox line represents the size of the Red Sox’s payroll. In similar fashion, the Orioles payroll line is stacked on top of the Red Sox, the Blue Jays on top of the Orioles and the Rays on top of the Jays.
In an ideal world, the stacked chart would show an equal amount of white space between each line on the chart — this would indicate perfect payroll equality. We’re not seeing anything remotely close to this in the AL East. The Yankees have a payroll that’s a bit less than 40% of the division total. The combined payrolls of the Yankees and Red Sox represent close to 70% of the total. The Yankees and Red Sox payrolls squeeze the payroll lines for the Orioles, Jays and Rays to the very top of the chart, so that the middle line (for the Orioles) is at about the 80% point on the chart.
This is what divisional payroll inequality looks like: lots of white space on the normal line chart between rich and poor teams, and the poor teams squeezed to the top of our stacked line chart.
How do the other divisions in baseball compare to the American League East? Let’s look first at the AL Central:
The AL Central line chart looks like a junior version of the AL East line chart: there are rich teams (White Sox, Twins and Tigers), poor teams (Indians and Royals) and a lot of white space in recent years between the rich and poor. Another thing to note: this inequality is relatively recent: back in 2004 all five teams were bunched pretty close together.
Next: the AL Central stacked chart:
The AL Central stacked chart looks an awful lot like the AL East stacked chart, at least if we look at the numbers for 2011. The triangle for the green line on the AL Central chart (for the Tigers) is at nearly the same spot as the similar triangle for the Orioles on the AL East stacked chart. The Royals and Indians are squeezed at the top of the AL Central stacked chart for 2011, same as the Rays and Jays on the AL East stacked chart. Again: note that this is a recent development in the AL Central — back in 2004, the five lines on the AL Central stacked chart were much more evenly spaced.
This may come as a surprise, but there is significant payroll disparity in the American League Central division, and this disparity is growing. True, the raw number difference between the White Sox and Royals is “only” about $90 million, while the raw number difference between the Yankees and Rays is more like $160 million. But if we look at the stacked line chart and consider payrolls on a percentage basis, we find that the Jays, Rays, Indians and Royals all have payrolls roughly equal to 10% of their respective division payrolls. That’s considerable payroll inequality.
Next: the American League West. Since you’re familiar by now with the two charts I’m using, this time we’ll consider both charts together:
For the moment, the AL West is dominated payroll-wise by the LA/Anaheim Angels. Note that on the stacked chart, the Angels presently rank about as high as the Yankees do on the AL East stacked chart, at slightly less than 40% of the overall division payroll. Moreover, the Angels payroll dominance is growing: it was only three years ago that the Angels separated from the pack when it came to payroll, and now the gap between the Angels and the second place Rangers is greater than the gap between the Yankees and Red Sox.
But if we ignore the Angels, the rest of the division is reasonably balanced — we don’t see the Mariners and A’s squeezed to the top of the AL West stacked chart. In part this is because there are only four teams in the AL West, leaving more “room” on the chart. But we can also confirm this balance from the raw numbers: the gap between the Rangers and A’s payroll is only about $26 million.
If AL West payrolls appear to be reasonably balanced today, the trend for the future in this division is not as rosy. We can see from the charts that the Angels’ and Rangers’ payrolls are spiking, while the M’s and the A’s payroll lines are relatively flat. We can expect in the future that the Angels and Rangers may be able to exploit their locations in the second and (by some measures) fourth largest markets in the U.S., and that soon the AL West picture will look much like the picture in the AL Central.
Next: the NL East:
The NL East should look a lot like the AL East, with the Mets and Phillies assuming the kind of payroll dominance we see from the Yankees and Red Sox. But in fact the NL East looks more like an extreme version of the AL West, with the Phillies in the roll of the sole dominant team. We might guess that the NL East payroll balance is skewed by the Mets’ recent financial troubles — the mismanagement of the Mets by the Wilpons seems to have forced the Mets to spend more like the San Francisco Giants and less like the New York Yankees.
In certain respects, the NL East has the worst payroll balance in baseball. Notice on the stacked chart that the Phillies current percentage of divisional payroll spending rivals the similar percentage spent by the Yankees in the AL East. Moreover, the gap between the Phillies and the second-biggest spender in the NL East (the Mets) is larger than the gap between the highest and second highest payrolls in any other division. The Phillies enjoy a dominance over the remainder of the NL East that teams like the Yankees and Angels can only dream about (assuming, of course, that teams can dream and that they’d dream about payroll if they could dream at all).
Next, a better balanced division: the NL Central:
The NL Central represents the closest thing to balance that we’re likely to see in baseball. The stacked chart above is a bit difficult to compare to the other stacked charts we’ve seen before, since the NL Central is the only division in baseball with six teams. So let’s look at the raw numbers: the Cubs have a payroll only $20 million greater than the Cardinals; the Cards have a payroll only $20 million greater than the Brewers; the Brewers payroll is within $15 million of the Reds and the Astros. And then we have the Pittsburgh Pirates … and at least the Pirates have increased their 2011 spending over that in 2010.
The NL Central is a bit like the NL East: it should be dominated payroll-wise by its sole big-market team, the Chicago Cubs. By one measure, Chicago is the third biggest media market in the country; Houston comes in 10th, and no other NL Central market cracks the top twenty. The failure of the Cubs to achieve payroll dominance may be tied to the debt assumed by the Cubs team when it was purchased out of bankruptcy by the Ricketts family. The Cubs’ team debt of over $500 million is the highest of any team in baseball — higher even than the debt owed by the Dodgers and Mets (of course, the debt picture gets complicated if we go beyond team debt, and consider off-balance sheet obligations and the debt owed by companies affiliated to baseball teams — a topic for another post on another day).
So … the payroll balance in the NL Central may be a temporary thing.
Last but not least: the National League West:
The National League West is a bit like the American League Central: three teams at the top, two at the bottom. In truth, the payroll balance in the NL West is not too terrible, in part because the teams at the top of this division (Giants and Dodgers) spend less than the two top payroll teams in any other division.
But the Dodgers should dominate this division today from a payroll standpoint, much like they did in 2008. The fact that the Giants outspend the Dodgers is less the result of the Giants’ recent success on the field, and is mostly the result of the damage wrought to the Dodgers by battling co-owners Frank and Jamie McCourt. Once the Dodgers are taken over by competent management, we can expect this situation to change.
Where does all this leave us?
We started with the well-publicized notion that there’s considerable payroll imbalance in the American League East. If we wanted to rank baseball’s divisions by payroll imbalance, then the American League East is Number One. But the AL East is not alone. There’s a large and growing payroll imbalance in the AL Central. The AL West and NL East may be worse than unbalanced: from a payroll standpoint, each of these divisions are ruled by a single team. The NL Central and NL West enjoy better payroll balance, but we can expect this situation to change as the Cubs and Dodgers get out from under their respective debt burdens.
In short, the Rays, Jays and Orioles are not the only small payroll teams in baseball that are forced to compete with big spending division rivals. The Indians, Royals, A’s, Nationals, Marlins, Pirates, D-Backs and Padres are in positions very similar to their poor relations in the AL East. If payroll disparity is a problem, then it is a league-wide problem, and in certain divisions (particularly the AL Central and AL West) a growing problem.
Or is this a problem at all? How much does it matter that teams like the Yankees have payrolls five times as great as teams like the Rays? You may remember, last year the Rays finished with a better record than the Yankees. Was that just a fluke? What kind of success can money buy in baseball? This is the ultimate question, the question for which we all think we have the answer, the question that is probably the most difficult to answer in any discussion of money in baseball.