MLB’s coffers are overflowing

This offseason should be quite a telling one for baseball. It will tell us which teams are most interested in acquiring talent and which ones instead are focused on lining their pockets.

Why is this winter different from past offseasons? Well, because the television contracts Major League Baseball negotiated over a year ago kick in for the 2014 season, and those deals more than double the amount of national TV money each team receives.

The overall effect is that baseball will take in approximately $750 million more each season via the new pacts than what the old contracts delivered. That’s an average of $25 million in new money per team. And that doesn’t account for the huge local broadcast deals some teams have signed.

So, the question is, what will each franchise do with that $25 million annual windfall?

It’s a rich man’s world

For the biggest of spenders, most of that new money likely will be poured into player salaries.

The New York Yankees have talked about getting under the $189 million soft salary cap luxury tax threshold, but they just signed Brian McCann to a five-year deal averaging $17 million a season. And Robinson Cano is more likely to return to the Bronx—at a cost of well over $20 million a season—than he is to take his talents elsewhere. And sure, an Alex Rodriguez suspension would lower the Yanks’ 2014 salary obligations, but he would be back on the books in ’15 barring a not-so-friendly arrangement to make him go away.

In addition to the Yankees throwing money everywhere, the new-look Los Angeles Dodgers showed last year that money is no object, and there’s little indication upcoming seasons will be any different. With a 2013 payroll well over $200 million and Clayton Kershaw‘s pending free agency following the 2014 campaign, it’s likely LA will be using its new money to keep its ace and two-time Cy Young Award winner in the fold. That, the Dodgers’ signing of Cuban second baseman Alexander Guerrero, and their need for a third baseman all indicate the Dodgers will be writing plenty of big checks for a long time.

After winning the World Series this fall, the Boston Red Sox have to at least make a show of spending what it takes to keep up their success. With Jacoby Ellsbury, Stephen Drew, Mike Napoli and Jarrod Saltalamacchia all free agents, Boston will pay to bring either them back or their replacements into the fold, although Xander Bogaerts, Will Middlebrooks and Jackie Bradley Jr. could serve as cheaper alternatives. Actually, these bargain fill-ins could offer even greater incentive to spend big to fill other holes.

Detroit, San Francisco, the Los Angeles Angels of Anaheim, Philadelphia and Texas are other teams with huge salary budgets and the incentive to up them further. In the next tier, St. Louis, Washington, Baltimore, Cincinnat, and Atlanta are competitive teams with the means to add this found money to their payrolls without breaking a sweat. And while $25 million doesn’t go as far as it used to, it could acquire enough additional talent to push these teams further toward their goal of a world title.

It’s no surprise that they’re giving none away

And then there are those who will take the money and run, balking about bad timing in their competitive cycle, poor attendance, and a host of other reasonable and absurd reasons not to spend money.

Sitting proudly in the corner with his dunce cap on will be Jeffrey Loria, owner of the Miami Marlins, the poor south Florida franchise that could afford to spend big two offseasons ago to bring in a wave of talent, only to deal those players away a year later and drop its payroll under $40 million. The Marlins took in enough money between the old national TV deal and revenue sharing to cover their payroll. The rest of their intake was gravy. This new TV money? Well, if Loria has some new insanely priced artwork hanging in his owner’s suite, you’ll know ESPN, Fox and TBS paid for it.

The Houston Astros actually have good reason not to throw around their new windfall. Whether or not it was the most profitable team ever last season, Houston has little incentive to spend big this winter. In addition to paying off team debt, the Astros know they have no chance to compete for a playoff spot next year, and most likely not the year after. However, at some point, they’ll have to bring in some free agents or sign their young players to extensions. When that time comes, they ought to have banked plenty of cash.

Tampa Bay, Oakland and Pittsburgh all made the postseason in 2013 with bottom-five payrolls. And while the rising tide will lift all boats this winter, each of these clever teams now has at its disposal a significant sum with which to upgrade its on-field talent. I have a feeling the Plexiglass Principle could bite the Pirates, but the Rays and A’s ought to have enough tricks up their sleeves to stay in the running with the big boys throughout next season. And Pittsburgh does have the benefit of playing in a division without a financial juggernaut, so it’s not like the Pirates are a clear one-and-done team.

