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February 12, 2010

Prospectus Hit and Run

AL East Competitive Ecology

by Jay Jaffe

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It's no secret that the American League East has been the game's strongest division in recent years. They've produced the highest winning percentage and Hit List Factor by far over the past three years, as well as the last three AL pennant winners, two of the last three World Series champions, and the strongest fourth-place team of the wild-card era. With the two highest average payrolls, those of the Yankees and Red Sox, and a reliance on more free-agent muscle than any other division, this is baseball's high-rent district, though not every team is trying to spend with the big boys. As part of my ongoing series on the game's competitive ecology (introduced via a division-based overview, and continued with a look at the NL East), today we delve further into some numbers that illustrate that diversity.

This series builds on the recent work of colleagues Shawn Hoffman, Matt Swartz, and Jeff Euston, as well as older work by Keith Woolner, Doug Pappas, Nate Silver, and Neil deMause. You can read Keith's introduction to the concept of competitive ecology here, dig the late, great Doug's introduction to Marginal Payroll Dollars per Marginal win here (as part of his must-read 2001-2002 series, "The Numbers," for my money some of the best work ever published under the BP banner), catch Neil's application of Nate's marginal-dollars-per-additional-win curve here, see Shawn Hoffman's introduction and then revision of his Payroll Efficiency Rating, chew on Matt Swartz's work on service time contracts and wins here and here, and check out the details of each team's payroll situation at Jeff's Cot's Baseball Contracts site.

In response to some reader comments to the NL East article, I've created glossary entries for some of the abbreviations from the tables below which may be unfamiliar to readers just tuning in at this juncture, including those of MP/MW, PER, NM, and AM. PER' is my break from Shawn's work, using actual wins instead of third-order ones, and end-of-year payrolls, which include earned incentive bonuses, buyouts of unexercised options, deferred cash, and more, and can add over 30 percent to a team's overall payroll expenditures than using opening-day payrolls. NM% is the percentage of WARP derived from Non-Market salaried players, a figure by which we can infer teams' relative abilities to produce talent from within and to buy it on the open market, by extension providing something of a proxy for team age via the distribution of the two.

Baltimore Orioles


Year  Win%   HLF  Attendance     Payroll        MP/MW     PER'   NM    AM   Tot    NM%
2007  .426  .453   2,164,822   $95,269,977   $4,148,528   0.70  17.1  12.2  29.3  58.4%
2008  .422  .440   1,950,075   $78,888,250   $3,428,868   0.80  22.4   9.9  32.3  69.3%
2009  .395  .410   1,907,163   $79,308,066   $4,422,602   0.62  21.1   7.8  28.9  73.0%
Avg.  .414  .434   2,007,353   $84,488,764   $3,967,942   0.70  20.2  10.0  30.2  67.0%

Post-season appearances:: The O’s haven’t had one since 1997, their last season above .500.

Call it the Curse of Davey Johnson. On November 16, 1997, on the heels of a 98-win season, a division title, and a trip to the ALCS, the Orioles skipper was named AL Manager of the Year. That same day, he tendered his resignation, the final act of a long-running conflict with owner Peter Angelos. The Orioles haven't posted a winning season since, and their losing campaigns have been fraught with grisly late-season collapses, including an 11-28 finish in 2007, a 7-30 one in 2008, and a 4-13 one in 2009.

Thanks to those finishes, the Orioles' winning percentage is the lowest in the AL over the past three years, and the third-lowest in the majors. Yet time and again, they've made the classic mistake of overpaying for mediocre free agents in an attempt to prop up their sagging ballclub, and get very little for their money. Consider that Miguel Tejada provided just 2.5 WARP in 2007, at a cost of $13.8 million. Ramon Hernandez gave them 1.3 WARP in 2007-08 at a cost of $14 million. Melvin Mora provided just 5.8 WARP over the three-year, $25-million extension that expired last year. Aubrey Huff produced just 4.2 WARP for the O's under a three-year, $20-million deal that the team only got out from under last season when he was dealt to Detroit in mid-August. Deals like those boosted the Orioles' average payroll to a mid-pack 16th during the three-year period, yet they were just 18th in Auction Market WARP; worse, they were 23rd in Non-Market WARP. Only the Yankees spent more per marginal win, and they've got the post-season goodies to show for it. There are no such prizes for the Orioles, who rank as the game's least-efficient team.

Things are changing, albeit slowly, under team president Andy MacPhail, who joined the fold in June 2007. He's trimmed payroll, locked up Nick Markakis through his age-30 season, pulled off the five-for-one Erik Bedard heist (which netted Adam Jones, Chris Tillman and, via the subsequent trade of George Sherrill, top hitting prospect Josh Bell), and drafted Brian Matsusz, the team's top pitching prospect now that Tillman has passed rookie status. While MacPhail didn't actually draft Matt Wieters, he signed him, and stands to benefit from the Non-Market production that all of those youngsters,a collection of under-25 talent that ranks among the game's best, will provide.

