Saturday, January 24, 2009

Ballplayers and their Marginal Revenue Product

This post is in response to this thread going on at Tango Tiger's site, which is a response to some curious salary valuation by JC Bradbury. The summary is that Bradbury has come up with an economic model that says Jeff Francoeur, who used up 652 plate appearances for the Braves last year (and made 479 outs) was worth 12 million dollars. The voices on Tango's site are trying to convince him that the proper place for such a model is the porcelain bowl that sits in the smallest room of your house.

Let's suppose that you own a factory with some great automated processes that produce a great product. You can sell these products and make 25 million dollars per year. The only thing you need is workers to push a few buttons at specified times. It's a very simple job, practically anyone can be trained to do it, but for some reason it has to be done by humans, and you need 25 of them to do it. With no workers, you can't make any products, and your revenue will be zero.

Do you put an ad in the paper for 25 entry level positions paying near 1 million dollars? (a little less than $1M obviously to account for overhead).

I don't think so. You are going to just pay enough to attract reliable workers. Maybe a bit more if you are generous, since you are making so much money yourself, but you aren't going to give all of that to the workers. Most of the money is earned by the capital expenditure, the factory.

An MLB franchise is that money producing factory. To make a lot of money, you need a big, expensive stadium (while most of those are public expenitures, not from the owner's capital, that is another debate. The MLB owner benefits from it) You also need the tradition, the big city location, the national TV contracts, and all the benefits that come from being a part of the exclusive club of 30 teams that get to call themselves major league baseball.

Add to this mix 25 replacement level players, by our definition players who are between 15 and 30 runs worse than average over a full season, and you will make money. We are talking about a major league team that wins 40-50 games, a really bad team. The last team this bad was the 2003 Tigers, but even they were able to draw 1.3 million fans. Say this replacement level team makes 100 million dollars. Should the 25 replacement players be considered responsible for that revenue?

I don't think so, for two reasons:

1. They are by definition replaceable. There are many more players who are a step below average than there are above average or average players. There are hundreds of players in the minors who are just as capable of contributing to a 45 win team, and would jump at the chance to do so for the major league minimum.

2. These players, outside of the money making context that is major league baseball, could not come close to drawing 100 million dollars in revenue. A good AAA team would likely be as good as this 45 win major league team, but the difference in money is staggering. A few AAA teams have drawn 1 million fans, but even those teams do so with ticket prices that are a fraction of what MLB tickets cost.

This is why replacement level players do not add significantly to revenue in major league baseball, and why no team would ever pay them more than the league minimum. That is, as long as the team recognizes them as replacement level players, errors in judgement will always exist. Major league baseball is set up as a huge money maker as long as they can get minimally acceptable players to show up and play. They increase their revenue beyond this minimum by acquiring the good players, the rare talents that are average major leaguers and better. These are the players who earn, and receive, the rewards of the game.

34 Comments:

At 1:02 AM, Anonymous Cash Matrix said...

Anybody could own a web site. Anybody could up sell their own products and services to their target audience. Anyone could try to promote their web site with a low cost. But there are not many web sites that have a truly successful web site with traffic all day through. What these individuals or companies lack is the most essential factor of success – a low cost web site promotion that really works.

 
At 8:30 AM, Anonymous Anonymous said...

I agree with you on principle that's JC's model is way way way off-base, though I'm not sure I buy that a team of openly replacement-level players could even generate what revenue the Tigers did in '03. Clearly the Tigers never intended to be that bad -- fans perhaps saw a good-faith (while grossly misguided) attempt to put a decent team on the field, and that kept them coming to the ballpark. Then you have the Marlins, who do essentially what you're saying (a team on minimum-salary players)... but they're not replacement-level players, and Florida always exceeds expectations and wins games, which brings fans out. I don't think MLB has seen, other than maybe the A's of the late 1970s, a concerted effort to put both cheap and untalented players on the field since the 1920s, when the economic environment was so different that comparing it to today is like apples and oranges. If today's fans ever caught wind of the fact that their hometown team's owner was deliberately putting 25 bad players on the field with no intention of winning, I don't know if they would be able to generate anywhere near the revenue of the '03 Tigers. If the team sucks, fans want the effort to be there, at the very least.

 
At 8:40 AM, Anonymous Chone said...

