Tampa Bay Plans A Step Backwards (More On Why Revenue Sharing Is Dead)

Sternberg has no choice, really.  All of the numbers are moving against him.  His players making the league minimum are becoming eligible for arbitration; his players formerly eligible only for arbitration are now also eligible to file for free agency.  Like any good young team, his team is getting older, and more expensive.  But the Rays’ revenues are not keeping up with their expenses.  Attendance at Rays’ home games is static at best.  The Rays’ TV ratings are up, but there’s no evidence that these ratings will improve the Rays’ bottom line. In short, Sternberg cannot afford a $72 million payroll, let alone the greater payroll that would be required to keep the current team together.

But it’s a shame, a damn shame.  It shouldn’t be this way.

How will the Rays trim $22 million from their payroll?  Consider that a number of Rays’ players are scheduled for pay increases in 2011.  Ben Zobrist is due a $4 million increase.  Evan Longoria gets a $1 million raise.  Kelly Shoppach and David Price get modest salary increases.  If the Rays are going to hold on to these players, then they’ll need to trim something more like $28 million from their payroll.  How will they do it?

Understand, I am NOT an expert on the Rays. But we all assume that Carl Crawford will not be playing for Tampa in 2011.  That will save the Rays about $10 million (based on Crawford’s 2010 salary), less the cost of his replacement.  Also, Rob Neyer has reported that Matt Garza and James Shields may be traded to another team before 2011, as the Rays could replace these two starting pitchers with Wade Davis and Jeremy Hellickson.  That’s $5.8 million more in potential savings, less the salaries of the players the Rays receive in return.  Plus, Pat Burrell is gone; that’s another $9 million saved.  These four cuts could save about $25 million.  So at a payroll of $53 million, the Rays could still field a starting lineup of Upton, Bartlett, Aybar, Zobrist, Jaso, Pena, Longoria …

Not so fast.  Jason Bartlett is eligible for arbitration.  So is B.J. Upton, Dioner Navarro, J.P. Howell, Lance Cormier and Andy Sonnanstine.  Some of these players can be retained in 2011 and some may have to go.  The Rays also have Carlos Pena, Rafael Soriano and Chad Qualls eligible for free agency at the end of this season. I’m not sure about Pena, but Soriano should have considerable value on the open market.  Both may be gone after this season. Qualls was a trade-deadline acquisition, and he’s earning about $4.2 million in 2010, so let’s assume that he’s not coming back either.

Mark from TheRayArea.com (our newest affiliate on the SweetSpot network) figures that the Rays will have to jettison Crawford, Pena, Soriano, Willy Aybar, and perhaps Bartlett and Navarro.  RaysIndex.com says that Joaquin Benoit may have to go, too.  If you add Garza and Shields to this list, then as many as 9 key players from the Rays’ 2010 roster may not be playing for the Rays in 2011.

Nine key players gone, out of a 25-man roster, including 4 full-time starting position players, two starting  pitchers and the closer.  Translate this into Yankee players: Gardner, Teixeira, Rivera, Posada, Jeter, Hughes, Pettitte, and maybe a couple of other guys. It’s hard to imagine how a team could lose that much of its core, and remain competitive.  Mark at TheRayArea.com put it this way, calmly and succinctly: “this is the last summer for these Rays.”

But it should not be this way. Not if revenue sharing worked the way it should work.

Consider: the purpose of revenue sharing is to permit small-revenue teams like the Rays to compete with big-revenue teams like the Yankees.  Baseball has invested billions of dollars in revenue sharing, hundreds of millions of dollars every year for the last 10 years, enough to fund the annual payrolls of the Yankees and Red Sox with a little bit left over.  What do we have to show for this investment?  In the ten years since revenue sharing was established, the Royals continued to lose, the Pirates continued to lose, the Marlins … the Marlins enjoyed a rapid rise to the top, were quickly dismantled and are now also-rans (.500 baseball). Up until 2008, the Rays continued to lose, too.  But in 2008 the Rays emerged as a young, exciting team capable of standing toe-to-toe with the two richest and most successful teams in baseball.  Now, it appears that this singular success story is going to end.

For heaven’s sake, why?  For lack of $10 million or maybe $20 million?   Remember, there’s $450 million distributed annually by baseball’s revenue sharing system.  There’s plenty of money potentially available to save the 2010 version of the Rays.  If the system could divert a bit of money from the Marlins, and a bit from the Pirates, the Rays could stay together another year, or two, or maybe longer.  Maybe this would give the Rays enough time to build attendance, to find the financing for a new stadium … enough time for the Rays’ to implement a plan to increase local revenues to catch up with their payroll … enough time for the Rays to sustain their recent success, and for baseball to see a real return on the money invested in revenue sharing.

Instead, the revenue sharing system will allow the Rays to sink back into mediocrity.  This is by design: revenue sharing provides the greatest rewards to teams that are losers and continue to be losers.  Ownership of teams like the Pirates and Marlins, teams that finish near the bottom of the standings year after year, make healthy profits as a result.

And what happens to Stuart Sternberg, a good owner who actually put a good product on the field with limited resources in a small market?  Sternberg loses money and is forced to dismantle his team.  What did revenue sharing accomplish for Stuart Sternberg?  It gave him the means to hold his 2008 squad together for an extra year, maybe two.

A system funded to the tune of $450 million a year ought to do better than this.

