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Friday, April 28, 2006

Angels, Dodgers Expected To Join Industry Calls To End Revenue Sharing

The Wall Street Journal (subscription) reports that large-market major league teams — including the Angels and Dodgers — are expected to band together in the coming labor talks in order to eliminate revenue sharing.
In recent weeks, the principal owners of the two biggest sharers -- the New York Yankees, who contributed $76 million in 2005, and the Boston Red Sox, who paid $52 million -- have denounced what they're forced to pay. "I'd like to see everybody competing, but we're not a socialist state," Yankees principal owner George Steinbrenner told USA Today during spring training. Through a spokesman, Mr. Steinbrenner declined to comment for this article.

To help prepare for the coming debate, the Red Sox are gathering data about revenue sharing in baseball compared with other sports, baseball executives say. Other big-market clubs -- including the Chicago Cubs, the New York Mets, the Los Angeles Dodgers and the Los Angeles Angels -- are expected to join Boston and New York in blunting calls for increasing the amount of revenue sharing, which is included in baseball's labor agreement. The issue is so contentious that MLB Commissioner Bud Selig recently told teams not to discuss it in the media.

Despite the disagreements, the clubs aren't nearly as economically and philosophically bifurcated as in the 1990s. "Clubs accept the structure that we're in," MLB President Bob DuPuy says. "It's a matter of refining the structure rather than an all-out assault on the structure."

The big clubs say some teams simply shouldn't get money. The most frequently cited example: the Philadelphia Phillies, who play in a new stadium in a major media market but received $4 million last year. High-revenue clubs also argue that teams such as the Tampa Bay Devil Rays, Florida Marlins and Kansas City Royals -- who cashed checks for more than $30 million apiece last season -- haven't adequately demonstrated they are using the revenue-sharing money to improve themselves. "How much more do you need?" one high-revenue club executive says.

The situation is exacerbated by what some big market clubs call "stealth sharing", or the tacit acknowledgement by ESPN and Fox national broadcast scheduling that more people are interested in watching a Yankees or Cubs game than a Devil Rays game.

Despite being outnumbered, big market teams will nonetheless fight moves to increase revenue sharing, and push for additional controls on the existing revenue sharing structure, such as requiring that such funds be spent on baseball operations. An accompanying table to the article indicates the Dodgers paid out $20 million in revenue sharing last year, and the Angels $11 million.

There are a number of good points in the article, the best IMO being that revenue sharing payments have to go into operations, not the owner's pocket. Not mentioned but front and center in my view is former Athetics owner Steve Schott, who insisted the A's were a small market team (depite playing in the 4th largest media market in the country) and ran them like one. He pocketed every dime paid from revenue sharing, keeping Billy Beane in an economic straitjacket.

And maybe some day the baseball lords will have to admit that some cities are just too small to support MLB on an ongoing basis. Kansas City and Milwaukee are by far the smallest metro areas in the majors. Why not move one team to northern New Jersey and the other to the Inland Empire, thus creating 3-team markets in the 2 largest ones?
I think Steinbrenner is throwing up a strawman with the socialist argument. Sports should be perceived as fair competition (at least in so far as everyone has a roughly equal shot at competing before anything is done). If it is not, then people will stop watching. That's one reason why gambling and steroids are such a big deal. It works in salaries, too. Fans are fine with salary discrepencies, but they need to feel as if other teams can compete (the Yankees haven't won the championship and have lost to teams in the playoffs with significantly lower payrolls over the last few years). The MLB is the actual company of baseball; each team is a franchise of MLB (much like the Carl's Jr. you eat lunch at it a franchise of Carl Karcher Enterprises). MLB actually is a monopoly (they are even legally declared one, with their anti-trust exemption). It is MLB's job to at least make it appear as it cares about each franchise equally, but it still needs to reward successful ones. Revenue-sharing is important for many teams, but at the same time, it shouldn't necessarily increase and I agree with the point that teams that get money from it should be required to attempt to improve their product on the field.

I don't see a problem with keeping teams like KC and Milwaukee where they are. Both have been successful in the past (they were two of the better teams in the 80s). Once both teams become successful, the fans will show up again. Also, Milwaukee is an extremely beloved team here in Wisconsin, I think it would be unfortunate to deprive them of a team, especially after they just built a pretty stadium. Especially when it looks like they will soon be successful again. I can understand moving teams like Florida, Tampa Bay, or Oakland where it appears that fans just are uninterested, even when successful (ok, TB hasn't been successful, but their support appears to be pretty low). Also, I think placing a team in Oklahoma City would work out well: they have proven that they will go watch major sports with the New Orleans Hornets actually having better attendance there than in NO. Its not the size of the market, its how you use it.
This is the Journal. Fifty dollar math geek words meaning "split in two" are now cool.
I read the article in the old-fashioned newsprint and ink version.

John Henry states that the Red Sox have to take in $2 for every dollar they spend just to break even.

Where his evidence for this statement can be found is unclear.
Uncle Al -- so, what's the region-appropriate name of the new MLB franchise for the Inland Empire? The Smogtown Chokers?
Professional baseball has always had economically weak teams. Remember in the 1950s-1960s when the joke was the K.C. Athletics were considered a surrogate farm club for the Yankees because they'd keep trading their top talent to New York? It's no different from now.

Major League Baseball added franchises primarily to get the revenue boost from awarding new franchises. They'll go to 32 when they think they need another cash infusion, you'll see.
Baseball has a free market. That's a good one. What next? Jeff Weaver is a groundball pitcher?

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