Baseball - revenue sharing, salary cap, contraction

[IzzyR]

So now that the World Series is over, the collective bargaining agreement ends as well. Baseball is considering cutting teams in small market low revenue areas. Also

Fehr expects revenue sharing among the teams to be a key issue in the talks. Low-revenue teams want an increase in revenue-sharing money they receive from the large-market clubs, and the union’s agreement is necessary for any change in revenue-sharing rules.

During talks prior to the last labor contract, teams spent about a year negotiating a revenue-sharing plan among themselves, and that proposal was altered during negotiations with the union.

Someone can correct me if I am wrong, but I believe the central issue of the revenue sharing is that it contained elements of a spending cap - teams were penalized for spending past a certain limit. This naturally has the players aggravated. I recall the players union saying that the owners needed to do more revenue sharing and less salary caps in order to solve baseball’s problems.

But it would seem to me that a revenue sharing agreement would also be a tremendous damper on player salaries. The reason for this is the declining returns that the salaries would bring. IOW, if a team is not going to gain 100% of the increased revenue that the star player brings in, and they are going to pay 100% of the salary, they will not be willing to pay as much for the increased revenue. So if the union is willing to go along with this (assuming that their consent is needed) I would think this is the way to go.

Of course, a lot of large market teams are not willing to forgo much of their revenue to the small market teams. This, I would think could be alleviated by giving the owners of large market teams equity in the small market teams to compensate for the lost revenue stream. In this way, there are no winners and losers on an individual level, and the game as a whole benefits from the more level playing field. (I would imagine you would have to divest after a time, or risk conflicts of interest).

The other option being considered - eliminating some teams - seems pointless. The problem with baseball is not the fact that there is not enough money in an absolute sense for the small market teams - it’s that these teams can’t compete with the large market teams. By eliminating the small market teams, someone else will now become the smallest, and be unable to compete. I once heard Bud Selig making this point, and am surprised that he would be considering this option now. Maybe he feels there’s nothing else he can do.

[ElvisL1ves]

I do think baseball has been badly hampered by the idea that some owners, particularly in the big markets (are you listening, George?), have that the fundamental business unit is their franchise, not the leagues as a whole. Blame the antitrust exemption for that, among other things, but it’s there. That’s made a permanent two-tier system, where the big-market teams only have to avoid screwing up, while the small-market teams have to be much better run just to have a shot at maybe winning for 1 year (ref. Oakland this year). Either way, the small market fans are getting the message that they may as well not bother.

The other major sports leagues have understood that the league is the fundamental business unit whose health must be nurtured, and have put some effective form of revenue equalization and cost controls into place that keep fan interest active across almost all of their markets. If there’s a debate available against baseball doing the same for its own good, I’d like to know what it is.

But there clearly are some dead markets baseball is saddled with, and the overall business is hurting because of it. Not only do the strong teams have to carry the zombies, the but there are too many players for the average fan to keep track of, and that promotes alienation from the sport.

There’s no good argument for keeping a team in Montreal, for instance. However, Jim Caple at ESPN.com has a good argument that dumping the Twins would be a selfish inside deal by Selig, who still owns the Brewers and would inherit the Minnesota market. Seems to me a much better choice would be Tampa Bay - the market is still a good one, but the current franchise is too screwed up to take advantage of it.

But I do think the sport’s biggest marketing problem is its pace. I’m not that old, and I remember games being typically 2-2.5 hours long almost every time. Games don’t hold casual fans’ interest now that they often hit 4 hours.

[Captain_Lance_Murdoch]

I thought sports were ment to be a diversion from the everyday business world. How much “fun” is this discussion?

I live in Minnesota and I fully expect to lose the Twins. Minnesotans refused to buy the Twins a new stadium and now we will be punished for it. We will now be used to blackmail other cities into buying stadiums for their teams. Anybody out there in Kansas City or Oakland? Let me tell you in advance that very few people here want to pay for these stadiums, so when the Twin Cities are used as a possible destination for your team just look your owner in the eye and call his bluff!!

Major League Baseball can die for all I care. I encourage everyone to find other interests.

