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January 9, 2009

Let Freedom Ring

Busting the Myth of the Salary Cap

by Shawn Hoffman

Small-market teams love salary caps. Or rather, they think they do. At least on paper, caps stop teams in New York, Boston, and Chicago from oligopolizing the free-agent market, and should therefore help level the economic playing field. And, to a certain extent, they do; a small-market team in a capped league is more likely to acquire or retain top-tier talent. But there's a catch. That same small-market team will need to win, and keep winning, just to stay financially viable. And sometimes, winning might not even be enough.

Let's say, in some far-off universe, MLB owners and players actually did agree on a salary cap. With it would come the normal provisions: a salary floor at around 75-85 percent of the cap, and a guaranteed percentage of total industry revenues for the players. Since the players have been taking in about 45 percent of revenues the past few years, we'll keep it at that figure (the other three major sports leagues, which are all capped, each pay out over 50 percent).

Using 2008 as an example, the thirty teams took in about $6 billion (not including MLB Advanced Media revenue), for an average of $200 million per team. Forty-five percent of that (the players' share) is $90 million, which we'll use as the midpoint between our floor and cap. If we want to make the floor 75 percent of the cap (a low-end figure, relative to the other leagues), we can use $77 million and $103 million, respectively.

With a $103 million cap, nine teams would have been affected last year, and a total of about $286 million would have had to be skimmed off the top. Since total salaries have to remain at existing levels, the bottom twenty-one teams would have had to take on this burden, which had previously been placed on the Yankees, Red Sox, et al. On the other end, fourteen teams would have been under the payroll floor, by a total of $251 million. Even discounting the Marlins' $22 million payroll, the other thirteen teams would have had to spend an average of $15 million more just to meet the minimum. Some of those teams might be able to afford it; most wouldn't.

Imagine being Frank Coonelly in this situation. Coonelly, the Pirates' team president, has publicly supported a cap. Had our fictional cap/floor arrangement been instituted last year, the Pirates would have needed to increase their Opening Day payroll by $28 million. Not only would the team have taken a big loss, but Neal Huntington's long-term strategy would have been sabotaged, since the team would have had to sign a number of veterans just to meet the minimum payroll.

Now fast forward to 2009. Let's say the Pirates' sales staff runs into major headwinds, with the team struggling and the economy sinking. The team's top line takes a hit, falling $10 million from 2008. The Mets and Yankees, meanwhile, open their new ballparks, and each team increases its local revenue by $50 million. If the twenty-seven other teams are flat, total industry revenues rise by $90 million (not including any appreciation in national media revenue). Forty-five percent of that, of course, goes to the players. So even as the Pirates' purchasing power decreases, the payroll floor actually rises.

In other words, without a more egalitarian distribution of income, the system crumbles.

Until recently, the NFL has been uniquely fit for this type of model, since most of its revenues have come from national television contracts. But now, with local revenues rising, small-market teams are feeling the pinch. This past May, the owners unanimously voted to opt out of their CBA, which was supposed to run through 2012. Some blamed the players' share of revenues. Others, including Dan Rooney of the Steelers, cited the need for more local revenue sharing.

But sharing local revenue has a major drawback: it is a tax, which inevitably lowers incentives and decreases output. If the NFL shared all (or even most) local intake, why would an individual team ever look to maximize revenues at its own cost (i.e. by hiring a sales staff, or cleaning its own stadium)?

The NHL, which also has a hard cap, does very little revenue sharing, partly thanks to an overly convoluted system. On a league-wide level, the results have been very positive; the NHL has had record revenues every year since its lockout, and Gary Bettman has been very positive about this season as well. But the NHL is a great example of why caps and capitalism don't mix: as the league grows, it ends up leaving teams behind. Small-market clubs like the Columbus Blue Jackets and the Nashville Predators are forced to spend almost two-thirds of their revenue on player payroll. And the Phoenix Coyotes, after years of hemorrhaging money, are on the verge of going bankrupt.

So what's the best solution? Certainly not the NBA's soft-cap system, which has too many problems to even count-imagine having to take on Luis Castillo or Carl Pavano every time you wanted to unload a high-priced veteran.