24 thoughts on “Tampa Bay Plans A Step Backwards (More On Why Revenue Sharing Is Dead)

  1. The only problem I see with this post Larry is the analysis of the Marlins, who are in 3rd place in the NL East, a mere 2 games under .500, and finished last year in more or less the same position, though slightly above .500 I believe.

     

    They're certainly not also-rans right now.

  2. Since Sternberg bought into the team, they have had over $140mn in operating profit and the franchise value has increased by 80%. What is the basis for his pleading poverty? The point of revenue sharing is to help support small market teams, not become the basis of their operations. As evidenced by the TV ratings, there is considerable local interest. Instead of threatening to cut payroll on the eve of the team's second post season bid, I'd imagine Sternberg would be better served trying to convert that interest into new revenue instead of scaring it away.

  3. Larry@IIATMS

    Everyone, say hello to Mark, who is the head honcho at TheRayArea.com, the Rays' SweetSpot blog affiliate.  (Mark, you might want to post here under the name "Mark@RaysArea", so we can easily distinguish you from our other Mark.)

     

    Mark, thanks for commenting here.  Your note about Crawford and the turf at the Trop is interesting … maybe he'd be defecting regardless of the money.  But even if he wanted to stay, it's hard to see the Rays investing 25% of their payroll in a corner outfielder, no matter how good the corner outfielder.  If the Rays are going to commit that kind of money to a single player, I'd figure they do so at a position that's harder to fill — like Longoria at third base.

     

    By my math, Crawford, Soriano and Pena cost the Rays around $28 mil.  If the Rays could simply sign the rest of the team in 2011 to contracts at the 2010 level, then they'd reach the salary goal set by management (ignoring for the moment the cost of bringing in three replacement players).  Of course, that's not going to happen.

     

    I'm not familiar enough with the Rays' system to know who would replace the three players you see walking. I assume that Desmond Jennings will replace Crawford in LF in 2011; he's a VERY highly rated prospect, but he also had a .756 OPS this year in his first full year in AAA.  He does not hit for power.  So, Crawford's departure will hurt.  NESN could not figure out how the Rays would replace Pena; they're figuring that Pena will come back, maybe at a reduced salary. &nbsp ;http://bit.ly/bqFxio  (I don't see the Mets giving up Ike Davis, but I'm no Mets expert.)  If NESN is right, then you're not going to save the money you're expecting in Pena's case.  As for Soriano, I'll assume along with you that the Rays have enough pitching depth to find a candidate or two to take over the closer's role.  Since you and I are both SweetSpot guys, we're not supposed to over-value the closer's role, but I think Soriano's departure is going to hurt, too. Particularly if Benoit goes as well.

     

    So add it up: Crawford + Pena + Soriano = 9.3 WAR, per FanGraphs.  I have to figure that the departure of these three guys will cost you around 5 wins in 2011.

     

    As for the other potential departures?  I think that Bartlett is more than an underperforming candidate for replacement.  Shortstops are notoriously hard to find these days; just look at what the BoSox have gone through since they let H. Ramirez go.    I'll go with you and assume that the Rays will retain either Garza or Shields, and I'll guess that the money the team saves in letting one pitcher go will about cover the cost of retaining the second pitcher (that might not prove to be the case).  Maybe you'll fill a hole with the guy(s) you get back in trade.

     

    It still means that Crawford, (let's say) Shields, Bartlett, Navarro, Soriano, perhaps Pena, maybe more, will not be in Tampa in 2011.  It's a big loss. Maybe the Rays are smart enough to make up for it.  Maybe this won't be a repeat of the 1997 Marlins' "fire sale" or the 2003 Marlins' "market correction".

     

    My point still stands.  Any decent system of revenue sharing would provide the Rays with the cash required to keep the team together.  You guys have a terrific team (we ought to know!) at a bargain price.  What would it take in the way of additional cash for the Rays to put together a Rays-type team in 2011?  Another $10 or $20 million?  That's less than the cost of an aging free agent in our neck of the woods.  To compare, what will be the cost (in terms of revenue sharing) to rebuild the Rays from scratch?

     

    It galls me that we're spending hundreds of millions in revenue sharing, and the Rays can't even consider keeping Carl Crawford.

  4. Larry@IIATMS

    Brien, you're right, correction made.

     

    William, please see part 3 of this series.  I don't see where you're getting your $140 mm number.  I'm projecting that the Rays are losing money, and you can see my argument for this over at part 3.  As for the purpose of revenue sharing … its stated purpose is to fund improvements in a team's on-the-field performance, and no small market team has seen improvements in recent years like the Rays.  Unfortunately, this is part of the problem with revenue sharing.  Revenue sharing cannot provide for sustainable improvements on the field without providing teams with the means to finance improvements in local revenues.

     

    I'm assuming that the Rays are locked into an existing TV contract, so that their recent increase in TV ratings will net them little or no additional revenue.  You can read Mark over at The Ray Area on this, but the team has not been able to generate additional attendance at the Trop.  The team needs a new ballpark — in fact, they needed a new ballpark to magically show up in 2008, when they started winning.

     

    It's not easy to take a small market team and manage it so that it makes mid-market revenues. (It looks like the Twins may have done it, but for the Twins it took a new ballpark that was 72% funded by the local taxpayers.)  But that needs to be the focus of revenue sharing.  Putting a winning team on the field is a part of the picture … but so is providing the team with the means to sustain that success.  I agree, the Rays should not be subsidized forever, but with $450 million in the bank we can afford to be a bit more patient and give the Rays another year (or three) to let their revenues catch up with their expenses.  If their revenue building plan proves to be less successful than their plan to win ballgames, then we'd cut off the Rays' special subsidy and they'd be allowed to return to mediocrity.