The last time a team deliberately tried to put 25 replacement level players on the field, Rick Vaughn, Willie Mays Hayes, and Jake Taylor led the Indians to a division title.

I think you're right, a deliberate effort would not draw as well as the Tigers, but they would still make a LOT more money than the same players would playing for a AAA team.

As a DC worker, I can tell you that despite a crappy team, there are other reasons fans come to the park. Sometimes they appreciate watching the talent that the visiting team brings. Sometimes they just like to watch baseball. They could draw a lot more if they had a competitive team, but do OK just having major league baseball.

 
At 5:24 PM, Anonymous Jeff said...

I can also attest to the fact, being a KC fan and living in Baltimore, there are many seasons when it is obvious neither the O's nor the Royals make any effort to field a competitive team. Maybe not 25 replacement level players, but certainly their intentions are well known and the expectations are crap. Yet, despite dwindling attendance, the teams continue to make money. But I have to say, it is difficult to watch. Either way, a Major League team will almost always have value because corporate sponsorship is always there and always more expensive at the Major League level, there are always a core group of die hard fans and the opposing team fans contribute as well. In this era of have and have nots, it is clear that money is made regardless of the quality of the players on a given team.

 
At 9:03 PM, Blogger Chone Smith said...

Cash Matrix,

I assume you are an actual person since you got through the word verification, though it looks like you're just cut and pasting here. I probably should just go ahead and delete your comment, but I'm a nice guy, so consider this fair warning.

The comments here are to talk about baseball. Not web site promotion. Future comments that do not address the subject - baseball - will be deleted.

 
At 7:16 PM, Blogger as said...

I like your blog. Thank you. They are really great . Ermunterung ++ .
Some new style Puma Speed is in fashion this year.
chaussure puma is Puma shoes in french . Many Franzose like seach “chaussure sport” by the internet when they need buy the Puma Shoes Or nike max shoes. The information age is really convenient .




By the way ,the nike max ltd is really good NIKE air shoes ,don’t forget buy the puma mens shoes and nike air max ltd by the internet when you need them . Do you know Nike Air Shoes is a best Air Shoes . another kinds of Nike shoes is better . For example , Nike Air Rift is good and Cheap Nike Shoes .the nike shox shoes is fitting to running.



Spring is coming, Do you think this season is not for Ugg Boots? maybe yes .but this season is best time that can buy the cheap ugg boots. Many sellers are selling discounted. Do not miss . Please view my fc2 blog and hair straighteners blog.
.thank you .


I like orange converse shoes ,I like to buy the cheap converse shoes by the internet shop . the puma shoes and the adidas shoes (or addidas shoes) are more on internet shop .i can buy the cheap nike shoes and cheap puma shoes online. It’s really convenient.
Many persons more like Puma basket shoes than nike air rift shoes . the Puma Cat shoes is a kind of Cheap Puma Shoes .
If you want to buy the Cheap Nike Air shoes ,you can buy them online. They are same as the Nike Air shoes authorized shop. Very high-caliber Air shoes and puma cat shoes . the cheap puma shoes as same as other.




polo shirts

ralph lauren polo shirts
chaussure puma

chaussure sport



chaussures puma

puma CAT

ed hardy clothing

ed hardy clothes



ed hardy womens

ed hardy sunglasses

 
At 8:54 PM, Blogger ed-hardy-shirts said...

 CLOTHES-WHOLESALE.US
straighthairgirl.blog126.fc2.com/
seriousblogging.com/crazygirlsshirts
free-blog-site.com/iammyself
d.hatena.ne.jp/hotfishing
www3.atword.jp/deepseaworld
kandypurity.blogspot.com
blog.oricon.co.jp/jacket-love-girl/
blog.goo.ne.jp/sweetyjackets
blog.360.yahoo.com/
azcentral.com/members/Blog/hotfish234
www2.atword.jp/chaussurespuma/
www2.atword.jp/edhardyshirts/
edhardywomens.blogspot.com/
weddingdressseason.com
seriousblogging.com/chaussurenike/
blog.goo.ne.jp/yutome
d.hatena.ne.jp/chaussuresport/
mensjacketscheap.blogspot.com/
pumashoes.cocolog-nifty.com/blog/
free-blog-site.com/mensjeans
d.hatena.ne.jp/womenjeanswholesale/
www2.atword.jp/wholesalejean/
blog.goo.ne.jp/cheapjeans
blog.360.yahoo.com/

 
At 8:54 PM, Blogger ed-hardy-shirts said...

