Baseball Musings
Baseball Musings
January 27, 2006
Revenue Sharing

Jeff Passan in the Kansas City Star covers all the angles on revenue sharing today. He quotes economists, small market owners, large market owners, agents and the union. Here's Andrew Zimbalist:

“This was a system that’s supposed to create competitive balance,” said Andrew Zimbalist, an economist who has consulted with Major League Baseball. “If all it does is take $20 million or $30 million from one team and give it to another, it might make David Glass happy, but it doesn’t do anything for competitive balance. The system right now penalizes success and rewards failure. It might sound clever, but it’s true.

“The Royals are an example of a team that has benefited from the dole in baseball. Insofar as if you can say there’s welfare abuse from laziness anywhere in our country, they’d be a potential candidate.”

Scott Boras proposes something I like:

And sometime, while revenue sharing is on the table, a large-market owner could make this point brought up by agent Scott Boras: If an owner purchases a small-market team at a fraction of the price of a big-market team, why should the smaller team be entitled to an equal share of revenues?

“We have a responsibility,” Boras said, “where there should be a platform that says if an owner is unsuccessful for a long time, there should be a mandate given to him about his ability to stay in the league. That may give him (the incentive) necessary to stay competitive.”


Posted by David Pinto at 08:22 AM | Management | TrackBack (0)
Comments

Hell, Boras is almost an agent of competitive balance himself, getting crippling contracts for his players that ultimately hurt the teams that spend a lot of money for his guys.

Posted by: Mike at January 27, 2006 08:35 AM

It's too bad this is coming from Boras' mouth, because him saying it stains the concept a bit. You know that he's saying it so he can sign his players to bigger contracts. But I think he's on the right track. Having owners in the league like Glass and Pohlad and Loria hurts baseball. Just imagine if owners were forced to spend their money on their teams - what a concept! These guys pocketing money - or threatening to leave their city because the citizens don't want to foot the bill to build a stadium for a billionaire - is just bad business and it hurts MLB as a whole.

Posted by: sabernar at January 27, 2006 08:45 AM

"If an owner purchases a small-market team at a fraction of the price of a big-market team, why should the smaller team be entitled to an equal share of revenues? "

This makes sense to me, but I can't get too worked up about it when I consider George Steinbrenner only paid about 7 million for the Yankees.

Posted by: Rally Monkey at January 27, 2006 10:15 AM

Rally Monkey: That logic makes no sense. My parents paid $80,000 for an apartment on the Upper West Side of Manhattan in the 1970s that they still own today. Should they be penalized because they came into the market at nearly the optimum time to pay an apartment? Why should Steinbrenner be forced to pay more because his ROI has been greater than others? He's a "victim" of circumstance. Of all the things to fault him on, you can't hold that against him.

Posted by: Benjamin Kabak at January 27, 2006 10:49 AM

I actually like George and the Yankees. I see the logic of his argument, but I just can't grok the idea of him as a "victim".

Posted by: Rally Monkey at January 27, 2006 11:15 AM

I have another idea. Instead of basing the luxury tax on how much each owner spends on his team, why base the tax on the percentage of an owner's income/assets he spends on his team. Why should George be penalized because he spends his money on his baseball team - while other owners are using their teams to make money instead of putting a good product on the field. Just a though.

Posted by: Vic at January 27, 2006 12:12 PM

I'm a Yankee fan so take this for what it's worth!

George, despite his payroll, is in a much better situation than many other owners. In fact I call it the "perfect storm" of ownership! He bought the team over 30 years ago for 10 million, so he has no team debt. He occupies a city owned stadium, so he has no stadium debt to service. He owns his own network and probably generates more local revenue than any other sports team in the United States.

Compare this to some of the newer owners in MLB. The Red Sox bought their team for over half a billion dollars! Peter Magowan financed most of their new stadium privately! What is the debt service like for both of these teams?

While nobody should be holding a pity party for these owners I don't understand why they should also finance the poorly run teams as well as their own teams.

Posted by: farley at January 27, 2006 12:30 PM

Here's one that for so many reasons could never happen but would be interesting: You make it like the English Premiere League, where the team that finishes at the bottom of each league or division gets sent down the next year to AAA, and the best two or more teams in AAA get a ticket to the show. Makes minor league games more interesting, and the Royals get their "be careful what you wish for": to play meaningful games in September.

