We like to complain a bit here at It’s About the Money about how the Yankees are taking in huge mountains of our money and not putting enough of it on the field. Obviously, baseball is a business (if a weird one that isn’t 100% about maximization of profits; many owners care more about winning than the bottom line), and the owners of baseball teams deserve to make money. That’s why teams that make less revenue spend less on payroll for the most part. Yankee fans don’t expect the Steinbrenners to go broke for the Yankees. I do think they expect to spend in proportion to the revenue the bring in.
Below is a scatter plot of post-luxury tax, post-revenue sharing 2015 MLB revenue (via Forbes) and 2015 MLB payrolls.
Assuming a simple linear relationship between revenue and payroll (which is generous to the Yankees, who have similar fixed costs to the other teams, but I won’t get all economicsy right now), teams that are above the trend line are spending less money on payroll than the predicted value given their revenue. Teams that are below the trend line are spending more on payroll than predicted.
We can see that the Yankees and Dodgers are huge outliers in opposite directions, as you’d expect. There are some other interesting tidbits on this graph: Detroit really is spending a lot more than they “should” in order to win a championship for their owner, Miami is right on trend, etc. Corporate-owned teams like the Mariners also tend to be right on trend, even though I’d have expected them to be below the line.
But the grander point here is: the Steinbrenners really are milking the Yankees more than other teams are milking their own teams. Continue reading Graph: The Yankees Are Underspending on Payroll