So instead of these models, what if there was an uncapped league, with limited local revenue sharing to support small-market teams, and a post-season system that naturally created tremendous parity? Does this sound familiar? It should. It's what MLB has had in place for over a decade, leading to record growth in both attendance and revenue.

The expanded postseason is key. More than any other sport, MLB's playoff system acts as an equalizer. Fair or not, in broad strokes, a team that wins 83 games in a bad division has as much chance of winning the World Series as the Yankees or the Red Sox. Seemingly, no matter how much those teams spend over the winter, that competitive advantage is neutralized come October.

So while the capped leagues all struggle to find the right balance between capitalism and socialism, baseball continues to prosper operating within a much more free-market system. Teams in big markets and small markets alike are making money, and everyone has a chance to win it all.

If it ain't broke, don't fix it. And right now, baseball is anything but broke.

(Note: All salary data taken from the Lahman Database.

Shawn Hoffman writes about business and baseball at Squawking Baseball.

Shawn Hoffman is an author of Baseball Prospectus. 
Click here to see Shawn's other articles. You can contact Shawn by clicking here

48 comments have been left for this article. (Click to hide comments)

BP Comment Quick Links

Jack G

Not to mention baseball's utter unwillingness to let anyone see it's real books. You can bullshit the fans and you can bullshit congress but good luck bullshitting the union lawyers when it comes time to hammer out how big the pie is and how much they're getting. That's a can of worms they don't want to think about opening

Thanks for this article by the way--I get in this argument all the time and I can't decide whether I'll forward people a link or print it out, wrap it in a brick, and throw it through their windows.

Jan 09, 2009 11:08 AM
rating: 1
 
oira61

Interesting theory but short on actual statistics. This being BP, can somebody compare parity among MLB, the NFL, the NBA and the NHL to show the actual effects of the salary caps?

Jan 09, 2009 11:12 AM
rating: 0
 
Jack G

As far as comparing between different leagues to measure parity, one has to remember it's a bigtime apples to oranges comparison. Given the effect of luck in baseball and the large sample sizes (that give us the data we know and love) along with the basic nature of the game, the vast, vast majority of winning percentages fall between .400 and .600 in any given year. Compare that with the NFL which just had 16-0 and 0-16 teams in back to back years. The .130 1899 Cleveland Spiders and .716 '01 Mariners have the lowest and highest winning percentages in over a century of baseball hstory; right now four NBA teams are outside that range this season so far

Jan 09, 2009 12:13 PM
rating: 1
 
kevburgh

The 1906 Cubs have the highest single season winning percentage at .763. They both won the same 116 games but the Cubs played 10 less games.

Jan 10, 2009 10:27 AM
rating: 1
 
willsharp

These aren't complex statistics or anything, but Joe Posnanski recently brought up how many teams have won championships in the other major sports over the last 30 years:

"But just remember that key fact — 20 teams have won World Series the last 30 years. And by comparison: Only 14 teams have won the Super Bowl over the last 30 years. Only 14 different men have won Wimbledon over the least 30 years. Only 13 teams have won the Stanley Cup over the last 30 years. Only NINE teams have won an NBA title over the last 30 years."
http://joeposnanski.com/JoeBlog/2008/12/25/buying-an-umbrella-in-new-york/#more-1334

Over the past four seasons, 20 different MLB teams have made the playoffs. Over the past ten seasons, 24 teams.

Jan 09, 2009 13:40 PM
rating: 0
 
Evan
(47)

The only strong revenue sharing scheme I've seen proposed that makes any sense at all (it wouldn't penalise success, and it would help small market teams) is the Zumsteg Plan, published here at Baseball Prospectus in 2002.

http://www.baseballprospectus.com/article.php?articleid=1599

That's a good plan, because it helps out teams in smaller markets without rewarding teams for wasting money, or simply not spending. It simulates the addition of new teams to overly large markets (like NY) without actually creating those teams.

it's a good plan. If baseball thought there was a competitive or fiscal imbalance problem, this is the sort of thing they would do.

Anyone who proposes a salary cap is only interested in transferring wealth from the players to the owners, because that's all salary caps do.