[eponymous]

*Originally posted by IzzyR *

Of course, a lot of large market teams are not willing to forgo much of their revenue to the small market teams. This, I would think could be alleviated by giving the owners of large market teams equity in the small market teams to compensate for the lost revenue stream. In this way, there are no winners and losers on an individual level, and the game as a whole benefits from the more level playing field. (I would imagine you would have to divest after a time, or risk conflicts of interest).

IzzyR - I’m not making comments on your points directly. I just wanted to add to the discussion you’ve laid out in this paragraph.

What would happen if “small market” teams decided not to play New York, Atlanta, or the other large market teams? In fact, Bill James, in his updated Historical Baseball Abstract, made a comment about this possibility.

One solution that Bill James suggests is that the broadcast revenues should be shared amongst all the teams. If the Yankees sign a $500 million deal for their broadcast rights, they pocket half and the other half goes to the rest of the league. Same goes for all the other teams. While the Yankess and other large market teams would have an advantage, it wouldn’t be as stark as it is now. The same could be done with gate revenues. I don’t know the percentages, but I believe that the home team retains a signficant portion of the gate receipts.

The other option being considered - eliminating some teams - seems pointless. The problem with baseball is not the fact that there is not enough money in an absolute sense for the small market teams - it’s that these teams can’t compete with the large market teams. By eliminating the small market teams, someone else will now become the smallest, and be unable to compete. I once heard Bud Selig making this point, and am surprised that he would be considering this option now. Maybe he feels there’s nothing else he can do.

I agree - I can’t for the life of me see contraction as a solution to the current problems facing major league baseball. Since I’m becoming more and more a cynic as I get older, the idea of contraction comes across as a tactical ploy by the owners to extract concessions from the player’s union in the upcoming negotiations.

I think the small market teams have much more clout than they realize. They need to understand that the political/financial dynamics of the game have changed. It’s no longer managment versus players - it’s now between the large market and the small market teams. Once the small market teams realize this, then they can begin to address the problems facing major league baseball.

[Dignan]

Team salary caps take away from the game, look at the NFL. Jerry Rice should have retired as a 49er, but because of the salary cap, he couldn’t.

A player salary cap would be much better. Make a maximum amount that a player could earn in a year, and have it stick. Of course the player’s union wouldn’t allow this to happen. We can always hope though.

[Dangerosa]

*Originally posted by ElvisL1ves *
**
However, Jim Caple at ESPN.com has a good argument that dumping the Twins would be a selfish inside deal by Selig, who still owns the Brewers and would inherit the Minnesota market. Seems to me a much better choice would be Tampa Bay - the market is still a good one, but the current franchise is too screwed up to take advantage of it.

**

Methinks Mr. Selig is sadly mistaken. Chicago is nearly as close as Milwaukee and Minnesota fans have a long standing rivalry with Wisconsin teams. My guess is that Twins fans are more likely to become Cubbies fans than Brewers fans (we don’t like the White Sox up here much either). Given the broadcast range of TBS, Atlanta looks like a good bet for a team to follow. And alot of Twins fans like the Mariners - another smaller market team.

[minty_green]

*Originally posted by ElvisL1ves *
The other major sports leagues have understood that the league is the fundamental business unit whose health must be nurtured, and have put some effective form of revenue equalization and cost controls into place that keep fan interest active across almost all of their markets. If there’s a debate available against baseball doing the same for its own good, I’d like to know what it is.

Ask for an argument and you shall receive: The NFL and NBA totally blow since they took this route. Seriously. It is absolutely painful to watch what passes for NFL football this season, and it has been that way for the last three or four years. Enforced mediocrity through salary caps and/or extreme revenue sharing is the worst of all possible solutions.

Seems to me a much better choice would be Tampa Bay - the market is still a good one, but the current franchise is too screwed up to take advantage of it.

A large portion of Tampa Bay’s problem is Tropicana Field, which is located on the wrong side of the Bay and is a dump anyway. Who wants to drive all the way from Tampa to St. Pete (an hour each way, not including the inevitable rush hour traffic) to watch baseball in a place with all the soul of the Astrodome and all the modern conveniences of the Circle K? The Devil Rays’ ownership was so anxious to get a team that they totally screwed themselves on the fundamental problem of where they were going to play.

