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Define "fair"

Mike SteffanosSaturday, February 25, 2006
By Mike Steffanos

Revenue sharing, which is supposed to make MLB more "fair", can actually be quite unfair to large market teams and their fans.

I've written a series of related pieces, beginning with Major League Franchises Need to Be in Major League Cities, where I have discussed the whole large market vs. small market "fairness" issue in major league baseball. I never intended to take this any further than the initial offering, which I conceived of and dashed off in the space of a couple of hours. With time, though, I've come to realize that this is an issue that's important to Mets fans and to the future of baseball.

What started me thinking about this subject was some buzz that the Marlins were looking into Portland, Oregon as a possible city in which to relocate. When I heard this, my initial reaction was the thought I articulated in the Major League Franchises piece:

I can see it now. A team is in place and everything is great for a couple of years. Then the excitement dies down a little, and the next thing you hear is, "How can Portland compete revenue-wise with [insert large market team name here]? We need a salary cap. We need more revenue sharing. It's NOT FAIR."

Nothing against Portland, which is a beautiful city full of nice people -- except for the citizen that sent me the nasty anonymous e-mail after reading that story. Like Portland, there are many beautiful cities in this country that are not major league cities, including the one that I live in. Unfortunately, some of these cities have managed to obtain major league franchises and others are in the process of lobbying MLB for the privilege.

Inevitably if one of these second or third tier cities is awarded a major league franchises, they will add their voices to the small-market clamor for "fairness", which, somewhat ironically I suppose, never takes into account the issue of fairness as it concerns the larger market teams and their fans. As the fan of a team that plays in one of the largest markets, I'm constantly barraged with opinions that decry the monetary advantage that my team "enjoys". Fortunately, the Mets have spared me from any substantial guilt in this matter, as they have been singularly unsuccessful in exploiting their advantage.

At first blush, no one can really argue against the concept of fairness in major league baseball. No team should be able to simply spend their way to success while others are doomed to finish down in the standings because they simply can't afford the talent to remain competitive. To argue against the case of small market teams just seems wrong.

Some of what you'll read on this subject almost makes it sound like the large market teams are cheating. An important question I've begun to ask myself is whether the small market teams are facing disadvantages that are truly impossible to overcome without dipping their greedy little hands into the pockets of more successful franchises. Remember, when it comes down it, it's really fans like you and I who bear the cost of revenue sharing in higher ticket prices. When dollars flow away from teams like the Mets to less successful teams, someone has to make up for lost revenue, and that someone is us.

In an article from the Boston Herald dated February 16, 2006, Red Sox owner John Henry discussed revenue sharing, and made the following point:

Baseball has to address the disincentives created by large scale transfers of revenue from successful clubs to less successful clubs. At high enough tax levels the incentive is to invest somewhere other than in baseball. The disincentives are just as powerful for the lower revenue clubs as for the higher revenue clubs. The Red Sox have taken an aggressive stance in investing in all aspects of the franchise. But one has to wonder how many teams will do so when the financial risks often outweigh the potential financial benefits.

The commissioner and the union have radically altered the game of baseball for the better over the last few years by transferring enormous amounts of dollars. But as with all taxes, there is a point at which taxation discourages effort and investment to the point that baseball clubs one by one come to the same, unfortunate conclusion. Looking ahead the Red Sox have to take it on faith that investment in baseball on behalf of our constituency -- the fans -- will make sense. But we cannot ignore the fact that it is their hard-earned dollars we are sending to other cities. [my emphasis]

This might sound like sour grapes to someone from Minneapolis or Milwaukee, but it's really a valid point. Those that are most in favor of the system as it currently stands want you to believe that the vast sums of money being moved around are coming out of the pockets of wealthy men like Fred Wilpon. They really don't want you to think about the higher ticket prices you're paying that subsidizes major league baseball in a place like Pittsburgh, where a ticket to a game is much cheaper than it is in New York. More importantly, what compelling reason does a team like Pittsburgh have to clean up their game and do a better job of exploiting the possibilities of their own market? By raising their own local revenues, they'll only reduce the amount of corporate welfare they receive from more successful teams.

Revenue sharing, as it is currently set up, is a part of baseball's collective bargaining agreement between the players and owners. Maury Brown, the editor of BusinessOfBaseball.com, believes that what he calls "meaningful revenue sharing" will be an important part of the next collective bargaining agreement. He cites the provision in the current CBA concerning revenue sharing that "each Club shall use its revenue sharing receipts ... in an effort to improve its performance on the field." The commissioner is supposed to be enforcing this, but most acknowledge that he's coming up short in this matter. According to Mr. Brown:

Recall that in 2000, Carl Pohlad (baseball's richest owner) and the Twins pulled in $21 million in revenue sharing. The problem with this? It was $5 million more than their entire player payroll. Clearly, Selig is not enforcing the provision...

Pohlad is a notorious cheapskate and con artist, but he's not the only one playing this game with revenues. Again, some of the lucre that Pohlad and his cohorts are lining their pockets with have come out of your pockets in the increased cost of Mets tickets -- it's not just Fred Wilpon's problem, it's yours, too.

Please don't take what I am saying here as a blanket indictment of all small market teams; nor am I trying to portray large market owners as benevolent souls being taken advantage of by cynical money grabbers. It's funny, however, how often the media likes to portray the opposite as true -- featuring small market teams as good-hearted Davids being crushed under the heels of large-market Goliaths. If nothing else, looking into this issue will convince you that there is a lot more to it than the oversimplifications we are often fed.

John Henry's statements on this matter prompted Baseball Prospectus' Joe Sheehan to say:

Some of the massive revenues the Yankees and Red Sox generate are due to natural advantages, but much more of them are due to putting products on the market that people want to buy, while aggressively moving to develop new revenue sources. A revenue-sharing system that acknowledges these advantages as well as the importance of all teams to a league structure, like the one linked above, is sensible. A system that ignores potential revenues and merely taxes success breeds resentment and subsidizes incompetence. [my emphasis]

What was sold as a panacea for nominal small-market teams has, predictably, deteriorated into welfare for the incompetent. This matters because the real conflict in baseball hasn't been "owners vs. players" but "big-team owners vs. small-team owners." The inability of the latter two groups to solve their differences without involving the players is why labor relations in baseball are such a nightmare. If owners like Steinbenner and Henry are growing disenchanted with their roles as feeding troughs for the game's underclass, it bodes poorly for the upcoming renegotiations of the CBA.

If you can read statements like that and not question the current system, your team must rank among the most incompetent of those welfare recipients. You have to appreciate the irony of the whole thing: most small market teams are located in the so called "red states", yet the revenue sharing that their fans are so in favor of is actually quite liberal. I'm neither an MBA nor an economist, but as a baseball fan I wonder just exactly where we are going here. As the pressure builds more and more for MLB to "level the playing field", I've come to understand that, like beauty, fairness is in the eye of the beholder. Those that support taking more and more revenue from large market teams to insure competitive balance have absolutely no concern about the hidden cost to fans of those teams.

From my point of view, if everything else in baseball is going to be made even, then I think fairness demands a standard cost for tickets in every major-league ballpark. To ensure this, fans in small markets will have to pay higher prices to subsidize the cost of my trip to Shea. Somehow, I have to think that once they are the ones bearing the cost of fairness, I don't think they would find it at all fair.

Note: I'm going to be keeping an eye on how this issue develops, and have created a special Small Market/Large Market category for anything I write on the subject.

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