Posted by: jon wan at January 27, 2006 12:35 PM

Great book by Howard Bryant about steroids, finance, the union and owners called "Juicing the Game". A bit dry at times but it really helped me understand the historical context of the management/labor issues (deep seated hatred and mistrust) and the role finances plays in the whole mess. I am with Steinbrenner that giving that cheapskate Pohlad (former MN resident here) any money is just stupid. Carl is in the top 50 of wealthiest americans. And he didn't get there by being stupid, why invest in your team if someone else is willing to foot the bill, especially if you don't really care that much about winning.

For as much as I would love it to not be a business, it is. Carl probably ends up getting more money to the bottom line in terms of tax right offs if the Twins lose money then he does if they are profitable. The last time the Twins signed a significant free agent was 1991 and Jack Morris and I think we know what happened...

For my money, the best method is to institute a salary basement, forcing the owners to spend the money they get on players and players only. There are two reasons it won't be implemented: 1. The owners would only want it if they can also get a cap which the players won't agree to, 2. The "have's" can't get a plurality of owners to vote for it as there are only about 10 teams that end up sending all the money to the rest of the league (Yankees, Boston, Cards, San Fran, Seattle, Atlanta, Cubs, Dodgers).

Posted by: Dave at January 27, 2006 12:58 PM

I can't speak for other teams but the Brewers finally broke their losing season streak, in part, because of revenue sharing. They were in a position to actually take on salary in their trade with the White Sox for Carlos Lee last year. Without revenue sharing, I doubt that trade would have been made.

There are obviously huge flaws in the system as it stands today, but it isn't completely useless.

Posted by: rluzinski at January 27, 2006 01:08 PM

The revenues has nothing really to do with how poorly the teams are run, it has to do mainly with the population base for the city that the team happens to be based in.

And George is not spending his own money, he is spending the revenues that I feel rightfully belongs to other owners. Without other teams to play against, he has nothing to sell. Unless he wants to go to the Harlem Globetrotter mode of operations and have a patsy team to play against, he needs to share his revenues with all the other teams.

In addition, if I recall right, he only has control over local broadcasting of his games, but I doubt he's sharing any of his YES revenues he's getting from Japan with his fellow owners. Last I heard, Japan is not local to the New York area.

I would buy that his "good management/ownership" skills earned him all the revenues if he exhibited this good management/ownership judgement throughout his tenure as owner. But if he didn't get forced out of baseball in the early 90's for some illegal government activity (illegal contributions to an election I believe), leaving the baseball operations in the hands of good baseball people (don't remember all the execs, but Brian Sabean was their head of player development or something), which netted him the heart of his W.S. teams, he wouldn't be making as many bucks today or lording it over everyone about the Yankee's late 90's run. He would be the same ineffective and unstable George we knew from the 70's and 80's, buying up players but for mostly little effect (relative to his revenues).

Because he has the huge revenue advantage, he has what I would call the "infinite monkeys" approach to baseball ownership. For those who don't know, the theory is if you have an infinite number of monkeys whacking at a typewriter (keyboard today), eventually one of them will type out Shakespeare's Hamlet (or all his works, depends on who tells the story). In King George's case, he has enough money to overspend and drive up the cost per performance for players for other teams (making it that much harder for lower revenue teams to keep their own players, let alone sign additional players) that he will win championships just by random luck.

Lastly, Boras will never advocate for revenue sharing/parity. This current system creates a greater dichotomy between the star and regular players in baseball, because if the high revenue teams overpay for the top players, the top players end up with more money, but since this is a shared pie, zero-sum game, it means that there is even less left over for the regular players. And, of course, Boras represents mainly the star players who get more of the pie from this system.

Posted by: Biased Giants Fanatic at January 27, 2006 01:10 PM

Dave--

You mean Darrell May isn't a significant free agent?

Posted by: Jeff A at January 27, 2006 01:51 PM

what about....if you can't afford your team....move it or sell it...I hate this baseball welfare system we have today....there are too many teams anyway. Tampa Bay shouldn't even exist.

Posted by: leco at January 27, 2006 05:48 PM
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