MLB revenue disparity and its impact on competition

[Jopal78]

20 hours ago, stalton said:

I'm pulling numbers out of thin air here, but you'd rather have a 1 in 100 chance of winning the WS in an unfair system rather than the straight 1 in 32 if it were even odds just because the win would be sweeter?

It is irrelevant what I think, I don’t own a team or have a say. Obviously, the large market clubs like things the way they are, so if your team is not one of the big dogs you have no choice but to hope for miracles, or follow one of the big dogs.

[stalton]

51 minutes ago, Jopal78 said:

It is irrelevant what I think, I don’t own a team or have a say. Obviously, the large market clubs like things the way they are, so if your team is not one of the big dogs you have no choice but to hope for miracles, or follow one of the big dogs.

Certainly none of our opinions matter when it comes to what actually happens to the Brewers. I was just curious about your and others' opinions and general philosophies about fairness and winning odds. I have zero faith that this league will not come close to being fair short of something drastic but as fellow fans of a team with terrible odds, how do we redefine success?

[umphrey]

I just look at the highest spending team and the lowest spending team and wonder what difference sounds good to me. The Mets spent almost 6x of the As last year, I think it’s too high. I would like to see it more like 3x. I don’t mind the big markets having an advantage, I think it helps the sport, but I wish they would tame it down a bit. 

[Redd Vencher]

4 hours ago, umphrey said:

I just look at the highest spending team and the lowest spending team and wonder what difference sounds good to me. The Mets spent almost 6x of the As last year, I think it’s too high. I would like to see it more like 3x. I don’t mind the big markets having an advantage, I think it helps the sport, but I wish they would tame it down a bit. 

A lot of that is the A's actively cutting payroll to nothing rather than their ability to spend higher. 

[treego14]

On 1/3/2024 at 1:29 PM, Frisbee Slider said:

Is MLB in the business of fairness or maximizing revenue and franchise value?

If the latter, they are doing fine.

 

IF the latter trumps the former, I want a new league!

Unfairness ruins any sport!

[TURBO]

It is beyond me how anyone can defend the current system.

Are some so trained to accept the unfair structure of this league that they have just been brainwashed into thinking everything is all right?

I don't understand.

[brewerfan82]

58 minutes ago, TURBO said:

It is beyond me how anyone can defend the current system.

Are some so trained to accept the unfair structure of this league that they have just been brainwashed into thinking everything is all right?

I don't understand.

I'm for making progress towards a more equal playing field (more revenue sharing, incentives for exceeding a lower payroll threshold and punishments for exceeding a higher payroll threshold, etc.) and when I was half my age it really bothered me that the Yankees could buy their way to the World Series (making it there 6 out of 8 years in the late 90's early '00s) while the Brewers were being run by the Seligs on a nickel and a dime.

But over the next 20 years, seeing other small market teams like the A's, Royals, and Rays (and eventually our own Brewers) have stretches of success despite all the disadvantages built into the system became a bigger and bigger source of hope. And the closer we've gotten to the World Series, the more pride I've had as a fan that our organization could actually compete and outsmart the bigger market teams.

The odds are certainly stacked against us, but we've had a really fun stretch of baseball and part of that is because it's so unexpected considering how the system is currently setup (and how dreadfully awful we were for such a long time).

So while I'm not opposed to new measures to even the playing field, it would be so so sweet to get a championship under our belt while things are still stacked against us. Being an underdog has become part of being a Brewer fan and if we don't get that championship until all teams are playing with equal payrolls, it'll take a little shine off that trophy.

That being said, it would only be A LITTLE shine lost, I'll definitely take that championship anyway we can get it! :) #gobrewcrew!

[Playing Catch]

48 minutes ago, TURBO said:

It is beyond me how anyone can defend the current system.

Are some so trained to accept the unfair structure of this league that they have just been brainwashed into thinking everything is all right?

I don't understand.

Speaking for myself, part of the reason I don't mind a little disparity is simply due to the economics of things. The larger markets already subsidize the smaller markets, not just in financial terms, but in bringing eyeballs to ballparks and TVs. (Without doing any research on the topic), I would guess that the vast majority of baseball fans ONLY pay attention to their own team, unlike in the NFL or NBA. I know that once the Brewers are eliminated, my interest in baseball really craters. If MLB wanted NFL-levels of parity, MLB would lose millions and millions of eyeballs (and dollars) because if the Mets and Yankees were as bad as the Jets and the NY Football Giants, it would ultimately impact stadium revenue AND TV revenue in that market.

