In the Best Interests of Baseball?

What exactly does the leaking of financial information about six teams by Deadspin.com seek to change at the end of the day?  In 2006–in the name of competitive balance–Major League Baseball, Inc. set in place a system to share revenues from the richest teams–those whose markets will always remain demographically enhanced–with the poorest ones.  Upsetting that apple cart is what the leaking of data is about and it may just be the opening salvo.

It is clear that the leaked data came from the large-market clubs.  The data posted by Deadspin focuses almost exclusively on the poorest of the poor–Florida, Tampa Bay, Seattle, Pittsburgh, and the Texas Rangers–although the Los Angels, one of the richest teams, was provided for contrast.  The tone of reporting about the data has been almost uniform outrage.  ‘How can these teams do so well economically while failing to field contenders?’

It is interesting how almost no one has focused on the Texas Rangers.  They are not a perennial small market team and they have been atop the AL West most of the season.  Yet from a financial standpoint they are among the most interesting.  The team just emerged from bankruptcy.  The documents provided to the bankruptcy court would be more illuminating in understanding the challenge that baseball teams of any market size face. As public records they are available to anyone, but they are unlikely to reinforce the underlying narrative that the poor are robbing from the rich, so they remain unexamined.

The other question is why the sudden interest?  Data on the bottom lines of every team has been made available by Forbes Magazine since 1998 and writers have made note of it ever since.  The Deadspin data provides a finer parsing of the balance sheet information, but the bottom line is the same. Yet it is remarkable how uniformly one writer after another has echoed the sense of outrage intended by whoever or whatever management personnel leaked the data in the first place.  No commentator has even mentioned that the Rangers situation was serious enough to force the team into bankruptcy.

Instead, writers generally sounded incredulous that teams like the Marlins and Pirates who have “cried poor,” can make money. Stefan Fatsis, talking to Bob Siegel on NPR on Friday afternoon said as much. To his credit Fatsis couched the discussion in terms of competitive balance and contrasted the experience of the Rays with the Marlins, saying that the success of the Rays in building one of the best teams in baseball is exactly why revenue sharing must continue.  The Marlins, he agreed, have done little to sow their revenue sharing funds back into payroll, and have walked off with profits that exceed those of most other teams.

The 2006 Collective Bargaining Agreement (CBA) between the owners and the Players Association created the current system.  It was haled as a breakthrough in addressing the issue of competitive balance, and whether it has been abused by owners pocketing its proceeds rather than re-investing them, it has had a positive effect on numerous small market teams like Tampa Bay that carry the flag of competitive balance with pride.

Numerous studies and regression analyses conducted during the 1980’s and ’90’s demonstrated the tight correlation between winning and overall payroll.  The 2006 CBA was intended to address that worsening situation and forced teams like the Yankees–who were spending money to win pennants at twice the level of the next richest team–to contribute money to the poorer teams based on their level of spending.  The Steinbrenners have expressed enduring resentment at the new efforts to level the playing field and along with the Boston ownership, would be among the most likely to have abetted leaking the financials on the six teams.

Stefan Fatsis on NPR speculated that the Deadspin leaks will likely decrease revenue sharing with a “payroll floor”  that requires more of the money be targeted at salaries.  That and other means to pressure small market teams not to pocket their windfall proceeds are a good thing, but there is reason to fear that the results of a new CBA may diminish the positive effects of revenue sharing overall.

Major League Baseball is uniquely healthy as a financial enterprise.  It has achieved that status by sharing the wealth.  As the Forbes data demonstrates, only two teams lost money in 2009–the Tigers and Diamondbacks.  But as is always the case, the rich have more resources to lobby against re-distributive mechanisms than those at the bottom of the pyramid.  The CBA is up for renewal in 2011 and the uproar over the Marlins and the Rays will increase over the next twelve months.  It must be galling indeed for the Yankees to forced to compete against the lowly Rays on equal footing for the AL East title. And even more galling for the Red Sox who must look up in the standings and see the “brother can you spare a dime,” Rays above them.

From 1955 to 2005 baseball saw its place in American culture diminished steadily as teams moved from cities in which they had played for the preceding fifty years.  Fan interest sagged as teams shifted and the baseball world re-organized to reflect shifting economic and demographic realities in the post-World War II world.  The 2006 CBA ended fifty years of economic uncertainty for most of baseball.  It created the opportunity for a new golden age of baseball.

Fan interest has surged in the last decades as new markets have developed.  It is in the interest of the game overall to see the Marlins and the Rays create new and expansive fan bases across the state of Florida.  Those toeholds remain tenuous, but if revenue sharing can help the Rays and Marlins to build new stadiums and better situate themselves, it is in “The Best Interest of Baseball,” as the clause in the Commissioner’s charter reads.

If cities like Pittsburgh and Washington, DC can use revenue sharing to re-develop fan interest in two of the oldest and most tradition rich baseball towns in the history of the game, that too is good for baseball.  The 2006 CBA has had only five years of effect, but already it has leveled the playing field for teams like Tampa and Minnesota.  The Twins were in danger of contraction a decade ago. Now, along with Tampa, they are poster children for the effects of revenue sharing, brought to fruition largely through the efforts of Bud Selig.

One can only hope that as this discussion moves forward, as the new CBA is negotiated, the larger number of owners who have benefited from revenue sharing will prevail and retain its basic leveling influences.  It is Selig’s ongoing legacy that as Commissioner he did serve, “The Best Interests of Baseball.” Tweeking the re-distributive equation to assure that more money is spent on payroll is in those same interests, but throwing the baby out with the bathwater is in no one’s.