Jan 09, 2009 11:19 AM
rating: 2
 
Patrick M

Yay Zumsteg Plan!

Thanks for saving me the trouble of having to look it up. I wonder how well it would hold up if updated with more recent economic figures...

Jan 09, 2009 11:57 AM
rating: 1
 
modofacid

Stellar read! Like Jack I often get into this and analogous arguments with friends and they never seem understand the concept. Is this article available to non subcribers?

Jan 09, 2009 11:35 AM
rating: 0
 
BP staff member Dave Pease
BP staff
(2)

Yes--anything without the "BP" whirligig dingus on the front page is free. We should put something in the actual article that lets subscribers know they're reading a Premium article, though.

Jan 09, 2009 15:46 PM
 
klipzlskim

Shawn - Can you expand on your statement that, "MLB's playoff system acts as an equalizer"? Statistically, I mean - not just citing small market teams who've won. I don't see that as an obvious fact. How does the team with Sabathia and Teixeira not have an advantage, all else being equal? (E.g. if Team X's payroll is the same as the Yankees' minus those two players, or less.) Thanks!

Jan 09, 2009 11:37 AM
rating: 1
 
Doofman

I also found this statement somewhat questionable, as it doesn't seem to address the source of the equalization. Even if it were true that the MLB playoff gives teams a better chance than in other sports A) MLB has a smaller percentage of its teams make the playoffs than the other major sports and B) it doesn't distinguish between "equalization" due to the playoff system itself and the underlying nature of baseball vs. football, basketball and hockey, which is more or less immutable.

And if the Chargers or Cardinals win the Super Bowl this year, couldn't that change the math on this question significantly?

Jan 09, 2009 11:45 AM
rating: 2
 
Matthew Avery

The advantage for the big spenders exists. But not nearly as much as in the regular season. A team spending $200 million is far more likely to win a division over the course of 162 games than it is to win a 5- or 7-game series. A .600 team will win about 97 games out of 162 much more often than a .600 team will win 4 out of 7. It's basic probability.

Jan 09, 2009 12:08 PM
rating: 1
 
eighteen

Look at Sabathia's April last year. Some advantage Cleveland had, huh?

Yes, the team with Sabathia and Tex has an advantage - in making the playoffs. Once in, though, that goes out the window. Individual ball games are far too variable and subject to chance to assume "all else equal." Remember Adam Kennedy's 3-dinger playoff game against the Yankees?

Jan 09, 2009 12:15 PM
rating: 0
 
brianpsmith
(832)

Kennedy's three homer game came against the Twins.

Jan 09, 2009 15:07 PM
rating: 0
 
eighteen

[slinks sheepishly away]

Jan 09, 2009 20:11 PM
rating: 2
 
hrcoll99

I believe Shawn's reasoning would be in that the small sample size of a series negates the relative value of a team containing those types of players because their production is fractionated in a an abbreviated time-frame.

By the way, awesome article. I agree with the sentiment that some statistical crunching could have helped your case, but you hit the nail on the head with the quote: "If it ain't broke, don't fix it. And right now, baseball is anything but broke." Everyone is making money, everyone. In the end baseball is a business. Americans love the game and will continue to watch, but from a business perspective, each and every MLB organization is successfully producing a cash generator in the entertainment business. Let them be free.

Jan 09, 2009 12:26 PM
rating: 0
 
Patrick M

klipzlskim,

Keep in mind that qualifier: "in broad strokes".

Yes, the team that enters the post-season has a bigger chance of winning the WS than the team that enters the post-season at 83-79. However, the edge the former has is surprisingly small when compared against the yawning gap in regular season records.

Look at Clay's PS odds from last year (http://www.baseballprospectus.com/statistics/postseasonodds.php):

---------- October 1 ---------------------
Win DS Win CS Win WS Yesterday
LAA 45.9791 25.6393 12.5129
TB 51.5756 25.4336 12.8452
CWS 48.4244 15.3718 5.4360
BOS 54.0209 33.5553 19.4431
CHC 71.8831 53.4287 32.2881
PHI 45.2256 13.8896 5.0166
LAD 28.1169 14.0216 4.9657
MIL 54.7744 18.6601 7.4924

The Cubs only looked that good because of the relative weakness of the NL: they were the only really good team in NL, so their path to get to the WS should have been easier.