People would lie to their mother

Regardless of where teams are in the payroll continuum or the competitive cycle, whether they have a new local TV deal or a stadium, or whether they’re highly profitable or just scraping by, they all have one thing in common: they’ll never tell the public the truth about their finances.

Forbes tries its best to estimate who makes what, but its numbers can only be so accurate without an insider’s perspective. We all expect sleight of hand, misdirection, and numerous other conjurer’s tricks from team front offices as they obfuscate—anything but the truth.

And why not? This approach has served teams well over the years. More than 20 new stadiums have been built in the past quarter century, funded largely by the public. Why be honest when deception can be so profitable?

And it’s certainly not that teams are spending a higher percentage of their revenues on player salaries. This article, direct from the horse’s mouth, tells the tale of baseball’s revenue growth:

In 1992, when Selig assumed leadership of the game, total industry revenues were at $1.2 billion; by 2012, revenues had grown more than 600 percent to a record total $7.5 billion.

That “more than 600 percent” growth is actually a 625 percent increase if you simply calculate $7.5/$1.2. Nice returns if you can get them.

Then look at the growth in player salaries over the same time frame. This Baseball Cube post shows the average player’s salary increasing from $798,185 in 1992 to $3,438,241 in 2012. That’s not bad money, either, but $3.44/$0.80 works out to a 430 percent gain.

So the owners are keeping a larger percentage of the money they take in as the dollar amounts grow bigger and bigger. People talk about owners taking on the greatest risk with a business because it’s their money. It seems major league owners have found a way around this—fans’ gullibility.

Money changes everything

Well, not everything. Yes, baseball is getting an extra $750 million in 2014. No, owners won’t be spending all of it—probably not half of it—to improve their on-field product. Some teams will invest in foreign acadamies, others will go after international free agents, and a bold few will scoop up the best talent on the major league free agent market in an attempt to capture a World Series championship.

Keep a close eye on who is who. Some teams will go for it in a big way in 2014. Others will prep for their time in the sun later down the road. And a few will tuck the money under the mattresses and cry about not having enough.

It’s that last group of franchises that needs to find new owners who will make the effort to compete that their fans deserve.

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Comments

  1. Bad Bill said...

    There’s a bad logic error here, which I summarize as follows: “More money is coming in, and it’s not going to the players in fair proportion, therefore the owners are keeping an unfair proportion of it.”  The error is that there are plenty of other things for owners to spend money on, and in some cases things are ramping up considerably beyond foreign academies.  In particular, it would be very interesting to know just how many teams are significantly buffing the business side of their organization, and by how much.  Exhibit A is probably Houston, with their acquisition of stat nerds and bloggers (not to mention former St. Louis management wizards) which has been in the news lately.  Some of these office staffs are getting rather substantial.  However, to my knowledge, their contracts aren’t public record, and it is impossible to know just how much the payroll for such people has expanded.  It’s probably non-trivial, though.  Anybody got good, shareable data?

  2. Detroit Michael said...

    Comparing average player salaries from 1992 to 2012 doesn’t completely tell you what the total player salaries are.  There are 30 instead of 26 teams now.  Furthermore, due to increased use of the disabled list, there may be more players per team now than in 1992.

  3. Jim said...

    Nice categories.  Even though they weren’t mentioned, we know which category the Rockies are in.  They are just like their expansion brothers, the Marlins.  But then with over 3 million attendance, who needs a winning team?

  4. Greg Simons said...

    Bad Bill – You’re right that I didn’t touch upon all the other ways teams might be spending money to improve the product.  But if a team brings in a couple dozen analysts at $100k a year (a total SWAG), that’s only 10% of their new inflow.  I have a very difficult time envisioning a scenario in which any owners are poorer than they were last year.

    @Detroit Michael – Good point about total player salaries.  I’ll see if I can dig up historical data on total money spent on player salaries.

    This page:

    http://www.cbssports.com/mlb/salaries

    puts total 2013 salaries at $3.1 billion, or ~40% of revenues.

    @Jim – sounds kinda like the Cubs.

