If having NY teams is good for the league because they have more fans, why isn't it good for the league to have more teams in New York?

I don't think it much matters, at least from a league-money view. If you have (I'm making these numbers up, obviously) 10 million baseball fans in NYC, in terms of what makes the league the most money, it's the same for 2 teams having 5 million each as it would be for 5 teams have 2 million each.

Sorry that should be "If having NY teams win more often is good for the league because they have more fans, why isn't it good for the league to have more teams in New York"

I think in the abstract, it would be fine. If the Dodgers and Giants had stayed, NY might have 3 healthy teams (although the Giants were struggling financially).

The problem is introducing a new team. I doubt NYC is going to subsidize another $1B stadium for a team with no fans; there would be no political support for that. Also, I don't see scads of disaffected NY baseball fans ready to jump ship from the Yanks and Mets to support a new team. And, where is the third big cable contract going to come from? Maybe MSG, but the Dolans are having all sorts of financial problems.

A New Jersey team might have a chance, but I don't see the state ready to pay for a stadium, and there is no city big/rich enough to do so.

I think a 3rd NY team just ends up being the Marlins-North; living off revenue sharing and centralized revenue.

I think a 3rd NY team would be more successful than that -- not as successful as the Yankees or Mets, at least not for a number of years, but even initially they would attract a lot of corporations and fans who either can't afford or get squeezed out of the Yankees and Mets empires. But for all the reasons you mention, there's no way this is going to happen.

I'm still very intrigued by snapper's numbers in post 84:

If you look at Forbes' estimates, the #1 MLB team (NYY) has revenues of $327M, #10 $194M, #20 $165M, and #30 $128M. For the NFL, #1 is also $327M (WAS), #10 $224M, $20 204M, #32 195M.

http://www.forbes.com/lists/2008/30/sportsmoney_nfl08_NFL-Team-Valuations_Revenue.html
http://www.forbes.com/lists/2008/33/biz_baseball08_The-Business-Of-Baseball_Revenue.html

There is no way to deny that NFL team revenues -- and team values -- are bunched much closer together than in MLB. I think this is one of the reasons the Minnesota Vikings have had so much trouble getting a new stadium to replace the Metrodome -- sure, they rank last in the NFL in revenue, but even with an underperforming team, they're still within 10% of the median NFL team revenue, and only about 15% from being a "top-10" revenue team. Statistically, somebody has to rank last, but it means a lot less in the NFL than in MLB.

I still don't know what the best MLB "revenue sharing" format would be, though. NFL revenue is based almost entirely on 8-10 league-promoted events per year. MLB team revenue seems to be highly dependent on maintaining day-to-day interest in a ballclub, and having the media and stadium situations to take full advantage of that interest. There is a huge revenue disparity, but there is also an investment disparity, as others have mentioned.

I still don't know what the best MLB "revenue sharing" format would be, though. NFL revenue is based almost entirely on 8-10 league-promoted events per year. MLB team revenue seems to be highly dependent on maintaining day-to-day interest in a ballclub, and having the media and stadium situations to take full advantage of that interest. There is a huge revenue disparity, but there is also an investment disparity, as others have mentioned.

The real issue is that the vast majority of NFL revenue come from 4 centrally negotiated national TV contracts.

This leads to all kinds of sub-optimal (for the league as a whole) behavior on the individual team level, e.g. teams leaving LA for StL and Oak, teams sticking with horrendous management for decades (Ariz, Det, Oak), etc.

Teams aren't punished for their poor behavior b/c TV money is national and shared equally, and it's pretty hard not to sell out 8 games a year. I believe this is a major reason NFL revenue growth has lagged MLB, badly. There is no financial pressure on individual teams to maximize their market potential.

Also, if you look at the MLB list, you'll see a bunch of the low revenue teams aren't small markets. Wash, Oak, FLA, and Ariz are all in top 15 MSA's by population, and Toronto would be top 10. So 5 of the lowest 11 are big markets that haven't developed the fan/revenue base effectively yet.

