MLB: Will Playoff Expansion Discourage Tanking?

Last month reports came out that Major League Baseball is planning a potential expansion of the playoffs to seven teams. While many people reacted negatively, one item mentioned by many in favor of the proposal was that it would help alleviate tanking and increase player compensation. In this article, we’ll examine the data from two perspectives in order to see if that’s likely to be the case.


2019 Payrolls and Standings


To start, we’ll look at the 2019 final standings combined with where teams ranked in payroll.


There are a few points here that would point towards an expansion not helping to avoid tanking or increasing payrolls:


  • While there are exceptions, for the most part payrolls are dependent on market size and not driven by tanking. In the AL, the Athletics and Rays both made the playoffs with low payrolls while the Red Sox spent the most and still missed the playoffs; the Rangers and Angels were also in the top five of spending without qualifying for the playoffs. We see similar trends in the NL – two of the top three payrolls miss the playoffs, along with the Phillies that had just spent on Bryce Harper. This doesn’t point to a scenario where teams slightly behind the cutoff would be inclined to spend more.

  • In this offseason, the Red Sox have chosen to cut payroll; while they still could contend for a wild card with Mookie Betts and David Price, they clearly did not value this nearly as much as believing their championship window had closed. Meanwhile, despite being contenders for both the AL Central and a wild card, the Indians have indicated the contending is not enough for them to offer Francisco Lindor his market value.

  • The argument that a change from five to seven teams would disincentivize tanking would imply that teams that are close to the seventh seed would be inclined to spend more. In the NL, the three teams in 8th-10th are all in the top six of the league in spending already. In the AL, the Rangers in 8th were already spending and the White Sox were 12 games behind the Red Sox. Neither would be likely to spend more if the playoffs were expanded.


There is little in the 2019 standings to suggest that an expansion to seven teams would cause teams to avoid tanking. Instead, the standings and actions in recent off seasons point to payrolls being dependent upon market size and where teams believe they are in contending for a World Series.


Impacts of Previous Wild Card Expansion


The other opportunity to explore if a wild card expansion would increase payrolls is in examining how team spending changed in 2012 when the playoffs were expanded from four to five teams. There are two tables below that we’ll use for this; the first looks at payroll from 2011-2013 to track how team spending changed once the change was instituted. The second compares the five-year change from 2006 to 2011 against the same change from 2011 to 2016 in order to help reduce the impact on any one-time anomalies.


Yearly Salaries, 2011-2013



Five-Year Changes, 2006-2016


Overall, salaries did show an increase once the wild card game was instituted. It also saw a much larger percentage increase in the five years after the change to the playoff model. It is worth noting that there are a few items that have disproportionate impacts on the league totals – for example, the 2011 Dodgers were going through concerns around ownership while the Nationals are a larger market team that moved into a contending phase.

In addition to these raw figures, it’s important to account for how they related to overall league revenues. From 2011-forward the percentage of revenues taken up by these direct salary costs decreased; as a note, this does not include benefits or other indirect costs correlated with salary.


Salaries as a Percentage of League Revenue


Based on this, it would appear that the increase in salaries is due to revenue changes that are only minimally driven by the wild-card game and did not decrease tanking (in fact, you could argue tanking has only become more prominent in the MLB since 2012). If the changes were driven by a desire to reach the 5th spot, we would expect the percentage of revenue to at least have stayed consistent.


Conclusion


As the standings from 2019 show, there’s very little evidence that a playoff expansion would have an impact on tanking. In addition to the analysis above, it’s worth mentioning that the two sports where tanking has become most prevalent are the NHL and NBA. While those are clearly different because of the immediate impacts that top prospects can have, those are two sports that already include a higher percentage of teams into their playoffs than the new MLB proposal.


However, that does not mean that players would not benefit from this scenario, just that it won’t be driven by removing tanking. Revenues in baseball should continue to grow, and the playoff expansion being discussed should have a much larger impact than the prior change simply due to the number of playoff games being added. Players should certainly benefit from seeing some of this revenue, but I’d anticipate that they’ll largely see it from an associated increase in the luxury tax threshold for the high-spending teams that are already trying to contend.


In my next article on this subject, I’ll use a few teams that missed the 2019 playoffs as test subjects to see how much payroll they would have needed to add to reach the playoffs under either model.


Salary figures used were taken from Spotrac for 2019 and USA Today for all other years.


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