Assuming the AL and NL had been a bit more balanced, Shawn's statement would have been pretty accurate.

Jan 09, 2009 11:54 AM
rating: 0
 
Patrick M

Sorry all, should have read:

"Yes, the team that enters the post-season at 108-54 has a bigger chance of winning the WS than the team that enters the post-season at 83-79."

Jan 09, 2009 11:58 AM
rating: 0
 
abcjr2

You have convinced me that spending controls are bad. You have not convinced me that the current revenue structure makes any sense.

The Yanks sit in the most lucrative market and by rule exclude anyone else from moving there; they keep the great majority of the ticket and all of the local TV revenue (plus a healthy subisdy from local government well beyond the means of other municipalities). Year after year they cherry pick the most expensive free agents.

Their response as a team is rational given the economic system the leagues have created, but that system is itself corrupting.

Make every team fork over half of the ticket income to the visiting team (and a prorated share of luxury box income based on per game ticket sales) and half the local TV revenue to the league to be divided equally among all teams. Teams will still have the incentive to be competitive because they will increase home ticket income if they win, and will increase draw on the road as well.

Jan 09, 2009 12:09 PM
rating: 3
 
ScottyB

The Yanks would have less money than they currently do, but would still get have more money under your proposal, as they increase attendance at their road games by a significant margin (#5 in road attedance, and this is significantly skewed by their 10 games in Tampa)

Jan 09, 2009 14:00 PM
rating: 0
 
warmsox

"The Yanks sit in the most lucrative market and by rule exclude anyone else from moving there;"

You know...except the Mets, who command a decent size portion of the same pie.

Jan 09, 2009 15:16 PM
rating: 1
 
Matthew Avery

While I agree that baseball's short-run business model is sound, it's also predicated on people staying interested in the game. If people start to realize that the playoffs is essentially just a lottery, they may lose interest in the sport. In short, if the mechanism of crowning a champion is broken and this leads to less interested fans, the long-run prospects of the sport may not be quite as robust.

(Now, you can argue that people don't really care that the system is broken, citing college football as a perfectly good example, and I might agree with you. But I don't agree that a strong business model is sufficient for a strong sports league.)

Jan 09, 2009 12:11 PM
rating: 0
 
GBSimons

The playoffs are a lottery in every sport, not just baseball. Certainly skill is a significant factor, but in a short series the best team does not always win.

Jan 10, 2009 05:40 AM
rating: 0
 
jerrykenny

I agree and think that this is the best argument against the 3-division/wild-card system we have now. I think moving back to a two-division/no wild card model in each league would best preserve the competitive integrity of the post-season. It would also bring back REAL winner-take all pennant races, one of the best features of baseball that has been almost completely eliminated under post-1993 Selig-ball.

I love baseball but find the current 3+ week slog through the post-season too much of a good thing. It's hard for even a great team to win three post-season series consecutively.

I'm also for more revenue sharing combined with a restriction that recipients are required to use the income from revenue sharing and the luxury tax for player acquisition and development (I suppose there could be a required percentage, say 75%).

Jan 10, 2009 06:59 AM
rating: 0
 
sabocat
Other readers have rated this comment below the viewing threshold. Click here to view anyway.

Since the financial blowup free market ideologues are either cute or dangerous. One thing is for certain, they are not analytical, which I always thought was the minimum standard for BP

Jan 09, 2009 12:46 PM
rating: -23
 
kilbarchan
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Cap or no cap, MLB has major issues when it comes to a level playing field. Sure there has been some anomalous behavior where a team like Rays or Rockies have a good season. I'm in Denver. I can't even imagine the Rockies being in the World Series again given the money the club has to spend. How many years (and luck) will it take? How many years will it take the Yankees?

Whatever happened to teams that have a great tradition like Pittsburgh, Cincinnati, or Kansas City? They have no prayer given the current business setup in MLB. If MLB, was really serious about being America's pastime or top sport, they would follow the NFL's lead (I no it's not perfect) and have a business system where any team has a chance for the brass ring.