  5. gdc said...

    I don’t read enough to know if this has been proposed, but maybe rather than have a luxury tax beyond regular revenue sharing that lower teams may just pocket, there could be 1 roster space removed for being double the avg payroll, 2 for 3x, etc.  So the big market teams who can afford it are free to spend just what they spend rather than give to the free agent plus the other team, but sacrifice being able to hold onto some minor leaguers that another team might snap up rather than just get cash to sign old players.
    So that Players Assn does not like this?  Maybe some of the lower teams get an extra roster spot whenever teams go over, maybe even two teams get one so there are even or positive changes in players being paid at least MLB minimum.

  6. MGS said...

    I have no interest in defending Loria or others like him, but the problem has never, ever been that some franchises “don’t have enough”.  Articles like this one get published on nearly an annual basis and they continue to obfuscate the economic disparity in baseball that MLB permits to create significant competitive imbalance on the field.  Small market teams getting an additional 25 million per year and others tracking what they do with it tells you basically nothing.  They could plow that extra 25 million into free agent acquisition and it doesn’t solve the problem.  Why?  Because that extra 25 million doesn’t close the gap between them and their large market competitors, who got the exact same amount of new money, along with the hundreds of millions they rake in from their local media deals. 

    The Dodgers TV deal, for instance, brings in approximately 30 times the amount of money the Brewers TV deal does.  Yet if small market teams use it to retire debt or expand their player acquisition or development staffs, their owners need to be replaced with ones “their fans deserve.”  Please.  Bury Loria, by all means, but don’t lump other owners into that category because they don’t see the point in signing free agents to even worse contracts than they would have last year.  All the extra 25 million does is inflate the market value of the players who are free agents this year.  It doesn’t make the best of them remotely more affordable to the organizations with less revenue than the Yankees.

    Write an article about that.  That one might actually be worth the bandwidth you’re using.

  7. Greg Simons said...

    @MGS – I’m not sure what I did to “obfuscate the economic disparity in baseball.”  I didn’t say every team needs to buy a big-time free agent to demonstrate that it’s trying to win.

    I talked about the Yankees and Dodgers having huge payrolls.  I said it makes sense for some teams (such as the Astros) to pay down their debt, invest in foreign academies, or spend in the international free agent market.  (“Others will prep for their time in the sun later down the road.”)

    There are more ways to compete than by signing MLB free agents.  And I was in agreement with Bad Bill’s comment that bringing in more analysts can improve their product, though that’s a small monetary investment.

    It seems like you’re arguing in a roundabout way for a salary cap.  I understand that conceptually this should help with competitive balance, but there would have to be a cap and a floor to have the desired effect.  And there would have to be greater revenue sharing to make this workable.

    As is, a salary cap mostly would keep salaries down and make owners wealthier.

    The owners I was targeting for replacement are those that use the team for financial gain only, the ones that won’t do anything with this extra $25 million to improve the team, short- or long-term.  Loria certainly qualifies – and on that I believe we agree – as did Frank McCourt. 

    Are there others out there?  Probably, but possibly not.  If any teams do all but nothing with their new income streams to help their franchises, they most likely fit the description.

  8. Greg Simons said...

    @Gyre – It’s not “a player (or two)” per team that get a qualifying offer.  There were 13 QOs extended this winter, and all were declined.

    People continue to be upset that players make more and more money, but more and more money is pouring into the game.  It has to go somewhere.

    If teams play a sub-par player being of his salary, that’s the team’s problem, and the fans should be upset.  The front office and manager should put the best team possible on the field.

  9. Dave Cornutt said...

    Greg, I think part of the problem here is that, with the current setup, teams have to assume nearly all of the risk of player contracts.  If a high-dollar player gets hurt, or just doesn’t feel like playing hard, it’s no skin off his nose.  He gets paid no matter what.  Yes, sometimes teams give out bad contracts—but that makes it worse, because other smarter people in baseball observe those occasions and conclude that high-priced players are too much of a risk.  That’s the thing… it’s not just the cost, it’s the cost coupled with the risk.