     

    The cost of letting the Rays sink back to the cellar, then funding them with Pirates-like dollars for another 10-year stretch (like 1997-2006), will be a lot more costly than whatever it might take to keep the current Rays together.

  5. Ben

    While this would never happen and is surely a shot in the dark, pie in the sky idea, there seems to be a logical way to fix this.  Teams who benefit from revenue sharing should have to report to MLB how the money was invested.  The percentage of revenue sharing a team receives will be entirely based on player development and player costs.  The teams that are taking the money for profit will have that money reduced annually to the point where the revenue sharing is only paying for player costs.  That way $450 million dollars can only be invested in player development and costs, rewarding teams like San Diego, Tampa and even the Marlins to some extent while punishing teams like the Pirates.

     

  6. The EBITDA data is from Forbes, which has a very good track record when it comes these estimations. With all due respect, I find it hard to belive that the Rays are losing money to the extent you suggest based on your analysis of the leaked financials. When examining the books of a private company, you have to read between the lines quite a bit.

    You also can't dismiss the nearly $150 million increase in the Rays' franchise value since Sternberg bought the team. A large reason for that increase is the guaranteed revenue that comes from simply being one of the 30 baseball teams. This is another form of subsidization.

    Revenue sharing has worked by allowing the Rays to get off their feet. Now, ownership can either go the extra mile and increase investment, or it can retreat and lose any progress it has made. The problem isn't with revenue sharing, but  either the commitment of ownership, the viability of the Tampa market or both.

  7. "I agree, the Rays should not be subsidized forever…"

     

    And of course, I disagree 100%, feeling that revenue sharing should essentially function as a gratuity payment from large market teams to small market teams as a payment for their territorial rights to superior markets.

  8. A couple of follow-up points:

    1) The Rays are locked into their current TV contract until 2016. Apparently, the Rays re-upped with Fox Sports Florida before the start of the 2008 season, so they basically sold low on their rights. According to estimates, they are probably receiving around $15 million /year, which was middle of the pack 10 years ago. In light of Texas’ reported $3 billion deal, I think it’s safe to say Sternberg was very short sighted in renewing the Fox Sports contract. More than a flaw in revenue sharing, that unfortunate decision is why the Rays may be feeling some financial strain. If anything, teams should feel the effect of bad business decisions, so I definitely don’t agree with the idea that MLB should basically extend a bail out until they can get out of that contract.

    2) When you look at income statement, you really have to be careful about making assumptions. In the case of the Rays’ leaked financials, the line items are so broad you really can’t come to too many predicative conclusions. For example, what account for $17 million in G&A? How about $11 million in “team expenses”? Finally, subtracting interest from the operating profit might seem sensible, but by doing so, you are essentially giving ownership a big fat bonus. Why? Because that interest exists because it a loan was taken to create revenue. In the Rays case, the interest is likely a result of the loan taken to buy the team. If you are going to consider interest as a cost of doing business, then you also need to consider an increase in equity as deferred revenue. Otherwise, the financial picture is misleading.

  9. jon

    While as a Yankees fan I hate to see the Rays stay together, your points are well-taken.  Why not have the revenue-sharing work like other progressive welfare systems (since, after all – RS is just welfare – only difference is that it doesn’t come directly from Uncle Sam.)  Have it so teams that get RS and improve get to retain RS money in future years, as long as they meet some standard of improvement (which the Rays can’t do = can’t get better than first place) or in such special cases, maintain the product.
     
    I know – the language, the numbers, how to quantify – would be a zoo; and honestly, how many of the large donating teams actually want to finance a team to knock them out of the playoffs – but it would be nice for the system to reward success instead of failure.

  10. Mark Smith

    What about a grant-writing process? The $450 MM goes into a central fund. The upper-echelon (payroll-wise) teams are not included. The rest must petition the MLB for funds, stating specifically what they plan to use it for. The total sum would be unknown to teams, and if the funds more than cover what's needed, either give it back to the other teams or keep it around if someone happens to need more for some reason (sign draft pick, trade deadline pick-up, etc.). This way, the Pirates get the amount needed to essentially cover their draft/IFA, but they don't have surplus money not being used on the payroll that they had this season. This is essentially a spin on something mentioned earlier in the discussion.

  11. @ Brien@IIATMS  "And of course, I disagree 100%, feeling that revenue sharing should essentially function as a gratuity payment from large market teams to small market teams as a payment for their territorial rights to superior markets."

    The small market teams are already getting a gratuity payment…in fact, they are getting several.

    The first gratuity comes from revenue sharing, which is self explanatory. Second, they are getting an equal slice of Central Fund revenue that comes from things like MLBAM, national TV contracts and merchandizing. Those revenues are primarily driven by larger markets, but all teams share equally. In the case of MLBAM, having equal ownership in the entity is like having options on a gold mine. As MLBAM revenues rise exponentially, all teams will benefit equally. Finally, the guaranteed portion of revenue from the Central Fund gives each franchise an inherent value it otherwise would not. Forbes currently estimates that inherent value at $150 million, meaning Sternberg could sell the Rays at a profit solely on the strength of the sports’ economic vitality.

