Mlb Revenue Sharing

1.0 INTRODUCTION

Major League Baseball (MLB) is one of the few sports where the wealth of the franchise can significantly affect performance in the short and long run. The team with the largest year-to-year revenues can afford to spend incredible amounts of money on scouting, developing, and even buying the best players for the team, which some people believe creates inequity in the league. Teams such as the New York Yankees and the Boston Red Sox have consistently performed well each season, rarely missing the playoffs and even capturing many division, league, and World Series titles. These two teams have also been among the leaders in player payroll and revenues earned. Because these teams also rank highest in revenue producing ability, it is difficult for other teams to compete athletically and financially, even in the long run.

Inequity in the league has been a concern for many years. However, the Major League Baseball Players Association (MLBPA) and the league’s owners have had difficulty reaching an agreement that balances competitiveness while keeping both sides satisfied. The Collective Bargaining Agreement (CBA) between the two groups focuses on this issue. In 2006, a new CBA was created for 2007 to 2011 with revenue sharing being the key topic discussed. For many years, revenue sharing has been the commissioner’s long-term solution to baseball’s imbalances. Its focus is to funnel revenues from high-earning teams to low-earning teams. In theory, the lower teams would then spend money on better players, increasing performance, attendance, and club revenue.

This report discusses and compares revenue sharing methodologies under the new and old CBAs. It analyses the two methods in terms of benefits and disadvantages, as well as their impact on competitive balance in the league.

2.0 ANALYSIS

The major differences between the new and old Collective Bargaining Agreements include the straight-pool base contribution amount, a fixed vs. variable pool...