Revenue sharing, TV revenue, and MLB

The Game Room
1

After hearing that the Angels signed a $3 BILLION dollar, 20 year TV contract with Fox, it re-enforced the fact that the imbalance in MLB regarding team revenue and their ability to bid for talent is completely out of whack.

For full disclosure, I’m a lifelong and loyal fan of the Pittsburgh Pirates, so obviously my opinion is driven by this fact and the frustration that they have been virtually removed from post-season competition.

When a team plays the Angels, like the Kansas City Royals, don’t they have some rights to that broadcast? They are, after all, an integral part of the broadcast. Without the KC Royals, there is no game.

If this premise is correct (and if it’s not, can someone tell me why it’s not?), couldn’t the small to medium market teams band together, and force the issue of revenue sharing? Outside of the Angels, Dodgers, Yankees, Mets, Red Sox, Cubs, Phillies and a few other teams, most MLB franchises can’t afford to pay $254 million over 10 years. Certainly not to more than one player, if they could do it at all.

So, the Royals, Pirates, Twins, A’s and others really and truly have no chance to bid for front line free agents. They have to rely on their scouting, farm teams, and young players to give them a shot. And every once in a while, the gears mesh and a team wins, like the Florida Marlins, and their 2 W.S. Championships in the 90’s. But it isn’t sustainable.

Other franchises, like the Pirates, are in a constant rebuilding mode, and the fan base has been trained to believe that they simply don’t have the money to put together a championship caliber team like they had in the 1970’s. Or, for you younger folks, the early 90’s where they lost three straight NL Championship series until in 1992, Bonds went free agent and the team began its rapid slide off the relevancy map.

With all this money - TV revenue - that teams have access to, the variance in dollars swing wildly. If all that money were thrown into a pool (revenue sharing), then each team would have a fair shot, with the only thing making the difference is managerial competence, and some luck to get the best bang for the buck. I fully understand why the Yankees and their fans don’t want any part of that. If I were a Yankee fan, I wouldn’t want any part of it either.

But there is something else to consider. Tradition. Variety. Fairness. Leveling the playing field so teams like the Pirates and Reds can compete in a league that they helped to create.

The Pirates, for instance have been around since 1882 (and in the National League since 1887) and are considered one of the “Classic 8” of the National League. They predate the Yankees and Red Sox. In other words, they are a huge part of baseball history, and to marginalize them near the point of extinction seems wrong.

The Pirates own 5 World Championships. If you count the pennants they won at the turn of the century (and I do, since no world series was played), they won the National League Pennant in 1901, 1902, and 1903. I include 1901 and 1902 as championship years, because the National League did not recognize the American League. They also won the N.L. in 1903, but lost the WS to the Red Sox.

To marginalize them to me is to do the same thing to the Green Bay Packers, Detroit Lions, Chicago Bears, or Cleveland Browns. These cities have various levels of population, but a city like GB can put together a championship team just as easily as any other team, as long as they make the right decisions and spend their money wisely.

So, here’s my question. Could a group of ML teams band together and force the other teams into revenue sharing by not permitting them to be shown on the Yankees own network (YES), the Angels network, and whatever else is out there?

And if not, why not?
Thanks for reading!

2

Well, they do, and they don’t.

In MLB, there’s a difference between a game which is carried by a national network (Fox, TBS, ESPN), and a game which isn’t.

In the former case (and those make up a small minority of the games played, even for the Yankees), that is, I believe, a revenue source which is shared between the teams.

In the latter case, teams are allowed to negotiate their own TV contracts for coverage of their games which aren’t nationally televised. In the case of an Angels / Royals game, both the Angels and the Royals have the right to have that game broadcast by their own TV affiliates. There are two separate broadcast teams covering that game, and two separate broadcasts: one going to the fans in southern California, with their announcers, and one going to the fans in Kansas and Missouri, with their announcers.

When you watch, say, the Royals’ broadcast of one of their games, you’ll hear a copyright disclaimer, something along the lines of, “this broadcast is the property of the Kansas City Royals and Major League Baseball.” Note that there’s no mention in that disclaimer of the other team (though the disclaimer in the other team’s broadcast of the game will have a disclaimer which doesn’t mention the Royals).