  12. Larry@IIATMS

    Jon, thanks.  Actually, I LIKE the Rays.  They’re young, fast and exciting.  Yes, when they play the Yanks I often wish that they were old, slow and boring!  But if the Rays are broken up, what’s our plan B for keeping the Red Sox out of the post-season? ;^)
     
    Agreed, it’s a lot easier to criticize the existing system of revenue sharing than it is to come up with the ideal replacement system.  (I’m not saying this as a backhanded kind of endorsement of the existing system.  The existing system has to go.)  But one thing is for certain: we can use the Rays as a way to evaluate any proposed reform of revenue sharing.  If the reform would help the 2010 Rays stay together, then the reform has something going for it.

  13. Larry,
    Awesome analysis, and thanks for the kind words about my posts.  I agree with your overall argument, revenue sharing is intended to prevent a team like the Rays from losing a homegrown talent like Carl Crawford.  But I think there is more to the story.
    First, CC’s departure isn’t totally motivated by money.  The money will be the story in the media but CC is at least partially concerned about playing many more years on the turf at the Trop.  He constantly complains about the abuse it puts on his body and, based on some comments from Torii Hunter, he is getting advice to move to a natural surface. (http://therayarea.com/a-cautionary-tale).
    More to the point, I think the Rays get under the self-imposed threshold simply by letting Crawford, Soriano, and Pena walk.  All three departures were in the plans for some time so the impact should be minimal.  (Heck, in Pena’s case, it might even be an improvement.)
    They might deal Garza or Shields but probably not both.  That deal, however, will be done in an effort to make room for Jeremy Hellickson, not necessarily to save money.  Shields seems like the most likely trade bait (I heard a rumor: Shields to the Mets for Ike Davis.  Thoughts?)
    The other potential departures (Bartlett, Navarro, Sonnastine, Wheeler, Cormier, Benoit, Aybar) are more baseball moves than money moves.  Based on the year each has had, the only player that could demand a significant raise would be Benoit.  But the Rays have proved to be experts in the one-year comeback player phenomenon and have resisted the urge to over-commit to resurgent players (See Hinske, Eric).  The others are either underperforming or simply replaceable if they get expensive.  (Reid Brignac likely replaces Bartlett to get him more at bats; A winter of defensive work for John Jaso makes Navi irrelevant; and Wheeler, Cormier, and Aybar are basically spare parts).
    So, I think the 2011 Rays will look a lot like the 2010 Rays without some of the marquee faces.
    I should re-post this.  What a great discussion.
    Mark
     

  14. Larry@IIATMS

    Brien, sorry, I was probably less than clear.  I am arguing that revenue sharing should provide a special subsidy to teams like the Rays that are winning and need more time to allow revenues to catch up with expenses.  It is this special subsidy that would need a time limit.  I am not disputing for the moment that ordinary, garden variety revenue sharing would be paid on a different basis, a potentially perpetual basis.  I am still working on my plan to replace the existing system of revenue sharing with something more rational.

     

    Ben, your plan sounds a lot like a very good plan proposed recently over at BizOfBaseball.  You might want to read about it at&nbsp ;http://bit.ly/c4CBCJ.
     

    William, you're making a series of great points.  Yes, ultimately there are limits on how much we can trust any set of financial statements.  You probably have heard the famous statement by Paul Beeston, the former president of MLB who now runs the Blue Jays: "Under generally accepted accounting principles, I can turn a $4 million profit into a $2 million loss, and I can get every national accounting firm to agree with me."  Personally, I think Beeston was being too modest — I'm sure he could do better than that!

     

    I won't go and check your math in the various Forbes' "The Business of Baseball" reports.  But as you've alluded to, Forbes is not trying to estimate a team's net profits.  They're trying to estimate a team's "EBITDA" – earnings before interest, taxes, depreciation and amortization.  I used to practice banking law, and bankers like to use EBITDA as a measure of a private business' profitability, since it does a good job of measuring what the business has left to pay back the bank.  But EBITDA is not net profits.  Consider: Forbes estimated that the Rays had $29.7 million of EBITDA in 2007.  The leaked financial data shows that the Rays had $21.7 million of EBITDA in 2007.  I think that the Rays' actual financial statements are more accurate than the Forbes' estimates, but for the moment let's go with the Forbes' estimates.  The leaked data shows that the Rays had a $9.9 million interest expense in 2007, so let's say for argument's sake that the Rays turned a $20 million profit in 2007.  Nice!

     

    What happened in 2008?  According to Forbes, essentially nothing: Forbes has the Rays with about the same EBITDA in 2008 as in 2007.  But that does not seem right.  The Rays had $20 million more in payroll in 2008, but Forbes only shows $15 million more in player expenses for 2008.  Yes, the Rays attendance grew in 2008, and they received some post-season income, but their expenses grew more quickly than their income.  The leaked financial statements show that the Rays made $7 million less in 2008 than in 2007, and this time I'm inclined to believe the leaked financial statements.  It still leaves the Rays profitable in 2008, to the tune of about $13 million.  Maury Brown at Biz of Baseball has concluded that the Rays would have lost money in 2008 if they hadn't made the playoffs, but that's because Maury trusts the leaked financial data more than he trusts Forbes.