    To add to what MGS said, it appears that the new TV money is already being priced into free agent player contracts this offseason.  So by next year the teams like the Royals and Astros are going to wind up right back where they were… signing a big name free agent will once again be too much of a financial risk for those clubs to take.  Consider this scary scenario: what if there was no draft, no automatic renewals or arbitration, and every player not under contract at the end of the season become a free agent?  Under those conditions, there would probably only be about eight teams.  Because other potential team owners would look at the business risk and conclude that it wasn’t worth it.

    Business in the U.S. today is very, very risk-averse.  That’s a much bigger problem than just baseball.  But at this moment there’s probably not a lot baseball can do to fix it.  It’s often said that a free agent is worth whatever the market says he’s worth.  Well, that pendulum swings both ways: if the Royals decide that a free agent is not worth $18M/year to them, then that’s their evaluation of the player’s worth to them.  You can’t force them to change their minds.

    I don’t think anyone in baseball, players or owners, really wants a NFL-like salary cap and revenue sharing scheme.  But the only alternative is that the owners and players are going to have to figure out how they are going to divide up the business risk.  This is going to be tough for the players because they have worked long and hard to make player contracts iron-clad.  But baseball can’t afford any more Mike Hamptons.  Eventually the unions are going to find the existence of the amateur draft, automatic contract renewals, and mandatory arbitration intolerable.  Arguably, they are right to do so, but when that day comes they’re going to have to come up with new idea of what constitutes a player contract.  If they don’t, it will reduce most ML franchises to being AAAA feeders to the handful of big-market teams.

  10. mgs said...

    Greg:

    You’re masking the actual problem because your article suggests that the real problem is small market owners who don’t care if they win.  I’ve got no problem with people ripping Loria because he essentially perpetrated a fraud on south Florida by taking actions that made people (foolishly) believe he would spend $ if he got a new stadium.  But that’s vastly different from other small market owners who recognize the futility of awarding $50-200 million dollar contacts to players who are at or near the age where they are highly likely to produce diminishing returns.

    Your analysis, for example, would suggest that the Minnesota Twins are doing things the right way by signing Nolasco to a $50 million dollar deal, even though his 95 ERA+ the past 5 years indicates he’s a below average pitcher, and at age 30, he’s statistically likely to get worse over the course of the contract rather than better.  Yet an owner who takes the same $ the Twins spent on Nolasco and uses it for stadium upgrades or game-day experience programs which might increase revenue for the next 20 years, or pays off debt left over from the last asinine contract they handed out and expands its scouting staff doesn’t really want to win. 

    I know it’s hard to know who’s lining their pockets and who isn’t when baseball refuses to release its books, but these sort of generalized broadsides against small market owners are the product of lazy thinking.  Yes, MLB owners have more revenue coming in than ever.  Yes, a significant portion and in some cases all of that money should go to the players.  But if that’s the sum of your analysis, you’re basically serving as the propaganda arm of large market owners who have been insisting for decades that the economic disparity in baseball isn’t a problem at all, and if there is one, it’s the fact that small market owners don’t want to win.  Tell that to Mark Attanasio in Milwaukee, who had no chance to keep Sabathia after 2008 or Fielder after 2011 and watched both teams get significantly worse the next year as the result of those losses.  Not because he didn’t want to win.  Not because he was running his franchise poorly (check out the Brewers attendance ranks since 2008).  Not because he hasn’t maximized the team’s revenues.  (The Brewers local media contacts, while miniscule compared to their large market cousins, have tripled under Attanasio’s watch.)  But because the value of Fielder’s contract with the Tigers was about 50% of the value of the entire Brewers franchise.  And why?  Not because he doesn’t want to win. Not because he’s not as good of an owner as the Steinbrenners.  But because he has the misfortune of owning a team in the league’s smallest market.  I know that doesn’t mesh with your narrative.  Too bad.  You’re a baseball writer.  If you’re going to get into revenue issues and how fans should judge their respective owners, you owe your readers a more complete analysis than “owners who don’t spend the new revenues are greedy.”

  11. Greg Simons said...

    @Dave – Sure the teams take on risk with FA contracts, but franchise values continues to soar, so I think owners’ financial risk overall is minimal.

