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THE CALL FOR INCREASED REVENUE SHARING
According to MLB, revenue sharing resulted in $450 million being redistributed this season amongst “small market” clubs. (Some would argue that “small payroll” is more appropriate) Commissioner Selig has long argued that revenue sharing is essential to MLB’s goal of engendering “competitive balance”. (Some prefer the terms “parity” or “mediocrity”). Commissioner Selig publicly argues that increased revenue sharing and the corresponding increase in competitive balance in MLB has been key to growing attendance and industry revenues to record levels in recent years. When the Tampa Bay Rays competed in the 2008 World Series (along with the Milwaukee Brewers making the playoffs the same season) MLB could proudly proclaim that competitive balance had never been greater and that fans in all thirty MLB markets could legitimately believe that the “fall classic” could include their hometown. MLB was proud that seventeen of their thirty franchises had competed in the World Series in the past twelve years while eight different franchises have been champions in the last nine seasons.
LWIB saw media reports that “large market” clubs are reasserting their on field dominance this season. Trades of some high profile veterans from “small market” clubs to “large market” playoff contenders this summer has also contributed to renewed concerns about “competitive imbalance”. Also LWIB, one small market owner and one small market executive mused publicly if increased revenue sharing needs to be achieved in the next round of CBA negotiations (the current CBA expires in December 2011) if competitive balance is to be maintained (re-established?).
Bob Nightengale reported last week for USA Today:
Baseball organizations have been reminded that the game's most powerful component often is a fat wallet.
If the regular season ended today, seven of the top nine highest-paid teams would be in the playoffs,….The Colorado Rockies or San Francisco Giants, who rank 14th and 15th and battling for the National League wild card, would be the only playoff team not in the top 10.……
The Texas Rangers and Florida Marlins are the only teams in the bottom 10 of payroll with winning records.
AND
That disparity was deepened by trade activity, with former All-Stars such as Matt Holliday (to the St. Louis Cardinals), Victor Martinez (Boston Red Sox) and Scott Kazmir (Los Angeles Angels) going from small-market clubs to teams with deep pockets. The Chicago Cubs and New York Mets are the only teams in the top nine of payroll not in contention.
Michael Hunt wrote last week for the Milwaukee Journal Sentinel:
When the champagne sting cleared from Doug Melvin's eyes after the 162nd game of last season, it was mentioned to the Brewers' general manager that teams from Milwaukee and Tampa Bay were in the playoffs and the two from New York were not.
For a moment we discussed whether this was the start of a more competitively balanced era for baseball, but soon the conversation drifted toward immediate concerns. Parity talk could wait.
So here it is, almost a year later, and it seems to be business as usual again in baseball. The New York Yankees, Boston Red Sox, Philadelphia Phillies and both Los Angeles teams represent the bulk of the ruling elite from their stations within the game's largest markets.
AND
As for the Brewers and their first playoff appearance in 26 years, as well as the Rays' refreshing run to the World Series, it is tempting to look at 2008 as little more than an anomalous season for baseball.
Commissioner Selig was quoted in both pieces and the tenor of his remarks was cautious. Mr. Selig speculated in Mr. Nightengale’s piece that the 09 season has been “aberrational” in terms of “competitive balance”. In Mr. Hunt’s piece the commissioner expressed his antipathy towards a salary cap but did say, "Is the system perfect? No. It needs some work,"
No doubt commissioner Selig treads carefully on this subject because he is acutely aware that revenue sharing is a contentious issue both amongst owners and with the MLBPA. Commissioner Selig must also be aware that at least some “small market” franchises will be pressuring MLB to bargain for increased revenue sharing in the next CBA. Milwaukee Brewers owner Mark Attanasio was quoted in Mr. Nightengale’s article.
“We've had a competitive balance the last seven or eight years, so the question is whether this is an aberration or start of a trend.
"If it's a trend, that's disturbing, and it's something we'll definitely need to consider in the next (collective bargaining agreement)."