Do you wannaghd hair straighteners for you own , we have many
cheap ghd hair straightenersin style and great,you can choose one from these
hair straighteners
Authentic chaussure puma
chaussure sport
And chaussure nike shoes
Come here to have a look of our Wholesale Jeans
Many fashionMens Jeans ,eye-catching
Womens Jeans ,and special out standing
Blue Jeans ,you can spend less money on our
Discount Jeans but gain really fine jeans, absolutely a great bargain.
www.crazypurchase.com
China Wholesale
wholesale from china
buy products wholesale
China Wholesalers
http://weddingdressseason.com

 
At 8:54 PM, Blogger ed-hardy-shirts said...

There are ed hardy shirts
,pretty ed hardy shirt for men,

ed hardy womens in the ed hardy online store

designed by ed hardy ,
many cheap ed hardy shirt ,glasses,caps,trouers ed hardy shirts on sale ,

You can go to edhardyshirts.com to have a look ,you may find one of ed hardy clothing fit for you
Top qualitymen's jacket,
These cheap jacket are on sale now,you can find
north face jackets inmage on our web

 
At 9:37 PM, Blogger sky22d said...

polo ralph lauren integrates two types of luxury and leisure style, now more and more popular men’s “thin” burberry polos, most designers have sought to perfect the cut with “cutting” a bag of bones of the body ralph lauren polo shirts. It is amazing that a tight lacoste polo shirts with pencil pants, full of retro style with a European aristocratic culture of leisure cheappolos.

 
At 10:47 PM, Blogger sky22d said...

The button to break the conventional design of polo shirts, the depth of clear lines of wholesale polo shirts from the Department of V on the first gives the impression of a unique, tailor-made with dark-green Lacoste polo shirts with the color scheme of Red and the casual cheap lacoste polos, stressed a summer of non-traditional use of color, so that the overall shape ofralph lauren polo shirts is full of flavor. The classic black-and-white cheap ralph lauren polos with matching black-and-white striped discount ralph lauren polos elegant leaves the impression that the import of polo clothing and black shoes brighten even more people.

 
At 10:48 PM, Blogger sky22d said...

Look !The shirt for men's clothing,ed hardy clothing, The ed hardy clothes on each piece were created ed hardy shirts and is recognized globally for his technical brilliance and mesmerizing imagery.Short sleeves ed hardy mens and ed hardy womens , remember to check out ed hardy t-shirts because they are very popular in demand too!Combination with ed hardy sunglasses,very handsome.

 
At 10:56 PM, Blogger qwee2232 said...

Andy Roddick's signature babolat pure drive, Pure Drive Roddick Babolat wilson k six, features GT Technology combined with head microgel and prince-o3-tour, versatile and accurate cheap tennis racquets with unparalleled performance and incredible feel with less vibrations.

 
At 10:57 PM, Blogger qwee2232 said...

new polos men poloswomen polosdiscount polossummer polospolo shirts whosalepolo fashionembroodered polos
tennis racketsclothing poloclothingedhardyshirtedhardyclothingsummer ed hardy clothingcheap shirtsed hardy brand
cheap ed hardypolo shirts cheapcheap tennis racketsdiscount tennis racketsralphlaurenpoloshirtscheappolospolo fashionpolo logo

 
At 5:20 PM, Blogger fdg said...

I like your blog . They are really great. Ermunterung ++ .please pay a return visit to my blog .thank you.
www.actiblog.com/iblog98/
iblog99.blog.so-net.ne.jp/
iblog99.justblog.jp/

 
At 11:15 PM, Blogger Peejay Li said...

