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

Over the last month, we’ve focused here (and here, and here) on the future of baseball’s system of revenue sharing. The revenue sharing system moves about $450 million annually from baseball’s high-revenue teams like the Yankees and Red Sox to low-revenue teams like the Marlins and Pirates. The idea behind the system is to help low-revenue teams compete on the field. But as we’ve learned from confidential financial statements revealed by deadspin.com, some of the “poor” teams have instead used these payments to increase profits, rather than invest these payments to improve their ballclubs.

In our last installment of this series, we focused on the Tampa Bay Rays, a team that some think has used revenue sharing in the right way. No doubt, the current version of the Rays is a terrific baseball team. However, as I argued here in detail, the Rays’ need for revenue sharing is greatest right now: their current payroll cost is rising, and their local revenues cannot keep pace. But perversely, now that the Rays are achieving the kind of success that revenue sharing (supposedly) was designed to foster, the Rays receive less in revenue sharing than perpetual losers like the Pittsburgh Pirates.

Based on the data revealed by deadspin.com, I stated previously that the Rays probably lost money in 2009, and that they’ll probably lose even more money in 2010. I questioned previously how much longer the Rays could hold the current team together.

Now we have confirmation from Rays’ owner Stuart Sternberg: the Rays are going to cut payroll. The Rays’ current payroll? $72 million. The Rays’ projected 2011 payroll? $50 million. That’s a 31% cut.

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Believe

Jose Bautista hit a home run yesterday, his 50th of the 2010 season, providing the winning margin for the Blue Jays in a 1-0 win over the Mariners. Bautista leads the major leagues in home runs.

And that’s where the story ends. Or where it should end. Only it doesn’t. Instead, some folks find this a worthy occasion to discuss steroids, and performance-enhancing drugs (PEDs).

So let’s make this clear.

We know that some baseball players have used, are using and will use PEDs. But there is no reason to single out Bautista for special scrutiny. No reason at all.

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Colvin: Anatomy of a Close Call

If you follow this site, you know how our CEO Jason has been fighting the good fight for bat safety in major league baseball, and has pointed to one possible solution to this problem: the “batglove”. Yesterday, another player – the Cubs’ Tyler Colvin – was injured by a flying piece of a broken bat. Of course, Jason was quick to report it here.

Jason and I both stressed that the bat pierced Colvin’s chest only a few inches from his heart. You might have concluded from this that Colvin was impaled by the bat, that the bat had turned Colvin into the baseball equivalent of shish kabob. Close friend of the site Mister D raised the question (quite legimitately and properly) whether Jason and I were exaggerating the potential danger to Colvin in this incident. I have to admit, I wrote my comments to Jason’s initial post before I saw the ESPN video clip of the incident. (You can view the clip here.) After I first saw the clip, I also thought that Jason and I had exaggerated the situation — the bat appeared to me to have harmlessly bounced off Colvin’s chest.

Then I read about how the bat actually punctured the left side of Colvin’s chest, how he had been hospitalized to prevent a collapsed lung, and how the injury would disable Colvin for the rest of the season.

In other words, I’d managed to mis-analyze Colvin’s injuries not once, but twice. I decided that this was an incident worthy of a closer examination.

What follows is my best attempt at a frame-by-frame breakdown of the Colvin video.

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Success and Sustainability (Part 3 of Why Revenue Sharing Is Dead)

As we’ve reported here and here, baseball has been rocked by deadspin.com’s leak of confidential financial statements covering the Pirates, Rays, Marlins, Angels, Mariners and Rangers. The leaked data shows that baseball’s system of revenue sharing does not work: it does not effectively require teams to use revenue sharing moneys to improve performance on the field.

In part 1 of this series, we focused on what the Pirates and the Marlins have done with the $40 million or more they’ve received annually in revenue sharing. Contrary to the intent behind revenue sharing, the Pirates and Marlins have used the bulk of this money for stadium construction (Marlins), to fund distributions to investors (Pirates) and to pad the team’s profits (both Pirates and Marlins).

In part 2 of this series, we discussed how revenue sharing was built on the myth that teams like the Marlins and Pirates are poor and struggling. The data leaked by Deadspin.com reveals that these are two of the most profitable teams in baseball, living off a revenue sharing system that functions like corporate welfare, rewarding incompetence and failure.

Given what we’ve learned from the data leaked by deadspin.com, I’ve predicted that baseball’s revenue sharing will not survive in its current form. Some analysts agree with me (including Jayson Stark, J.C. Bradbury and Jordan Kobritz). Others do not. Most notable among the dissenters is Maury Brown, chief guru at bizofbaseball.com. Maury is the preeminent online expert on the economics of baseball, so when Maury disagrees with me, I have to take notice.

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Secrets and Lies (Part 2 of Why Revenue Sharing Is Dead)


Last week I predicted that the financial statements leaked by deadspin.com – confidential financial statements covering two years of operations for the Pirates, Rays, Marlins, Angels, Mariners and Rangers – would result in the death of baseball’s revenue sharing system in its current form. The leaked data shows that the revenue sharing system is not working: it permits teams to use most of their revenue sharing money to pad their profits, instead of applying those moneys to improve the team’s performance on the field.

There’s another reason why baseball’s revenue sharing system will not survive in its current form: it is built around secrecy, and lies.

Before we turn to the lies, let’s focus on the secrets. The data revealed by deadspin.com is confidential. Baseball does not disclose the amount of money paid and received under revenue sharing. There is no disclosure of how teams use their revenue sharing money. This information is kept secret from the fans who fund revenue sharing by buying tickets and merchandise, paying for advanced MLB subscriptions and following the sport on radio and TV.