[PhiloVance]

Ah Ha! I knew it would come to this. Ever since the AL bought into the DH and the STUPID strike of 1972, MLB has gone downhill. More strikes, expansion, the ‘divisions’, blah blah blah. Next thing you now, the NL will have the DH.

I have long been a MLB fan. First a Dodger fan, even back in the Brooklyn days. I’ve seen them move west and loved it, since I live in the west. I’ve seen the O’Malley’s sell them to Murdoch and, while I still watch BB now and then, I’ve ceased to be a Dodger fan or a MLB fan. I guess I’m an old purist at heart. I liked the days of the two team league, each winner playing the other winner in the World Series. Not the NFL/NBA/NHL like idiotic playoff system they have now. Why the fuck play the season? Hey, we all know don’t we: MONEY, yeah.

I may be unrealistic, but I really believe MLB has done this to itself. The sad fact is they took trusting people with it: the people in Montreal and in the Twin Cities. I hope Minnesota and Montreal sue the pants off MLB and let it die.

BTW I’m still a baseball fan and watch the grandkids in their summer and winter leagues.

[IzzyR]

*Originally posted by Dignan *
A player salary cap would be much better. Make a maximum amount that a player could earn in a year, and have it stick.

From a moral standpoint, it is a lot worse.

Originally posted by Minty Green
Ask for an argument and you shall receive: The NFL and NBA totally blow since they took this route. Seriously. It is absolutely painful to watch what passes for NFL football this season, and it has been that way for the last three or four years. Enforced mediocrity through salary caps and/or extreme revenue sharing is the worst of all possible solutions.

I don’t agree with this. Beyond questioning whether your facts are true, I would suggest that “mediocre” is only relative to expectations. In basketball and football, fans have come to expect a higher winning percentage in order for a team to be “great”. In baseball, the winning percentages are already low - I doubt if they would go much higher.

I wonder if someone knows what the income disparity was in the league over the early years of it’s history. I would imagine TV is the source of the current discrepancy. If in the pre-TV years the iincome was pretty much evenly spread out, this would disprove your theory.

[BobT]

Baseball has always had great economic disparities. Go find a St. Louis Browns fan. They’ll tell you about having no hope. Or somebody who watched baseball in Philadelphia in the 1930s and 1940s (although the Athletics did win in 1930-31 before falling off the face of the earth.)

Current disparities do mostly come from TV, but it’s all on the local level. Just because there are more people around who can watch their games, the Yankees’ local TV contract is many times more valuable than Kansas City’s. You can pick up Kansas City broadcasts throughout much of the Midwest, but it’s sort of like the presidential election, it’s people that matter, not the area. Montreal didn’t have an English-language radio broadcast in 2000, but did get one in 2001, although it probably didn’t produce a lot of revenue for the Expos.

The FOX and ESPN contracts are shared among the 30 teams.

The whole situation smells to me. The owners created the problem and now they want to whack one franchise (Minnesota) that has been around since 1901 and has won more World Series in the last 20 years than the Braves, Cubs, and Red Sox put together.

[IzzyR]

*Originally posted by IzzyR *
In baseball, the winning percentages are already low - I doubt if they would go much higher.

Sorry, make that “lower”.

Originally posted by BobT
Baseball has always had great economic disparities. Go find a St. Louis Browns fan. They’ll tell you about having no hope. Or somebody who watched baseball in Philadelphia in the 1930s and 1940s (although the Athletics did win in 1930-31 before falling off the face of the earth.)

Were the lack of hope in these instances due to income disparities? (I imagine there may be a correlation between winning and income - a constant loser will draw smaller crowds than a constant winner. What I’m more interested in is if there were income disparities between teams in different markets - regardless of how much they won).

[minty_green]

*Originally posted by IzzyR *
Beyond questioning whether your facts are true . . .

Ain’t no facts involved, just my perception that the quality of the games in both the NFL and NBA has declined significantly since they both adopted salary caps.

