It's Time for MLB's Billionaires to Embrace a Revenue-Sharing System With More Equity In It

[Matthew Trueblood]

A flat tax is almost never a good idea, because inequality exists almost everywhere, and flat taxes do far too little to address it. Major League Baseball is no exception, so their revenue-sharing system needs an overhaul.

Image courtesy of © Dave Kallmann / Milwaukee Journal Sentinel / USA TODAY NETWORK via Imagn Images

With the next round of labor negotiations hanging over MLB and its players like the sword of Selig, the possibility (or lack thereof) of a salary cap and floor system for the sport has become a hot topic lately. As ever, the MLB Players Association views that structure as a non-starter, while a significant bloc of team owners view it as the best way forward. Whether or not there's a work stoppage that makes the winter of 2026-27 a horrible, echoing silence (or even steals games from the 2027 slate) depends somewhat heavily on how hard teams push to achieve a cap.

Since that system is unlikely to come to fruition, though, the likely redress for the owners' concerns about costs and the union's concerns about teams not spending enough is reform of the revenue-sharing system already in place. That system is not working for anyone, right now, for a very simple reason: it's effectively a regressive income tax.

Many fans are surprised when they learn that teams already pool 48% of their net local revenues, including gate receipts, local TV rights fees, and more. That sounds like a lot, and upon hearing it, the impulse is to assume that no more sharing is needed.

Maybe the sheer size of the pool is sufficient, but reform is urgently necessary. Right now, using a three-year blended average of revenues, teams all owe 48% of what they make through eligible revenue streams, and then get back 1/30th of the money pooled that way. In practice, of course, it works differently than that. Based on revenue reports and projections, some teams make an estimated quarterly payment of what they'll owe (taking away what they would receive from the amount they pay), while others never make a payment but only receive the difference between their share of the pool and the amount they would have owed from their own revenue. In effect, though, everyone keeps 52% of what they make, and gets a dividend worth about 3% of all 30 teams' other 48% (less some money held by the central league office).

Let's use some imaginary figures (but ones that certainly bear some strong relationship to reality) to explore the effect of that revenue-sharing plan. Say that:

• The Dodgers make $600 million in net local revenue;
• The Braves make $450 million; and
• The Brewers make $225 million.

Under the current system, all three teams owe 48% of that sum to the league's pool. The Dodgers, then, would pay in $288 million; Atlanta would pay $216 million; and the Brewers would cough up $108 million. Even after taking out the money set aside for the Commissioner's Discretionary Fund and some to cover player benefits, though, each team's share of the resulting pool is somewhere around $160 million. So, the Dodgers would actually pay in $128 million; Atlanta would pay $56 million; and the Crew would receive $52 million. Again, these figures are all hypothetical, but you see the mechanisms at work.

The problem with this system is that the Dodgers kept $312 million as their non-shared segment of the pool, and then another $160 million that they would have been due when the pool was disbursed again. Atlanta kept $234 million, plus $160 million. Milwaukee, meanwhile, only receives $52 million via revenue-sharing. So, the three teams end up with the following amounts of local revenue with which to work, after revenue sharing "levels the playing field":

• Dodgers: $472 million
• Atlanta: $394 million
• Brewers: $277 million

Now, each team also has a huge amount of other money flowing in, mostly from national TV revenues—but also from any real estate or other investments attached to the product but not technically shareable under the rules. Add a flat $100 million or more to each of those numbers, and the percentage represented by the gap between each shrinks. Still, does this system give the Brewers any realistic way to compete with the Dodgers, financially? Of course not. That's because, even though the Dodgers are well over twice as rich as they are, the two teams pay the same (they won't call it this, but that's what it is) income tax to the league, on a rate basis. The gap doesn't close nearly enough.

The system needs a more progressive approach. In this negotiation, neither side wants to put any constraints on revenue or disincentivize earning, but a modest increase in the tax rate for the teams who make the most money wouldn't do that.