This is not the first time that Mr. Attanasio has spoken publicly about this subject, he made similar remarks this off season in reaction to the New York Yankees spending in the free agent market. Mr. Attanasio was not the lone “small market” voice LWIB to speculate publicly that “competitive balance” could be an issue in the upcoming CBA negotiations. Pittsburgh Pirates President Frank Coonelly was asked in an online chat, “Any plans to lobby MLB to change its revenue-sharing system so that small-market teams like the Pirates can better compete?” Mr. Coonelly responded:
Major League Baseball already has, by a large measure, the greatest amount of local revenue sharing of any of the professional sports. Because of that revenue-sharing program there is baseball in markets like Pittsburgh, Kansas City, Cincinnati, Baltimore, St. Petersburg, Minneapolis and many more. Not only can we compete under the current system, the Rays, the Rockies and the Twins have shown that we can win under the current system……Having said all of that, the Pirates continue to work through the Commissioner's Office to aggressively pursue changes in the Collective Bargaining Agreement that will continue to reduce disparity and increase parity.
How will the MLBPA react if (obviously there is also opposition to increased revenue sharing amongst ownership) MLB negotiates for increased revenue sharing? Many argue that the true aim of revenue sharing and payroll taxes is not to achieve competitive balance but to suppress player compensation. As veteran players have met with diminished demand for their services in the free agent market in recent years, can the PA consent to increased revenue sharing and a resulting further “drag” on salaries? And finally, how important is “competitive balance” to a league’s bottom line?
Andrew Zimbalist wrote in his 2003 book, May the Best Team Win, Baseball Economics and Public Policy:
While owners have claimed that they want more revenue sharing and a luxury tax on high payrolls in order to level the playing field, it is apparent that they are also seeking to control the growth in player salaries. Higher revenue sharing taxes lower the net marginal revenue product of players, and, other things equal, lower their salaries.
Many sports economists argue that revenue sharing has had little to no impact in increasing “competitive balance” in MLB. Some would also argue that eight different franchises winning the past nine World Series is not evidence of greater “competitive balance” but simply a result of the increased number of clubs competing in the postseason. Sports Economist David Berri wrote in 2006:
From 1996 to 2000 the New York Yankees won the World Series four times. “Baseball has a competitive balance problem” was the cry heard throughout the land. The only solution was some mechanism to control the growth of salaries and re-distribute baseball’s wealth from the rich – i.e. the Yankees – to the poor.
The 2002 labor agreement – which was just extended to 2011 – was designed to resolve these problems. A luxury tax on high payrolls was enacted. This tax – primarily paid by the Yankees – was designed to restrict spending by large market teams on players. The agreement also focused on revenue sharing, which gave small market teams more money.
AND
Commissioner Bud Selig tells us that the 2002 agreement has ushered in a “golden age.” If by “golden age” he means an era of pay equality and competitive balance, then the data doesn’t seem to agree. Team payrolls are even less equal today and the level of competitive balance appears to be about the same.
The reality is that competitive balance improved in baseball during the 2oth century as the population of available athletes expanded. And the improvements occurred well before the 2002 agreement. …..In the last thirty years the standard deviation of winning percentage in both leagues has changed very little. Yes, payrolls have increased dramatically, but competitive balance remains basically the same.
So is this a “golden age” of baseball? If by “golden age” we mean the Yankees are not winning the World Series every year, then I guess that is true. But one should not be confused about how that trick was pulled off. The true trick happened when baseball expanded participation in the playoffs. Since 1995 the team with the best record in baseball has only won the World Series once. And that is because the best team now has to navigate three playoff rounds to win the title.
Putting aside the debates over whether or not revenue sharing and luxury taxes has resulted in greater “competitive balance” and whether or not small market clubs are investing their revenue sharing dollars in baseball players (as opposed to adding it to their bottom line), does greater “parity” lead to increased fan interest in a league? Many believe that the New York Yankees dominance (if dominance is measured in World Series championships) of MLB in the late 1990’s was a key factor in the resurgent interest in the sport. Proponents of this argument also point to the enormous popularity of the EPL, a league with great competitive disparities. (An apples to apples comparison is not quite accurate due to the “promotion / relegation” structure of the EPL).
From a separate post from aforementioned sports economist David Berri on the importance of “competitive balance” to the popularity of sports leagues. (see here for additional discussion)
….the link between competitive balance and attendance has been extensively studied…..
And what does this literature indicate? Competitive balance does impact demand, but it doesn’t appear to be very “important.” At least, dramatic changes in balance do not seem to have a very dramatic impact on league attendance. Given this result, I am not sure the “optimal level of balance” is something leagues should actively seek…
This issue is unlikely to derail the upcoming round of CBA negotiations (if the owners decide to make it an issue). Industry observers foresee a continuation of the present good relations between MLB and the PA. Nonetheless, commissioner Selig is faced once again with the formidable challenges of balancing the demands of large and small market clubs while bargaining an agreement which allows the players to earn an equitable amount of revenue.