I would like to be the supporter of yours. Thank you for sharing such a nice article.
chaussures puma
puma speed cat
Nike Tn Chaussures
requin tn
nike shox
puma shoes
puma CAT
puma basket
puma speed
baskets puma
puma sport
puma femmes
puma shox r4 torch
nike air max requin
nike shox r3
shox rival r3
tn plus
chaussures shox
nike shox r4 torch
air max tn requin
nike tn femme
pas cher nike
tn chaussures
nike rift
nike shox nz
chaussures shox
nike shox rival
shox rival
chaussures requin
jeans online
cheap armani jeans
cheap G-star jeans

 
At 1:55 AM, Blogger lucyliu said...

nike air max 90
nike air max 95
nike air max tn
nike air rift
nike shox r4
nike air max 360
nike shox nz
puma mens shoes
puma shoes
puma speed
nike shoes
nike air
nike air shoes
puma cat
air max trainers
mens nike air max
nike shoes air max
nike shoes shox
air shoes
nike shoe cart
puma future
cheap puma
sports shoes
nike air rifts
nike air rift trainer
nike air
nike rift
nike rift shoes
cheap nike air rifts
bape shoes
jeans shop
diesel jeans
levis jeans

 
At 7:05 PM, Blogger LAN said...

puma mens shoes
puma shoes
puma speed
nike shoes
nike air
nike air shoes
nike air max 90
nike air max 95
nike air max tn
nike air rift
nike shox r4
nike air max 360
nike shox nz
puma cat
air max trainers
mens nike air max
sports shoes
nike air rifts
nike air rift trainer
nike air
nike shoes air max
nike shoes shox
air shoes
Lucyliu IS Lucyliu
nike shoe cart
puma future
cheap puma
nike rift
jeans shop
diesel jeans
levis jeans
nike rift shoes
cheap nike air rifts
bape shoes

 
At 2:08 AM, Blogger uwanna said...

gucci replica handbags
men gucci shoes
Gucci men sneakers
Gucci men moccasins
gucci women sneakers
gucci women boots
Gucci men boots
Gucci
Gucci shop
Gucci bags
Gucci shoes
Replica GUCCI SHOES
wholesale gucci shoes
cheap Gucci handbags
Gucci ON sale
Gucci Belts
Gucci small accessories
Gucci hats & scarves
Gucci wallets
Gucci Handbags
Women Gucci shoes
Men Gucci shoes
discount gucci shoes
cheap Gucci shoes

 
At 6:57 AM, Anonymous Anonymous said...

3d covers -
500 scrapbooking sketches -
acid alkaline diet -
acne free in 3 days -
advanced pc tweaker -
apple patch diet -
art of approaching -
auction inspector -
av advance -
build a nice store -
burnthefat -
burn the fat -
carb rotation diet -
catch spouse cheating -
chikara reiki do -
combat the fat -
conversationalhypnosis -
conversational hypnosis -
copy that game -
cure gout now -
dl guard -
dog training online -
driver checker -
driver robot -
drop shipping wholesalers -
earth4energy -
earth 4 energy -
easy backup wizard -
eatstopeat -

 
At 6:57 AM, Anonymous Anonymous said...

eat stop eat -
error fix -
error killer -
error smart -
evidence eraser -
evidence nuker -
ex girlfriend guru -
fatburningfurnace -
fat burning furnace -
fatloss4idiots -
fat loss 4 idiots -
final uninstaller -
fitnessmodelprogram -
fitness model program -
fit yummy yummy -
flattenyourabs -
flatten your abs -
flat to fab -
forex grid bot -
get google ads free -
get paid to draw -
get this off my chest now -
governmentregistry -
government registry -
heartburn no more -
homemadeenergy -
home made energy -
honest riches -
learn photoshop now -
linden method -
malware removal bot -
marketing on the fringe -
maternityacupressure -
maternity acupressure -

 
At 6:57 AM, Anonymous Anonymous said...

meet your sweet -
musclegainingsecrets -
muscle gaining secrets -
my online income system -
negative calorie diet -
no adware -
one minute cure -
one week marketing -
online pickup secrets -
partenon -
pc on point -
perfect optimizer -
perfect uninstaller -
pick the gender of your baby -
power cash secret -
profit lance -
publicrecordspro -
public records pro -
push button marketer -
quit smoking today -
registry easy -
registry easy download -
registry fix -
registry winner download -
reverse mobile -
reverse phone detective -
richard mackenzie direct -
rocket spanish -
rss power plus -
sem business blueprint -
silent sales machine -
spam bully -
sports betting champ -
spyware cease -

 
At 6:57 AM, Anonymous Anonymous said...