Let's get all the fans involved instead of those in the select eight cities or whatever that spend. If a franchise can't meet the minimum in the system (say the Marlins), then they need to sell the team or get additional investment.

Of all the systems in pro sports, MLB's has to be the worst for the fans. That's the bottom line for me.

Jan 09, 2009 13:12 PM
rating: -4
 
ScottyB

I disagree. Tampa and Minnesota were very competitive this year on low payrolls (Oakland had a great 8 year run, Florida won two recent WS, etc.). Seattle and Baltimore were uncompetitive with high payrolls. Payroll certainly helps, but smart management/scouting/player development is more important.
Also, having "big market teams" soak up the expensive players frees the "small market teams" from being shackled with one huge contract ruining their chances. For example, the Mets willingness to pay Delgado $16mill this year has kept that number off Florida's payroll.

Jan 09, 2009 14:06 PM
rating: 4
 
Shaun P.
(676)

I think the Rockies could certainly go to the Series (or even the playoffs) again, if they just spent their money a bit more wisely. OK, I'm being kind - a LOT more wisely. Ditto KC (check out Joe Posnanski's Dunn/Bloomquist post for more) and, until recently, Pittsburgh.

All the money in the world won't help a team win if the team is poorly run - just look at the 2008 Mariners, the first time with a $100M+ payroll to lose 100 games.

Jan 12, 2009 08:02 AM
rating: 0
 
Nickus

I totally agree. As a hockey fan, the cap is a failure. In five years it will be a source of major labor contention. When you have teams signing players like Rick DiPietro to ten year contracts because in the long run it will be cheap, yet neglecting his injury history, it is nothing but a burden. It forces teams to take major gambles on young players like Dustin Penner that then end up hamstringing them in the long run. Also, caps negatively effect a team's ability to keep the players they develop. I think MLB has the best system. If you know you have a good crop of young players, you can buy out their arbitration years at below market prices but still more than they would earn through arbitration, and be able to contend for a few years.

Jan 09, 2009 13:26 PM
rating: 0
 
roughcarrigan

To be fair, is that a failure of the NHL cap or a failure of NHL GM's who are unfamiliar with the wisest way to work under it. They've only had a year or two now, so it's probably not reasonable to think that they'll immediately proceed in the most efficient fashion.

Jan 10, 2009 11:11 AM
rating: 0
 
tbwhite
(361)

I think this article sets up a false choice. The assumption is that the salary cap will be calculated by taking total league revenue divided by number of teams to get an average revenue per team, and then 45% of that number is the salary cap. So, the assumption is that all revenue is being shared equally.

But then suddenly, when it comes talking about why it won't work, the revenue is no longer shared, leading to all of the inequities that were pointed out. I doubt very much this would happen in real life. Either complete revenue sharing would go into effect prior to the cap, thus negating the arguments made in this article. Or, the cap itself would have to vary by team based on their revenues, this too would negate the arguments presented here.

Also, the Posnanski piece is stupid. For the last 30 years, MLB has had free agency and no salary cap. The only financial structure that has changed in MLB is the limited revenue sharing that goes on today. Every other sport has seen dramatic changes in the financial structure that has impacted the competitiveness of the league. The NFL has had a salary cap and free agency for what 15 years ? The NHL even less than that. Turnover in champions is lower over the last 30 years in those sports because for most of that time there was no free agency and no salary cap. Hence, dynasties like the 49ers, Cowboys, Edmonton Oilers and NY Islanders which reduces the number of unique champs over the last 30 years.

Also, the Posnanski article ignores the unique structure of MLB playoffs. MLB has by far the most restrictive playoff structure of any major sport. For much of the last 30 years just 4 teams made the playoffs. Compare that to 12 or 16 for the NHL or NBA. The scarcity of playoff spots makes it much harder for a champion to repeat. Over the last 30 years a typical World Series champ had just one playoff spot open to them next year(the one they could get by winning their division), while the typical Super Bowl champ had 3 or 4 playoff spots available(the one for winning their division plus several wild card spots).

Jan 09, 2009 14:07 PM
rating: 4
 
AirSteve01

The Patriots are not a dynasty from ancient history...