What if, instead of a flat 48%, the revenue-sharing rate was 40% for teams in the lower third of the league; 48% for the middle third; and 56% for the top third? In that altered situation, the three teams in our example would end up with very different amounts of revenue when the redistributions were complete. The league would collect more, and thus dole out more, and a larger share of that money would have come from the richest clubs in the league, to begin with.

In that scenario, these three teams might end up keeping:

• Dodgers: $444 million
• Atlanta: $414 million
• Brewers: $315 million

The gap still isn't closed, there, but it's much smaller. It's more plausible that a small-market team can keep its franchise player, and build a winner around them even as they enter their 30s. It's more likely that an owner will decide to flex their budget a bit and chase a championship. There would be messy bits to this, like teams jockeying to be on the right side of dividing lines between tiers, but this is one way for revenue sharing to do a much better job of addressing the massive inequalities in the modern game.

Big-market teams would howl at this, of course. There would need to be other concessions—perhaps, much to the union's potential delight, a slackening of penalties on spending beyond the competitive-balance tax threshold, or fewer advantages for small-market teams in the draft and in free-agent compensation—to mollify them. Both small- and medium-market teams would benefit, though, and the whole league would become more invested in the earning power of everyone else in the league. It could be the best way to avoid a sport-shattering work stoppage, and to make it easier for David to compete with Goliath.

 

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[Frisbee Slider]

Billionaires invested billions to buy their franchises, in some cases. It will be hard for them to diminish their own profitability ‘for the good of the game.’

[Frisbee Slider]

It would be like buying a house for $2 billion and then have it suddenly be worth $500 million less.

I get the Dodgers are now worth $5 billion but diminishing your own profits by hundreds of millions is tough.

[endaround]

The issue becomes that there needs to be a definition of "big market" that means "big market" and not just "we do a bad job of getting revenue from our market". The Rays play in a huge market and are right next to the huge Orlando market. Why should they get treated as a small market because they are bad at selling themselves?

[Matthew Trueblood]

1 minute ago, endaround said:

The issue becomes that there needs to be a definition of "big market" that means "big market" and not just "we do a bad job of getting revenue from our market". The Rays play in a huge market and are right next to the huge Orlando market. Why should they get treated as a small market because they are bad at selling themselves?

The league already has a formula to calculate market score. I'm not sure which criteria you're using here, but Tampa ranks 13th in the US in media market and 24th in NA in MSA population. Tampa isn't close to Orlando, and fan allegiance is lower there because many residents are transplants. I think we have a solid handle on who the behemoths and the have-nots are, here. And you'd certainly keep the market size disqualifier, which already exists in the CBA. If you have a market score that suggests you should be a revenue-sharing payor but your actual revenue positions you to RECEIVE shared funds instead, you get disqualified and your share is refunded to qualifying teams.

[Brock Beauchamp]

1 hour ago, Frisbee Slider said:

Billionaires invested billions to buy their franchises, in some cases. It will be hard for them to diminish their own profitability ‘for the good of the game.’

While you're correct that owners tend to not care about the long-term health of the game much, I have two counterpoints:

1. You don't need 30 owners to agree, you need 24 to agree. Aim for that number and the Dodgers/Yankees can pound sand. They can't stop you.

2. While the future is unknowable, sports history has thus far shown that team valuations NEVER go down.

[gregmag]

Outstanding article.  I never thought of revenue sharing in terms of an income tax before, but it clicked as soon as you framed it that way.
 

I worry that owners don’t really care about competition. They’re happy with the sport as a glorified exhibition tournament, where audiences tune in nationwide to see star players and fans are generally happy because the teams with the biggest fan bases win the most playoff series and championships. I don’t know how we address the competitive balance problem if the people who run the game don’t care about competitive balance.

[jesusoftheapes]

3 hours ago, Frisbee Slider said:

Billionaires invested billions to buy their franchises, in some cases. It will be hard for them to diminish their own profitability ‘for the good of the game.’

Well that is an intelligent take . I am glad it is not a mystery this is the way of the Rich.   The one thing Rich people love most is more money.     

