By Mike Steffanos
According to Maury Brown in the Hardball Times, the New York Mets contributed $24 million in MLB revenue sharing dollars last year. Regular readers of this site know that I have a strong opinion on the use of revenue sharing to level the playing field in major league baseball. Although I agree that an effort to be made to keep things competitive and give small market teams a chance; I take exception when fans of teams in large markets, already paying the highest ticket prices, have to subsidize baseball for some small-market cities. It's a complex question, and a subject to which I've been paying attention. For my earlier writings on this subject, please scroll to the bottom of this posting.
There have been some interesting articles on this subject recently, including one by ESPN's Jayson Stark (ESPN Insider subscription required) from late last month. As Stark points out, one of the big issues in the upcoming Collective Bargaining Agreement (CBA) negotiations will be revenue sharing. The problem, as Stark, myself and many others see it is simple:
At least four teams -- the Marlins, Devil Rays, Pirates and Royals -- are getting more money from their good friends at MLB than they're spending on their entire payroll (this is before they sell one ticket).
This is true. All of them, according to sources, rake in around $30 million in revenue-sharing handouts alone -- plus another $20 million to $30 million in TV, radio, Internet and Central Fund payoffs (generated by national TV contracts and licensing deals).
That comes to $50 million to $60 million, by our count. But their payrolls, by anyone's count, come to slightly less than that. Or, in the Marlins' count, to insanely less.
During negotiations for the new CBA, it is expected that this issue will be addressed. Ownership is hardly unanimous on this subject. Small market teams favor the status quo if not more revenue sharing. Large market teams fear that this form of "corporate welfare" is a huge disincentive to small market teams like those mentioned to increase their profitability, since that would result in a loss of revenue sharing dollars. It's an interesting Catch-22. Stark quotes an unnamed "prominent baseball man" on the dilemma:
Talk about welfare, there's zero incentive for these teams to take that money and spend it. ... If they get better, they draw more people. If they draw more people, they get a better TV contract and they sell more hot dogs. And if you do that, you lose your $30 million a year [in revenue-sharing money only]. Then you actually have to run your franchise like a real business and make it work.
Stark suggests the simple fix of inserting wording into the new CBA that mandates teams using all revenue sharing dollars to improve the on the field product, and suggests a way to enforce it. A really good read, if you have an ESPN Insider account.
In a story in the New York Times from around the same time frame, Murray Chass has a great story on the same subject, including outing two rather surprising recipients of revenue-sharing dollars:
The Phillies and the Orioles were among the recipients of the smallest payments -- the Phillies $6 million and the Orioles $2 million -- but the intrigue comes from their receiving any money at all.
The revenue-sharing system, which is designed to funnel money from wealthier clubs to poorer ones, large markets to small markets, transferred $312 million last year. ... Philadelphia is by no means a small market. It has the fourth-largest television market in the country. Baltimore doesn't have the population of New York or Los Angeles, but the Orioles drew more than 3.4 million fans in six of the first seven years (not counting 1994, the strike year) at Camden Yards.
But the Orioles have allowed themselves to deteriorate, and their attendance has shrunk. The Phillies have been bad for so long that they have turned off their fans, too. Last year, their attendance was ninth in the National League.
The revenue-sharing game is about revenue. Forget market size. High-revenue teams are payers, low-revenue teams payees.
Chass also goes on to mention the smaller clubs that are spending less than they take in. I did not realize that large-market teams like the Phillies were eligible for revenue-sharing. I would imagine that some more successful teams in much smaller markets (like St. Louis) contributed to that $6 million. That's just crazy.
Maury Brown, who writes about the business side of baseball for the Hardball Times, is writing a series of articles on the upcoming CBA. In part 2, he addresses revenue sharing specifically. Brown does a great job in explaining this complex issue. I would be doing his article a disservice if I attempted to summarize it, especially since the Hardball Times web site is free to all. Brown does a good job of stating the contentious issue here:
So, back to that provision within the CBA where clubs are supposed to use the revenue sharing monies to improve on the field performance ... The loophole, of course, is that you can "improve" your on the field performance any number of ways, be it investing in scouting, or farm systems, or what have you. The verbiage in the provision is vague, in that sense.
Because of the vagueness of the provision governing how revenue sharing dollars should be spent, no team, not even the worst offenders, have been penalized for not spending their money to improve the team. This is a concern of owners of large market teams -- and also to the fans, who are indeed subsidizing baseball in smaller cities. By the way, Mr. Brown has an excellent web site of his own called The Baseball Journals, where he writes a lot about the business side of the game and offers up some great interviews. I should also stress here that in referring to the writings of Mr. Brown and anyone else I have cited and/or linked to, in no way implies that they are in agreement with me or my take on this issue.
I've written so extensively on my own views on this matter that I feel no desire to beat regular readers over the head with it again. I wrote this in one of my previous articles, and it effectively much sums up my feelings on this matter:
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.
I'll continue to follow this issue and post on it as it evolves.
More Small Market/Large Market Opinion:
Major League Franchises Need to Be in Major League Cities
View All On This Topic