Is The Gap Shrinking Between Baseball’s Rich and Poor?

1.      Teams That Made (and did not make) the Playoffs.  As we’ve already noted, the 2010 baseball season was a bad year for money.   Of the top ten revenue teams in baseball, only three (the Yankees, Phillies and Giants) made the playoffs.  A large number of rich and (usually) successful teams missed the post-season in 2010: the Red Sox, Angels and Cardinals were replaced in the playoffs by the lower revenue Rays, Rangers and Reds.  We’ve discussed it before: there’s substantial revenue to be earned in the post-season.  When only three of the top revenue teams make it to the post-season, that shifts revenue from baseball’s rich to baseball’s poor.

2.      Financial Reverses At The Top.  When we say that 2010 was a bad baseball year for money, we’re not only thinking about results on the field.  The Red Sox saw their TV ratings drop, which probably hurt their bottom line.  The Mets, Dodgers and Cubs saw declines in home attendance, which certainly hurt their bottom line.

3.      Success In The Mid-Market.  2010 was a good year for teams in the middle tier of baseball revenue earners.   The teams with the 16th, 17th, 22nd and 24th highest revenues (according to Forbes) – the Rockies, Rangers, Reds and Twins — enjoyed the 4th, 2nd, 3rd and 1st highest increases in home attendance.  Other mid-market teams enjoyed sustained success at the box office.  For example, the Milwaukee Brewers had a mediocre season on the field, but still managed to draw the 11th best home attendance in baseball – 2,500 more fans per home game than the New York Mets.

If you want to point to one reason why revenue sharing declined in 2010, point to the Minnesota Twins.  Just nine years ago, the Minnesota franchise was close to folding; the team is now one of the most successful in baseball, and not just on the field.  With the opening of new Target Field, the Twins enjoyed the highest increase in baseball attendance, up an average of more than 10,000 a game in 2010.  In fact, the Twins are in danger of being classified as a “rich” team!  Their 2010 attendance was 6th highest in baseball, and their 2010 end-of-season payroll was 10th highest in baseball – ahead of traditional powers like the Cardinals and just $7 million behind the big-market LA Dodgers.

So, 2010 was a down year financially for many big-market teams, and a relatively good year for baseball’s middle class.  But there’s no reason to think that we’re seeing a trend.  Sure, the Twins should continue to do well, but their financial fortunes should decline a bit as the excitement over their new stadium begins to wane.   Sure, we should continue to see small market teams make it to the post-season, but big revenue teams like the Red Sox and Cardinals are likely to crowd out small-market teams like the Reds and Rays.  Moreover, big market teams like the Cubs and Mets cannot underachieve forever.  The Mets’ hiring of new GM Sandy Alderson may signal an end to the team’s recent stretch of mediocrity.  That might prove to be bad news for mid-market teams like the Braves.

In order to shrink the gap between baseball’s haves and have-nots, we’ll need more sustainable trends than the ones we saw in 2010.  For example, we’ll need continuing increases in centrally-shared revenues, such as those generated by Major League Baseball Advanced Media.   But more importantly, we’ll need to see improvements in the ability of baseball’s financial bottom-feeders to generate revenues.  Small-market teams like the Twins and Brewers are showing how this can be done.  Teams like the Rays, Royals, Pirates and Marlins need to follow suit.

No, the Pirates will never generate the kind of local revenues earned by the Yankees.  But if the Pirates could earn money like the Brewers, or the Rockies, or even the Reds, this would go some way to narrow the gap between baseball’s rich and poor – and would permit the gap to be narrowed more meaningfully by a reformed system of revenue sharing.

2 thoughts on “Is The Gap Shrinking Between Baseball’s Rich and Poor?

  1. Good stuff Larry. If revenue sharing has accomplished anything, it has allowed small market teams to give extensions to their top talent, allowing them to retain them longer. But this has also made free agency a less and less attractive place to find premium talent still in their prime. For all the hoopla about Tex and CC in 2008, that was a relatively rare opportunity for a team like the Yanks. Most years feature one or two premium guys, the price tag gets exorbitant because too many teams are chasing too few players, and you wind up grossly overpaying for players who's best years are in all likelihood behind them. I think Brian Cashman is well aware of this, which is why he insisted on remaking his farm system a few years back. You have to either fill many of your needs in-house (especially when it comes to volatile relievers) or have the trade chips available when a player becomes available.

  2. Steve S, terrific comment, in particular your point about premium free agents becoming harder to find.