MLB's Revenue-Sharing Model Has Two Big Problems. How Can They Be Fixed?

[Jake McKibbin]

Image courtesy of © Mark Hoffman/Milwaukee Journal Sentinel / USA TODAY NETWORK via Imagn Images

Major League Baseball's revenue-sharing model was created to level the platform all teams play from, without completely removing the incentive for some clubs to seek stronger financial positions and revenue sources. The idea is that the Dodgers and Yankees need a sturdy competitive landscape to exist, in order to bring in the massive sums of money they accumulate. The problem is that, at present, two large loopholes exist in the league's revenue-sharing plan:

1. Some teams have managed to avoid paying what they should owe; and
2. The revenues shared are then distributed equally, rather than on a meritocratic basis. That disincentivizes some teams from trying to win and improve the on-field product.

Tax Avoidance
Let's start with the first, and perhaps the most obvious culprit: the Los Angeles Dodgers. Way back in 2012, with the team facing imminent bankruptcy after Frank McCourt siphoned funds from the club to finance his divorce, MLB awarded the Dodgers a favorable deal to pull themselves out of a hole. The following season, they would be permitted to treat their media revenue as a maximum of $84 million for revenue-sharing purposes, a figure that would increase by 4% each year thereafter. This deal would continue for the following 25 years. (Note: yes, that is a ludicrous period of time for this kind of deal.)

In 2017, MLB realized the folly of their ways and adjusted the initial starting point to $130 million, but even that has proven to be an insufficient change. The Dodgers' TV Deal with Spectrum far exceeds that; it's valued at $8.35 billion over 25 years, or $334 million per year. Here's how that looks over the course of the 25-year period, with all values below in millions:

Year	Real Local TV Revenue	Revenue Sharing Due	Adjusted Local TV Revenue	Adjusted Revenue Sharing Due	Annual Savings	Cumulative Savings
2014	$334.00	$113.60	$130.00	$44.20	$69.40	$69.40
2015	$334.00	$113.60	$135.20	$45.97	$67.63	$137.03
2016	$334.00	$113.60	$140.60	$47.80	$65.80	$202.83
2017	$334.00	$160.30	$146.20	$70.18	$90.12	$292.95
2018	$334.00	$160.30	$152.10	$73.01	$87.29	$380.24
2019	$334.00	$160.30	$158.20	$75.94	$84.36	$464.61
2020	$334.00	$160.30	$164.80	$79.10	$81.20	$545.80
2021	$334.00	$160.30	$171.10	$82.13	$78.17	$623.98
2022	$334.00	$160.30	$177.90	$85.39	$74.91	$698.88
2023	$334.00	$160.30	$185.00	$88.80	$71.50	$770.38
2024	$334.00	$160.30	$192.40	$92.35	$67.95	$838.33
2025	$334.00	$160.30	$200.10	$96.05	$64.25	$902.58
2026	$334.00	$160.30	$208.10	$99.89	$60.41	$963.00
2027	$334.00	$160.30	$216.50	$103.92	$56.38	$1,019.38
2028	$334.00	?	$225.10	?
2029	$334.00	?	$234.10	?
2030	$334.00	?	$243.50	?
2031	$334.00	?	$253.20	?
2032	$334.00	?	$263.40	?
2033	$334.00	?	$273.90	?
2034	$334.00	?	$284.80	?
2035	$334.00	?	$296.20	?
2036	$334.00	?	$308.10	?
2037	$334.00	?	$320.40	?
2038	$334.00	?	$333.20	?

With 48% of all teams' local revenues being shared, the Dodgers are saving over $60 million per year even now, halfway through this slow walk back to paying full freight. In the first year of Shohei Ohtani's contract, they saved the entire salary ($68 million) they deferred to after the end of Ohtani's deal in revenue-sharing avoidance alone. They were required to put that much into escrow, and they could easily do so, because they had all that extra cash they didn't have to pay into the league's shared pool. If the next CBA changes nothing about the fundamental revenue-sharing structure, the Dodgers will surpass $1 billion in cumulative savings in the first year of the new deal.