     

    Move to 2009, where everything went wrong for the Rays financially.  They did not make the playoffs — so they lost out on the $11.5 million in post-season profits from 2008.  Their attendance dropped, by $6 million according to Forbes.  Their payroll increased, by $13 million according to Forbes.  That's a $30 million hit against the numbers from 2008.  How could the Rays have possibly not lost money in 2009?

     

    Finally, look at 2010.  The Rays will make some post-season money (how much we don't know — the formula for computing a team's playoff share is byzantine beyond belief).  But their attendance has not picked up, and their payroll has increased again.  It has to be another bad year financially for the Rays.

     

    OK.  You can choose not to believe any of this, and I probably wouldn't blame you.  You figure that Sternberg is cooking the books.  You figure that back in 2007, Sternberg was padding the expenses with payments of real salaries to relatives working phony jobs (like my neighbor Frank McCourt), and now he's cut all that phony baloney out so he can still turn a profit.  I have no argument to make in return, except that I have to argue from the numbers we have, which (thanks to deadspin) are MUCH better than the numbers we had before.  The numbers say that the Rays are losing money and that Sternberg is justified to cut payroll.

     

    You raised a lot of other stuff in your comments, but I have a day job and I need to get back to it for the moment!

  15. JP

    Maybe this is old hat by now, but why exactly do even the smallest markets need to contend with the same frequency as the largest markets?  I agree a system in which the big markets totally dominated baseball, leaving medium and small markets with no chance would be bad for the long term health of the game.  If teams in those markets are precluded from contending, the sport's popularity could really die out over time.

     

    But what's the argument for subsidizing smaller market teams to the extent that all teams are all on equal footing?  Isn't it good for baseball for larger markets to have a bit of an edge?  This ain't football where a small market team from Green Bay (or Minneapolis) with an iconic QB can drive big national ratings.  The true wonder of baseball is the tension of pivotal at bats that can only come from really caring about the outcome of the game.  That is why baseball is, and always will be, a local game.  If cities like NY, Boston, Philadelphia, LA and Chicago get to enjoy that tension a bit more often, the game will be more popular overall.  The Super Bowl with the Steelers can still draw huge ratings.  The World Series with the Pirates cannot.

    Look, if the season ended today, here would be the playoff teams, with market size rank.

    AL

    Yankees (do they play in a large market?)

    Rays (26th largest market)

    Twins (21st largest)

    Rangers (14th largest)

    NL

    Phillies (11th largest)

    Braves (17th largest)

    Reds (28th largest)

    Giants (10th largest – though the market is divided with the A's, and they are only 1 game up on the Padres, who play in the 23rd largest market.  San Diego is also just 0.5 games behind Atlanta for the Wild Card).

     

    So we have the Yankees, 3 teams from small markets (plus the Padres who could join the group), 1 from medium sized market team, and 3 from large markets (counting Rangers as a large market team, though they're not monstrously huge).

     

    Is this really such an unacceptable mix?

  16. According to Forbes, the Rays EBITDA was still $16mn in 2009. One reason that is possible could be because of increases in Central Fund revenue, which the Rays share equally with major league baseball. In 2009, the MLB Network was launched, and with it a new source of significant revenue, so that could have played a big role in offsetting the Rays loss of post season revenue and decline in gate receipts. I don’t see why the Rays have to have had a bad year in 2010 working off that base, especially if they reap the rewards of post season and continue to enjoy increasing central fund revenue.

     

    I admit that I am predisposed to mistrust a team’s financials over an independent estimation, but even if we take the leaked financial as gospel, they still show a healthy operating profit. There is no reason to use net profit as the basis for the revenue sharing argument because then MLB would be subsidizing Sternberg’s purchase of the team. He is already being rewarded in terms of guaranteed revenue and increased equity. I don’t see why he should be alleviated of the debt burden that is the foundation of his purchase.

    Something tells me Sternberg’s cries of poverty have more to do with the upcoming Stadium talks than reality. He is likely going to ask for a significant handout from the local government, so his comments strike me as some early posturing. He has too much incentive to "cook the books", and therefore shouldn't simply be taken as his word.

  17. Larry@IIATMS

    Mark Smith, the difference between your ideas and Brien's go to the heart of why I'm having trouble figuring out what to do about revenue sharing.  Brien's concept (and forgive me Brien if I get this wrong) is that revenue sharing should address a fundamental lack of fairness built into MLB.  The Yankees have territorial rights to the largest (and possibly the richest) population base and media market in the country.  The Pirates have rights to something else.  So, we should design a system where the Yankees pay something to the Pirates to help even out the playing field. It wouldn't matter much (if at all) whether the Pirates spent this money to improve the ballclub, or to build a Sushi bar in center field.  In fact, it wouldn't matter at all what the Pirates did with their money.  We don't tell the Yankees how to spend their revenue; why should the Pirates have to answer for their expenditures?

     

    Your concept goes in the other direction: let's invest money in teams like the Pirates, but only according to a well thought-out business plan.  Yours is a plan where revenue sharing comes with strings attached.  Yours is a plan that follows the logic of baseball's existing system of revenue sharing, only we'd put the kinds of processes in place that would help make certain that revenue sharing money was spent wisely and effectively.  Moreover, your plan follows the logic of the argument I'm making here, which is that baseball's revenue sharing system lacks accountability and transparency, and is not designed to foster sustainable success.

