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Home Maury Brown MLB Can't Have Their Cake and Eat it Too (Revenue-Sharing)

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MLB Can't Have Their Cake and Eat it Too (Revenue-Sharing) PDF Print E-mail
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Written by Maury Brown   
Tuesday, 24 November 2009 14:10
Scott Boras
Scott Boras' message on money being transferred
between the haves and have-nots in MLB is self-
serving, but that doesn't mean the message isn't
correct.

The tension between management and labor in Major League Baseball continues to rise as agents and some in the MLBPA believe that collusion to keep player salaries down is afoot, while those in the league office and within the individual clubs vehemently deny it. At the center of the dispute is how much (or little) the downturn in the economy has impacted MLB.

On the final day of the owners meetings last week in Chicago, Commissioner Selig said that there was no question some clubs lost money this year.

"I think of all the heartache that's in the world,” Selig said. “We live in this environment. We don't live in a bubble. And so, I think the clubs in some areas have been hit a lot harder than others."

But, in the overall, baseball is weathering the recession better than expected.

Major League Baseball had three attendance projections at the beginning of season that ranged from flat, compared to 2008, down 10 percent, or down 20 percent. Selig and Co. were more than pleased by the end of the regular season. Total attendance for 2009 was 73,418,529, down 6.58 percent from a total of 78,591,116 in 2008. The total regular season attendance figure ranks as the fifth highest in MLB history. In another measure of attendance, ballparks saw an average of 30,338 over 2,420 games, down 6.77 percent from the 32,543 in average attendance over 2,415 games last season.

While the league is still crunching numbers, the MLBPA has projected that total revenues for MLB should be $6.3 billion, down 3.17 percent compared to the record-setting $6.5 billion last year.

Into this mix steps baseball’s most powerful and polarizing agent, Scott Boras, and MLB Executive VP or Labor Relations Rob Manfred.

Boras, citing a report by Bill Madden of New York Daily News in August, claimed that due to revenue-sharing and centralized funds, some low-revenue making clubs were pulling in-between $80 million-$90 million before a single ticket was taken at the gate, concession sold, or parking paid (he later clarified to say that the figures were between $70-$80 million). As Liz Mullen and Eric Fisher of the SportsBusiness Daily reported, Manfred said of Boras, "He completely made those numbers up." Manfred made similar statements to other media, including telling the Boston Globe that Boras' comments "have no basis in reality" and said Boras was living in "fantasy land."

Since then, Boras has been on ESPN and Jayson Stark has looked into the figures. As Stark wrote of the Pirates, and Marlins:

Your team collected more money this season -- before it ever sold one ticket -- than it spent on its entire major league payroll. In fact, it collected more than it spent on its major league payroll and its player-development system combined.

Stark, using sources, finds that when combining revenue-sharing, central funds (national television, MLB Advanced Media, MLB Network, Luxury Tax etc.), and local media rights for television and radio, finds that $80 million to $90 million is not out of the question.

Looking At Revenue-Sharing

Determining whether the centralized funds or local revenues are correct is a matter of how solid Stark’s sources are. I’m not going to debate that (for the record, they appear solid), but you can bet, some in the league don’t like what they see, so let’s remove everything but the revenue-sharing.

This year, approx. $400 million will be distributed from high revenue making clubs such as the Yankees and Red Sox to those at the low end of the spectrum, such as the Marlins, Pirates, Rays, and Royals.

Revenue-sharing figures for each of the 30 clubs have not been leaked to the media since 2002-2003, and 2005 (see the complete set of figures), which saw revenue transfers of $169 million, $220 million, and $308.4 million respectively.

So, just over $190 million more in revenues will move between payors and payees this year compared to the last year that full figures were available in 2005, an increase of 22.9 percent.

Looking back at the figures from 2005, the Rays had the highest level of revenue-sharing funds come their way at $33 million. Since 2005, the revenue-sharing formula has become far more complex than in the prior CBA, using a system that looks at trailing years of revenues, and other factors. But, for discussion sake, if we look at the largest receiver of revenue-sharing funds over the life of the data we have (Expos for 2002-2003, and Rays in 2005), we could apply an approx. 3 percent increase from then to now. That would give the team receiving the most revenue-sharing in 2009 (likely, the Marlins), $42.9 million in revenue-sharing funds. So, if we were to add Stark’s central fund average, minus pension fund of $30 million, the idea that a club received between $70-$75 million in revenue-sharing and centralized funds is not out of the question.