[jesusoftheapes]

2 hours ago, gregmag said:

Outstanding article.  I never thought of revenue sharing in terms of an income tax before, but it clicked as soon as you framed it that way.
 

I worry that owners don’t really care about competition. They’re happy with the sport as a glorified exhibition tournament, where audiences tune in nationwide to see star players and fans are generally happy because the teams with the biggest fan bases win the most playoff series and championships. I don’t know how we address the competitive balance problem if the people who run the game don’t care about competitive balance.

Remembering their job is just to make their investment profitable is important.    

I think this is a topic that is not helping bring the fanbase together before a season and we should only talk about these things after the season is over as not to sully the coming seasons hopes and dreams.  

You are in no way wrong though. 

 

[jesusoftheapes]

Profit sharing in the NFL has made people a lot of money .   It has also made it so no one believes that the games are not rigged.      No one with honest  eyes can watch the NFL anymore and actually say they believe this is an honest game.     The thing about profit sharing is the league is in control of everyone now.   Those markets are designed to be profitable when they are needed an boost to their franchises coffers.   

I do not think it is the worst idea in sports to share money as long as thumbs are not on scales to disseminate that cash.    When sharing profits becomes normal so do manufactured outcomes so the unprofitable becomes more profitable in their market shares.  

 

So there are major downside to profit sharing in other sports and if implemented in Baseball the same way we can bet there is not going to be the outcome we all want from the practice. 

We need to remember that the second the NFL started profit sharing the game became near unwatchable .   I do not want the same thing to happen in the MLB.    

There has to be a better way then rigging the league to make everyone more profits.     So the proper system has yet to be devised but as long as this Commissioner is in charge here I highly doubt we actually get any meaningful change in the MLB that benefits anyone but the upper 10% of teams.    He likes the system he has build and won't be coming off of it anytime soon and that is WAY bigger of an issue than Owners profits .  

[Trax]

The Commissioner works for the teams, they are his boss.   As it is and has been allowed, the big market teams are the boss and that is a major problem.  

 

We only have to look at what the Dodgers and Mets have done recently, and then add in another big handful of teams.  It is a completely unfair system and it's the fans on the vast majority of teams who are getting royally ripped off with a system that is lopsided.

The stinking Angels make more money off of TV revenue than the Brewers make with that and everything else they do from ticket sales to concessions.  Look what the Dodgers and Mets and Yankees and a few more can pay in player contracts with better profitability whether they win or lose.   The difference is it doesn't matter if Ohtani shreds a knee tomorrow and Snell shreds his elbow, They've loaded their team to the point they still have a great shot at the Series.  Next year they'll just buy a couple more if needed.   The Brewers can't do that by a longshot and it's not the owner, it's the system.

 

The big market teams call the shots and they tell the small market owners to shut up and benefit from a growing asset.  The owners will have made a good investment in the end, they're taken care of to a degree.  It's we fans who get the shaft.

 

The fans need to revolt and the owners need to take the plight and the facts public.  We need a system of parity similar to what the NFL has.  If they don't go that route then they need much greater revenue sharing with harsh penalties for overspending.  A cap with a floor and a ceiling.   It is pathetic what MLB has become.

[Frisbee Slider]

On 2/27/2025 at 4:52 PM, Trax said:

We need a system of parity similar to what the NFL has.

The NFL is boring and trending downward. I appreciate they are still massively popular, though.

On 2/27/2025 at 4:52 PM, Trax said:

The stinking Angels make more money off of TV revenue than the Brewers

Los Angeles and Anaheim are more desirable television markets than Milwaukee and Wauwatosa.

On 2/27/2025 at 4:52 PM, Trax said:

it's the fans on the vast majority of teams who are getting royally ripped off with a system that is lopsided.

 

I would wager there are many more Dodger fans in the world than Brewers, Pirates, Royals, Twins, Rays and Marlins fans combined. We are a small minority.

 

On 2/27/2025 at 4:52 PM, Trax said:

 It is pathetic what MLB has become.

I assume there will be reforms after next CBA. A league with 30 equally mediocre teams is not the way, though.