This strongly suggests to me that your premise isn’t correct. It suggests to me that the agreement between the teams of MLB on local TV broadcasts explicitly allows the individual teams to not have to share that revenue.

The smaller market teams would absolutely like to get a more equal sharing of those revenues, and have absolutely been trying to do so. In the past decade or so, they’ve managed to get a luxury tax instituted, but it’s by no means equal sharing. Part of the problem is there are really only a handful of teams who are really in the “small market” camp (Pittsburgh, Kansas City, Oakland, Milwaukee, Minnesota), and they don’t have enough political clout to get major changes in the system instituted.

The big difference (and it’s a huge difference) is that the NFL, in a remarkable show of prescient wisdom back in the 1960s, was able to forge a contract with the TV networks (well, back then, the NFL’s agreement was specifically with CBS) to cover every single NFL game, and an agreement between the teams of the NFL to equally share the revenue from that TV contract. Without that equality (which continues to this day), the NFL would probably be in the same state as MLB, and a team like the Packers might well no longer exist.

If they could have, I expect that they would have already attempted something like this. I suspect that doing so would put a team in breach of its agreements with MLB, and would probably open it up to sanctions and fines from MLB, and possibly lawsuits from the other teams.

To really make a revolutionary change to the system would probably require a very strong commissioner, who could stand up to teams like the Yankees and Angels. Unfortunately, MLB doesn’t have that (and hasn’t for a long while, if it ever did). And, truthfully, it probably would have needed to be a change which was instituted decades ago, before the amount of money got to be so huge.

3

I believe you are correct in stating my premise isn’t correct. But I wonder if that’s only because it was a deal made a long time ago before the disparity was so large. I’m wondering if it’s something they could take to court and try to get a reversal. I’m guessing these agreements were made in the pre-cable, internet and satellite days, and as TV began to evolve, no one with a home market like the Yankees was willing to say “let’s share it all!”

Even the luxury tax is a joke. There is no rule requiring teams to spend x% of it on players. They don’t have to use any of the money, and can pocket it if they so choose. Pirate ownership (under the Nutting family, led by Bob Nutting) run a profitable business. They don’t lose money each year. They just lose games.

I don’t know what the situation is in other cities, but Pittsburgh’s situation is particularly heinous. The state legislature jammed a tax increase up the ass of Allegheny County residents (a 17% net increase in sales tax) after they voted the tax measure down in a referendum to save the Pirates. (Build a stadium, keep the team). The Nuttings got a sweet deal. A new stadium for free, along with a free parking lot and anything else that needed to be built. The team, not the city, gets the bulk of the money from parking (the city gets a nominal parking tax charge, while Nutting pockets the bulk of it), concessions, you name it. And the taxpayers, who paid for this money machine for Nutting get no guarantee in return… no agreement by the Nuttings to spend x% of revenue on the roster, team development, nothing. That includes revenue sharing. The Pirates have operated in the black for years.

You are right, of course. But Selig isn’t that guy. And you’d think he’d be sympathetic to the small market teams (he used to own the Brewers, now run by his daughter? I think). The whole thing stinks.
I’d love to find out what the real agreement is, and if it is a federal law that would need to be changed, or if it’s an agreement made by the owners long ago or something else. Something needs to be done, though. Curt Flood had the guts to take the reserve clause all the way to the Supreme Court. I suspect that’s what would have to happen in this case if it were to ever change.

4

I’m not sure on what basis they could get such a reversal. MLB is a entity consisting of 30 independent organizations (the teams) which are allowed to operate in unison. If a minority of those teams (the small-market teams) say, “hey, we think the set-up is unfair”, I suspect the courts would say, “your organization can change things with a vote of the teams. It’s not our fault that a minority of the votes agree with you. If you want to change how MLB operates, convince more of your fellow teams to agree with you.”

Agreed. The Pirates are a particular case that the tax-paying teams hate.