All of this should help to bring fans back to Oriole Park at Camden Yards, a distinctive, trend-setting ballpark that brought in an average of 3.37 million fans per year during its first decade of operation (1992-2001). The O's fell below 2.2 million in 2006 and below two million in 2008, more a comment on the team's craptacularity than on the arrival of the nearby Nationals, who have been every bit the mess, minus the charming ballpark and long-lost winning tradition.

Boston Red Sox


Year  Win%   HLF  Attendance     Payroll        MP/MW     PER'   NM    AM   Tot    NM%
2007  .593  .624  2,971,025   $155,402,595   $3,054,063   1.09  30.2  30.6  60.8  49.7%
2008  .586  .608  3,048,250   $147,075,645   $2,934,389   1.15  32.7  28.8  61.5  53.2%
2009  .586  .569  3,062,699   $140,454,683   $2,785,661   1.31  35.7  18.6  54.3  65.7%
Avg.  .588  .600  3,027,325   $147,644,308   $2,925,627   1.16  32.9  26.0  58.9  55.8%

Post-season appearances: The Red Sox have reached the playoffs in each of the past three years and six of the past seven, winning the division and the World Series in 2007 (their second championship in four years), advancing to the ALCS after winning the wild card in 2008, and making the 2009 playoffs as the wild-card winners.

Since John Henry purchased the team in that sordid three-way deal involving the Marlins and Expos in 2002, the Red Sox have become one of the game's model franchises. On Henry's watch, the Sox have ended their 86-year championship drought, become perennial post-season contestants and, thanks to modifications of Fenway Park, have broken the three-million mark in attendance for the first time in franchise history.

The price tag hasn't been cheap. Boston's average payroll has run second only to the Yankees, albeit a distant second, 33 percent lower, and with a gap that's widened with every year, even more so when one considers that after paying the luxury tax from 2004-07, the Sox pared enough payroll to avoid it in 2008 and 2009 while the Yanks have continued to make eight-digit payments. The key for the Red Sox is their farm system. While the Sox have received more WARP from Auction Market talent than all but three teams (the Yanks, Cubs, and Cardinals) over the past three years, they've also ranked ninth in Non-Market WARP, and the balance between the two sources has swung heavily in the cheaper flavor's favor over the past three year thanks to the contributions of Dustin Pedroia, Jon Lester, Kevin Youkilis, and Jonathan Papelbon.

The Sox have locked up the first three of that quartet in long-term deals that buy out years of their free agency. They've also spent rather heavily this offseason, committing $120.5 million to free agents Adrian Beltre, Mike Cameron, John Lackey, and Marco Scutaro, though only Lackey is signed for more than two years. That still brings their current payroll commitments to a staggering $165.8 million, though with a crop of pending free agents that includes David Ortiz, Mike Lowell, Josh Beckett, Victor Martinez, and Jason Varitek, their commitments for 2011 are just half of that. If you want to complain that this is the year the Red Sox are trying to buy a title, it's your best shot.

Still, the take-home here is that the Sox have spent heavily, but they've spent well, and they've got a strong minor-league system that should keep the pipeline running, though they're light on near-ready talent. Overall, they rank seventh in PER' during this time span, and third among the 12 teams that have averaged at least $100 million in payroll.

New York Yankees


Year  Win%   HLF  Attendance     Payroll        MP/MW     PER'   NM    AM   Tot    NM%
2007  .580  .591  4,271,083   $218,311,394   $4,574,260   0.97  18.9  36.7  55.6  34.0%
2008  .549  .551  4,298,655   $222,519,480   $5,237,611   0.76  13.6  39.6  53.2  25.6%
2009  .636  .619  3,719,358   $220,024,917   $3,838,693   1.02  18.6  46.3  64.9  28.7%
Avg.  .588  .587  4,096,365   $220,285,264   $4,479,999   0.92  17.0  40.9  57.9  29.4%

Post-season appearances: They won the wild card in 2007, ending a string of nine straight division titles, missed the postseason in 2008, ending a string of 13 straight playoff appearances, and won the division and the World Series in 2009.

The 800-pound gorilla of baseball's economic system stands alone, and not just because they're the defending World Series champions. With an average payroll that's 49 percent higher than the second-highest team(!), they're simply in their own financial stratosphere; according to last year's Forbes estimate, the Yankees are worth $1.5 billion, 64 percent more than the next-highest team, the Mets—for whatever that's worth. They charge the highest ticket prices, including some astronomical ones in their brand-new ballpark. They draw the most fans, though they fell to second in the majors last year after leading for six straight years, the result of decreased capacity in the new park. Their YES Network has the largest audience of any regional sports network, and they have the game's most lucrative cable deal. Their brand value is the highest of any North American sports franchise. Forget the 800-pound gorilla. They're King Kong.