     

    There are huge obstacles to overcome in order to design a Brien-type proposal or a Mark-Larry type proposal (note that I'm siding with you for the moment, but it may be temporary, so don't count on my loyalty!).  The biggest problem I see with a Mark-Larry proposal is perfectly illustrated by the Rays.  Arguably, the Rays used revenue sharing in the right way, to build a winning ballclub.  But once the ballclub started winning, the team could not find the local revenue to sustain the club's success (and as I've pointed out repeatedly, baseball's revenue sharing system is not designed for sustained success).  I think that we all might have assumed that once the team got better, the money would follow (mostly driven by bigger crowds at the home ballpark).  What's caught us by surprise is that this isn't happening — not in Tampa Bay, or in Cincinnati, or in San Diego.

     

    What the Rays needed was a plan to grow local revenues as the team got better — they needed a new stadium in a better location, and they probably needed an expiring TV contract so they could sign a better contract based on the higher value of broadcasting an up-and-coming team.  With these basic pieces in place, maybe the Rays could have pumped up the local revenues to the point where they could keep the current team in place.  No, there's no way the Rays could ever match the Yankees (or the Red Sox, or the Dodgers) in the revenue-generating department.  But if the Rays could earn money on par with the Cards, or the Brewers, or the Rockies, they'd have an economic base that could sustain a good team.

     

    So the question is, how do you design a revenue sharing system with strings attached, that would promote better teams on the field AND higher revenues to support those teams?  This, I'll admit, has me stumped.  For one thing, higher revenues seem so closely tied to new ballparks, and MLB is not in the business of paying for the construction of new ballparks.  No, MLB is dedicated to the proposition that they can threaten and cajole the various municipalities of North America to finance all or a portion of the construction of these ballparks.  This leaves teams like the Rays dependent on their own political clout to get their new ballparks built, and whatever you might think of this state of affairs, it's not a state of affairs designed to produce new ballparks just as a team like the Rays starts playing good enough baseball to attract new fans.

     

    Then again, the Brien system has its own problems.  Let's compare Pittsburgh to New York.  Most of the advantages are in favor of New York when it comes to generating a lot of baseball revenue, but Pittsburgh has a few advantages of its own.  For example, the Pirates got their baseball park for free, and it cost a lot less to build than the new Yankee Stadium.  How do we "level the playing field" for the Pirates, when there are so many factors that go into making the playing field uneven in the first place?

     

    So, I'm still thinking.  One thing for certain, though: if my plan to fix revenue sharing wouldn't do something more to help out the 2011 Rays, then it isn't good enough.

  18. Mark Smith

    Interesting. I guess that in my system, the Rays would be rewarded. For instance, they would be rewarded with more money next season than they received this season because they have key free-agents leaving and have had a solid building plan. There would have to be some limit on this as the MLB can't subsidize TB forever, but if the MLB could for a few more years, it may build a fan base strong enough to support it. This is all theoretical, of course.

  19. Larry@IIATMS

    JP, the Wall Street Journal has called this baseball season "The Year Money Didn't Matter". &nbsp ;http://bit.ly/d7Uby0  This is the kind of uninformed chatter we can expect to emerge from a small sample size.  What happened in 2010?  The Mets continued to be mismanaged.  The Cubs continued to be the Cubs.  The Dodgers sank under the weight of the McCourt debt.  The Red Sox were clobbered by the injury bug.  So it ends up that being rich provides no immunity against bad management and bad luck.  Or as MLB put it, baseball's competitive balance has never been better, thanks to the astute stewardship of Bud Selig and his boys.

     

    I'm not sure how you're sizing the various baseball markets.  If we rank the teams by Forbes' values (William has me focused on Forbes), we have the first (Yanks), sixth (Phils), ninth (Giants), twelfth (Rangers), thirteenth (Braves), fifteenth (Padres) and sixteenth (Twins) most valuable teams potentially in the playoffs.  I think you have to consider the Yanks and Phils to be big-market teams, and the others to be mid-market teams.  The Rays and Reds would be small-market.  I think this year is a triumph of the middle of the baseball market, which is terrific, because nearly every baseball team can aspire to mid-market revenues.

     

    If we rank teams by payroll at season's start, then the distribution of teams looks almost random: three in the top ten (Yanks, Phils, Giants), three in the mid-ten (Twins, Braves, Reds) and three in the bottom ten (Rays, Rangers and Padres).  It's a little crazy, the Rangers having the 4th lowest payroll in baseball on this list, now that they have a crazy-good new TV contract, and given that they have exclusive access to the ninth largest North American metro area by CSMA (http://bit.ly/9mONk9), the Rangers are a big market team by any fair definition.

     

    Anyhoo, I'm not trying to start a debate on how to measure market size.  It's just that when the statheads try to tell us how important money is year to year, what they're really telling us is something that's been true for years about the Mets and Cubs, and something that is true for the moment about teams like the Red Sox and Dodgers.  IOW: when they say that it's not about the money. chances are good that what they're measuring is really something else.

  20. JP

    Okay, maybe I should've done more homework, but I just based my rankings off this site, which appears to look at each city's greater metropolitan population: http://www.baseball-almanac.com/articles/baseball
     

    I will argue vehemently that we should NOT be looking payroll, but market size, however determined.  (Greater metropolitan population?  Population times per capita income?  Population times per capita income after taxes…..?)  If a team in a fairly large market fails to rake in big revenue, and can't afford a big payroll, tough rocks.  I frankly don't have much pity for a team like the Marlins.  Sorry, they play in a decently sized, if not huge, metropolitan area.  Teams should all be finding ways to maximize their fan base, given the market they have to work with.  It's not "unfair" that a ream like the Cardinals can afford a disproportionately large payroll.  That's real fan passion fueling the dollars.  Get some of that passion, and you'll have some of those dollars.  If Miami cared like St. Louis, the Marlins could have a $100 million payroll too.