With that, here's some Opening Day player payroll figures (minus bonuses, deferred payments and incentive clauses, or, money paid or received in trades or for players who have been released). to digest:

  • Marlins - $36,834,000
  • Pirates - $48,693,000
  • A's - $62,310,000
  • Royals - $70,519,333
  • Padres - $43,734,200
  • Nationals - $60,328,000
  • Rays - $63,313,034

Why Is MLB So Defensive?

Ken Rosenthal of FOXSports.com also reported on the war of words between Manfred and Boras over the figures cited, with Manfred highlighting management’s concerns over the messenger of the figures.

"Just like when he does a player negotiation he lies about the numbers in order to get the price up, now he's taken that to the macro-economic level and lying about industry numbers in order to get player (contract) numbers up," Manfred said. "There is no one club getting $80 or $90 million in combination from revenue sharing and Central Baseball. Not one."

Boras cast doubt on Manfred's statements generally, saying he "has never disclosed information about funds that teams get from Central Baseball or revenue sharing."

"Rob Manfred works for the owners, has always worked for the owners," Boras said. "The information I've gathered is from documented, substantive sources — the Daily News, the SportsBusiness Journal. I stand on the record of documented information, not on the basis of information of someone who is biased due to his employment."

When sports economist Andrew Zimbalist was made aware of the figures Boras cited, he said, "It should surprise no one to learn that Boras is blowing hot air again and that Manfred is correct."

As mentioned, above, Boras clarified that the figures were closer to between $70-$80 million, but Manfred and Zimbalist are focusing on Boras, rather than the overall message.

It should surprise no one that Boras has an agenda, and that agenda is to get the most out of the free agent market as possible. Manfred is, of course, looking to thwart Boras’ efforts. The defensive tone simply shows that this battle between high-profile agent and management has been raging for some time.

But, Manfred and Zimbalist focus on the figures, rather than the message, which is while some clubs may have suffered at the local level due to the economy, revenue-sharing and centralized funds have buffeted them to an extent against the decline.

Select Read More to see the solution MLB doesn't want you to have

The Solution MLB Doesn’t Want

There is, of course, a solution to this dilemma, but MLB wants no part of it: release the revenue-sharing figures, as was the case in 2002-’03, and 2005. The difference between then and now is that leaking the figures doesn't serves MLB any purpose. In ’02-’03 it was to show that Selig’s revenue-sharing system was working, while 2005 was to solidify the system leading up to negotiations for the current CBA.

As I noted, revenue-sharing figures leaked to the media have dried up over the last few years, which is by design, and completely within MLB’s rights as a private industry to withhold the data. As Zimbalist noted, “This is a product of private ownership and proprietary information.”

Zimbalist is correct, of course, but then MLB, through Manfred or any other representative, has no leg to stand on when I, or Stark, or Madden, or for that matter, Boras, talk about what the figures most likely are.

Major League Baseball can’t have their cake and eat it too. If the league wishes to stand on the grounds of the revenue-sharing figures being proprietary – a lack of transparency – so be it. But, don’t get defensive if column after column there are questions as to how some clubs are receiving considerable funds to assist them in competing with large revenue-makers only to claim that, woe is me, we’re losing money due to the recession. If MLB wants that discussion to dry-up, simply release the figures.

Whether a method to address clubs spending too little on player payroll involves a luxury tax in reverse, as Stark has suggested, or that there are stiffer penalties for those that breaking the luxury tax threshold repeatedly, such as the Yankees have, to achieve a greater sense of economic parity, as I have suggested, the debate will continue to rage. Baseball can choose to make the discussion difficult or easier, as is their prerogative.  But, Manfred shouldn’t get defensive at Boras, despite his transparent selfish needs. If the league has decided to stonewall on the topic of funds being transferred to and from clubs to achieve economic parity, then live with the chatter.


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Maury BrownMaury Brown is the Founder and President of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey. He is available for hire or freelance. Brown's full bio is here. He looks forward to your comments via email and can be contacted through the Business of Sports Network.

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