    Plus, teams have players at insane bargain prices for three years (i.e. Mike Trout for $500k), then they get them for reduced prices for the next three years.  During these six seasons, if a player gets hurt, he’s gone, and the team typically owes him nothing beyond that season’s salary.  And this is after paying him a pittance in the minors for some period of time.

    I’m not yet ready to say the new TV money is being priced into new contracts.  The typical going rate the last few years has been ~$5 million a year.  Jhonny Peralta got $13 million a year, and he’s typically a 2-3 win player.  Jason Vargas got $8 mil a year, and he’s usually worth 1-2 wins.  Same with Marlon Byrd.

    If there was no draft, the theory I’ve always heard is that prices would drop since the supply of available players would rise dramatically while the demand would be the same.  Would the big-market teams get all the best players?  I don’t know, but I don’t think there would be only eight teams.

    I’m not expecting teams to overvalue FAs.  I expect them to do something with this new money to improve their franchises – FA signings, minor league facilities upgrades, more scouts and analysts, better foreign academies, etc.  Some of this may be under the radar.  If so, the team should hype their efforts on their web sites and to local and national media.

    I think the business risk already favors the owners.  If it wasn’t, franchise values would swell like they have.  The Dodgers sold for $2.1 billion!  The Rangers, Astros, and Cubs (I may be forgetting others) have sold for huge amounts the last few years.

    Baseball can afford plenty of Mike Hampton deals.  They absorbed that contract, and they’ll absorb future flops, too.

    The idea that small-market teams will be feeders for large-market ones has existed for decades. It may have been true at times (KC A’s to the Yankees repeatedly).  But this year’s playoff teams included Tampa Bay, Pittsburgh, and Oakland.  Those teams ranked 28th, 27th, and 26th, respectively, in payroll.  Cleveland was 21st, Atlanta was 18th.  That’s half the playoff teams in the bottom half of payrolls.  Four of the top eight payroll teams made the postseason, and the #1 (Yankees) and #3 (Phillies) weren’t among them.  I see that as parity.

    Sure, it’s more difficult for the small-market teams to compete, but it’s far from impossible.

    I don’t see that the business risk balance needs to change significantly.  Everyone is making lots of money.

  12. Greg Simons said...

    @mgs – You’re misreading my narrative.  I never said the problem is small-market owners who don’t care to win.  I said it’s any owners who don’t want to win.

    And I stated in my article and in at least two other comments that spending on ways other than on MLB FA is a legit investment in the future.  (Astros example and one of my final lines, “Others will prep for their time in the sun later down the road.”)

    As far as the example of the Brewers, Attanasio signed Ryan Braun through 2020, guaranteeing him about $145 million (existing deal plus extension).  No, that’s not Fielder money, but it’s a hefty investment.  The Rockies signed Troy Tulowitzki and Carlos Gonzalez to big-money deals.  The Mariners and Felix Rodriguez, the Rays and Evan Longoria, the Twins and Joe Mauer.

    I do think “owners who don’t spend the new revenues are greedy,” but I’m not limiting that spending to MLB FAs, and I’m not directing my assertions toward only small-market teams.

  13. Gyre said...

    “All the extra 25 million does is inflate the market value of the players who are free agents this year.”

    Yup, I cannot believe the number of players considered to be worth 14Mill. Most teams have a player (or two) that will get a Qualifying Offer and I can see that new money disappearing into them.

    And then the players that turn down a QO simply ensure that next season, the minimum will be even higher.  Then the fans get stuck with a sub-par player (most likely because of small injury) being in the game, because of the salary.

  14. Jim said...

    Earlier, I stated the Rockies were like their brethren, the Marlins.  I stick by it no matter what MGS says.  Until the cattle barons in Greeley tell or show us what they are doing with the extra money we have to presume that business in normal and they are lining their pockets with it, just like profits in other years. 

    I’ve said it before and I will say it again.  The Rockies need to draft ONLY pitchers and try to find someone who knows how to develop them for high altitude pitching (yes there are quite a few around, I’ve talked to two in the last six months).  If you throw enough jello at the wall, some is bound to stick.  When these drafted pitchers get to free agency time, if the Rockies still have them, then let them walk.  But under my scenario, they would never get much past the first or second year of arbitration because their replacement would be here and besides they would be pitching like they are worn out, so trade of dump them.