According to MLB, revenue sharing resulted in $450 million being redistributed this season amongst “small market” clubs. (Some would argue that “small payroll” is more appropriate) Commissioner Selig has long argued that revenue sharing is essential to MLB’s goal of engendering “competitive balance”. (Some prefer the terms “parity” or “mediocrity”). Commissioner Selig publicly argues that increased revenue sharing and the corresponding increase in competitive balance in MLB has been key to growing attendance and industry revenues to record levels in recent years. When the Tampa Bay Rays competed in the 2008 World Series (along with the Milwaukee Brewers making the playoffs the same season) MLB could proudly proclaim that competitive balance had never been greater and that fans in all thirty MLB markets could legitimately believe that the “fall classic” could include their hometown. MLB was proud that seventeen of their thirty franchises had competed in the World Series in the past twelve years while eight different franchises have been champions in the last nine seasons.
LWIB saw media reports that “large market” clubs are reasserting their on field dominance this season. Trades of some high profile veterans from “small market” clubs to “large market” playoff contenders this summer has also contributed to renewed concerns about “competitive imbalance”. Also LWIB, one small market owner and one small market executive mused publicly if increased revenue sharing needs to be achieved in the next round of CBA negotiations (the current CBA expires in December 2011) if competitive balance is to be maintained (re-established?).
Bob Nightengale reported last week for USA Today:
Baseball organizations have been reminded that the game's most powerful component often is a fat wallet.
If the regular season ended today, seven of the top nine highest-paid teams would be in the playoffs,….The Colorado Rockies or San Francisco Giants, who rank 14th and 15th and battling for the National League wild card, would be the only playoff team not in the top 10.……
The Texas Rangers and Florida Marlins are the only teams in the bottom 10 of payroll with winning records.
AND
That disparity was deepened by trade activity, with former All-Stars such as Matt Holliday (to the St. Louis Cardinals), Victor Martinez (Boston Red Sox) and Scott Kazmir (Los Angeles Angels) going from small-market clubs to teams with deep pockets. The Chicago Cubs and New York Mets are the only teams in the top nine of payroll not in contention.
Michael Hunt wrote last week for the Milwaukee Journal Sentinel:
When the champagne sting cleared from Doug Melvin's eyes after the 162nd game of last season, it was mentioned to the Brewers' general manager that teams from Milwaukee and Tampa Bay were in the playoffs and the two from New York were not.
For a moment we discussed whether this was the start of a more competitively balanced era for baseball, but soon the conversation drifted toward immediate concerns. Parity talk could wait.
So here it is, almost a year later, and it seems to be business as usual again in baseball. The New York Yankees, Boston Red Sox, Philadelphia Phillies and both Los Angeles teams represent the bulk of the ruling elite from their stations within the game's largest markets.
AND
As for the Brewers and their first playoff appearance in 26 years, as well as the Rays' refreshing run to the World Series, it is tempting to look at 2008 as little more than an anomalous season for baseball.
Commissioner Selig was quoted in both pieces and the tenor of his remarks was cautious. Mr. Selig speculated in Mr. Nightengale’s piece that the 09 season has been “aberrational” in terms of “competitive balance”. In Mr. Hunt’s piece the commissioner expressed his antipathy towards a salary cap but did say, "Is the system perfect? No. It needs some work,"
No doubt commissioner Selig treads carefully on this subject because he is acutely aware that revenue sharing is a contentious issue both amongst owners and with the MLBPA. Commissioner Selig must also be aware that at least some “small market” franchises will be pressuring MLB to bargain for increased revenue sharing in the next CBA. Milwaukee Brewers owner Mark Attanasio was quoted in Mr. Nightengale’s article.
“We've had a competitive balance the last seven or eight years, so the question is whether this is an aberration or start of a trend.
"If it's a trend, that's disturbing, and it's something we'll definitely need to consider in the next (collective bargaining agreement)."
This is not the first time that Mr. Attanasio has spoken publicly about this subject, he made similar remarks this off season in reaction to the New York Yankees spending in the free agent market. Mr. Attanasio was not the lone “small market” voice LWIB to speculate publicly that “competitive balance” could be an issue in the upcoming CBA negotiations. Pittsburgh Pirates President Frank Coonelly was asked in an online chat, “Any plans to lobby MLB to change its revenue-sharing system so that small-market teams like the Pirates can better compete?” Mr. Coonelly responded:
Major League Baseball already has, by a large measure, the greatest amount of local revenue sharing of any of the professional sports. Because of that revenue-sharing program there is baseball in markets like Pittsburgh, Kansas City, Cincinnati, Baltimore, St. Petersburg, Minneapolis and many more. Not only can we compete under the current system, the Rays, the Rockies and the Twins have shown that we can win under the current system……Having said all of that, the Pirates continue to work through the Commissioner's Office to aggressively pursue changes in the Collective Bargaining Agreement that will continue to reduce disparity and increase parity.