Not any more (parenthetical note: I’m originally from Wisconsin, and the Brewers are the team I support). Selig’s daughter and her husband took over running the team when Bud became commissioner, and were, by most accounts, pretty terrible owners. They sold the team in 2004 to Mark Attanasio,

5

IIRC, the MLB rules require a vote of 75% of the teams to ratify a contract. Let’s say that all the small market teams band together for an NFL revenue-sharing agreement. How many teams will oppose splitting everything equally?

Yankees
Red Sox
Dodgers
Cubs
Braves
Rangers

That’s six I can think of off the top of my head. You could probably find another from the Diamondbacks, Angels, Giants, Mets and some other franchise I’m not thinking of. No deal.

6

Well, I’ll add the Angels for sure, and the Mets. I don’t know what the Braves revenue stream is like compared to the Yankees YES network, but my guess is that TBS is generating money just fine.

I’ll also add the Phillies. I have no idea what the White Sox are doing, and they are usually considered the poor sister to the Cubs, but they both stink right now.

So yeah, no matter how you slice it, there isn’t enough teams out there that could change it by a vote.

Maybe the answer is a rich owner. As much as I dislike Mark Cuban, he is from Pittsburgh, so it would be nice to see someone with his money owning the team. But he wants a glamour franchise, like the Cubs or Dodgers, and the MLB owners will never vote him in anyway…

Ah, the Pirates. Anyone remember the good old days when Bing Crosby was a part owner?

7

Thanks for the update on the Brewers. I had no idea they were sold. Who is Attanasio, Selig’s son-in-law?

:smiley:
I think Bud Selig is a crap commish, but at the end of the day, I guess most of them are/were. After all, they work for the owners.

8

Thank goodness, no. No relation to the family. Made his money in investment management, I believe.

9

You would think in a year in which no top ten payroll team made it to the LCS we would get a break from this tired argument, but nope. The Angels defeated the Marlins in the offseason world series, and somehow it means that no one else can compete for the actual baseball title.

Look we have been through this. Lack of revenue is not the reasons the Pirates have been terrible for twenty years. It certainly didn’t help, but it is well behind its breathern, terrible trades, terrible drafting, terrible scouting, overpaying for mediocre free agents, and prefering to go for an outside shot of winning 81 games then fully committing to rebuilding.

A quick look at the nl central shows how ludicrous it is to blame the pirates failure on market size. The actual two big markets, the Astros and Cubs, are absolute disasters. The other three teams, markets equal to or slightly bigger than Pittsburgh have somehow managed to build quality teams in below average markets.

The Brewers remain a prime example of why team operations trump market in importance. Under Selig’s they ran a terrible organization and complained that they couldn’t compete.
Attanasio quit the whining, rebuilt the system, traded for other team’s star pitching, and now has a team that is a World Series contender. An amazing thing happened along the way, fans started showing up, giving the Brewers the revenue to increase payrolls further. It turns out that fans will show up, well anywhere except Tampa, if you put a quality product on the field.

There is no reason Pittsburgh cannot use the same blueprint for success. In fact they have, there is no one who has invested more than the pirates into their system the last few years. They just have 15 years of mess to clean up first, so it is going to be a while before they are good again. The new CBA will probably hurt them too, and it will stop them from making the kind of investment they have been making in amatuer talent going forward.

If that doesn’t convince you, let’s try it one more way. Why should the Pirates make as much revenue as the Angels. The Angels have put exciting products on the field and worked to grow the game of baseball in their area, while the pirates have done little to help the sport beyond allowing taxpayers to build them a shiny new stadium. And if the pirates should make as much as the Angels, how about the Dodgers then. They certainly have as strong a market to work with. Should they get the fruits of the Angels success while they drive their own team into the ground?

10

You haven’t said anything that I haven’t said (or agreed with). With two small distinctions.

