Pete Abraham, the beat writer and blogger at The Amsterdam Journal News, was good enough to grant me a spot in his winter pinch-hitting lineup. Here is the post. Many thanks to Pete for the opportunity.
Below is a slightly expanded version of that post, with some financial details and statistical information added here that would have bumped the post at LoHud over the 500 word limit. The original was 497 words and, as the regular readers here know, brevity is not my strong suit. Tough decisions ensued, so I figured I’d omit some figures and include them here. Otherwise, it’s essentially the same.
This off-season, the Yankees have come under fire for their high-priced, free agent acquisitions. After they signed Mark Teixeira, Peter Gammons compared them to Wal-Mart, braying “Wal-Mart eats up small-family businesses. The Yankees eat up the Brewers and the Indians.” After they acquired Sabathia, Burnett, and Teixeira, some, including Astros owner Drayton McLane, clamored for baseball to adopt a salary cap. While I object to the Yankees’ receiving city-sponsored tax-exempt bonds and their new stadium’s cost overruns, I disagree with both Gammons’s misguided portrayal of the Yankees’ financial relationship to other teams, and with knee-jerk cries for a salary cap.
First, it’s ironic that Gammons compared the big-spending Yankees to a corporation that recently settled for over $600 million various class-action lawsuits for stealing overtime from employees and forcing them to work through lunch and breaks periods–for underpaying employees through threats, coercion, and stealth. Do the Yankees financially “eat” teams such as Milwaukee and Cleveland? Revenue-sharing figures suggest otherwise. In 2005, Milwaukee received $24 million in revenue-sharing money and Cleveland $6 million, with the Yankees contributing $76 million of roughly $312 million that thirteen teams paid the other seventeen.
The purpose of revenue sharing is to improve the competitiveness of small-market teams through earnings redistribution from larger-market teams. Yet teams often accept such largess to offset payroll without re-investing in new talent or keeping their own. The $24 million paid to Milwaukee represented just over sixty percent of its $39,934,833 payroll that year. Florida received $31 million in revenue sharing for 2005, yet refused to re-invest that money. In fact, that $31 million represented nearly half Florida’s combined payroll for the 2006-2008 seasons, $67,317,000, aided by its 2005 trade of Josh Beckett and Mike Lowell to Boston.
What many small-market teams have done, and what the current revenue-sharing system rewards, is to profit as the team struggles and fans fish for reasons to attend games. The Marlins and Royals are prime culprits, profiting from low payrolls and with low attendance figures (each at or near the bottom in attendance every year from 2004-2008). Florida has occasionally competed for the playoffs since winning the 2003 World Series, while the Royals are perennially a profitable laughingstock far more valuable now than eight years ago. Yet they have nonetheless been in the black, with Florida earning $43.3 million in 2006–tops in baseball– with a payroll just under $14 million, and the Royals earning $8.4 million in 2006 and $7.4 in 2007. The Pirates were also profitable, pulling in $23.9 million in 2006, good for 3rd most profitable in baseball, and $17.6 million in 2007, 18th most profitable. Yet they won a scant 67 and 68 games in 2006 and 2007 respectively, were 15th in attendance in the NL each year, and cut payroll from $46.7 million in 2006 to $38.5 million in 2007 (Plunkett’s Sports Industry Almanac 2008 and 2009; USATODAY.com Salary Database). Poor win-loss records do not necessarily equal destitution.
Even as the small-market, low payroll Rays reached the World Series last year, others caterwaul for a salary cap. Yet will this achieve either on-field parity or greater profits for small-market teams? Not necessarily. Despite having half the teams in the playoffs that the other three major North American sports leagues do, baseball has already had twenty-three different teams make the playoffs since 2001, with seven different champions. Moreover, the NFL, NBA, and NHL not only have salary caps but salary minimums, pegging mandatory payroll spending to their respective salary caps (86.4% for football, 75% for basketball, roughly 72% for hockey). Should baseball adopt a salary cap after the 2011 season, it may come with such spending minimums. Based on its 2008 payroll of $21,836,500 Florida would have to increase its spending by roughly $68 million just to reach the league average.
Would baseball’s small-market teams accept this structure when mediocrity or worse has been profitable? That would require payroll investments and accountability to fans that many franchises abhor. Critics should neither pity the Yankees their riches, nor criticize them and their recent re-investments without examining profitably unsuccessful teams too often indifferent to making such improvements.