I wonder if someone knows what the income disparity was in the league over the early years of it’s history. I would imagine TV is the source of the current discrepancy.

I don’t have and direct figures on team-by-team revenue, but Bill James’ revised Historical Baseball Abstract makes it quite clear that team-by-team attendance varied dramatically among teams. To pick one random decade, the Yankees had 16,133,658 paying customers for the 1950s, while the Washington Senators had a total of 5,598,081.

Since, in the absence of television revenue, paying customers were presumably the primary source of team revenue, I think it’s pretty safe to assume the Yankees had a lot more cash on hand than the Senators.

[IzzyR]

*Originally posted by minty green *
I don’t have and direct figures on team-by-team revenue, but Bill James’ revised Historical Baseball Abstract makes it quite clear that team-by-team attendance varied dramatically among teams. To pick one random decade, the Yankees had 16,133,658 paying customers for the 1950s, while the Washington Senators had a total of 5,598,081.

Since, in the absence of television revenue, paying customers were presumably the primary source of team revenue, I think it’s pretty safe to assume the Yankees had a lot more cash on hand than the Senators.

You may have posted this before seeing my recent post. In any event I’ll reiterate. Any winning team will draw more attendance than any losing team, all other factors being equal. What is significant is whether the pool of possible incomes were equal. If the team having low attendance is the result of it’s losing record, the fans may be frustrated (as are today’s Chicago fans) but they do not know that the deck is stacked against them. Which is the situation that the small market team’s fans are in today.

So I think your comprison of one of the worst teams of the 50s with the best team of the 50s is not the one I was looking for. I’d like to see a comparison of teams with comparable records in different markets.

One might tthink that a team in a big city has a larger pool of fans to draw from. But OTOH, a big city will have proportionately more competing entertainment to draw those fans. By contrast, with television, people in different sized cities have about the same number of options, so the pool of viewers is smaller.

[Gadarene]

The Baseball Prospectus guys are vociferous opponents of contraction, and make an especially salient point when they argue that had contraction been considered a decade ago, two of the likeliest candidates would have been the hapless Indians (who hadn’t made the postseason since 1954) and the mediocre Mariners (who didn’t have a winning season their first fourteen years in the league, from 1977 to 1990). Cleveland and Seattle. Who’ve since combined for nine division titles and two of the best seasons (1995 for Cleveland; 2001 for Seattle) in baseball history.

Who’s to say that the Twins, the Marlins, or a relocated Expos team wouldn’t be the next decade’s Indians?

[minty_green]

*Originally posted by IzzyR *
What is significant is whether the pool of possible incomes were equal.

I just went back and looked at James’ decade-by-decade attendance figures since 1900. I went with the figures for whole decades to reduce attendance shifts attributable to particularly good or bad team performance.

Clubs from New York had the highest attendance in the 00’s, 20s, 30s, 40s, and 50s. The Chicago White Sox had the highest attendance for the 10s. In the 60s, 70s, and 80s, it was the Los Angeles Dodgers. Not until the 1990s was the highest attendance for the decade from a team not in one of (at the time) the two largest cities in America, when Camden Yards opened in Baltimore, ushering in the new era of really cool ballparks. I would submit it is no accident that the highest attendance coincides quite nicely with the largest population centers.

And who had, decade-by-decade, the lowest attendance? In the 00s, 10s, and 20s, it was the Boston Braves, who had roughly 1/3 the attendance of the decades’ biggest teams until the 20s, when the discrepancy went to 1/4. In the 30s and 40s, the attendance losers were the St. Louis Browns, who had 1/9 and 1/4 the attendance of the biggest team. The 50s and 60s saw the emergence of my beloved-as-soon-as-they-moved-to-Texas Washington Senators, who pulled in 1/3 to 1/4 the number of fans. In the 70s, it was the Oakland Athletics who tanked, again with 1/3 the numbers. The Mariners and Expos lost the 80s and 90s with about the same discrepancy.

