Cost Per Win

[WaterfallJumper]

Jason La Canfora, the new analyst on the NFL network, wrote an excellent blog this week detailing the cost per win of each team. I know we're not supposed to post full articles, so here's the link:

NFL.com Blogs Blog Archive More Moneyball (The Economics of Wins and Losses)

I am completely unsurprised to find that the Patriots, Colts, and Steelers are in the top four; their sustained success over the past decade is a direct result of their ability to make each and every dollar count. I know we often discuss the Patriots' superior money management in a salary cap era, but this article looks at the entirety of their committed cash, not simply player's salaries. In other words, using sound business principles in the FO, advertising and marketing, scouting, partnerships and sponsorships, etc. Good stuff.

 

[jmt57]

Interesting analysis. There was a similar but not identical article at Football Outsiders a few weeks ago that looked at cap efficiency and salary per win. This nfl.com column takes it a step further with those additional costs.

FOOTBALL OUTSIDERS: Football analysis and NFL stats for the Moneyball era - Authors of Pro Football Prospectus 2008

Not that the info would ever become public, but it would be interesting to see how profitable each team actually is, and a correlation between profit and wins. From looking at that list I'm guessing the Bucs, Chiefs and Titans might be the most profitable teams in the NFL.

 

[spacecrime]

Interesting analysis. There was a similar but not identical article at Football Outsiders a few weeks ago that looked at cap efficiency and salary per win. This nfl.com column takes it a step further with those additional costs.

FOOTBALL OUTSIDERS: Football analysis and NFL stats for the Moneyball era - Authors of Pro Football Prospectus 2008

Not that the info would ever become public, but it would be interesting to see how profitable each team actually is, and a correlation between profit and wins. From looking at that list I'm guessing the Bucs, Chiefs and Titans might be the most profitable teams in the NFL.

Profit per win is a weird measure. The easiest way to increase profit per win is to have fewer wins.

 

[aurakilla]

wont a team earn less if it wins less o_0


like say more pats fans buy more jerseys then lions fans

 

[jmt57]

Profit per win is a weird measure. The easiest way to increase profit per win is to have fewer wins.

Yeah, I kind of got off topic a little bit. Not really looking for profit per win, but curious to see whether or not there is any correlation to winning organizations and profitable organizations - or if there is no correlation at all. For example, perhaps teams like the Bengals and Bucs are more profitable in their losing years than in their winning years; is it a case of being either profitable or a winner? Do certain teams consistently rank in the top third or bottom third in profit regardless of whether they are winning or not? Does winning result in higher profits, or does it cause expenses (such as salaries) to increase and therefore result in lower profits?

Those were the kind of questions I would be curious about - but as I said earlier, one I'm sure we'll never know as that P&L information will surely remain private.

 

[ctpatsfan77]

On a minor note, the Patriots were 11th in actual $ paid from 2004-2008. The average team spent $502.2M, as did the median team. The Patriots paid out $512.3M, $20M less than the Colts, about $5M less than the Steelers, and over $50M(!) less than the Cowboys.

 

[jmt57]

wont a team earn less if it wins less o_0


like say more pats fans buy more jerseys then lions fans

They're going to have more demand for their tickets - resulting in more sellouts, less no-shows (who spend zero at the stadium), and the ability to raise prices without an adverse affect on attendance.

In regards to apparel sales, my understanding is that with the exception of what is sold at the stadium on game day, that money is split equally among all 32 teams.

 

[JoeSixPat]

Profit per win is a weird measure. The easiest way to increase profit per win is to have fewer wins.

I think you've got it backwards - as evidenced by the fact that the teams with the fewest wins have the most costly price per win... it's not about profit if I understand this correctly - its about return on investment with "wins" being the return.

Every team spends hundreds of millions of dollars - the only difference is that some teams spend that and win, and some teams spend that and lose.

In general I'd agree with you that this whole analysis has limited practical application except to emphasize how much teams like Oakland spend to be bad.

 

[jmt57]

Regarding how profitable these teams are, there is one publicly owned team: the Packers. And the numbers are revealing.