  1. If there was a salary cap (and a salary floor) along with revenue sharing, then teams like the Pirates would have to spend the money they are currently putting into their collective pockets. That would not guarantee them a winner. All you have to do to know that is to look at the Cubs or the Mets. There is more to winning baseball than just signing the big free agents. However, I believe one of two things would happen if the Pirates were forced to spend a certain amount of money. Either the Nuttings would actually try to improve the product on the field so they could improve their income stream and take home pay, or they would admit that they know nothing about building a successful franchise, and sell the team to someone that might be able to do what needs to be done. The Nuttings aren’t going to own the Pirates if they are losing money. They are not interested in that. This isn’t a team purchased out of love for the game or love for the team. There are teams out there that can absorb losses to the balance sheet because ownership is willing to do so. The Nuttings are businessmen, not baseball men. If someone were to force them to run their business differently, they would probably sell, take their massive profit, and go do something else.

  2. If the Pirates made as much as the Angels, the league as a whole benefits. Every team has a chance, based on the same dollars, to do the exact same thing as any other team (theoretically). Fan interest increases everywhere because all of a sudden, it doesn’t matter where the team is located. It matters how the organization is run. A premium is put on competency.

Look at the NFL. Each team operates under the same rules, with virtually the same money. And any team that makes more revenue in areas that aren’t shared (like the Cowboys with their stadium revenue) STILL can’t pay any more than any other team for the salaries of their players in a given year.

The reason why the Steelers have been good since the early 1970’s is because they have a great organization that likes to run things a certain way. Same with teams like the Patriots. It works. There are other teams, like the Lions (until this year), or the Browns who can’t seem to ever get their team on a consistently winning path. That’s a management issue, and it shows. It’s no accident that the Lions started winning after firing Matt Millen. A different person will draft differently, and their drafts the past 2 years have been great. Maybe they are finally on the road to better things.

Anyway, the point is, unless things change, certain teams will never compete in baseball. When there is no incentive to spend, many teams will choose not to.

11

Well if all you want to do is force them to spend more money, what do you need revenue sharing for? I assume you in fact actually want them to spend money in other people pockets. This isn’t necessarily bad, but lets keep our issues straight.

Well every owner wants to make a profit, and the pirates profit seems in line with other franchises, so that part isn’t an issue. So we are left with the option of the pirates should spend more money on the major league level, which might make them slightly better, but is unlikely to make them competitive. I think the fundamental issue here is lack of understandings on how you build a good baseball team. You can’t do it mainly through free agency. You have to develop your own Pujols, Votto, or Braun and then supplement with outside talent. Even if the Pirates signed Pujols they would be at best mediocre in the near future.
In fact free agent spending would likely be counterproductive at this point, as anyone they sign would be unlikely to be a contributor on the next good pirate team. Better to develop their own talent.

The pirates have been spending money by the way. They just haven’t been doing it on the major league level. Given where they are at, this is a very good plan. Too bad the new cba kills it.

Well that depends doesn’t it. If you make them equal by lifting the Pirates to where the Angels are that is undoubtedly good for the game. However, if you make them equal by lowering the Angels to where the Pirates are, well that is bad for just about everyone.

There are a couple of others problems here. One is that is no actual evidence that fan interest correlates to parity. In fact baseball ratings are almost always better when the usual name big markets are involved. The things is people don’t care if small markets can compete. They care if their small market is competing. I tend to doubt that the success of the brewers, diamondbacks, and Cardinals caused you to watch more baseball then the success of the Cubs, Mets, and Dodgers would have.

The other issue is that there is more to running a good franchise than building a successful team. Take the Red Sox. When Henry took over, Fenway park was a disaster and most people thought a new stadium was necessary. Henry was able to orchestrate massive renovation greatly improvement the fan experience. This in turn gave him additional revenue to use on his baseball squad. If every team shared the same revenue there would have been no incentive for Henry make all those improvements. This would once again have been bad for baseball.

It kind of amazing that you look at the NFL and understand that money is not the reason that some teams are always above or below average, and look at baseball and completely lose that understanding. Since baseball has as much parity as football, it is kind of difficult to argue that divergent revenues is much of a problem.

Well here is your problem. This statement is comically wrong. Every team can compete. I mean the Rays play in a subpar market with an awful stadium and are in the AL East. They still manage to compete. Make a list, I’m curious. I would bet that at least one of them will be competing this year.

Well yes. The irony is that revenue sharing tends to lessen the incentive to spend, as it gives teams guaranteed profit no matter how well their team does.