Jan 11, 2009 18:49 PM
rating: 0
 
sandyk

If one were just to judge by teams making it to the championship game or series, one has to conclude that MLB has at least as much parity, if not more so, than the NFL and the NBA.

Certainly in the current decade, there have not been any substantial changes to the salary caps in the NBA or in the NFL. Comparing the championships that occurred in all three sports in the 2000s, we see that the NBA has had 5 champions (Lakers, Spurs, Pistons, Heat, Celtics) and 5 others that made it to the championship round (Pacers, 76ers, Nets, Maverics, Cavaliers); the NFL has had 7 champions (Rams, Ravens, Patriots, Bucs, Colts, Steelers, Giants) and 6 others that made it to the championship game (Titans, Raiders, Panthers, Eagles, Bears, Seahawks); and MLB has had 8 World Series champions (Yankees, Diamondbacks, Angles, Marlins, Red Sox, White Sox, Cardinals, Phllies), with 6 others that made it to the World Series (Mets, Giants, Astros, Tigers, Rockies, Rays).

Thus, in this decade, 27% of MLB teams have been champions, while 47% have been to the World Series. In the NFL, the percentages are 22% and 41%, while in the NBA it is 17% and 33%. Measured in this way, at least, it is hard to make the case that MLB without a salary cap has less "competitive balance" than the other two capped leagues.

Jan 12, 2009 09:22 AM
rating: 0
 
fgreenagel2

Welcome to the team, Shawn. This puts you on the BP map.

Jan 09, 2009 14:10 PM
rating: -2
 
jayman4

The author seems to set the cap and then postulate that certain teams could not meet it. The other piece is the revenue sharing. The other teams in the league would have to finance the spending. That is the whole idea. Rich subsidize the poor to create an even playing field. Or at least more even than we have now.

People might say this is not fair or is socialism. Look, NY gets a huge windfall by being in NY and not allowing other franchises to come in. That oligopoly in NY (Mets, NYY) is protected. Nothing free-market about that.

Also, the rich teams get a lot of value from having poor teams: they need someone to play aside from just big market cities. Under the current system, they get all the benefit of having the poor vistors show up so they have some entertainment and get all the spending power they were granted by their market size.

Also, I disagree that sharing local revenues is some disaster. Yes, you need to have incentives for teams to improve their performance and profitability, but the fact that they will not capture 100% of those gains does not mean that they will not do them. I get taxed by the US government but it does not stop me from working, or trying to increase my salary.

My guess is that BP, who hates anything that tinkers with the current system because it is strongly pro-player and anti-owner (nothing wrong with that in itself), has had this put up to counter the uproar from the Texeira signing.

The current system is broken and will just continue to get worse. At some point, engagement from fans perennial uncompetitive teams, or compettive for brief period periods, with many years of uncompetitive "re-building", are going to lose interest. Many already have. It will not take its toll immediately, but it will continue to undermine the game.

Both players and owners should focus on increasing baseball revenues from a more balanced league and sharing those gains.

Jan 09, 2009 14:17 PM
rating: 1
 
jerrykenny

I agree that the NY area could support at least one more team but then that would just put another team in New York for the rest of the country to complain about.

Yeah, the Yankees and Mets would lose some revenue but you might end up with three successful franchises in New York, in effect, re-creating the early to mid fifties where you had 5 subway World Series in 7 years.


Jan 10, 2009 07:10 AM
rating: -1
 
Michael Bodell
(89)

I'm biased given I am a Jays fan, but the teams that have it by far the toughest in MLB right now are Toronto, Baltimore, and Tampa Bay. You can say poor Pirates don't have much money, but they also don't have to compete for playoff spots against the Yankees and Red Sox. The Yankees and Red Sox average 1.5 playoff spots a year between the two and leave very little room for a team to pass them. While it is true that $ alone doesn't make a good team, and that smart management is needed, the thing that makes the Yankees and Red Sox so tough is they both have a ton of money *AND* smart management.

Jan 09, 2009 14:32 PM
rating: 1
 
warmsox

A large reason (beyond simple payroll) that the Yankees and Red Sox have done so well (Particularly the Red Sox in this example) is in their ability to identify and develop talent.