meet your sweet -
musclegainingsecrets -
muscle gaining secrets -
my online income system -
negative calorie diet -
no adware -
one minute cure -
one week marketing -
online pickup secrets -
partenon -
pc on point -
perfect optimizer -
perfect uninstaller -
pick the gender of your baby -
power cash secret -
profit lance -
publicrecordspro -
public records pro -
push button marketer -
quit smoking today -
registry easy -
registry easy download -
registry fix -
registry winner download -
reverse mobile -
reverse phone detective -
richard mackenzie direct -
rocket spanish -
rss power plus -
sem business blueprint -
silent sales machine -
spam bully -
sports betting champ -
spyware cease -

 
At 6:57 AM, Anonymous Anonymous said...

spyware nuker -
spyware remover -
starting a day care center -
the bad breath report -
the cb code -
thedietsolutionprogram -
the diet solution program -
the super mind evolution system -
traffic travis -
truth about abs -
turbulencetraining -
turbulence training -
twitter affiliate cash -
twitter decoded -
video piggy -
video web wizard -
vincedelmontefitness -
vince del monte fitness -
warp speed fat loss -
wedding speech 4u -
windo fix -
your bill killer -
you will get paid -
zygor guides -
20 day persuasion -
advanced pc tweaker -
adware bot -
affiliate naire -
apple patch diet -
article submitter -
art of approaching -
burnthefat -
burn the fat -
carb rotation diet -

 
At 6:58 AM, Anonymous Anonymous said...

cold sore freedom in 3 days -
conversationalhypnosis -
conversational hypnosis -
copy that game -
cure for bruxism -
cure hemorrhoids -
cyber link pro -
dl guard -
driver checker -
driver robot -
drop shipping wholesalers -
earth4energy -
earth 4 energy -
easy backup wizard -
easy click mate -
easy photo biz -
eatstopeat -
eat stop eat -
epinoisis -
error fix -
error killer -
error smart -
evidence nuker -
fap turbo -
fatburningfurnace -
fat burning furnace -
fatloss4idiots -
fat loss 4 idiots -
final uninstaller -
fitnessmodelprogram -
fitness model program -
fit yummy yummy -
flattenyourabs -
flatten your abs -

 
At 6:58 AM, Anonymous Anonymous said...

cold sore freedom in 3 days -
conversationalhypnosis -
conversational hypnosis -
copy that game -
cure for bruxism -
cure hemorrhoids -
cyber link pro -
dl guard -
driver checker -
driver robot -
drop shipping wholesalers -
earth4energy -
earth 4 energy -
easy backup wizard -
easy click mate -
easy photo biz -
eatstopeat -
eat stop eat -
epinoisis -
error fix -
error killer -
error smart -
evidence nuker -
fap turbo -
fatburningfurnace -
fat burning furnace -
fatloss4idiots -
fat loss 4 idiots -
final uninstaller -
fitnessmodelprogram -
fitness model program -
fit yummy yummy -
flattenyourabs -
flatten your abs -

 
At 6:58 AM, Anonymous Anonymous said...

flat to fab -
governmentregistry -
government registry -
heartburn no more -
hippo jaw -
homemadeenergy -
home made energy -
honest riches -
hot video squeeze templates -
instant website creation -
jump manual -
keyword research pro -
linden method -
malware removal bot -
maternityacupressure -
maternity acupressure -
meet your sweet -
micro niche finder -
musclegainingsecrets -
muscle gaining secrets -
muscle gain truth -
my traffic strategy -
nasty dirty money -
negative calorie diet -
no adware -
pc optimizer pro -
perfect uninstaller -
pergola plans -
pick the gender of your bady -
plr ebook club -
pregnancy without pounds -
profit lance -
publicrecordspro -
public records pro -

 
At 6:58 AM, Anonymous Anonymous said...

questions for couples -
quit smoking today -
ready made review sites -
reg genie -
registry easy -
registry easy download -
registry winner -
registry winner download -
retrievea lover -
reverse mobile -
richard mackenzie direct -
rocket italian -
rocket spanish -
roulette sniper -
rss ground -
secret affiliate weapon -
secrets book -
spam bully -
spyware cease -
spyware nuker -
spyware remover -
spy zooka -
starting a day care center -
tattoo fever -
team idemise -
the bad breath report -
the cb code -
thedietsolutionprogram -
the diet solution program -
the rich jerk -
the super mind evolution system -
turbulencetraining -
turbulence training -
vincedelmontefitness -