If the percentage of total MLB revenues going to major league player salaries is in a steady decline, shouldn't the player's union be advocating a salary cap/fixed percentage payout to the players? The last strike showed a lack of player solidarity on luxury tax issues. Perhaps a fight over a definite dollar percentage would give the union a stronger hand.

"This leads to all kinds of sub-optimal (for the league as a whole) behavior on the individual team level, e.g. teams leaving LA for StL and Oak, teams sticking with horrendous management for decades (Ariz, Det, Oak), etc."

Al Davis may have lost his marbles some time ago but to say his management of the team has been horrendous for decades is just plain wrong. Yes, the Raiders have been rubbish the last six years but they finished first in their division the first three years of this decade, including two trips to the AFC championship game and a trip to the Super Bowl.

In the past, the MLBPA has also stated that they're against a salary floor as well, on principle, even if there wasn't a salary cap on the other end.

NYRoyal

you seem very offended by the economic disparity in MLB. Clearly teams in New York and LA bring in much more money than teams in Cincinatti and Cleveland. personally I feel like MLB has done enough to level the playing field though. Are we ever going to see the marlins match the yankees, or even the mets payroll? No. Can they put a competitive team on the field every year? probably not. IF they commit to it, do they have the financial resources to put one together for a couple years at a time? Absolutely.

ANY team in major league baseball can be competitive if they make smart decisions and spend wisely. I hate to keep using the Marlins, but If they took their 36MM profit and invested 30MM in the team they could be much better, and make some of that money back. Look at the free agent field this year. theres a lot of bargains out there. you could make considerable improvements with 30MM. The twins and the A's have good models I think. they develop players and when a crop of them is ready to break out they pay people for a couple years and make a run, when that run ends their fans have to sit through a few bad years.

The truth is though they can certainly have winning teams, the bottom ten teams are NOT going to be in the playoffs as often as the top ten. get over it. there's simply no way to put everybody on the same level.

New York will always be New York and Oakland will always be Oakland, and the local revenue they get will always be proportionate to the city and whats going on there. The Yanks pull in a lot of money because in the thriving metroplis of NY,literally millions of people have lots of disposable income to spend on baseball. Oakland is a decaying craphole. It's sad but it's going on all over the country(I'm from buffalo, I know.)*

The only way to curb big market teams having more money is moving them, so unless you're envisioning a thrilling series between the Des Moines Yankees and Loisville Mets, We're just gonna have to live with it.


*having disposable income does not make you a better person, I'm sure there are just as many fine people in Oakland as in NY. Just wanted to make that clear.

This is my first post ever, and I won't sit and refute the math on this or propose that I have math to back up my claims, but...

If part of Dan's argument is that ineffective management has led to non-competiteness from some small market teams (which I tend to agree with) wouldn't this be a symptom of the revenue issue rather than a cause of the revune issue? Since many baseball decisions are not made by an owner but by a combination of GM, Asst GM, Manager, Scouting Director, Owner, etc. can't large market teams pay the more talented people more than small market teams? And won't small market gimicks like Money Ball, valuing draft picks and building very strong minor league systmes have limited longevity because eventually big market teams will mimic these techniques and reduce their value?

There was another thread of conversation that large marketplaces have larger fan bases, hence more revenue so baseball profits more when those teams do better. I think there's a very big chicken and the egg argument here. If those large market teams were not winners would they have as large of fan bases? If not, where would those fair weather/casual fans go? Would those fair weather/casual fans just be supporting different teams? I think the argument that the large market propenents make is that large market winning teams create casual fans or at least incrementally more than small market winners do. I'm not sure that lives up to the inevitable comparison to the NFL where in spite (it the above argument holds true) of small market winners, it's the most popular American sport.