If we were being honest with ourselves about desiring a perfect competitiveness-to-revenue ratio across the league, The Brewers would move to New York to become more financially AND competitively viable.

With this said, I believe MLB is nearing that tipping point of competitiveness, and that further rules will need to be added to maintain the current competitiveness of the league.

[Fear The Chorizo]

I think the competitive balance luxury tax rules need to be re-evaluated.  Specifically, the accounting side of what % of deferred contract values get counted against yearly payroll amounts that figure into what a team's luxury tax amount is during the years players with those deferred contract payments are actually on the field.

With the current economic advantage that the Dodgers have over everyone else with their massive TV deal AND the accounting rules for the luxury tax, they can readily absorb deferred contract amounts and bounce back and forth around the luxury tax penalty while outbidding everyone else for players they either want to bring into the organization or retain in the organization.  If Ohtani's ~$70M AAV for a 10-year playing contract would factor into the teams' competitive balance payroll for each of those 10 seasons instead of the ~$40M or so amount, they wouldn't be able to ever get their actual team payroll below those luxury tax thresholds and reset their penalty without completely gutting the rest of their MLB team a few years from now.  The current luxury tax system is being skirted by the Dodgers due to their massive TV contract allowing them to essentially shift what their penalty would be to the league each of these next 10 years into deferrals to premium players after they also get the benefit of having them on the field now while other teams can't afford to even think about similar setups.  So, still a luxury tax, but not one that actually evens out "competition" at all because the team with the best financial setup isn't impacted on the field by it at all.

[brewerfan82]

2 hours ago, Fear The Chorizo said:

If Ohtani's ~$70M AAV for a 10-year playing contract would factor into the teams' competitive balance payroll for each of those 10 seasons instead of the ~$40M or so amount, they wouldn't be able to ever get their actual team payroll below those luxury tax thresholds and reset their penalty without completely gutting the rest of their MLB team a few years from now.  The current luxury tax system is being skirted by the Dodgers due to their massive TV contract allowing them to essentially shift what their penalty would be to the league each of these next 10 years into deferrals to premium players after they also get the benefit of having them on the field now while other teams can't afford to even think about similar setups.

Hope this doesn't completely derail the topic, but... my understanding is that if the Dodgers had given Ohtani a traditional contract that paid out equally over 10 years, it would have been for the $46M per year that the luxury tax is penalizing them for. Essentially a $460M contract distributed equally over 10 years is equal to a $700M contract distributed the way the Dodgers are paying Ohtani over the next 20 years. So any team able to pay him a $460M deal over 10 years would have been able to do the same thing the Dodgers are doing. If $700M severely backloaded over 20 years equals $460M over 10 years, then they shouldn't be penalized further than $46M per year just because they structured the same amount of money differently. If luxury tax wasn't adjusted for present day value, then you risk teams actually being able to skirt the luxury tax by severely frontloading contracts instead (ie. giving Ohtani $300M or whatever upfront over 10 years instead and only being penalize $30M against the luxury tax each year).

[tmwiese55]

Minor note on the topic as I've seen it mentioned so many times.  But the Yankees dynasty late 90s wasn't purely on the back of FAs.  It was primarily done with their own guys and them actually finally having the smarts to hold them instead of trade as prospects.

Did a quick looks up:  1998 payrolls they were #2 at 63 mil.   The top 10 teams only ranted from 70-50 mil.

1997: #1 at 59 mil. 2 was 55.  Top 10 only ranted from 59-45 mil.   

99 and 00 is when they and those around them starts to tick up and then it explodes after that and then they and Bos start going bananas.  But since then NY only has 1 WS, all the ridiculous FA money and spending since then has only gotten 1 title.   I guess I'm just saying its often overlooked the core of that Yanks team was homegrown or brought up with them when young.  And without doing a bunch of digging I would guess there was a structural change regarding finances that let them and the other big markets explode, top of my head it would be their local TV contract as cable TV exploded into every house in the late 90s/early 00s rather than being a luxury beforehand. 

[jay87shot]

I think think the league needs to implement a few things. 

1)Put in a salary floor and cap. I don't care if you start then at like 50 and 300 million as long as you compress the difference and by like 2028 make it like 110+ and 350. The mlb really needs to curb teams going on like 4/5 year rebuilds. It kind of makes it hard to be a fan and go to games when your team starts a full rebuild, having a respectable salary floor would force teams to keep some vets/fan favorites no matter what.

