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How does the NBA stack up to the NFL, MLB, and NHL in spending efficiency?

Oct 24, 2011, 3:28 PM EDT

NBA Finals Mavericks Heat Basketball AP

Periodically, one financially inclined publication or another takes a look at the performance of professional sports teams in relation to their payroll. What typically ensues is just basic division; the outlets divide the total salary cost by the team’s wins, and then rank the teams according to their total cost per win. It’s a fun exercise, but Ira Boudway of Businessweek took things a step further. After calculating that “cost per win” number for each team across all four major sports over the last five years, Boudway found the standard deviation for each team within their respective sports. Using that standard deviation — dubbed “Efficiency Index” for the purposes of that particular post — Boudway was able to compare across leagues, and determine the spenders who are getting the greatest payoff per dollar spent relative to their competition.

NBA clubs don’t rank too well overall; the Spurs (5th) are the only basketball franchise in the top 10 according to the aforementioned Efficiency Index, and the Jazz (14th) and Lakers (15th) just barely managed to squeeze into the top 15. There are a run of NBA clubs in the low-20s, but overall, pro basketball doesn’t quite seem able to keep up with the MLB or NHL in term of win efficiency in financial terms.

That said, there’s an interesting trend at the top of these rankings: the “smartest-spending” NBA, NFL, and NHL teams are rewarded for their spending efficiency with playoff berths and championships, while MLB teams often fail to compete despite showing well in terms of their cost per win. Only two of the seven baseball teams in the Index’s top 30 have participated in postseason play over the last five years. Three of those inept teams (Florida Marlins, Pittsburgh Pirates, San Diego Padres) have fallen short of the playoffs five straight times despite ranking in the Efficiency Index’s top 10. True to form, this kind of data speaks to the return on high-level spending in baseball, which is by nature inefficient.

However, even when we look at NBA teams within the context of cross-league comparison, it’s hard to draw any concrete conclusions. This kind of reframing is interesting on a self-contained level, but it doesn’t do too much to clarify the existing, oft-debated dynamic between big spending and big wins in professional basketball. We know that exorbitant spending in the NBA isn’t always efficient, but it clearly can be; teams like the Lakers, Mavericks, and Magic have benefited greatly from their ability to give and take on large contracts. However, a line can — and should — be drawn between teams that spend and teams who are willing to spend. The chicken-egg element of these discussions lies in the fact that some owners are willing to spend if they have the right talent base to justify such expenditures, but simply don’t believe their middling clubs are worthy of an excessive investment. This chart, while interesting, doesn’t do much to clarify that debate; we still don’t know if NBA teams spend because they’re good or if they’re good because they spend, and it’s difficult to determine that much without control data taken in different league conditions within the same sport.

So here we are, right where we were: some NBA teams spend intelligently, and some do not, and both of those facts are separate from the total payroll of the teams in question. Here’s hoping the league and the union have more conclusive data to back their competitive equity claims in their negotiations than the limited correlations we try to draw facts from on the outside.

  1. hansob - Oct 24, 2011 at 5:52 PM

    sorry, but any “does this team spend money wisely” study that ranks the Yankees last in MLB is fundamentally flawed.

  2. nickwatanabe - Oct 24, 2011 at 8:16 PM

    I think the numbers may need to be corrected for the number of games played. I have done so, and posted the adjusted numbers here:

    The numbers are close, they show a correlation of 0.95, but you’ll notice when you correct for the number of games that these teams play, the NFL tends to do much better in terms of efficiency.

  3. loza6984 - Oct 24, 2011 at 8:59 PM

    How many organizations have a core of Holt, Popovich and Buford? The triad of the owner, coach and GM have made the Spurs successful. Most small mkts don’t have that and never will (especially in BB).

  4. rajbais - Oct 24, 2011 at 9:23 PM

    Just say poor, period!!!!

    The contracts of Luke Walton, Jerome James, Jared Jeffries, Drew Gooden, and Mark Jaric had bigger back ends than J-Lo and Beyonce!!!!

  5. rajbais - Oct 24, 2011 at 9:26 PM

    How about poor, period!!!

    No comparison amongst other leagues is needed!!!

    Look at the contracts of Luke Walton, Jerome James, Jared Jeffries, Drew Gooden, and Marko Jaric!!!! Their back ends were bigger Beyonce and J-Lo’s!!!

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