Another argument for a cap or maybe against MLB marketing is the lack of a salary cap in MLB is a (either real or perceived it doesn't matter much) turnoff to fans. The argument that a team can outbid another because they had a resource advantage does not exist much outside of MLB (maybe a bit in the NBA, but not in the NFL).

And won't small market gimicks like Money Ball, valuing draft picks and building very strong minor league systmes have limited longevity because eventually big market teams will mimic these techniques and reduce their value?

I'm not sure how this follows at all. The actual strategies were only an indirect subject of Moneyball, the point was the larger demonstration of market inefficiency. There will always be inefficiency and places to improve and bad ideas to make better.

What you're arguing is essentially that there's a solution concept for baseball management. That seems a little far-fetched - it's only in the last year that a weak solution for Checkers has been demonstrated. Why would competitive baseball suddenly achieve what pretty much no other industry ever has?

Also, if you look at the MLB list, you'll see a bunch of the low revenue teams aren't small markets. Wash, Oak, FLA, and Ariz are all in top 15 MSA's by population, and Toronto would be top 10.

While you make a good point there's a logical reason behind all 4 of those teams being small markets. Washington, Florida and Arizona are all recently created/moved teams to areas with a very large transplant population. Meaning most people in the area are older and more likely to have allegiance to other teams from their birthplaces. And Oakland, while in a very large population center, has to deal with another team 10 miles away and a suburban area that would rather contract herpes than admit they are in any way associated with Oakland. Toronto has the apparent disadvantage of being a secondary sport in a city with a very large support system for their local preferred sport team (see converse examples LA Kings and Atlanta Thrashers).

My final argument, if there still is any on this thread, is this. I think we can all agree that what Florida is doing is not beneficial to baseball. I think we can also all agree that allowing 5-8 teams to be the only teams able to afford all the marquee free agents is not good for a 30 team league. And the idea of a salary cap even in the most non-sensical fans eyes was never to provide more revenue for greedy small mkt owners. There's another chicken and the egg argument. Does small market ownership require shrewder business acquemen since there is far less guarantee of intangible/goodwill benefits (playoffs, championships, moral victories, etc) thus making small market owners more about profits than wins? I'm not sure I'm phrasing that as well as I hoped but I think that the point is there.

I'm not sure how this follows at all. The actual strategies were only an indirect subject of Moneyball, the point was the larger demonstration of market inefficiency. There will always be inefficiency and places to improve and bad ideas to make better.

I probably should have said Sabermetrics instead of Moneyball.

What you're arguing is essentially that there's a solution concept for baseball management. That seems a little far-fetched - it's only in the last year that a weak solution for Checkers has been demonstrated. Why would competitive baseball suddenly achieve what pretty much no other industry ever has?

Let's pretend that I didn't have to wikipedia Solution Concept...

But it's magnified because you have a number of incompetently run teams living off the teat of others.

My point was in direct relation to this quote to say, if you have incompetently run teams, you have to have competently run teams (or overlycompetent?). For this to happen there has to be a knowledge/talent gap and if that exists don't large market teams have the ability to exploit that advantage with money the same as on the playing field?

My other point would be that small market teams have to be efficiently inventive and repetitively so to achieve consistent on field success or at least to combat the strategy of spending 2x as much money on the same number of players. On the flip side a large market team does not have to be nearly as risky but can still be efficient by mimicing successful small market practices a year or two after their initial implimenation (ie Japanese players which has now become a select marketplace where only a few teams compete for marquee players).

I just in good conscious cannot believe that lazy greedy small market owners are the problem and not the symptom of the problem of monetary discrepancy in the league. While I admit that baseball would be better served having a Mark Cuban type who's willing to spend James Dolan type money without the lesser revenue stream, I think that the current nature of MLB precludes those owners from existing and creates an atmosphere wherein it's easier to make $ than it is to get wins for small market teams.

Since many baseball decisions are not made by an owner but by a combination of GM, Asst GM, Manager, Scouting Director, Owner, etc. can't large market teams pay the more talented people more than small market teams?

