In the past, I have railed for MLB to implement a salary cap and a salary floor. Although it concerns me that the Yankees spend so much more than all of the other clubs (they had a higher payroll in 2009 than the Marlins, Padres, Pirates and A’s combined), my more pressing concern is how little the bottom spending teams spend on payroll.
The real sin in all of this is that many teams are making more money from TV/radio rights and revenue sharing than they are spending on their payroll. How can MLB allow team owners to do this? It’s baseball’s dirty little secret, but at the moment, it’s not a very well kept secret.
Uber-agent Scott Boras recently made some comments that stirred the pot. He claimed that there are teams receiving $80 – $90 million “before they ever sell a ticket” who are only spending $40 – $50 million on payroll. To Boras, this is wrong and is a slap in the face of the fans who follow the team.
MLB was quick to respond. MLB Executive Vice President Rob Manfred issued a statement dismissing Boras’ claims and indicating that the numbers he used ‘have no basis in reality.” However, it seemed to me that Manfred purposely didn’t respond to the specific allegations Boras made.
In any case, Jayson Stark of ESPN.com took up the case and came to some interesting conclusions.
“If you live in Pittsburgh or South Florida, you’ve probably gotten so used to blaming The System for all your team’s problems, there’s an excellent chance you never noticed something every fan of these two “small-market” operations should know:
“Your team collected more money this season — before it ever sold one ticket — than it spent on its entire major league payroll. In fact, it collected more than it spent on its major league payroll and its player-development system combined.
“But it isn’t just the Pirates and Marlins who are cashing checks larger than their payrolls before the ticket offices open. By some estimates, a third of the teams in the sport are doing exactly the same thing.”
One-third all all teams spend less on payroll than they receive from TV/radio rights (local and national) and revenue sharing? That seems impossible, but Stark backs up the contention.
According to Starks figures, which he gleaned from sources throughout MLB, each team receives a check from the central fund (which includes national TV rights, radio, Internet, licensing, merchandising, marketing, MLB International Money) totaling $40 million. Every team also gets a check for revenue sharing, although the amount varies by team. According to Stark, the five neediest teams get $35 million each, but no one apparently gets less than $20 million. Local TV money varies, but all but one team makes at least $15 million per year from local TV rights and the other team makes at least $12 million per year.
According to Stark, the neediest teams in the game get at least $90 million before they sell a ticket. He then subtracts $10 million from that amount for pension and operation fees, leaving $80 million. Then Stark says:
“OK, now let’s head back to the payroll list. We count a minimum of a dozen teams, depending on how you define “total payroll,” that aren’t spending that same number — $80 million — on their major league payroll. So it isn’t just Scott Boras who has the right to ask: What’s up with that?”
Rob Manfred doesn’t dispute the figures, but says that the meaning of the figures has been misunderstood.
“When you evaluate a baseball team,” Manfred said, “you need to understand that these teams have expenses in addition to the 25-man roster on the field. They have multimillion-dollar benefit costs. They have the cost of paying 15 players on the [40-man] major league roster who are not in the big leagues.
“They have the cost of their player-development system, which averages $15 million [per team] a year. They have the cost of acquiring [amateur] players through the [June] draft and internationally, which averages $9 million [per team] a year. So for anybody to take a club’s revenues and say that 60 percent should go to major league payroll, that’s just a fundamental misunderstanding of this business.”
As Stark then correctly points out, MLB teams have many other income streams that are not included in these figures. If you are going to list all of the expenses an MLB team has, you have to then also include all sources of revenue, including ticket sales, concessions, parking, sponsorships, souvenir sales, etc.
Stark then offers a solution than I like much better than my original salary cap solution. Stark suggests that MLB continue to tax the highest spending teams just as they do now, but also start taxing the lowest spending teams. Set payroll parameters that discourage the wealthiest teams from spending their competitors into oblivion, but which also encourage the “poorest” teams to spend the money they receive from the central fund, revenue sharing, and local TV rights to improve their teams and to compete on the field.
I never liked the idea of a salary cap, but I didn’t see another way to make baseball more competitive and to level the playing field between the highest and lowest revenue teams. Stark’s proposal accomplishes this without resorting to a salary cap. Brilliant!
As Stark points out, this proposal will not cure all of MLB’s ills, but it will improve competitive balance and the play on the field. And once competitive balance is established, many of MLB’s problems will seem much less important.