Another loophole in Major League Baseball’s revenue-sharing system involves local media deals, more generally. Clubs can manipulate revenue figures by acquiring partial ownership of the broadcasters that air their games. While revenue from local TV rights is subject to sharing across the league, profits generated through ownership stakes in the broadcasting networks are not. Instead, they are treated as a subsidiary/investment earning.

The most prominent example is the New York Yankees, who own a significant share of the YES Network. The network reportedly generates around $500 million annually, yet only about $200 million is included in the revenue-sharing calculations.

Other teams employing similar strategies include:

• Chicago Cubs – Marquee Sports Network
• Boston Red Sox – New England Sports Network
• Chicago White Sox – CHSN
• Atlanta Braves – Bally Sports South/Southeast
• Detroit Tigers – Bally Sports Detroit
• St. Louis Cardinals – Bally Sports Midwest
• Houston Astros – AT&T SportsNet Southwest
• Miami Marlins – Bally Sports Florida

Ownership stakes vary among these teams. For instance, the Marlins have a much smaller share in Bally Sports Florida, compared to the Cubs’ stake in Marquee. Additionally, the financial instability of Bally Sports and its parent company, Sinclair Group, introduces risk. However, in larger markets, the risks are lower and the financial rewards greater, enabling teams like the Yankees, Cubs, and Red Sox to significantly reduce their revenue-sharing obligations—at least relative to the spirit of the revenue-sharing rules.

The core issue with these loopholes isn’t the modest additional income small-market clubs would receive—less than $10 million annually per team, most years—but the missed opportunity to limit the spending power of big-market franchises. This perpetuates a concentration of top-tier talent among the wealthiest teams, increasing monopolization within the league. Addressing these loopholes would be a meaningful step toward greater competitive balance in Major League Baseball.

The league could go a long way to addressing competitive balance by implementing changes to address these two methods by which big-market teams reserve large portions of their revenue, which may handicap some in a meaningful way. The impact to the Dodgers of changing their revenue-sharing agreement would be substantial, but it's shrinking every year. The league already adjusted this once and could do so again.

On top of this, the shares in local network's to avoid treating them as local revenue earnings is a clear workaround—the type that, were it a tax avoidance scheme, would be closed quickly. It's particularly important the league do so, given that some of the ownership groups mentioned above (the Red Sox and the Cubs, most notably) do not appear to be investing as they are capable of. They're pulling that money out of the game's circulation entirely.

This all invites the question: Do small-market teams deserve a greater share of revenues?

Problem Number Two - This Isn't A Meritocracy
Some small-market teams take being competitive very seriously. The Brewers, Rays, and Guardians all take pride in their on-field product, trying to compete year after year. They have shown themselves to be capable of standing with, and beating, the bigger-payroll teams within their divisions. Over the last five years, the Brewers have four division titles; the Guardians have three; and the Rays have reached the postseason three times, with one division title and a 100-win season to boot.

The point of revenue sharing is to maintain a strong, competitive sport. These teams have certainly done that. Others have certainly not. Bob Nutting of the Pirates has invested almost nothing into his team, despite the increased draw of Paul Skenes and a phenomenal rotation behind him that's crying out for some offensive support. The Cincinnati Reds haven't been quite so poor, but they certainly haven't done much around Elly De La Cruz. The Chicago White Sox have been a dumpster fire, while the Rockies have shown minimal interest in doing anything that will actually help them win (though they have spent money; we'll blame this one on ineptitude). Finally, the Minnesota Twins' recent culling is a poor look for the sport and their fan base.

Some of these teams tanked in 2025, and will probably do so again in 2026. Some have done it on such a consistent basis that it should be questioned whether they deserve the additional revenue at all. Just as the Cubs should have extra revenues wrested from them if they're not rolling them back into the team, small-market teams with no intention of spending should be denied extra funds.