Just touching on this, Cashman makes $2 million a year. Beane makes something like $1.5, plus a (small) portion of the club. When you get down to the Asst. GM, Scouting Director levels, the salary differences just aren't that big. Even the poorest team can afford high salaried front office personnel.

Why do I feel like I'm pulling teeth here? The revenue-sharing plan, which includes local television and ticket sales, shares at 31%. This isn't some guess.

And again, national TV, actually shared more than equally (MLB actually kicks in a little more to lower-revenue teams). International. Internet. Merchandising. All shared equally.

And a luxury tax on top of it all!

I'm so disappointed that I missed this discussion when it happened, so I could correct such mis-statements.

The Forbes numbers on the Yankees are totally wrong because they don't include YES. YES revenues alone are over $250M a year, producing over $100M in net profit for the Yankees. Essentially YES is a dodge used by the Yankees to avoid sharing revenues with their rightful owners, the teams that are featured playing the Yankees on the YES network. Historically visiting teams are due 40% of the gate revenues as revenue share. This should have translated to the TV age, but the yankees and other teams use regional sports networks to hide this revenue. Instead YES pays only about a third of the actual net profits to the Yankees to be shared with other teams, and diverts about two thirds to the team through the YES back door so it's unshared. Essentially YES and other RSN's enable theft by richer teams from poorer of revenues they are rightfully owed.

There has always been revenue gaps between teams, but RSNs have made those gaps much, much larger.

Which conveniently ignores that the Yankees can hardly count all the YES Network revenue as Yankee money given the ownership situation. The $65-$75 million in rights fees goes into the revenue-sharing pot.

They're making some money here from party-related transactions, no doubt, but who cares? The additional money would just go to buy Jeff Loria a bigger yacht or Carl Pohlad a nicer coffin.

MLB should no doubt use their wide discretion to independently evaluate YES's rights fees, but I don't see any moral imperative until the revenue-sharing system is drastically overhauled to repair the perverted financial incentives.

Which conveniently ignores that the Yankees can hardly count all the YES Network revenue as Yankee money given the ownership situation. The $65-$75 million in rights fees goes into the revenue-sharing pot.

Which means that total YES profits are in the range of $175M+, and the Yankees only share the amount YES pays in rights fees, $65M-$75M. That's outright theft from other teams who are probably owed another $40M+ by the Yankees. The yankees don't pay enough luxury tax to offset what they owe on regular revenue sharing on other teams product (i.e. their games with the yankees).

Which means that total YES profits are in the range of $175M+, and the Yankees only share the amount YES pays in rights fees, $65M-$75M. That's outright theft from other teams who are probably owed another $40M+ by the Yankees.

I didn't know that the half-owner of a network that shows Yankees and Nets games was allowed to take 100% of the profits and flush them into the Yankees.

So, your position is that the YES network should be paying 100% of their profits to the Yankees for right fees? After all, YES would have to be underpaying $120 million a year (on $150 million in profits for 2007) for $40 million to be missing from <strike>Jeff Loria's yacht fund</strike> the revenue-sharing pool. What exactly is your basis for saying that the Yankees are being underpaid by $120 million a year? I'm hoping you have something more than indignation about how slum lords are being unfairly "stolen" from.

It sure doesn't appear the Yankees are half owners, the Nets have been sold and Goldman cashed out. And it appears that the vast majority of the economic profit generated in YES, is generated by Yankee's games. Which means it's actually being generated by other teams playing the yankees, and that money should be shared, just like gate sales are shared. Maybe it's not a $100M difference, but you can bet there is a substantial difference between what YES pays the Yankees and what the Yankees would report as revenues were they to incorporate their YES ownership in their reported financials.

Or if the Yankees don't want to follow revenue sharing rules they can conduct a full season playing their A squad vs. their B squad and keep 100% of revenues to themselves.

