Payroll matters in MLB

FiveThirtyEight notes that despite some small budget successes in MLB like the Houston Astros or Kansas City Royals, money correlates as strongly to winning as ever.

J.C. Bradbury, an economics professor at Kennesaw State University, found that winning more increases revenue exponentially. “Going from 85 wins to 90 is worth more than 80 wins to 85,” he says. As a result, while it might cost more per win for a team that wins 90 games than 85, it makes financial sense because the revenue reward will be higher as well. This leads to a self-perpetuating cycle. Additionally, fans of teams that win frequently expect them to continue winning, and management pays more to do so. For a team like the New York Yankees, paying 10 percent more than anyone else for a second baseman who is only 5 percent better than his closest peer is worth the money (and they can afford it).
Perhaps one reason for the renewed focus on the success of small-budget teams is the importance of playoff success versus the regular season. Postseasons in American sports offer a smaller sample size than, say, soccer’s English Premier League, where the winner is determined by 38 games. In baseball, the better team (the one with the higher payroll) is less likely to prevail over the course of a short playoff series than they would be over an entire season. That, combined with the expansion of the playoffs, means it’s easier for a small-budget team to reach the World Series, as the Kansas City Royals did in 2014, losing to the San Francisco Giants in Game 7. Winning a playoff series can come down to a few factors — a couple of good pitchers and luck — that are less important during the regular season. “The formula seems to be: limp through regular season, get into playoffs, then win,” said Rodney Fort, professor of sport management in the School of Kinesiology at the University of Michigan.

That's the compromise at the design of MLB. It's harder for a small-budget team to make the playoffs, but once they're there, the odds of them winning it all are better than they are in, say, the NBA. Much of the design of sports is arbitrary, you can have set things up to increase or decrease the role of randomness for your own narrative goals. If you're uncomfortable with the idea that you can just buy wins, you're not going to root for teams like the Dodgers, Yankees, or Red Sox.

I'm not a huge soccer fan, but it seems there are no salary caps for UEFA teams in Europe. Do fans there feel similar reservations about the effective monopoly on success for those with deep pockets?

I'm of mixed emotions on the topic. On the one hand, a salary cap that puts all teams on on equal footing seems equitable. On the other hand, its larger effect is to suppress player salaries, shifting those dollars into owners' pockets. Oddly, most sports fans I know seem more sympathetic to owners than players, not what you'd expect from people who are themselves laborers. That is, if their team gets a bargain on a star player, they're happy.

I generally side with players, even if their salaries are already high, because I like seeing people achieve fair market value for their contributions. I wonder if the prevalence of fantasy sports has made more fans more sympathetic to ownership than players since such games generally put fans in the position of being a general manager.