Not surprisingly, that allows the Yankees to play by different rules. The team ranks just 28th in the majors in Non-Market WARP over the three-year period, though not for the lack of trying. Robinson Cano has accounted for a good chunk of that value (13.5 WARP over the last three years, 22.0 over the last five), but young pitchers Phil Hughes and Joba Chamberlain have only intermittently succeeded at the big-league level; likewise for a bevy of young relievers and since-traded outfielder Melky Cabrera. The Yanks have made up for that by being the runaway leader in Auction Market WARP, with an annual total that's 30 percent higher than that of the Cubs, good enough to put them just one win per year behind the Red Sox's MLB-high overall WARP total. Their payroll includes the game's four most expensive contracts in terms of total value (Alex Rodriguez, Derek Jeter, Mark Teixeira, and CC Sabathia), and the highest average annual value at six positions (starter, reliever, catcher, first base, shortstop, and third base). A good chunk of that Auction Market talent was actually homegrown—the "core four" of Jeter, Jorge Posada, Mariano Rivera, and Andy Pettitte (following a free-agent sabbatical in Houston)—and dates back to the team's booming talent production system of the mid-90s, but it's gotten mighty expensive.

With such high stakes, winning isn't everything. It's the only thing. The Yanks have been right around 1.0 in terms of Payroll Efficiency Rating during the two years out of three in which they made the playoffs, but missing them in 2008 cost them dearly, and led to the fourth-highest MP/MW mark of the period.

For all of that, it's worth noting that the Yankees don't just throw money or prospects around willy-nilly. Despite their big expenditures, particularly last winter when they committed $423.5 million to Sabathia, Teixeira, and A.J. Burnett, they've demonstrated some discipline in certain instances. GM Brian Cashman speaks of a budget that he has to stick to, and while it's probably not too much of a challenge for him to shake loose some extra scratch for a deadline acquisition-in for a penny, in for a pound, after all-the past few years have seen him hoard the team's young pitching talent instead of chasing after Johan Santana when he was up for trade from the Twins, let popular and still-productive free agents Bobby Abreu, Johnny Damon and Hideki Matsui walk away, pass on the likes of Matt Holliday and Jason Bay despite their left field vacancy, and resist the charms of free agent Manny Ramirez, all in an effort to field younger teams. On the other hand, the money the Yanks saved by letting Damon walk led Cashman to reacquire Javier Vazquez, thus setting up a battle for the fifth rotation spot between Hughes and Chamberlain and pushing the other one back into the bullpen. Yes, the tab really adds up when you're buying both belt and suspenders.

Tampa Bay Rays


Year  Win%   HLF  Attendance     Payroll        MP/MW     PER'   NM    AM   Tot    NM%
2007  .407  .430  1,387,603    $31,817,020   $1,217,070   0.79  23.7   0.5  24.2  97.9%
2008  .599  .587  1,780,791    $51,020,720     $828,527   2.23  48.9   6.5  55.4  88.3%
2009  .519  .545  1,874,962    $71,222,532   $1,695,552   1.03  39.1   8.7  47.8  81.8%
Avg.  .508  .521  1,681,119    $51,353,424   $1,198,619   1.33  37.2   5.2  42.5  87.7%

Post-season appearances: The Rays won the division and the AL pennant in 2008, both franchise firsts.

We all laughed back in 2005, when then-GM Chuck LaMar declared at the outset of his final season at the Devil Rays' helm, "The only thing that keeps this organization from being recognized as one of the finest in baseball is wins and losses at the major-league level." At that point, the franchise had failed to top 70 wins during its seven seasons of existence. It would be another three years before he was proven correct; thanks to a nominal exorcism and historic upgrades to their defense and bullpen, the newly-monikered Rays rose up and captured the division title and the AL pennant thanks to the high-upside talent they'd accumulated during their years of futility.

Their 97-win showing in 2008 produced the highest PER' of the past three years, and it also produced the fourth-lowest MP/MW. Only the Marlins' three seasons produced lower dollars-per-win figures, and nobody topped the Rays' single-season showing of 48.9 WARP from their Non-Market salaries. The 10 highest WARPs on that team, and 12 of the top 13 (everyone except Japanese import Akinori Iwamura), came from Non-Market salaries.