    What about hitters, you say?  Name a free agent hitter who is having trouble getting much attention (Justin Morneau?) who wouldn’t want to reestablish himself at Coors Field and move on. 

    No expensive free agents unless you happen to catch lightening in a jar.  What the heck, they’ve been lousy all their life, what difference does it make to try something that might work.

  15. Greg Simons said...

    @mgs – One more time, I never said small-market teams don’t try to win.  If you want to tell yourself that’s what I said, there’s nothing I can do about that.

    Tell me, what is your solution?  You’ve complained repeatedly about the economic disparity, but what would you suggest be done about it?  Greater revenue sharing?  A salary cap?  A limit on the number of free agents a team can sign?  Please present some sort of proposed solution.

  16. mgs said...

    Greg:

    “I see that as parity.”  What nonsense.  Yes, teams with small revenue streams make the playoffs.  The Rays are particularly good at it, and they regularly get trotted out when people try to defend the current paradigm.  I’ll readily admit that the past 10 years have been significantly better than the 1990’s were when it came to on the field competitiveness and there are examples, like the Rays, of how to do it.

    But it wasn’t all that long ago that people used to trot out the A’s as exhibit A in the defense of baseball’s economic structure.  That became less popular when the A’s best players left for large market teams and the A’s never managed to get over the hump, not to mention the famous and accurate quote from Beane that his stuff doesn’t work in the playoffs.

    The problem with pointing to the Pirates and the Rays making the playoffs this year and suggesting there’s parity in MLB is that it ignores the fact that there’s been a significant economic shift in the structure of the league in the past 18 months.  It has nothing to do with the nearly meaningless extra 25 million you’re talking about in your article.  It has everything to do with the exponentially increasing local media deals.  The economic gaps between the haves and the have nots in baseball is widening dramatically.  It’s bigger than it ever has been before.  And the result will be that it will become harder than ever for small market teams to retain their best players.  The rough parity that existed from 2004 or so to 2012 will fade, and you’re writing about what the small market owners are going to do with the extra 25 million from the national TV deals.

    And your attempted defense by pointing to small revenue teams in the playoffs in 2013?  Easily refuted.  The payrolls of the playoff teams in 2013 included the #2, 4, 5, 11, 13, 16, 20, 21, 27 and 28.  Looks balanced, doesn’t it?  A closer look suggests otherwise.  The Wild Card teams were ranked 13, 20, 21 and 28, and #‘s 13 and 20 were eliminated in the first two days of October.  The next round saw the elimination of #‘s 16, 20, 27 and 28 by teams ranked 2, 4, 5 and 11, the four highest payrolls in the playoffs. 

    What a coincidence.

    So your final 4 teams had an average payroll rank of 5.5.  Put another way, the average payroll of the Championship Series participants was $157 million, and the lowest payroll among those teams was $115 million.  Nineteen teams in MLB, roughly 63% of the leagues, had smaller payrolls than the lowest of the Championship Series teams.  Only 4 had payrolls equal to or greater than the average payroll of the Championship Series teams.

    Tell me Greg.  Did all 19 of the teams with payrolls smaller than the lowest payroll in the league championship series have greedy owners who were just lining their pockets and didn’t give a damn if they won or not?

  17. mgs said...

    Read your own article.  This is a broadside against any owner that doesn’t increase their payroll by 25 million prior to the 2014 season.  You’ve back-pedaled a bit on that in the comment threads, but that only goes to demonstrate my point that this was a poorly thought out piece that doesn’t deliver much in the way of new information, as most Hardball Times readers were likely already aware that the teams were getting more out of the national TV contracts. 

    The solution is simple:  a hard cap and a hard floor, with a guarantee in the CBA that the players will receive a certain percentage of overall revenue.  If the actual contracts in effect in any given year don’t hit the guaranteed share of revenue, the balance is delivered to the union for distribution to the players utilizing a performance formula to compensate players who have outperformed their contracts.  (This exact thing has been going on in the NFL for a decade.)

