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In Sports Efficiency, Does Size Matter?

This week Bloomberg Businessweek revealed their second annual ratings of the smartest-spending franchises not just in baseball, but in professional sports. The ranking determines how well the 122 franchises in the NFL, NBA, NHL, and MLB spend their money, compiled by using regular and post-season records and publicly available payroll data to calculate how much teams spent per win over the last five seasons (for baseball he also included the first half of the current season). So what does it say about where and how you play?

If you are small market like the number one Tampa Rays or smaller sports that have a big say in the market like the number two Detroit Red Wings or number three Pittsburgh Penguins (a glitch changed the original rankings overnight and moved the Texas Rangers to 4th and the Pens to third) it probably says you know how to manage your dollars and your market share. If you are all about the glitz, or try to be a small fish in a big sea, like the bottom feeding team of New York  (No. 120 MLB’s New York Mets; No. No. 116 NBA’s New York Knicks; No. 115 and NBA’s Brooklyn Nets) then probably in at all works for you. Although it’s not a practice that probably works for brands in the real world outside of sports. ROI be damned, let’s spend and charge people and maybe we will win, but maybe not.

“I can’t pretend to know the various franchises well enough to discern a common style, but I would say that finding the Rays sitting on top is another validation of their search-for-slim-advantage approach which has been well chronicled by Jonah Keri,” said Bloomberg Businessweek’s Ira Boudway, who ran the study for the magazine. So is it another level of “Moneyball” that makes the small fish swim with the bigger ones? Hard to really say, as the rest of the top 10 does include teams like the New York Giants, the LA Lakers and the Boston Bruins.

For this year’s ranking, bonuses were added for the victories that matter most: wins above .500, playoff wins, and championships. The scale also counts regular season wins once, with a half-win bonus for every win over .500. Playoff wins count for 10 percent of a season; championships for half a season. In their Super Bowl-winning season in 2011, for instance, the New York Giants got credit for nine regular-season wins, plus a .5-game bonus for their ninth win—the one that put them above .500. Their four playoff wins earned them 6.4 more wins and the Super Bowl victory eight more for a total of 23.9 “weighted” wins.

So that does show that winning at all costs doesn’t work, but no matter where you play, the cost for winning has to be managed. Going forward the new world order of managing the Collective Bargaining Agreements for each league will also play a bigger factor added Boudway. The Rays and Rangers seem to have done a good job of master capology, while NFL and NBA teams in their first year of new deals will still have to find the most efficient ways of navigation. “The CBA’s figure in for sure,” Boudway added.  “They are the rule books for management, but it’s probably too soon to tell who in the NBA and NFL have figured out how to best exploit the new rules.” The NHL? With CBA limbo fast-approaching, the days of their teams at the top may be changing as well.

So what were the biggest surprises to the list? The bottom dwelling Rams, who have not won on the field or at the bank, or the second to last Timberwolves, who are fighting for a new arena deal in Minny while trying to get people to buy in to Kevin Love and Ricky Rubio?

“It is probably how good the Marlins still look even when you give bonuses for the playoffs and championships,” Boudway added. “There are some seasons a few years back where they spent almost nothing. I imagine that will change going forward.”  The new look, bad season free spending Marlins ended the project (which went through the All-Star break for MLB) at a surprising #12, surpassed only in efficiency in baseball by Tampa and Texas (the Dodgers bank busting trade with the Red Sox did not factor in to this chart this year), while the “Moneyball” A’s under GM Billy Beane are 48th amongst all teams.

The complete chart can be seen at    http://www.businessweek.com/articles/2012-08-30/smartest-spenders-in-sports

 

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