     

    And most importantly, the small sample size argument here doesn't fly at all.  I know I only provided this year's teams, but it's not some bizarre fluke.  The Rays have done this before.  The Twins have done this before.  Over the last 11 seasons (I'm including this season), the Twins, Rockies, Rays, Brewers, Indians,  Athletics, Padres, Marlins, Reds and Cardinals have accounted for 29 playoff appearances by my count. That's roughly a third of all playoff berths over that time period.  That's exactly what we would expect from those 10 teams if we had assigned playoff berths entirely by random!  (I know the A's play in the Bay Area, which is a large market, but they split that with the Giants, and that split is not exactly even.)

     

    Look, life's better as a Yankee fan than a Pirate fan.  I'm not arguing that market size and payroll don't matter.  But it's patently ridiculous to argue that small/mid-market team success is some Haley's comet-like occurrence.

     

     

  21. JP

    We're sort of splitting hairs here.  Bottom line, small and mid-market teams have had success.  As for pointing to the overwhelming success of the Yankees/Boston/Dodgers/Braves, I have some quibbles.  Yes, those 4 teams have had about as many playoff berths as those 10 teams i mentioned.  However, the Braves are not a big market team.  Their market is right around the median, and below the mean for MLB teams, and they've had tremendous success over a very long time frame.  Really, that 42 playoff-berth number is largely generated from the Braves (a mid-market team) and yes, the Yankees.

     

    The Yankees are a class unto themselves.  No team can come even close to matching their payroll.  Your numbers tell a story of one fantastic mid-market team, and one, sui generis class.  The Yankees are gonna spend an insane amount, and they'll probably always suck up a hugely disproportionate portion of playoff berths.  But is this one team truly a systemic issue for baseball?

     

    Also, I would not use WS wins, but playoff berths as our key metric of success.  As all of us baseball nerds have learned, the playoffs are almost entirely a crap shoot.  If big market teams are winning a disproportionately large number of WS relative to their playoff berths, then it's probably just luck.

     

    I stand fully by my argument that small/medium markets need a reasonable ability to contend for championships, but not an equal chance.  I think we already have a pretty good balance.

     

    You make a good point, that new markets need time to build up fan bases.  The Rays can't match the history of the Cards.  But how long are we talking about here?  Generations?  The Marlins have been around for 17 years.  They've been around for almost as long as I've been a Yankee fan. They've won two world series.  How much longer should that sort of team really receive subsidies?

     

    The failure of the Rays, Padres, or Marlins to draw fans, even when their teams are playing quality ball in tight playoff races says a lot to me.  Those markets can produce winning teams as it is, just less frequently.  MAYBE, MLB could continue to subsidize them to see what happens with more prolonged success.  But if those fans can't make it to the park to watch contending clubs, how much should we expect?

     

    The day any fan can honestly say, "It is nearly impossible for us to contend because our market is too small," I will firmly support more aggressive revenue sharing.  That's not at all where we are now.

  22. "How much longer should that sort of team really receive subsidies?"

     

    At the very least as long as big market teams have subsidies in the form of territorial rights, I'd say.

  23. Larry@IIATMS

    JP, did I SAY that small-mid market team success is a Haley’s comet-type occurrence?  Yes, I’m stating as strongly as I can that the Rays should not be allowed to sink into mediocrity.
     
    I have no problem with how you’re ranking your baseball markets.  There are a number of different ways to do it, and you can get into big arguments over what is the right way.  I’ve seen the article you refer to in baseball almanac, and the CSMA is a fine tool. If you want to see a guy sweat the details of how to measure baseball market size, see Nate Silver here: http://bit.ly/d3zq1Z.  And I think there’s plenty to argue about with Nate Silver.
     
    I looked at payroll because payroll is probably the best way to measure the effect that money has on competitive balance.  No, I would not use payroll as a guide to determine how much a team should pay or receive in revenue sharing.
     
    As for the long-term impact of money, or market size, on a team’s ability to make the playoffs?  We’ve discussed this here before, too — see http://bit.ly/c61mvZ.  We looked at the numbers of times each team has reached the post-season since baseball expanded the playoff system.  Just about everyone has made the playoffs at some point, and some small market teams have done a lot better at this than the Mets and Cubs.  And once a team makes the playoffs, anything goes.  The playoffs are a crapshoot — not just this year when you have three AL teams with about the same regular season record, but every year.
     
    I didn’t say that mid-market or small-market teams have no chance.  Of course they have a chance.  It’s just not as good a chance, on average.  You pointed to ten small-to-mid market teams that have made it to the playoffs 29 times in 11 years.  Personally, I prefer to look at the 16-year period since the strike, after the playoffs were expanded, and we’ll count this year.  Over this time period, the Twins, Rockies, Rays, Brewers, Indians, A’s, Padres, Marlins, Reds and Cards made it to the playoffs 40 times.  That’s an average of 4 appearances per team over the 16 year period, pretty close to what you’d expect if you simply selected these teams by lottery.  You could argue that these teams are doing OK.  Of course, you skipped the O’s, Nationals, Royals, Pirates and Blue Jays — these teams would have lowered the average.  But your point is well-taken, as I said myself in the earlier post cited above.  If you measure competitive balance by the ability of small to mid-market teams to make the playoffs, then baseball is doing OK.
     