The Yankees may have abandoned that recently but they tried it for awhile and it was starting to bear fruit, but New York being what it is they were not able to sit around and let them develop.

All this does is force the other 3 teams to be more creative and be run better than they traditionally have been and now all 3 have some of the best talent around in their systems (though Toronto is at the low end compared to BAL & TB) so that they will now have a continuous run of good, young talent replacing the talent that got too expensive. The Rays JUST proved that it is entirely possible to win the division with a comparitively miniscule payroll.

Sure they have it tough, but now they just have to be better and that's the name of the game isn't it?

And just one final point, what about the AL West having to compete with Beane's A's taking the division all those years? Woe unto them. You know what happened? The Angels smartened up and started using their financial ability to their advantage in a smarter fashion than they had been. And now the Mariners and Rangers are doing it too.

Jan 09, 2009 15:24 PM
rating: -2
 
warmsox

One addendum to this: In the end, this trend where *gasp* teams get better management to utilize their resources properly so that they can compete with the best teams is a good thing isn't it?

Or would we rather see every team run by incompetents and wasting money?

Jan 09, 2009 15:26 PM
rating: -2
 
TGisriel

As an Orioles fan, I agree with the comment that points out the disadvantages of being in the AL East with the Yankees and the Red Sox.

I think the way to attack the problem is with greater revenue sharing. The Yankees are not the only team playing when they get revenues from tickets and their cable TV system. They have an opponent every night. That opponent should share in the the high revenues the Yankees (Mets Red Sox, Cubs etc.)get for each game. As noted elsewhere in these comments, the Yankees may benefit because they are the best road draw. From my perspective they have at least earned that.

The Yankees (and Mets) remind me of Governor Richards' famous comment about George H.W. Bush. "He was born on third base and thought he hit a triple."

When you factor in the population base, the Yankees are not as good at attracting attendance or revenue per capita of many of the small market teams. They just have a larger population base to exploit.

Jan 12, 2009 12:47 PM
rating: 1
 
lajolla
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Wait a moment. This article's MLB salary perspective is simply way off-base. Anyone that could assert that MLB is prospering withing some bizarre kind of 'free market system" needs to go back to econ 101?

Jan 09, 2009 17:36 PM
rating: -5
 
EnderCN

A cap wouldn't stop the Yankees from having an advantage. In the NFL as an example a player will take a paycut to go to a successful team or to a team that will give them better endorsements. A team like the Lions is just as disadvantaged as a team like the Pirates in baseball.

Jan 10, 2009 10:31 AM
rating: 0
 
Matt Swartz

Baseball doesn't have a salary cap, but they have the most restrictive labor agreement in that players are the teams' property for six years after they reach the major leagues, which also takes a few years for most players. Most players have their salaries determined in a non-free market system in their primes. Look at the top 10 hitters and top 10 pitchers in VORP this past year:

pujols, hanley, chipper, berkman, wright, utley, arod, reyes, holliday, pedroia;
cliff lee, johan santana, lincecum, halladay, lester, dempster, hamels, haren, danks, erwin santana.

of those, only pujols, chipper, berkman, arod, santana, halladay, and dempster have reached six years of service time. the other 13 of 20 guys have their salaries determined by arbitration or the reserve clause. that's the great equalizer. the yankees have $200MM to spend but they have to choose almost entirely from guys over 30 as free agents.