2)Fix the arbitration and contract length problems. The idea that it takes essentially 4ish years for superstars to make a reasonable salary is ridiculous. Then superstar who hit free agency get 10-12 year deals that pay them 40 million when they can hardly run (end of contract)is worse. A team like the Brewers can't compete in terms of years on free agent contracts with the big market teams. Especially if those deals are paying a guy into their 40's. If the league went to the players association with a way to get younger players paid better in return for a 6-7 year cap on contract length, smaller market teams could stand to keep more than 1 player long term (especially with a salary floor around 100). Essentially small teams can't have more than a couple devent veteran players (15+ million) contacts where as big teams have like 10 or so similar players.

3) Figure out the TV revenue disparaty. The league may be moving toward this but the Dodgers make over $300 million and the Brewers make about $30 (off the top of my head). Some disparity is needed but the gaps again need to be closed better.

I agree with the idea that you can't just make everything equal. However there needs to be things in place that don't allow a team to pay 1 player more than multiple teams spend in a year and allow smaller markets to stay competetive without constant rebuilds.

[Fear The Chorizo]

3 hours ago, brewerfan82 said:

Hope this doesn't completely derail the topic, but... my understanding is that if the Dodgers had given Ohtani a traditional contract that paid out equally over 10 years, it would have been for the $46M per year that the luxury tax is penalizing them for. Essentially a $460M contract distributed equally over 10 years is equal to a $700M contract distributed the way the Dodgers are paying Ohtani over the next 20 years. So any team able to pay him a $460M deal over 10 years would have been able to do the same thing the Dodgers are doing. If $700M severely backloaded over 20 years equals $460M over 10 years, then they shouldn't be penalized further than $46M per year just because they structured the same amount of money differently. If luxury tax wasn't adjusted for present day value, then you risk teams actually being able to skirt the luxury tax by severely frontloading contracts instead (ie. giving Ohtani $300M or whatever upfront over 10 years instead and only being penalize $30M against the luxury tax each year).

460M does not equal 700M.  Yelichs contract extension that has small deferred payments is still reported as the total amount he is eventually getting paid, so just because Ohtani is getting almost all of his actual dollars paid out to him after the playing years of the contract are over with doesn't mean he would have signed a $470m deal that pays him all upfront instead..he is still going to make $700m on this contract. One question that just popped into my head - will Ohtani's contract count $24m against the dodgers' luxury tax accounting payroll during each of his deferred years?  If not, it's total garbage. 

[brewerfan82]

33 minutes ago, Fear The Chorizo said:

460M does not equal 700M. 

Agree to disagree I guess :)

[brewerfan82]

43 minutes ago, Fear The Chorizo said:

Yelichs contract extension that has small deferred payments is still reported as the total amount he is eventually getting paid

This is incorrect: https://www.spotrac.com/mlb/milwaukee-brewers/christian-yelich-14316/

[brewerfan82]

44 minutes ago, Fear The Chorizo said:

just because Ohtani is getting almost all of his actual dollars paid out to him after the playing years of the contract are over with doesn't mean he would have signed a $470m deal that pays him all upfront instead..he is still going to make $700m on this contract

He probably should as he would likely make way more than $700M over 20 years if he was paid $470M upfront.

[jerichoholicninja]

As long as some teams are run by/owned by idiots and other teams are run by smart people there will never be a "level" playing field. 

[BrewerFan]

18 hours ago, jerichoholicninja said:

As long as some teams are run by/owned by idiots and other teams are run by smart people there will never be a "level" playing field. 

Or the wealthy teams will hire the executives of the well run team and run their organizations like the Rays(LAD) or the Brewers(NYMs) and the "level" playing field will become even more lopsided.

You really just explained the NFL...save for the financial component. Building a team with "smart people," helps a helluva lot more when you generate twice the revenue(or more) of the other teams.

[jjgott]

It's unclear why the only entity required to sacrifice in the name of more parity is labor .  Why, as fans, do we not demand more from the owners/executives?  Let's get real progressive:

1. A profit cap - Owners are capped at an annual 1% profit margin.  Ticket prices are also capped across the league and, like rent control, are capped at how much they can be increased year over year.