    Of course, I can pick 4 big-market teams — the Yanks, Braves, BoSox and Dodgers — who have made 42 playoff appearances during this same stretch.  In other words, my four big market teams have the same number of playoff appearances as your 10 small-mid market teams, plus the five teams you failed to mention.  So, market size matters, and money matters.  (Yes, I know, if I add in a few of the less talented big market teams, like the Mets and Cubs, then the contrast is not as sharp.)  We then go back to the point you made earlier, which is that it’s not necessarily a bad thing for big market teams to succeed more often, so long as the small market teams have a palpable chance to succeed also.  Fans of the Blue Jays might argue this point, but it’s still a good point worth considering.
     
    Of course, there’s the small matter of who has won the World Series during this stretch.  The 4 teams on my list have won 8 World Series, the 10 teams on your list (plus the five teams that you did not include on your list) have won 3.  (You’d have done a bit better here if you’d included the Diamondbacks on your list, but I could have countered with the Angels, White Sox and Phillies.)  Yes, winning the World Series is a crapshoot, but in this crapshoot it helps to be able to throw the dice as many times as possible.  SSS, to be sure, but the advantage here again belongs to the big markets.
     
    What were we arguing about?  The Rays?
     
    You might argue that, based on the discussion above, the Rays have nothing to worry about. They’ll make the playoffs once every 5 years or so, just like the other small-mid market teams we’ve mentioned.  I disagree.  There are sharp distinctions to be drawn between the teams on your list, in terms of the present economic ability of these teams to build and sustain a winning team.  The Rays have a small market, poor fan support (at least as measured by the willingness of the fans to attend games — there are good comments over at Mark’s post today suggesting that the Rays have a good fan following) and a lousy stadium — they’re a triple threat.  You’ve pointed correctly to the Cards as the example of a team whose great fan support gives them the economic wherewithal to compete against teams from bigger markets.  Good example, particularly since the Tampa and St. Louis markets are nearly the same size as measured by CSMA.  Of course, St. Louis has had a lot more time to develop its market.  Arguably, the Rays should have the goal of becoming like the Cards, and arguably revenue sharing should give them that chance.

  24. Larry@IIATMS

    JP, I don't see a lot of disagreement here.  You say that the Braves don't neatly fit into the big market mold.  OK, I claimed the Braves for my big market group because you didn't claim them for your mid-market group.  You say that the Yankees are a special case, and that's true, but all 30 teams are more or less special cases.  It's a bit strange to group the Yankees together with the Mets, who can't seem to do anything right, or the Dodgers, who have traditionally acted like a mid-market team and whose current ownership has placed the team under a suffocating layer of debt for no good baseball reason.  We're grouping teams together as best we can into arbitrary classes and trying to draw general conclusions, but what we're really doing is amalgamating the stories of 30 individual franchises in ways that only make a little bit of sense.

     

    The MSM tends to group teams into 3 categories: the very rich (Yankees alone), the relatively rich (BoSox, Phillies, Mets, Cubs, maybe the Dodgers), and the group struggling against unfair economic odds to keep up (everyone else).  My view of things is heavily shaped by the multi-part series I did here on salary caps.  The big take-away lesson from that series is that salary caps have to be paired with salary floors, and that a handful of teams (Pirates, Marlins, Rays, a few others) have such lousy local revenues that they'd never survive under a meaningful salary floor.  I get asked a lot how these teams can ever compete economically with the Yankees, but baseball would have significantly greater economic parity if it were possible for these teams to merely compete with the Minnesota Twins.

     

    This is why the Rays' success is such a big deal to me.  The Rays' core consists solely of guys the team drafted while finishing last (or next to last) ten years in a row, and a crazy number of these draft picks actually morphed into solid major leaguers (the Pirates and Royals drafted in near the same position as the Rays all those years, and have nearly nothing to show for it).  This isn't going to happen all that often — the MLB draft is a bigger crapshoot than the post-season, plus how many teams can finish last so consistently without completely imploding?

     

    I think you've noticed that the Rays are not a fluke, in that they are a solid baseball team with the ability to compete in the toughest division in baseball for quite some time, that is, so long as the team stays together.  This makes the Rays different from nearly every other team you've mentioned.  No other team you've mentioned could be said to be the strongest team in baseball (well, maybe apart from the A's in their Moneyball prime … and the Mariners in 2001 … maybe I should just retract this statement), and no other team achieved that success in the AL East.  Add to this equation the fact that the Rays are in that group of very low revenue teams (like the Pirates) that either never succeed or succeed at a lower rate than the mid-market teams you've mentioned. The Rays are much more like the Pirates and Royals, teams that seem to have no chance even in baseball where just about everyone has a chance.  I agree that in any given year, some small to mid-market team will put together a .550 season and take one of the central divisions.  But it's a lot harder to break through in the AL East.  You just can't count on the Rays' reassembling a championship core in the next 5 years, or 10 years, simply because the Rockies and Brewers make the playoffs on a league-average basis. The first of these achievements is significantly more difficult to achieve than the other; consequenty, this achievement is a lot more valuable.

     

    In any event … we can continue this discussion the next time I post on money matters. Thanks for participating, JP.  You raise the quality of what I do here, more than a couple of notches.

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