    The amount of the cap and floor have to be driven by the amount of shared revenue.  The more revenue is shared, the narrower the gap between the floor and the cap.  The narrower the better.  If the large market teams refuse to share additional revenue (almost a certainty), the gap will remain relatively large, as there are revenue poor teams who likely couldn’t stay solvent if they were dealing with a salary floor of say 80 million without additional revenue sharing.  One possible solution to that would be to set a hard cap at about $150 million and a dollar for dollar tax at everything about $125 million, with that dollar for dollar tax revenue redistributed to the lower revenue clubs with the floor rising for every dollar that’s transferred.

    Go ahead and take potshots at it if you like.  It doesn’t change the valid criticisms of this article that have been made in this thread.  It was poorly thought out, and hardly informative.

  18. Marc Schneider said...

    Why would the baseball players have any incentive to agree to any kind of salary cap?  In hockey, they did because the owners locked them out for an entire season and claimed that they needed the cap to maintain the viability of the league, a perhaps not implausible scenario for the NHL.  The NFL players did so because their union is weak.  MLB is not facing any financial problems and the union is strong.  Frankly, why should players care about competitive balance-assuming that the cap is necessary for that? As long the the league isn’t literally facing financial ruin, as a player, I would not agree to a salary cap.  In fact, it’s probably better from a player’s standpoint-at least a star player-to have a few financial giants that can pay top dollar rather than having a bunch of teams on more equal footing that are limited in what they can pay. Isn’t Brian McCann better off that the Yankees are able to pay him $17 million/yr than if there were more teams able to bid but the top salary was, say, $15 million?  (I’m just making up numbers.) I just don’t see why the players would agree to this absent a lockout that would shutdown the game for a year or two.  What am I missing?

  19. Dave Cornutt said...

    So the Rockies have opened their books to the Denver Post today, and they are showing that of the new TV money, $20M is already committed to arb raises for existing players and to other club expenses, leaving only $5M free.  There would have to be a close examination to verify all of the claimed expenses, but so far it looks plausible.

  20. Greg Simons said...

    @Marc – I’m opposed to the idea of a salary cap because I think it primarily limits players’ earning potential and inflates owners’ profits.  As you said, it may have been necessary in the NHL to save the sport, but MLB isn’t there.

    I asked mgs for a proposal, and if we were to assume a salary cap was necessary, I think his idea would be a reasonable starting point for negotiations.  I mentioned that the owners would have a tough time agreeing to it, and you’re quite right to point out that the players’ union would be firmly against it.

  21. Greg Simons said...

    @Dave – Interesting article about the Rockies.  Here’s a link if others want to check it out:

    http://www.denverpost.com/rockies/ci_24630592/rockies-owner-dick-monfort-provides-detailed-look-at-teams-budget-financial-structure

    I hadn’t heard about the $8M per team possibly going to the central fund.  Interesting.  And I like the fact that they combined the $4-5M in new money with expired contracts such as Todd Helton’s to arrive at $11M to add to the payroll.

    I certainly appreciate the transparency.

  22. Greg Simons said...

    It’s a solid proposal, and I’m not going to take potshots at it, though I think getting buy-in from 30 owners would be extremely difficult.

    I do wish your reading comprehension skills were better, because I never said what you’re claiming I said.

  23. mgs said...

    Greg:

    My reading comprehension skills are just fine, thanks.  It’s a large part of what I do for a living, and I get by just fine. 

    Marc:

    I agree with Greg (and you) that it would be a tough sell.  Historically the idea was abandoned because the MLBPA indicated they would refuse to consider any deal with a cap as part of the scheme.  But in other sports, particularly the NFL, the union agreed to a cap even though business was booming, so I think it’s an overstatement to suggest that the survival of the sport has to be at stake before the players would consider it.

    The primary selling points would have to be 1) a floor that’s high enough so that the cap counteracts the salary drag a cap would have. 2) increased revenue sharing to fund a salary floor around 80 million, which would have the effect of increasing the payrolls of about 1/2 the teams in MLB by anywhere from 25% to 100%; and 3) the guaranteed percentage of all revenue.  I’m not sure what percentage of the revenue the players are getting now, but if the owners guarantee the players more than half of the revenue generated by the sport (like the NFL has), that can have a dramatic impact in getting the players on board with any idea they believe will grow the business side of the sport.  It helps make the union and the league partners, or in this case, it keeps them feeling that way.