Or if the Yankees don't want to follow revenue sharing rules they can conduct a full season playing their A squad vs. their B squad and keep 100% of revenues to themselves.

Except the Yankees are following the revenue sharing rules as they presently exist and they certainly weren't the first to develop their own cable network, being several years behind the Red Sox development of NESN and perhaps others. Some may want to change the rules but it's not likely, and I don't think we'll have any of those "small-market" teams leaving MLB while the value of their franchises continues to go up.

Except the Yankees are following the revenue sharing rules as they presently exist and they certainly weren't the first to develop their own cable network, being several years behind the Red Sox development of NESN and perhaps others. Some may want to change the rules but it's not likely, and I don't think we'll have any of those "small-market" teams leaving MLB while the value of their franchises continues to go up.

Except the present revenue sharing rules were put in place when ticket sales were nearly 100% of total revenues, and radio/tv revenues were incidental. The Yankee's certainly weren't the first to exploit RSN's (the Braves were), but they have clearly been the biggest abusers of the loop-hole, and funneled far more money through YES and outside the scope of revenue sharing agreements.

The fact that revenue sharing hasn't been updated to close these loopholes is directly attributable to large market teams taking advantage of this loophole fighting any efforts to close them.

Just checked - as of last year, the Yankees owned 36% of YES (source CNN):

Come on, this doesn't pass the sniff test. It's a private business operating in obscurity created for the express purpose of hiding revenues from other MLB teams. Do you really think they'll tell the truth? You don't think that maybe the Yankee's own 36%, and the Steinbrenner family another 36%?

And Goldman is so overleveraged it is nearly bankrupt, they have either already sold or will sell soon. But again, don't you understand that ownership can be structured in many ways to separate economic interests and control interests and to obscure what you want to obscure? Goldman and other investment banks have always offered to serve as owners in titles of assets to enable many of their clients to structure investments to minimize taxes and oversight of their activities.

Considering that MSG refused the Yankees demands of a 10-year, $1 billion contract, it's hard to see why as much of the tv rights is stowed away in party-related transactions as you think. If nobody else is willing to pay $200 million a year to broadcast the Yankees, why should the YES network be forced to give them $200 million a year?

That refusal was years ago. And if total profits from those broadcasts were $100M a year at that time, yes I expect MSG refused to run those games as a non-profit. Essentially YES was created to avoid sharing any significant portions of those profits with the carriers.

And YES is funding the building of a new $1B stadium for the Yankees. Doesn't that imply YES has enormous cash flow that isn't being paid in full to the Yankees?

Seriously, are you Jeff Loria's accountant or something?

Come on, Dan, you are better than this. If you can't completely rebut my arguments, your only course of action is to attack my motivations? Certainly I might be over-stating the case here, the Yankees may not be hiding $100M a year in revenues, it might only be $25M or $50M. But you can't deny that YES was structured to hide some revenues, and that this revenues are rightly shared with their opponents.

I can't stand Loria. I've advocated that the MLB should set minimum payroll levels at $75M or so just because of scumbags like him. My point is, get away from Yankee provincialism and the bias of small market teams, think about the sport as a whole. It was originally structured to ensure much more similar revenues for each team. Even if the yankees had double the revenues of the other teams, a 60-40 split ensures the playing field is closer to level.

As you and others have pointed out, even identical revenues would not ensure identical results. Some owners are simply far better than others, as is the management they would hire. But similar revenues at least gives teams similar opportunities to succeed, and that's all that matters. Looking big picture, I think it's important that if you want to attract fans in every city, that you give their home town team reasonable resources to compete. That's why I'd like to see a more even distribution of revenues with a high minimum payroll to go with soft caps like luxury taxes.

And to see Loria and his ilk banned from ownership for life.

but they have clearly been the biggest abusers of the loop-hole

Cable revenues have never been covered the way VA argues they should be. That's not a loophole, it's following MLB rules.