P2 – Who are the Bad Guys?

Wrong question.

OK, if the Marlins profitability is so obvious, how do they get away with suggesting that they are not profitable [or revenue-neutral, David Samson’s favorite obfuscation] and that their finances are too complicated for writers and fans to grasp?

Forbes aside, it is not in the best interests of those in position to call them out on it – MLB & the Revenue Sharing payer teams – to do so. Here’s my perspective on each of the groups involved:

Florida Marlins / Revenue Sharing receiving teams – By keeping their finances hidden, they avoid the pressure to spend MLB’s Revenue Sharing monies on player salaries. Every MLB team attempts to hide their finances, teams receiving Revenue Sharing monies have the most incentive to do so.

MLB / Commissioner Selig – While guarantying that revenue sharing monies would continue to increase in the new Collective Bargaining Agreement [CBA] in effect for the years 2007 through 2011, MLB avoided placing specific demands on what the teams receiving the Revenue Sharing monies would have to spend on player salaries. The likely reason would be to avoid the organizational nightmare of micro-managing the 7 or 8 small market teams which are typically receiving the Revenue Sharing monies. Having Revenue Sharing receiver teams not spend their Revenue Sharing monies is a headache for MLB and a threat to the Revenue Sharing structure which has developed under Selig [see Pittsburgh Tribune-Review article]. They would prefer that the smaller market teams use the money to be more competitive, but their main incentive is achieving labor peace [CBA] and staying out of the way thereafter.

The CBA contains language which indicates that teams receiving Revenue Sharing monies must use them to “improve on-the field performance.” No team has ever been disciplined or had a grievance filed against them for violating that policy. Which is one reason the Marlins just can’t come out and say that they intend to pocket Revenue Sharing monies to help fund their portion of the planned stadium construction costs. Assuming that were true.

Revenue Sharing payer teams – i.e. Yankees, Mets, etc. – While they too benefit from MLB’s veil of secrecy regarding their finances – both NY teams are currently having stadiums built which will benefit from public monies [see NYT article] – it must still grate them to watch teams like the Marlins & Rays pocket their money. But apparently not enough of a problem for them to mess with their golden goose or they would have insisted on provisions which left no doubt as to how teams receiving monies would have to spend those monies. I would assume that Revenue Sharing payer teams are an excellent source of information for Forbes researchers.

But if you doubt the resentment, just read what the Yankee’s Hank Steinbrenner said recently. “I don’t want these teams in general to forget who subsidizes a lot of them, and it’s the Yankees, the Red Sox, Dodgers, Mets,” he said to The New York Post. “I would prefer if teams want to target the Yankees that they at least start giving some of that revenue sharing and luxury tax money back.”

Local Media – Because the Marlins finances are not public information, there is a limit as to how strongly they can attack the Marlins claims, without having to back down because of a lack of hard evidence. In addition, it is not the type of material which the typical sports reader or listener could be expected to be interested in. Aside from making a name for themselves, there are practically no incentives for people in the media to pursue this issue. In fact, the incentives would if anything, argue for a harmonious relationship, given their inter-dependence from an advertising and programming perspective.

Players Union – These guys are killing my incentive narrative. If the Yankees are ‘taxed’ $76 million, which could have been spent on a multi-year deal for some aging pitcher who would have broken down in 18 months, and the Marlins & Rays proceed to not use those monies for player salaries – that would appear to be an invitation for the Players Union to get involved [insert steroids conspiracy theory here].

Local Government – Those who oppose public monies to build stadiums for sports franchises are the other group whose interests would coincide with getting into the Marlins finances. However, their arguments are often too populist [rich owner rant, etc] to have a meaningful effect.

Marlin Fans – We have no leverage. Hey it’s not like threatening to stay away is still an option.

To put the conflict among the various parties in economic terms; While at a macro-level it may be desirable for each entity to pursue their own interests [see Adam Smith], at the micro-level it frequently gets messy and complicated [see Virgil Sollozzo].

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About Jorge Costales

- Cuban Exile [veni] - Raised in Miami [vidi] - American Citizen [vici]
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3 Responses to P2 – Who are the Bad Guys?

  1. Eric Toms says:

    I think revenue sharing also suppresses player salaries. Whether or not it also contributes to parity amongst clubs is arguable as is whether or not parity contributes to increased popularity of the league.

  2. Jorge Costales says:

    You’re right about suppressing salaries – the combination of the payer teams having the luxury tax as a dis-incentive and then if the receiving teams just keep the monies

  3. Another reason to not mandate that revenue sharing be spent on payroll is that pesky issue of time horizons. What if I’m a small market owner and want to bank profit for 3 years while I build up my team with young (cheap) players and then spend the banked money to get one or two free agents? By making me spend this year’s money this year you’re telling me how to run my franchise in a way that may not be the most conducive to winning in the long run.

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