Spring training has arrived, but that hasn’t stopped Major League Baseball’s economics from remaining a hot-button topic from all corners of the industry. Various franchise owners have expressed their concerns about the state of the game following an offseason that witnessed the Los Angeles Dodgers and New York Mets assert their financial might. In most cases, the owners state their desire for at least one of two proposed solutions: a salary cap and/or better revenue sharing.
As it turns out, agent Scott Boras has an idea for a measurement of his own to combat what plague’s MLB’s business: a metric tracking how much of each team’s revenue is being used on their roster.
“[We] look at the number of teams that spend 50% [of their revenue], you would guess how many? You would think a lot. No, it’s a very small number,” Boras said during a recent appearance on Foul Territory. “The Yankees spend 40%, they used to spend 55%. You’re going to have Boston in that area. You’ve got a number of teams that are spending below $100 million. For example, last year there were six teams spending below $100 million and the money they get from the general fund is above that.
“So, we really need to have a competitive commitment measure, a metric to say, ‘On your 40-man roster, how much of your revenues are you spending?'”
Let’s begin with an acknowledgement that Boras has a vested interest in teams spending at least 50% of their earned revenues. Just as owners have their own financial incentive for suppressing player salaries through a cap mechanism, he makes his living as an agent by receiving a share of what players sign for; the more money his players get, the more money he gets. That’s industry for you. Anyway, Boras is correct in his assertion that a lot of teams just aren’t spending. Back in mid-January, we noted that 15 teams — literally half of MLB — had handed out less than $30 million in total contracts this winter. Those numbers have changed since, but it’s still been a pitiful offseason for too many clubs, including a slew who receive bundles of money from the aforementioned general fund.
For those unaware, MLB’s Central Fund is part of the revenue-sharing mechanism that redistributes money from national broadcast and licensing deals (among other inputs) to teams on the lower side of the financial spectrum. While exact revenue-sharing payouts aren’t publicized, it’s not unusual to see reported estimates. The Athletic reported in December that the Athletics are believed to receive around $70 million in local revenue-sharing funds. In exchange for receiving revenue sharing, teams are supposed to spend at least 1.5 times the payout, as stipulated in the Collective Bargaining Agreement. The MLB Players Association has, on occasion, had to file grievances against teams who appear to be skirting that part of the bargain.
The idea here seems to be to flip the salary cap proposal — a mechanism that doesn’t actually promote parity based on empirical research — into a payroll-to-revenue framework. You can argue that 50% is too high or low, or that there are unintended consequences from linking the two. Let’s just cut to the chase and say that it doesn’t matter. None of it matters. This isn’t going to be implemented anytime soon, if ever.
The MLB Players Association and the franchise owners have been at odds over a salary cap for as long as there’s been free agency and a Collective Bargaining Agreement. This whole deal usually plays out the same way: the players refuse to take the owner at their word about the miserable financial state of franchise stewardship, while the owners decline to open their books to prove what they’re saying is true. All indications are that the cycle is unbroken, and it’s fair to think that this won’t be the time it ends with the owners airing their franchise’s revenues.
