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June 27, 2007

The Big Picture

Competitive Sharing

by David Pinto

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It's a basic fact of life that teams require opponents. In my mind, that fact represents the great rationale behind revenue sharing--since no one pays unless two teams are on the field, home teams should share income with their visitors. The better a visitor draws people to the ballpark, the more that team should take home a piece of the host's pie. That makes teams compete for their shared revenue.

Currently MLB divides up local money in a convoluted way. Under a competitive revenue sharing plan, teams would distribute a high percentage of available local revenue (I'd set it close to or at 50%). When it comes to the gate, the split would be easy--fifty percent of the gate and concessions go to the visitors for a given game. For local television and radio, figure a dollar amount per ratings point based on half of the broadcast rights; teams then get paid for each ratings point they earn. This plan encourages opponents to bring out as many fans and viewers as possible.

A team like the Yankees, which sells out games with high ticket prices contributes more money than it takes in with this plan. However, they contribute to the teams that help them raise the most revenue. The following table presents the average attendance at Yankee Stadium for visitors in 2006:


Average Attendance of New York Yankees Visitors, 2006
Visiting Team    Avg. Attendance
Mets                      55,196
Red Sox                   55,051
White Sox                 54,956
Twins                     54,229
Braves                    54,058
Tigers                    53,955
Angels                    53,754
Mariners                  53,519
Indians                   52,820
Athletics                 52,696
Orioles                   52,406
Blue Jays                 52,320
Royals                    51,192
Devil Rays                48,532
Rangers                   45,403
Marlins                   38,150

Note that the Marlins would have thrown away a lot of Yankees money in 2006 under this plan; putting a decent team on the field could result in another 12 to 15 thousand fans in the Bronx for their games. If one assumes the relative attendance figures here are indicative of television and radio ratings, Florida would come up short in Yankees broadcast revenue as well. Also, take notice of the fact that if Florida improved their attendance at Yankee Stadium they not only help themselves, but the Yankees as well. It's a win-win!

In fact, the Marlins drew poorly almost everywhere in 2006. The following table shows the average Marlins' attendance for visiting teams in 2006, and how that number ranked among all teams that visited that opponent:

Marlins as Visitors, 2006
Home Team     Avg Attendance    Rank
Brewers              34,132       4
Diamondbacks         26,031       9
Pirates              23,400       9
Devil Rays           14,637      10
Rockies              23,689      12
Dodgers              43,611      12
Mets                 43,290      12
Padres               31,635      12
Cardinals            40,991      12
Phillies             31,929      13
Cubs                 38,385      13
Nationals            22,897      14
Astros               35,568      14
Braves               27,831      14
Orioles              18,183      15
Reds                 18,522      16
Yankees              38,150      16
Giants               35,055      17

The average rank for the Marlins in 2006 comes in at 12.6, which means the potential exists for the Marlins to bring in many more fans on the road. Under a collective bargaining agreement that rewarded the better road draws, the calculation as far as the risks that came with conducting a fire sale after the 2005 season would have been very different. In 2005, the average attendance rank for the Marlins as a visiting team was 9.6; the salary dump would have caused Florida to take a shared revenue hit. Instead, as a low revenue team, they received a nice paycheck.

While the Marlins offer a good example of why competitive revenue sharing might be a good idea, looking at all the data, I'm not sure how much better it would be than the current system. As it turns out, there isn't that much difference between teams in terms of drawing power. The following table looks at the ranks of visiting teams over all hosts in 2006:

TeamMean RankBest RankWorst RankSt. Dev.Mean Average Attendance
Yankees 2.90 1 12 3.34 38,271
Red Sox 3.30 1 11 2.80 35,854
Cardinals 5.90 1 17 4.79 34,040
Mets 6.90 1 16 4.99 34,694
White Sox 7.40 1 15 5.00 30,908
Indians 7.50 1 15 4.52 31,745
Giants 7.90 1 18 6.03 33,537
Athletics 8.00 1 15 4.02 31,439
Dodgers 8.20 2 18 5.33 31,892
Tigers 8.20 3 16 3.89 30,202
Cubs 8.30 1 17 5.18 33,174
Padres 8.60 1 17 4.66 32,273
Braves 8.90 1 18 5.53 32,214
Orioles 9.00 3 16 4.29 30,983
Royals 9.10 2 16 4.30 31,645
Astros 9.20 2 18 4.33 32,669
Twins 9.30 1 15 4.54 29,484
Angels 9.60 1 16 4.40 29,509
Reds 9.80 2 18 4.31 32,436
Rangers 10.10 4 16 4.38 29,152
Brewers 10.20 3 18 4.99 30,385
Phillies 10.30 2 16 4.49 30,856
Diamondbacks 10.40 2 17 4.31 30,130
Nationals 10.80 2 18 5.63 30,633
Pirates 10.90 1 17 5.38 30,625
Blue Jays 10.90 5 16 3.82 27,466
Mariners 11.10 4 15 3.87 28,866
Devil Rays 11.20 5 17 3.94 27,463
Rockies 11.70 6 18 4.10 30,975
Marlins 12.40 4 17 3.09 30,441

I thought the data would show a pecking order of teams that draw well, but apart from the Yankees and Red Sox at the top, and the Marlins at the bottom, the rankings are fairly random. Teams can rank at either extreme depending on the host. In other words, there's not enough of a difference between most teams to make the difference in revenue sharing meaningful. Teams might as well throw all the money in a pot and divide it evenly, which is pretty much what part of the CBA does.

Of course, if road attendance were somehow incorporated into revenue sharing, the data might start looking less random. For example, over the last two seasons, the Giants ranked sixteenth in terms of average attendance among visitors in Atlanta. There's room there for improvement, so the Giants could launch a campaign to bring out fans to Turner Field. It doesn't matter which fans show up, Braves or Giants--San Francisco would earn more money by putting people in the seats. The Giants could promote their best players ("It may be your last chance to see Barry Bonds!"), or they could talk trash ("The Braves' legs turn to jelly at the sight of a Matt Cain fastball!"). Imagine the Nationals buying ads on Denver stations to promote their games with the Rockies. In other words, rather than the home team conducting all the promotions, visitors would be encouraged to bring out fans as well, as many teams already do.

It is possible to change how a team draws on the road. Over the past five seasons, the Red Sox have done a very good job of improving their road ranks:

Boston Red Sox, Average Rank as Visitor
Season    Mean Rank
  2002          6.1
  2003          5.3
  2004          3.2
  2005          2.9
  2006          3.3

Boston combines an extremely competitive team with a marketing campaign to make fans all over the country (and the world) part of Red Sox Nation. Orioles and Devil Rays fans may not like a stadium full of people rooting for the other team, but the front offices like what it does for their bottom line.

Pure, competitive revenue sharing offers the potential to spread the wealth while encouraging all franchises to put together their best possible teams. It could also encourage an overall growth in attendance by getting teams involved in the promotion of games in cities they visit. While the chances of baseball adopting such a plan are small, an adjustment to the split pool of money to penalize teams that draw extremely poorly on the road might prevent fire sales like the that of the Marlins after the 2005 season. For that reason alone, it's a plan worth considering for the next CBA.

Related Content:  Fans,  Florida Marlins,  Revenue,  Yankees Fans

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