Admittedly, Boston, St. Louis, Washington, Oakland, Seattle, and Montreal were all reasonably big cities. They have to be in order to support a major league team. But they are (or were) all fairly small when compared to the other cities that host major league teams, and they are substantially smaller than the cities whose teams had the highest decade-by-decade attendance.

Incidentally, Bill James’ standard deviation analysis (which I don’t even pretend to grasp) indicates that the 1980s and 1990s were the two most competitive decades ever in MLB. I just throw that out there for those who think it was so much better in Days of Yore.

[IzzyR]

*Originally posted by Gadarene *
they argue that had contraction been considered a decade ago, two of the likeliest candidates would have been the hapless Indians (who hadn’t made the postseason since 1954) and the mediocre Mariners (who didn’t have a winning season their first fourteen years in the league, from 1977 to 1990). Cleveland and Seattle. Who’ve since combined for nine division titles and two of the best seasons (1995 for Cleveland; 2001 for Seattle) in baseball history.

I don’t know about this argument. The basis for contraction is not the lack of success of the franchise but the small potential revenue base. (Truth is that Seattle may actually be a good candidate, but they are out of the running at the present time, due to recent success).

Who’s to say that the Twins, the Marlins, or a relocated Expos team wouldn’t be the next decade’s Indians?

I don’t think it makes sense to talk about relocating teams - presumably all locations were considered when granting the recent franchises, and it is likely that there are no other locations that have obvious and significant advantages over the present ones. It makes no sense to start franchises in completely new locations, with the trouble that the present ones are having already.

In any event, the significant fact is as follows: it is true that winning can change everything. Any given losing franchise can suddenly sign some genius GM and manager, have a run of luck developing farm system prospects have enjoy success for a few years (until their stars become eligible for free agancy and sign with some big market team). During those years it is likely that their revenue stream will improve significantly. But all sports are zero sum games. For every winning team there must be a losing one. So no sport enterprise can exist under a system where a team (or some of the teams) must have extended success simply in order to survive. If there are cities that cannot support a franchise unless that franchise has success comparable to the 90s Indians, that city should not have a franchise.

But the real argument against contraction is the one mentioned earlier. There is no absolute amount of money that is needed to support a team. The amount is completely relative to what other teams are spending. As soon as the weakest teams are eliminated, other cities will have the smallest potential revenue base, their management will be hard pressed to compete, salary-wise, they will occupy a disproportionate percentage of the league cellars, and the problem is as before.

[Green_Bean]

Didn’t MLB just expand? To expand and contract within a few years just doesn’t make sense.

It also makes no sense to eliminate teams when there are cities without teams that could probably support a team–like D.C.

I agree with those that speculate that this is just a bargaining chip.

[Gadarene]

I don’t think it makes sense to talk about relocating teams - presumably all locations were considered when granting the recent franchises, and it is likely that there are no other locations that have obvious and significant advantages over the present ones. It makes no sense to start franchises in completely new locations, with the trouble that the present ones are having already.

Izzy, this doesn’t make any sense to me. Could you elaborate?

[Gadarene]

This is a fantastic article on contraction.

Another possible reason is the desire to return to the largely successful blackmail days of the early 1990s, when a team could threaten to relocate and scam its host city into paying for a cushy new stadium. It’s hardly a coincidence that the three teams most frequently cited as targets for elimination are in cities that have recently rejected new-stadium proposals:
Montreal, which was conned into paying for a new arena for the Canadiens, only to have the team go into the tank and sell off its top players;
Miami, where the Marlins play in a stadium that is less than 10 years old;
Minneapolis/St. Paul, where the Twins play in a stadium that is less than 20 years old, one that fans have routinely packed during winning seasons.

Realizing that the public has caught on to their shell game of having teams threaten to move – at this point, there’s nowhere for a team to move on short notice – the owners may be using contraction as a new tactic. If it actually occurred, contraction would also re-open one market (Miami?) for a new shell game of threatened relocation, or for another lucrative expansion round in two or three years.

Question: What problem does contraction purport to solve? Seriously.

[Gadarene]

1991-2000 attendance figures: Milwaukee Brewers, 15,238,305; Minnesota Twins, 15,499,156. (culled from here.)