2. An "estate" sales tax - MLB receives a tax payment upon the sale of a team.  Money can be used to subsidize player salaries for smaller market teams.  Like real estate, the tax is assessed on the gain from when the team is purchased to when it is sold. 

3. An employee salary cap - Managers, GMs, trainers, etc. have a fixed pay scale akin to players.  So, for example, the GM of the Dodgers cannot make more than the GM of the Pirates, no matter how much better the GM of the Dodgers drafts. Or teams have a capped pool of money they can use for support staff.  So you can hire that star GM, but the head athletic trainer is just a kid straight out of PT school.  That way, owners can't just "buy" their way to a better run team.

I understand why the owners would never agree to this, but if parity is what we're after, might as well make it parity across the board.

[nate82]

On 1/13/2024 at 11:29 AM, Fear The Chorizo said:

I think the competitive balance luxury tax rules need to be re-evaluated.

I don't think the players union and the large market teams will agree to any changes unless there is a salary floor that increases with the cap.  Even making a slight change to the rules on the accounting side will need some other changes like this.  The owners as a whole weren't all that keen on adding a salary floor in the last CBA.

I don't believe the owners will make any changes to the luxury tax rules because they are unwilling to do anything about the floor.  I still believe a $100mm floor is perfectly achievable by all of the small market teams.  There shouldn't be a single team under $100mm in MLB.  If a team can't afford that as a minimum then it is time to remove them from MLB and become a AAA or AA team. 

[Fear The Chorizo]

6 minutes ago, nate82 said:

I don't think the players union and the large market teams will agree to any changes unless there is a salary floor that increases with the cap.  Even making a slight change to the rules on the accounting side will need some other changes like this.  The owners as a whole weren't all that keen on adding a salary floor in the last CBA.

I don't believe the owners will make any changes to the luxury tax rules because they are unwilling to do anything about the floor.  I still believe a $100mm floor is perfectly achievable by all of the small market teams.  There shouldn't be a single team under $100mm in MLB.  If a team can't afford that as a minimum then it is time to remove them from MLB and become a AAA or AA team. 

Based on this offseason I can see the Dodgers not wanting to adjust the luxury tax accounting rules...but I don't think any changes need to have universal agreement on the owners' side of things in order to be adopted, and the other large market club owners are probably more on the side of the small market clubs.  

And I don't know why the players' union would care if a competitive luxury tax rule change forces a team to account for the full value of a contract against the team's luxury tax payroll during the playing years of a contract - if anything, Ohtani's almost entirely deferred contract actually sets a precedent the players' union should be leery about.

 

[nate82]

7 minutes ago, Fear The Chorizo said:

And I don't know why the players' union would care if a competitive luxury tax rule change forces a team to account for the full value of a contract against the team's luxury tax payroll during the playing years of a contract - if anything, Ohtani's almost entirely deferred contract actually sets a precedent the players' union should be leery about.

Anything that would impact FA would be a concern for the players union.  The luxury tax is not something the players union likes.  In the last round the players union wanted assurance there would be a minimum to go a long with a more restrictive tax.  I believe the top cap would have been more like the NBA and the players union wanted there to be a minimum which the league rejected. 

Having a smaller or more restrictive top doesn't really do anything competitively when there is no floor cap. 

[Fear The Chorizo]

1 minute ago, nate82 said:

Anything that would impact FA would be a concern for the players union.  The luxury tax is not something the players union likes.  In the last round the players union wanted assurance there would be a minimum to go a long with a more restrictive tax.  I believe the top cap would have been more like the NBA and the players union wanted there to be a minimum which the league rejected. 

Having a smaller or more restrictive top doesn't really do anything competitively when there is no floor cap. 

I just don't view forcing teams to account for deferred dollars paid to a player on a contract during the time period the player is actually playing (i.e., the competitive window of that player's contract) as being more restrictive.  If anything, it should have been set up that way in the first place.  I'm not advocating the luxury tax limit to be restricted or grow slower, I'm advocating for the rules to be set up to force teams to pay the penalties for going and staying over those limits to MLB and then those penalty dollars actually being provided to smaller clubs that would lead to increased free agent contract signings by them, increasing their payrolls.  The way it's set up and with how the Dodgers are approaching things, it shouldn't be termed "competitive luxury tax".

This hasn't been an issue until the Dodgers are now using their massive TV contract to give them a way to skirt permanently being over the luxury tax thresholds by deferring ~95% of actual dollars paid to the best player in the sport until after his playing term of the contract he signed in free agency ends.