Last year Green Bay had a $20.1 million operating profit - though they ended up with only $4 million in net income due to some fairly large investment losses. They had $247.9 million in revenue and $227.8 million in expenses; more than half of their expenses was player costs of $138.7 million.

With the current setup I would guess that the biggest disparity from one team to another would be the cost of a stadium. Some teams get sweetheart deals from local city, county and state governments, while other teams have to foot most of the bill themselves. If the CBA is not resolved and there is no salary cap - or salary floor - I'm guessing that we will see many of those teams with a higher amount of debt owed on their stadiums opt to reduce their largest expense - player costs - in an attempt to become more profitable.

 

[spacecrime]

I think you've got it backwards - as evidenced by the fact that the teams with the fewest wins have the most costly price per win... it's not about profit if I understand this correctly - its about return on investment with "wins" being the return.

Every team spends hundreds of millions of dollars - the only difference is that some teams spend that and win, and some teams spend that and lose.

In general I'd agree with you that this whole analysis has limited practical application except to emphasize how much teams like Oakland spend to be bad.

No, I think cost per win is a very valid analysis tool. I was merely commenting on another poster's thoughts about profits and winning, which is very different than cost per win. But he was thinking more on the lines of correlating the two, perhaps as a graph with team profit as the abscissa and number of wins as the ordinate. I'm betting the graph will trend upwards as the team profit increases.

 

[spacecrime]

Regarding how profitable these teams are, there is one publicly owned team: the Packers. And the numbers are revealing.

Last year Green Bay had a $20.1 million operating profit - though they ended up with only $4 million in net income due to some fairly large investment losses. They had $247.9 million in revenue and $227.8 million in expenses; more than half of their expenses was player costs of $138.7 million.

With the current setup I would guess that the biggest disparity from one team to another would be the cost of a stadium. Some teams get sweetheart deals from local city, county and state governments, while other teams have to foot most of the bill themselves. If the CBA is not resolved and there is no salary cap - or salary floor - I'm guessing that we will see many of those teams with a higher amount of debt owed on their stadiums opt to reduce their largest expense - player costs - in an attempt to become more profitable.

Wouldn't teams that owned their own stadiums show more profit? I would think that Kraft keeps the revenues from parking and consessions, whereas teams like Falcons, Iggles, Colts etc etc etc see the state/city that owns the stadium keep those monies.

I don't know, but to me that has to be the biggest draw of biliding our own stadium - getting to keep all the revenue generated.

 

[jmt57]

Wouldn't teams that owned their own stadiums show more profit? I would think that Kraft keeps the revenues from parking and consessions, whereas teams like Falcons, Iggles, Colts etc etc etc see the state/city that owns the stadium keep those monies.

I don't know, but to me that has to be the biggest draw of biliding our own stadium - getting to keep all the revenue generated.

Oh I agree - in most cases. However some of those 'sweetheart' deals that have been brokered over the years are so sweet that the city and county fund the stadium - and yet the team also gets to keep some or all of those additional revenues you mentioned.

 

[MoLewisrocks]

Every season when Forbes revisits it's analysis of the NFL as a business they offer a little nugget they call the player cost per win ratio that measures a teams success relative to the league average of 100.

NFL Team Valuations: #3 New England Patriots - Forbes.com

They also offer lots of insightful little gems like what percentage of a teams value is based on it's own holdings or marketing efforts and what is based on merely it's existence within the NFL.

 

[PatsFanSince74]

Pats the Most Cost Effective Team in the NFL

Interesting pickup by Reiss in today's Globe, from NFL.com, showing that the Pats have been the most efficient NFL Franchise in terms of getting a bang for their buck over the last five seasons. It's also interesting that other teams put out more dollars than the Pats. The Pats come in 10th on the "Committed Dollars" stat, but number one when it comes to lowest dollars per win. Perhaps Miguel or someone who knows more about this than I do can enlighten us on the difference between the Cap number and "Committed Dollars."

Here's the top line quote and the link. What do you think?

"...we’re going to rank the teams in terms of “bang for their buck” — how much each club spent per win the past five seasons. The sheer disparity between, say, what the New England Patriots spent on each victory, versus the Oakland Raiders at the bottom of the list, indicated the inefficiencies in dollar terms. And remember, this is not salary cap spending, this is actual dollars as per the NFL Management Council.