It's hard to argue against the Brewers, Rays and Guardians receiving more funds than the Pirates or Rockies from revenue sharing. They're advancing the sport, performing well within their markets, and playing some unique brands of baseball that allow them to win on the margins. With clear statements of intent, it seems as though these teams should be better rewarded. Teams with winning records could receive larger shares of revenue-sharing funds the following year, while teams who lose more than 100 games or spend less than a certain amount could be barred from receiving their full allotments the next year. Perhaps such a ploy would better incentivize small-market teams to compete with more urgency, addressing the competitive balance issue in MLB.

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Can you see any of the changes mentioned above coming into MLB in the next CBA? Would either make a difference? Let us know your thoughts in the comments below!

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[dsid74]

An easier addition to the CBA would be to provide small markets with additional draft picks/spending pools both domestic and international.  Give the small markets the advantage in developing home grown talent.  This is cheaper for small markets and reduces the need for large increases in revenue sharing, which the big market teams will support.  It provides them with more players to develop and control (cheaper) which offsets their inability to spend and compete with the big FA spenders.  

Should there be more revenue distributed to the small market teams?  Yes, but this is almost a no brainer.  When given the choice between giving up revenue or allowing small market teams more draft picks/spending pool, there shouldn't be a lot of teams balking at this.

[endaround]

"Some small-market teams take being competitive very seriously. The Brewers, Rays, and Guardians..."

*BZZZZT* Wrong!

The Rays are not a small market team. It isn't 1998 anymore.  Tampa-St. Petersburg is the 11th largest media market at 2.2 million households.  Orlando, which would be less likely to send fans to games but is right nearby for TV revenue is 1.9 million households and the 15th largest market.  Together that is bigger than Chicago that has two teams. The Rays are one of the problems in baseball because they don't fully utilize their market.  They should be a net contributor to MLB  not a taker.

[Trax]

This out of balance MLB is beyond perverse,     

 

There are a number of ways to address it the best being a similar cap situation like the NFL has.

The big market teams teaming with the players union will never allow that to happen.   The next best way would be to address revenue sharing in a big way along with penalties for teams going over certain thresh holds.  Losing international money, losing draft picks, whatever it takes.  You could also provide additional high picks to the smaller market teams.  Some kind of cumulative affect, but I think without a cap you need both carrot and stick.  Reward and penalty. 

[eddiemathews]

2 hours ago, endaround said:

"Some small-market teams take being competitive very seriously. The Brewers, Rays, and Guardians..."

*BZZZZT* Wrong!

The Rays are not a small market team. It isn't 1998 anymore.  Tampa-St. Petersburg is the 11th largest media market at 2.2 million households.  Orlando, which would be less likely to send fans to games but is right nearby for TV revenue is 1.9 million households and the 15th largest market.  Together that is bigger than Chicago that has two teams. The Rays are one of the problems in baseball because they don't fully utilize their market.  They should be a net contributor to MLB  not a taker.

I think their problem is somewhat the same as the Marlins. So many of the folks that live down there are relocated from elsewhere and aren't interested in the Rays. Perhaps the new stadium will help, but it hasn't seemed to help the Marlins. 

[Sixtolezcano]

9 hours ago, Trax said:

This out of balance MLB is beyond perverse,     

 

There are a number of ways to address it the best being a similar cap situation like the NFL has.

The big market teams teaming with the players union will never allow that to happen.   The next best way would be to address revenue sharing in a big way along with penalties for teams going over certain thresh holds.  Losing international money, losing draft picks, whatever it takes.  You could also provide additional high picks to the smaller market teams.  Some kind of cumulative affect, but I think without a cap you need both carrot and stick.  Reward and penalty. 

This wouldn’t solve this problem as once the smaller market teams extra picks reach FA they still wouldn’t be able to afford these player due to less funds. The smaller market teams would still remain farm teams to the larger market teams.

[Trax]

Without a true cap largely increased revenue sharing would have to be part of the package so that the small market teams could compete far better than now in order to retain and bring in outside talent.  Carrot and stick, stick being penalties.

 

But no doubt an NFL cap is the way to go.  Big market teams and the players union will never allow it.