[BrewerFan]

20 hours ago, jjgott said:

It's unclear why the only entity required to sacrifice in the name of more parity is labor

I don't think anyone's asking for "Labor," the players to sacrifice anything. I think them earning ~50% of the total revenue is a GOOD thing. They're not at this point because the teams that make all the money are trying to not go too deep into the taxes and the small market teams just can't afford to pay everyone.

If this was like the NBA(forget the NFL, it'll never be that equal) then you would actually have more money going back into the players' pockets.

21 hours ago, jjgott said:

1. A profit cap - Owners are capped at an annual 1% profit margin.  Ticket prices are also capped across the league and, like rent control, are capped at how much they can be increased year over year.

No...I don't like that. It disincentivizes owners from improving the fan experience. 

21 hours ago, jjgott said:

2. An "estate" sales tax - MLB receives a tax payment upon the sale of a team.  Money can be used to subsidize player salaries for smaller market teams.  Like real estate, the tax is assessed on the gain from when the team is purchased to when it is sold. 

I...don't really have a strong opinion on this. It makes a little bit of sense, but it's really hard to see how you enforce this legally. It's akin to buying into a really not HOA and then when you sell your house, you have to pay them a % on top of everything else you've spent because the HOA has made all the properties more valuable. 

But sure. 10% of the sales price(after taxes...otherwise it's a little unfair to ask for 10% on a 6 billion dollar sale and you're already paying probably...30% after taxes with the capital gains and then the depreciation they claim that accelerates). So you sell for 6 Billion, you end up pocketing say...4 billion, 400M goes to MLB. That's unlikely to pass any type of legal scrutiny, but not a terrible idea. 

21 hours ago, jjgott said:

 

3. An employee salary cap - Managers, GMs, trainers, etc. have a fixed pay scale akin to players.  So, for example, the GM of the Dodgers cannot make more than the GM of the Pirates, no matter how much better the GM of the Dodgers drafts. Or teams have a capped pool of money they can use for support staff.  So you can hire that star GM, but the head athletic trainer is just a kid straight out of PT school.  That way, owners can't just "buy" their way to a better run team.

I don't really like this either. No other league has this and I don't think you should limit how much you can pay trainers or even your GMs. 

This should still be a merit-based business and you should be rewarded for success. 

21 hours ago, jjgott said:

I understand why the owners would never agree to this, but if parity is what we're after, might as well make it parity across the board.

You'll never get that. For instance, in the NFL...the Cowboys make a TON more than the Packers do. Even after they put the majority of their ticket sales, the TV revenue, merchandising...put that all in and divide it by 32, they still generate a ton more money.

 

BUT with the cap, with the floor, with the main thing, the revenue sharing, it hasn't provided that huge benefit. Now the wealthier teams still have some advantage in the NFL. They can stay ahead of the cap with cash(too much to get into, but they can keep giving signing bonuses, prorate it, push the cap down the road and they're spending 20, 30, 50 Million a year more and just using accounting and the ever-rising cap to push it down the road)...BUT it's not a system where the Chiefs and Packers can't afford to pay Mahomes and Rodgers or even Chris Jones and Kenny Clark. 

 

Make the floor 100M, the cap 300M. You can even have exceptions as you have in the NBA. You can go over for a 10/5 player...call it Brett Rights. I don't care. Just move the needle a bit without a system that's...I don't know what the word is...I guess punitive toward the owners.

 

If you lock in how much they can make and you lock in ticket prices, you'll end up with an inferior experience. Just no motivation to improve anything at the stadium. 

[nate82]

MLB is trying to get their luxury cap similar to the NBA but are unwilling to share more revenue with the players or put in a salary floor.  I am not sure why the owners want to keep on protecting the Orioles, Pirates, Reds, Guardians and Rays so much.  The Orioles specifically are still well under $100mm payroll.  The Brewers will be somewhere around $100-120mm in opening day payroll while the Orioles and Rays will be around $85mm and the A's right now are under $50mm.  The gap between the smallest market in MLB and the lowest payroll team could be upwards of $70mm. 

How is that even competitive?  Your lowest team is not even spending to be somewhat competitive in the league at all.  There needs to be a minimum in MLB without it even with a cap on spending it won't make the league more competitive when you have a team like the A's who are just there.  A $100mm floor shouldn't be a hard barrier to overcome and it can be done by all teams.