Jan 10, 2009 13:38 PM
rating: 0
 
lajolla

Amusing that my previous comment has been rated below the viewing threshold by other BP readers:) But this kind of 'peer review' can only really work when all reasonable questions are allowed to be seen and heard. Fortunately someone at BP has at least provided subscribers with a way to still view 'censored' comments. This is only my third comment since I became a subscriber, and I guess a 'censored' comment avg of .333 is not too shabby? In any case, it would be very helpful if BP could provide subscribers a way to edit their comments after they have been posted, in order to try and address other readers' negative comment ratings? It would also be helpful if BP would post the identity of those readers who take the solemn responsibility of rating (and censoring) other subscriber's posts:)
As for the article in question, this particular reader has a hard time understanding how the term 'free-market system' can be used to describe the baseball oligopoly that has forever been exempt from any Federal government anti-trust regulation? And the article surely does not help to clarify the incredibly complex economic disparities between large-market and small-market clubs by using concluding generalities such as:
"...baseball continues to prosper operating within a much more free-market system. Teams in big markets and small markets alike are making money, and everyone has a chance to win it all... If it ain't broke, don't fix it. And right now, baseball is anything but broke."
Baseball economics are sui generis and can only be explained on a club-by-club basis. But since each club's books are simply not available to the general public, (or any other governmental regulatory agencies) there is little that we really do know about each club's economic situation. And just to draw this comment to a merciful close, at times the strange 'economics' of baseball really does resemble a bizarre upper-class Ponzi scheme? For example, the Yankees have already received NYCity financing and tax deferrals to the tune of 950 mill in order to construct the House that Ruth did not build. And just days ago the Yankee management reapproached NYCity for 370 mill in new taxpayer-backed financing for additional stadium amenities. In the meantime, the Tribune Co is trying to find a billion-dollar buyer for their large-market Cubs club, while the small-market Padres are in the process of slashing (to the bone) overall roster payroll to 40mill in order to make the club's balance sheet more amenable to incoming new owner Jeff Moorad.
in short, it is broke, and it does need to be fixed.

Jan 10, 2009 13:52 PM
rating: 2
 
GagneCY03

Proponents of salary caps (and floors) are more concerned with competitive balance than maximizing profits for owners or players. And using 1 year to show that the "competitive edge" of spending more is "neutralized" is an extreme case of sample bias. And in that year, the Cards had the 11th highest payroll in the majors (http://content.usatoday.com/sports/baseball/salaries/totalpayroll.aspx?year=2006). While the playoffs are incredibly unpredictable, there's still overwhelming evidence of high payroll correlating with reaching the postseason.

Jan 10, 2009 19:55 PM
rating: 0
 
Johnson Magic

Expanded playoffs aren't so much an equalizer as they are a randomizer. An 83-win team can come out of either of the West divisions and run off three "best of" series in arow, true. But it took five near perfect drafts in a row for the Rays to become the 'equals' of the Yanx and Sawx. Does anyone really think the O's and Jays can do merely a good job of drafting and player development and have a postseason possibility that is the "equal" of the Angels?

Why do we assume only national TV revenues should be shared? There's nothing sacrosanct about local TV.

I live in CT an none of my friends or neighbors would tune in to MSG to watch a Yanx intrasquad scrimmage. They tune in to watch the Yanx play the Rays, the Royals, the Indians and the Rangers.

It takes two to tango. The Yanx don't have a viable MSG network without legitimate teams coming into Yankee Stadium to play. The can't command $2,500 / seat without there being some other non-Yankees team on the field.

It strikes me as perfectly legitimate within the construct of a league for nearly all bame-specific revenue to be split evenly (this would be broadcast revenue, primarily).

I make the exception for attendence-specific revenue (tickets, parking, hot dogs, etc.). The home team should keep the bulk of this, as an incentive to maximize fannies in the seats.

With shared revenue comes shared responsibility...the Pirates et al would now have the means to pay a representative MLB payroll, and would have to do so.

Jan 12, 2009 06:39 AM
rating: 1
 
Johnson Magic

The should read "game specific revenue".

Jan 12, 2009 06:41 AM
rating: 0
 
jayman4

If the developing good talent before they hit FA is the antidote to the venom of payroll imbalance, ought there not be some advantage bestowed to smaller payroll teams? Yes, there is the draft order, but teams, draftees and agents have noticed that the draft is really important, so the signing bonuses have become an issue for small market teams. The slot system has become a joke, where it is almost a FA like system, so big market teams can take bigger risks on the drafting as well.

And, people love to cite how Yankees develop talent, they deserve credit. But, when they have that good talent, they can easily afford to sign them when they hit FA. The Padres developed Peavy, signed him to a reasonable contract, but now can barely afford him but probably cannot so will have to trade a Cy Young pitcher for economic reasons. How often does NY or any major market team face that choice? Never.

Jan 12, 2009 11:39 AM
rating: 0
 
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