How will the MLBPA react if (obviously there is also opposition to increased revenue sharing amongst ownership) MLB negotiates for increased revenue sharing? Many argue that the true aim of revenue sharing and payroll taxes is not to achieve competitive balance but to suppress player compensation. As veteran players have met with diminished demand for their services in the free agent market in recent years, can the PA consent to increased revenue sharing and a resulting further “drag” on salaries? And finally, how important is “competitive balance” to a league’s bottom line?
Andrew Zimbalist wrote in his 2003 book, May the Best Team Win, Baseball Economics and Public Policy:
While owners have claimed that they want more revenue sharing and a luxury tax on high payrolls in order to level the playing field, it is apparent that they are also seeking to control the growth in player salaries. Higher revenue sharing taxes lower the net marginal revenue product of players, and, other things equal, lower their salaries.
Many sports economists argue that revenue sharing has had little to no impact in increasing “competitive balance” in MLB. Some would also argue that eight different franchises winning the past nine World Series is not evidence of greater “competitive balance” but simply a result of the increased number of clubs competing in the postseason. Sports Economist David Berri wrote in 2006:
From 1996 to 2000 the New York Yankees won the World Series four times. “Baseball has a competitive balance problem” was the cry heard throughout the land. The only solution was some mechanism to control the growth of salaries and re-distribute baseball’s wealth from the rich – i.e. the Yankees – to the poor.
The 2002 labor agreement – which was just extended to 2011 – was designed to resolve these problems. A luxury tax on high payrolls was enacted. This tax – primarily paid by the Yankees – was designed to restrict spending by large market teams on players. The agreement also focused on revenue sharing, which gave small market teams more money.
AND
Commissioner Bud Selig tells us that the 2002 agreement has ushered in a “golden age.” If by “golden age” he means an era of pay equality and competitive balance, then the data doesn’t seem to agree. Team payrolls are even less equal today and the level of competitive balance appears to be about the same.
The reality is that competitive balance improved in baseball during the 2oth century as the population of available athletes expanded. And the improvements occurred well before the 2002 agreement. …..In the last thirty years the standard deviation of winning percentage in both leagues has changed very little. Yes, payrolls have increased dramatically, but competitive balance remains basically the same.
So is this a “golden age” of baseball? If by “golden age” we mean the Yankees are not winning the World Series every year, then I guess that is true. But one should not be confused about how that trick was pulled off. The true trick happened when baseball expanded participation in the playoffs. Since 1995 the team with the best record in baseball has only won the World Series once. And that is because the best team now has to navigate three playoff rounds to win the title.
Putting aside the debates over whether or not revenue sharing and luxury taxes has resulted in greater “competitive balance” and whether or not small market clubs are investing their revenue sharing dollars in baseball players (as opposed to adding it to their bottom line), does greater “parity” lead to increased fan interest in a league? Many believe that the New York Yankees dominance (if dominance is measured in World Series championships) of MLB in the late 1990’s was a key factor in the resurgent interest in the sport. Proponents of this argument also point to the enormous popularity of the EPL, a league with great competitive disparities. (An apples to apples comparison is not quite accurate due to the “promotion / relegation” structure of the EPL).
From a separate post from aforementioned sports economist David Berri on the importance of “competitive balance” to the popularity of sports leagues. (see here for additional discussion)
….the link between competitive balance and attendance has been extensively studied…..
And what does this literature indicate? Competitive balance does impact demand, but it doesn’t appear to be very “important.” At least, dramatic changes in balance do not seem to have a very dramatic impact on league attendance. Given this result, I am not sure the “optimal level of balance” is something leagues should actively seek…
This issue is unlikely to derail the upcoming round of CBA negotiations (if the owners decide to make it an issue). Industry observers foresee a continuation of the present good relations between MLB and the PA. Nonetheless, commissioner Selig is faced once again with the formidable challenges of balancing the demands of large and small market clubs while bargaining an agreement which allows the players to earn an equitable amount of revenue.
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