Wednesday, April 7, 2010

Is There A Way To Fix Baseball's Revenue Disparity?

It's a rare thing when the two opposing parties are both right.

But that is what is happening now in the very public feud between Milwaukee Brewers owner, Mark Attanasio and New York Yankee President Randy Levine.

The hoopla started when Attanasio said, in a USA Today article:
"We're struggling to sign one guy and the Yankees infield is making more than our team."
Levine, in a burst of impolitic honesty, said:
"I'm sorry that my friend Mark continues to whine about his running the Brewers. We play by all the rules and there doesn't seem to be any complaints when teams such as the Brewers receive hundreds of millions of dollars that they get from us in revenue sharing the last few years. Take some of that money that you get from us and use that to sign your players."
So, they're both right. Or both wrong, depending how you look at it.

Baseball has a huge disparity between the haves and the have-nots. There are two teams, (the San Diego Padres and the Pittsburgh Pirates) with total team salaries that are 5 to 6 times less than the Yankees. As USA Today writes, the Red Sox and the Yankees have a larger combined payroll than the bottom 7 teams combined. So, as far as Attanasio's point goes, he's right. There is too much disparity between the haves and the have-nots.

On the other hand, Levine is correct. The Yankees do play by the rules. Each year, they pay out millions of dollars to small market teams via the luxury tax. Since 2003, obeying the rules of the luxury tax, the Yankees have paid out just under $175 million dollars. That's not revenue sharing. That's just the Yankee tax, luxury tax.

And the small market clubs get more money as well. In 2009, revenue sharing—another way in which large market clubs dole out cash to the smaller market clubs, as opposed to the luxury tax—moved $433 million for high-revenue clubs to low-revenue clubs. Combined with the luxury tax, that is a ton of cash being handed out to small market teams.

Where does it all go? Well, the truth is, not every team uses they are given by the Yankees to better their ballclub. As reported on this web site on March 11th, John Henry, owner of the Boston Red Sox, wanted Major League Baseball, to go after "baseball's revenue-sharing welfare cheats."—i.e., teams that take the money from high revenue clubs and pocket it. Bill Madden of the New York Daily News quotes John Henry:
"Change is needed and that is reflected by the fact that over a billion dollars have been paid to seven chronically uncompetitive teams, five of whom have had baseball's highest operating profits."
So, on that point, Levine is right. Certain small market clubs have taken a lot of the money handed to them, made huge profits off of the handouts, and never once tried to improve their ballclubs.

So what's the solution? A hard salary cap? Maybe, but the truth is baseball might not want to cap the Yankees and Red Sox and that ilk. Why? People are drawn to those teams. Ratings for the 2009 World Series, where the Yankees played the Phillies were the highest they've been since 1999. The highest TV rating earned in the 2009 World Series was 13.5; the year before where the Rays played the Phillies, the highest TV rating was 9.6. Check out the ratings for Fox's Game of the Week. Insert a large market team in the game, the ratings go up. Don't; they go down.

And ratings means money. Not just for the big clubs, for all the teams in baseball. So, by evening the playing field with a hard cap, MLB jeopardizes killing the goose that lays the golden egg, meaning, if the Yankees are just like every other team, then baseball doesn't have a certified cash cow.

So, again, what's the solution? Perhaps forcing the small market teams, who receive the baseball welfare checks to spend it on players, might help level things out. Commissioner Selig already began to do this by forcing the low-sending Marlins to start spending money. This winter, he called out marlin's management for not spending enough. They gave Josh Johnson a new contract the next day.

Instead of a hard salary cap, others have suggested tweaking the payroll tax. For every team with a payroll above, say, $100 million, hit them with a payroll tax. Then take that money and distribute it to the teams below the $100 million dollar line. That said, there would have to be the minimum salary line, of 70 million or so, thus forcing the have-not teams to spend money to get money.

Would it work? It's worth a shot. The system now isn't completely flawed. Small market clubs such as Tampa, Minnesota, Colorado, Florida and others remain competitive, while some big spender clubs like the Cubs and Mets flounder. That said, it could use a tweak. It's up to MLB to create a system that allows teams to re-invest the money they earn to improve their ballclub, but still allows for a somewhat even playing field.

Let's hope they can do it.

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