Now it turns out that we weren’t the only people being kept in the dark.

Jayson Stark at ESPN.com reports that these numbers are also kept secret from other baseball teams. This news would be hard to believe if it didn’t come from a source as trustworthy as Jayson Stark. Of course, every baseball team knows the amount it pays or receives under revenue sharing. But it turns out that no team is told by Bud Selig and the brass at Major League Baseball how much is being paid or received by any other team. “We knew these teams were getting millions,” an official of one club told Stark. “But we thought that ‘millions’ means maybe $40 million. But not close to $50 million. We knew it was a lot. Just not to this extent.”

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Revenue Sharing Is Dead

Major League Baseball’s system of revenue sharing died this week. Out of respect for the system’s mourners (chief among them the Pirates and Marlins), baseball will continue to follow the rules mandated by the defunct revenue sharing system until baseball’s collective bargaining agreement expires in 2011. But believe me, the system is dead. Like a certain dead parrot of Monty Python fame, baseball’s revenue sharing is no more, it has expired and gone to meet its maker, it’s a stiff, bereft of life, it rests in peace, it’s pushing up the daisies, it’s kicked the bucket, shuffled off its mortal coil, run down the curtain and joined the choir invisible.

The death of baseball revenue sharing was reported between the lines of the financial statements leaked this week by deadspin.com. These financial statements covered two years of operations for the Pittsburgh Pirates, Tampa Bay Rays, Florida Marlins, LA of Anaheim Angels, Seattle Mariners and Texas Rangers. With all due respect to my colleague Brien, these leaked financial statements are a big deal. A very big deal.

The documents reveal that the Pirates, Marlins and Rays are receiving substantial amounts of revenue sharing – nearly $50 million a year in the case of the Marlins. Under the terms of baseball’s collective bargaining agreement, each team is required to use its revenue sharing money to improve its on-the-field performance. But from the leaked financial statements, it appears instead that some teams (in particular, the Pirates and Marlins) are not using the bulk of these revenue sharing moneys to make their teams better. Instead, these teams retain most revenue sharing money as net profits.

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Luck and Competitive Balance, Part 1: The Post-Season

There’s an ongoing debate on the topic of competitive balance in baseball. On one side are those who think that baseball has a competitive balance problem. These people point to the widening gap between baseball’s richest and poorest teams, and argue that rich teams like the Yankees “buy” their world championships by signing many of the best players to large contracts beyond the means of poorer teams.

On the other side of the debate are those who look at the results of baseball’s post-season. Eight different MLB teams have won world championships over the last 10 years, and 13 different teams have won the last 20 championships. In the 15 years since baseball has gone to an eight-team championship series, only 4 of 30 teams have failed to make the playoffs: Montreal/Washington, Kansas City, Pittsburgh and Toronto. Compare this record to NBA basketball, where nearly half of the teams have never ever won a championship, and where 4 teams (Spurs, Lakers, Pistons and Celtics) have won 61% of all NBA titles.

If you look at the results of baseball’s post-season, baseball’s competitive balance looks pretty good. But how can this be when the Yankees are able to spend so much more than, say, the Florida Marlins? Well, perhaps big-spending is not an effective way to win championships. Consider a statistic from the book “The Wages of Wins” by economists David Berri, Martin Schmidt and Stacey Brook: for the period 1988 to 2005, only 17.6% of a baseball team’s wins can be explained by the team’s relative payroll. This means that a baseball team won’t win a lot more games by spending a lot more on player salaries.

(J-Doug at Rational Pastime has an excellent piece online that comes to roughly the same conclusions reached by Berri, Schmidt and Brook.)

If you’re like me, you’re looking at that 17.6% figure and you’re asking yourself a bunch of questions. Let’s say that the Yankees win 100 games this season. Berri/Schmidt/Brook are telling us that 18 of these wins can be explained by the Yanks’ $200+ million payroll. But how do we explain the other 82 wins? Where do they come from?

Berri, Schmidt and Brook would probably laugh at this question. It’s their job to look at factors like team payroll and team wins, and determine if there’s a significant relationship between the two. That’s it. They’re not professionally required to look for other factors. If they decide to look for other factors, they might find some (or not), and the factors they find might add up to less than 100%, or more than 100% (these factors are not necessarily independent of each other). It’s not the job of Berri, Schmidt and Brook to get to exactly 100%.

Still, we have to wonder: if payroll is not a big deal, is there another factor more strongly related to team wins? There’s a suggestion in “The Wages of Wins” that such a factor does indeed exist.

That factor is luck.

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Clemens Indicted

Roger Clemens has been indicted by a federal grand jury for allegedly lying to Congress in 2008 about his use of steroids, HGH and other performance-enhancing drugs.

We do not know if Clemens is guilty of the charges against him. We do know that the Clemens case follows a pattern set by the indictment of Barry Bonds and the conviction of Marion Jones. Athletes accused of using performance-enhancing drugs face scandal and disgrace. Athletes accused of lying under oath about performance-enhancing drugs face prosecution and prison. Continue reading Clemens Indicted

Larry@Safeco

IIATMS sends its reporters around the globe to bring you the most important stories in sport.

Just kidding. I’m taking vacation time in the Seattle area, so I thought I’d visit Safeco. Royals v. Mariners, August 8. Possibly not the highest rated Sunday broadcast on the MLB network.

Some observations.

Safeco is a beautiful park, well worth a visit if you’re in the area. It’s quite dramatic when the roof rolls open at the beginning of the game to let in the bright Seattle sunshine. Er … the bright Seattle cloud cover. This IS Seattle. The park is intimate, the sight lines are great, and there’s a view of downtown from the first base line seats.

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