Okay, here’s the list:.."


NFL.com Blogs Blog Archive More Moneyball (The Economics of Wins and Losses)

 

[Urgent]

Re: Pats the Most Cost Effective Team in the NFL

Interesting.
But, basically, another way to say it is:
The NFL has a salary cap.
The Patriots and Colts have won the most games the past five years.

The article notes:

It’s hard not to look at the list and throw some love at the front offices in San Diego and Jacksonville, hanging with the big boys despite their low spending.

San Diego spent 5% less than New England over those five years. That's the difference in spending between 'the big boys' and the small market teams in the NFL. This is not baseball, where the Yankees spend about five times more than competitors in their own division.

He makes another point, comparing the $8mm per win for the Patriots and $25 mm per win for the Raiders, commenting on the difference in efficiency. However, since New England spent $512mm and Oakland spent $513mm, it's purely the difference in wins, 63 to 20.

If you ran the baseball counterpart, New York would be the Raiders here. Since they spend multiples of everyone else, their cost per win is dramatically higher than Tampa Bay. That's an interesting view into the economics of sports. This analysis simply says that New England and Indy have won a lot under the salary cap system.

 

[xmarkd400x]

Re: Pats the Most Cost Effective Team in the NFL

I think Brady deserves a piece of the credit here. He'd turn the Raiders into an 8 win team.

It's not possible, given the salary cap, to pay Brady what he's worth along with fielding a competitive team.

 

[ctpatsfan77]

Re: Pats the Most Cost Effective Team in the NFL

He makes another point, comparing the $8mm per win for the Patriots and $25 mm per win for the Raiders, commenting on the difference in efficiency. However, since New England spent $512mm and Oakland spent $513mm, it's purely the difference in wins, 63 to 20.

You're right to an extent (there's both a cap and a floor), but the actual difference in cash paid out between team #1 (the Cowboys) and team #32 (I forget who offhand) is actually about $100M, or about 20% of the lowest team's payroll over that period.

That said, I would say that, because of the way the statistics are computed, anything within $1M/win or so really isn't statistically significant.

 

[Funktopus]

Re: Pats the Most Cost Effective Team in the NFL

I look at that data set and all I see is that there is no relationship between total wins and total expenditures over a 5 year period. As if I would take the number of times a team played in a uniform divided by wins and then proclaim that all the good teams play in more efficient uniforms.

A better analysis would be to evaluate the relationship between the change in wins vs the change in expenditures anually over time for each team. Though I'd be shocked if there were any correlation. But it would be an interesting excercise to see if anyone were thwarting (or not being helped by) the salary cap.

-F

 

[PatsFanSince74]

Re: Pats the Most Cost Effective Team in the NFL

You're right to an extent (there's both a cap and a floor), but the actual difference in cash paid out between team #1 (the Cowboys) and team #32 (I forget who offhand) is actually about $100M, or about 20% of the lowest team's payroll over that period.

That said, I would say that, because of the way the statistics are computed, anything within $1M/win or so really isn't statistically significant.

Well said.

Since I started the thread, I wanted to clarify this a little bit, so I put the data on a spreadsheet and ran a simple regression with the "Cost Per Win" as the Dependent Variable and the "Number of Wins" as the Independent Variable. As you would expect, the correlation is very high. The number of wins explains around 82% of the cost per win. Not 90% or 95% admittedly, but significant enough to settle the discussion for practical purposes.

On the other hand, if you make "Wins" the dependent variable and the "Committed Cash" the independent variable, there is virtually no correlation between how much more (or less) is spent by a team and the number of wins it produces.

The conclusion I draw is that the Patriots, and a handful or two of other teams, have figured out how to get the most out of what they spend while others, starting with the poor Raiders, have really blown it. Interestingly, the Redskins end up in a uniquely bad place. Their committed cash was the third highest but they ranked 20th in number of wins, leaving them number 24 in Cost per Win, just eight better than the Raiders.

 

[MoLewisrocks]

Re: Pats the Most Cost Effective Team in the NFL

http://www.patsfans.com/new-england-patriots/messageboard/10/248440-cost-per-win.html