    It’s a pipe dream.  I don’t deny it.  I think you could put a package together that would be good for baseball and good for the players, but you have to have the will amongst the owners to make the offer, and right now my guess is that you’d have the support of less than half of the owners.  MLB is still in many ways run like a conglomeration of mid-size businesses.  I’m not sure what drives that culture, which has long since faded in other sports.  Large market owners in the NFL had the foresight to give up their economic advantages in the NFL some 50 years ago.  There’s no sign of that being the case any time soon in the MLB.

    The other significant group that would likely oppose a cap/floor are the agents.  The agents, or at least a handful of the most powerful agents in any sport, tend to wield more power in the union than most individual players do, and my guess is that many of the most well known and powerful agents that serve MLBPA members would oppose a cap since they have a tendency to spread wealth more evenly (if only to a degree) amongst union members instead of concentrating it in the hands of a few dozen players.  MLBPA likely has the most dramatic range of salaries than any other sports union, and there’s little doubt that benefits the agents who tend to land the guys who can attract 20+ million per year in a contract.

    Does MLB need a cap to survive?  No.  But I don’t think it’s a coincidence that revenues increased dramatically in a period of improved competitive balance over the past 10 years.  If, as seems inevitable, the revenue differential between the large and small market teams once again relegates 33-66% of the leagues to permanent also-ran/AAAA status, which is what the situation was in the 90’s, then it will become increasingly difficult to maintain revenue in those smaller markets.  That’s not fatal to the MLB’s business model by any stretch, but it could relegate/return MLB to regional sport status.  There’s already significant evidence that baseball is a regional sport.  That’s demonstrated annually by the playoff ratings.  The NFL is a national sport, and its fans will generally watch any team play at any time, whereas with baseball, a significant portion of fans won’t watch if their team isn’t playing.  That’s why a regular season Sunday or Monday Night Football game outdraws a game in the NL/ALCS or even the World Series.  If those regional fans believe their team has no chance to compete, they’ll walk away, and MLB’s revenues will stop growing.  It won’t shut the doors by any means, but it’ll prevent baseball from competing for entertainment dollars in many, many markets.

  24. Marc Schneider said...

    msg,

    Interesting points.  My only issue is that, even pre-free agency, there was a revenue gap between large and small markets.  The Yankees certainly had an advantage over, say,the St. Louis Browns.  Yet, baseball was a truly national sport at a time when one team won the World Series 20 times in a 44 year period.  But I don’t dispute that, with the growth of the NFL, it’s much more difficult-or maybe impossible-for baseball to ascribe to national status.  There are a lot of reasons for this, including the fact that, IMO, football is a better TV game than baseball-and baseball is much better in person.

    I’m not sure the revenue differential you describe necessarily will have the effect you suggest.  Free agency is, even for the large market teams, an inefficient way to put a team together. The Yankees greatest periods of success in the free-agency era have come when they developed their own talent and used free agency to supplement.  Small market teams can and do compete by developing young talent.  Granted, in many cases, those players end up with large market teams, but a lot of time this is at the time when those players are starting to decline.  A smart, well-run team-Tampa Bay is an obvious example-can receive a good portion of the player’s value before he departs, leaving the big markets to, in effect, pay for that past performance.  Look at Albert Pujols and Josh Hamilton; the Angels are really paying for the production those guys provided to the Cardinals and Rangers and are likely to receive much less value for all the money they are paying. I believe that this might end up being the case with the Yankees; as a Braves fan, I think Brian McCann is a fine player but I honestly think the Braves have extracted much of his value already and the Yankees will be paying in the future for the value he provided to the Braves. I don’t dispute that the revenue gap confers a significant advantage on the large market teams, and makes it harder for the smaller markets to compete, but I’m not sure it’s as dire as you contend, especially with the playoff format that really favors less-endowed teams.

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