 
At 6:58 AM, Anonymous Anonymous said...

vince del monte fitness -
warp speed fat loss -
wedding speech 4u -
windo fix -
wrap candy -
zygor guides -
7day ebook -
360 fix kit -
advanced pc tweaker -
adware bot -
affiliate naire -
art of approaching -
beating adwords -
believe and manifest -
blogging in action -
body building revealed -
burthefat -
burn the fat -
carb rotation diet -
cheat your way thin -
cold sore freedom in 3 days -
conversationalhypnosis -
conversational hypnosis -
convert 2 ev -
cure for bruxism -
cure hemorrhoids -
digi cam cash -
digital media solution -
dl guard -
driver checker -
earth4energy -
earth 4 energy -
easy backup wizard -
easy member pro -

 
At 6:58 AM, Anonymous Anonymous said...

easy tv soft -
eatstopeat -
eat stop eat -
error fix -
error killer -
evidence nuker -
fap turbo -
fatburningfurnace -
fat burning furnace -
fatloss4idiots -
fat loss 4 idiots -
final uninstaller -
fitnessmodelprogram -
fitness model program -
flatten your abs -
gamers testing ground -
gov auction -
governmentregistry -
government registry -
gov records -
herbal hair solution -
homebre ware -
home job group -
homemadeenergy -
home made energy -
inteli gator -
joanas world -
joyful tomato -
kidney stone remedy -
learn digital photography now -
learn elements now -
linden method -
lose man boobs -
malware removal bot -

 
At 6:58 AM, Anonymous Anonymous said...

maternityacupressure -
maternity acupressure -
meet your sweet -
muscle gaining secrets -
muscle gain truth -
niche adsense themes -
ninety day powerseller -
pc optimizer pro -
pregnancy miracle -
pregnancy without pounds -
privacy control -
publicrecordspro -
public records pro -
quit smoking today -
reg genie -
registry easy -
registry genius -
registry smart -
registry winner -
registry winner download -
retrievea lover -
reverse mobile -
richard mackenzie direct -
rocket italian -
save my marriage today -
secrets book -
seo elite -
spyware cease -
spyware remover -
spy zooka -
stock assault -
talking to toddlers -
the action machine -
thebadbreathreport -

 
At 6:58 AM, Anonymous Anonymous said...

the bad breath report -
thedietsolutionprogram -
the diet solution program -
the rich jerk -
tonsil stones remedies -
top secret fat loss secret -
turbo cash generator -
turbulence training -
twitter online system -
uncle sams money -
underground hypnosis -
vincedelmontefitness -
vince del monte fitness -
warp speed fat loss -
water 4 gas -
wedding speech 4u -
wp goldmine -
wrap candy -
xsite pro -
zygor guides -
37 days to clean credit -
advanced defrag -
adware alert -
adware bot -
affiliate prophet -
affiliate video brander -
anti spyware -
art of approaching -
atomic blogging -
auction classified cash -
automated cash formula -
bbq book -
bloggers pay check -
blogging in action -

 
At 6:58 AM, Anonymous Anonymous said...

body building revealed -
burnthefat -
burn the fat -
carb rotation diet -
cheat your way thin -
chopper tattoo -
cleanup the profits -
cold sore freedom in 3 days -
commission blueprint -
conversationalhypnosis -
conversational hypnosis -
cure for bruxism -
declutter fast -
driver checker -
earth4energy -
earth 4 energy -
easy member pro -
easy tv soft -
eatstopeat -
eat stop eat -
fap turbo -
fatburningfurnace -
fat burning furnace -
fatloss4idiots -
final sync -
final uninstaller -
fitness model program -
fit yummy yummy -
flatten your abs -
forex ambush -
governmentregistry -
government registry -
healthy urban kitchen -
homebrew installer -

 
At 8:02 PM, Blogger anna said...

I don’t know why but I just Love Those Things, how do you think about it? air force one shoes, you can just simple choose this option and pick what you want.You should try to experice it.five finger shoes,These are nice for you...

 

Post a Comment

Links to this post:

Create a Link

<< Home