Last year was a different story, however. The Rays' payroll rose by about $20 million, with the contracts of free agent Pat Burrell and the arbitration-eligible Scottt Kazmir accounting for nearly two-thirds of that increase. Alas, the team underperformed relative to their Pythagorean record from the get-go, losing seven of their first nine contests decided by one or two runs, and falling out of the running for a playoff spot by mid-August. With their attendance lagging relative to the expectations for a pennant winner (they were up just 3.4 percent, albeit in an industry that fell by 6.6 percent due to the bad economy), the Rays traded Kazmir to the Angels for prospects in late August, freeing themselves from about $23 million worth of future commitments.

Though they've got an enviable core of young talent with which to overcome the trade of Kazmir—none of their five starters has even four years of service time—the Rays also have some payroll concerns, particularly given that their attendance is more or less capped by playing in a lousy, poorly-located dome. Their current commitments are just $5 million less than last year's year-end figure, and that's before including the arbitration-eligible B.J. Upton's salary. Five players (Carlos Pena, Carl Crawford, Burrell, Rafael Soriano, and Dan Wheeler) will make $40 million of the $66.6 million they have allotted, thus making the team more reliant on Auction Market talent than at any time in the recent past; a slow start could lead them to trade Pena or Crawford to save money. Still, with Non-Market talents like Evan Longoria, Ben Zobrist, Upton, James Shields, Matt Garza, and more, the Rays are hardly out of the running in this division despite their financial disadvantages.

Toronto Blue Jays


Year  Win%   HLF  Attendance     Payroll        MP/MW     PER'   NM    AM   Tot    NM%
2007  .512  .528  2,360,648    $95,069,351   $2,454,342   0.95  26.8  15.3  42.1  63.7%
2008  .531  .556  2,399,786    $98,343,520   $2,337,527   1.12  31.7  19.7  51.4  61.7%
2009  .463  .502  1,876,129    $84,130,513   $2,762,519   0.80  30.9  14.1  45.0  68.7%
Avg.  .502  .529  2,212,188    $92,514,461   $2,492,702   0.95  29.8  16.4  46.2  64.5%

Post-season appearances: The Jays haven’t made an October appearance since 1993, when they won the second of their back-to-back World Series.

The Blue Jays have been one of baseball's top eight teams over the past three years in terms of their Hit List Factor, yet the heavy traffic of the AL East, combined with some bad luck in the Pythgenpat department—a third-order deficit of 19.4 wins, worst in the majors—has limited them to one third-place finish and two fourth-place ones in that span. Worse, exorbitant long-term investments in outfielders Vernon Wells (seven years, $126 million) and Alex Rios (seven years, $69.8 million) forced the team to trade ace Roy Halladay once it was clear they could no longer afford him, a fiasco which indirectly cost GM J.P. Ricciardi his job.

One could almost forgive Ricciardi's optimism after the Blue Jays finished second in 2006; while the team's year-end payroll had risen from $45.7 million to $72.4 million over the previous year, their 87 wins and division ranking marked their high-water mark thus far in the wild-card era. Ricciardi had already locked up Halladay for 2008-10 via a three-year, $40-million extension, and he'd gotten good mileage out of pricey additions Troy Glaus, B.J. Ryan, and even Burnett up to that point. His 27-year-old center fielder was coming off a .303/.357/.542 showing and his third straight Gold Glove; why not lock him up too? Alas, Ricciardi overpaid drastically, as Wells' performance receded amid injuries, and the economy took a major hit. Wells has tallied just 4.2 WARP over the past three years at a cost of $24.6 million, and now the real punishment begins: He'll make at least $21 million a year between now and 2014, his ages 31-35 seasons.

All told, the team has gotten just middling results both on the Non-Market and Auction Market fronts, ranking 15th in the former and 12th in the latter during the timeframe. That hasn't been enough to succeed in the cut-throat AL East. As the team fell from the lofty heights of a 27-14 start last year and began shopping Halladay, their attendance took a major hit, falling an MLB-worst 21.8 percent over the previous year.

The Jays have turned the page, however. They were able to foist Rios on the White Sox, thus avoiding more than $61 million worth of commitments, and they replaced Ricciardi with assistant GM Alex Anthopolous, thus far a much less confrontational and more forthright figure than his predecessor. Anthopolous traded Halladay to the Phillies in a four-way deal, which netted the team a pair of five-star prospects in Kyle Drabek and Brett Wallace, not to mention a four-star one in Travis D'Arnaud. Meanwhile, they've got Non-Market players such as Aaron Hill, Adam Lind, Travis Snider, Brandon Morrow, and Ricky Romero to build around, and just $33.1 million committed for next year. Rebuilding's not a whole lot of fun, but at this point, the Jays have little choice given the way the rest of the division is headed.

Jay Jaffe is an author of Baseball Prospectus. 
Click here to see Jay's other articles. You can contact Jay by clicking here

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