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Summer is here—in baseball terms, anyway—and Red Sox and Yankees fans are eager to ratchet up their annual, venomous rivalry in the Bronx next week.
Red Sox Nation is still crowing about last fall's World Series championship, while fans of the Bronx Bombers, who failed to make the playoffs, are characteristically chirping about recapturing baseball's mountaintop for an unprecedented 28th time.
But baseball, as we're constantly reminded, is a business, so the ultimate game between the Red Sox and Yankees remains the same as always in the 2014 season: Who will reap a better return on their investments?
Naturally, even that calculation is contentious when it comes to these two clubs. "There are a couple of ROIs you could be talking about," said Andrew Zimbalist, a professor of economics at Smith College whose work scrutinizes the financial machinations of baseball and other sports. "One is per player ... the other is the investment in the entire franchise. Those are somewhat related, but not necessarily."
So let's look at player payroll for 2014. At $203 million, the Yankees—for the first time in 15 years—do not have the highest among MLB's 30 teams, ceding that perch to the Los Angeles Dodgers and their $235 million squad. The Red Sox weigh in at No. 4, with a $162 million commitment.
Although size matters in many realms, not always in baseball. "The statistical relationship over the last 25 years between payroll and win percentage at the team level is .22," said Zimbalist, co-author with fellow Smith professor Benjamin Baumer of "The Sabermetric Revolution," which examines the statistics-laden model of analyzing and acquiring players that was pioneered by Bill James and popularized by "Moneyball."
"That means that 22 percent of the variation in win percentage is explained by the different payrolls teams have, and, of course, that 78 percent is explained by other factors," Zimbalist said. Those intangibles include injuries, team chemistry, drafts and player development, trades, luck, or maybe even an umpire's single call.
That also means, alas, that "buying a championship," the refrain Red Sox fans love to throw at their Yankees counterparts, isn't possible in and of itself. "You can't buy love, and you can't buy victories," Zimbalist said.
Nonetheless, you can lavish big bucks on some awfully good players, a tactic for which both franchises are famous—or infamous, depending on your allegiance. The ROI on some of those acquisitions are legend, dating back to Boston's sale of Babe Ruth to New York in 1919 for $100,000.
This year's Red Sox and Yankees teams provide stark examples of their different philosophies. Following a disastrous, last-place finish in 2012 and then a worst-to-first miracle in 2013 behind a team that featured several inexpensive but highly productive players, Boston let several of them go, signed a few replacement bargains and are now picked by many pundits to win their division. Bill James, by the way, is an employee, so Sabermetrics has been a guiding light for owner John Henry's expenditures.
Over in the Bronx, the brothers Steinbrenner and general manager Brian Cashman, though hardly Sabermetrics averse, have kept their wallets open, doling out $465 million in contracts for several marquee free agents. The last time the Yankees spent so extravagantly was 2009, after they missed the playoffs for the first time since 1995.
Two of this year's respective signings say a lot about the rivals' approaches to ROI. New York signed Boston's free agent center fielder, Jacoby Ellsbury, to a seven-year, $153 million pact. Hopes are that like other recent Beantown defectors—think Wade Boggs, Roger Clemens and Johnny Damon—Ellsbury, 30, will help put the Yankees into title contention.
Back in Boston, its new center fielder is Grady Sizemore, a three-time All-Star with the Cleveland Indians who has been beset by injuries that kept him out the game since midway through the 2011 season. Yet GM Ben Cherington was convinced enough by his scouts and stat-crunchers to sign him to a one-year deal at $750,000 in base salary and incentives that could yield the 31-year-old $6 million.
"That's a tough ROI to look at," said Jim Duquette, a former GM for the New York Mets and the Baltimore Orioles and currently a host for SiriusXM's MLB Network Radio channel, "because you're betting on him staying healthy, which he hasn't been able to do the last few years. But the Red Sox have given themselves a chance to get a lot of productivity for the dollars."
Sure, signing Ellsbury potentially weakens the Yankees' archrival, "but the expense is really high to do it," Duquette said. "He is a quality leadoff guy, but the back end of that contract is not going to look good because you're going to see a decline," Duquette adds, alluding to the common age-factor bugaboo.
If their first games are any indication, Boston's won bragging rights. In its opener in Baltimore, Sizemore went 2-for-4 with a home run. A day later in Houston, Ellsbury finished 0-for-4 with a walk.
—By Bob Woods, Special to CNBC.com