Mlb Revenue Sharing

DOES MAJOR LEAGUE BASEBALL REVENUE SHARING WORK? A LOOK AT THE GROWING DISPARITY BETWEEN LARGE-MARKET AND SMALL-MARKET TEAMS

Bryan H

BUSI 607

July 10, 2013

Abstract

This paper explores the revenue sharing models that have been used by Major League Baseball since the 1997 collective bargaining agreement and how the changes in revenue have affected the competitive nature of the game. These changes have given small market teams the ability to compete on the field and in the front office with teams that have larger revenues. The revenue sharing model has been adjusted as the imbalance continued after the initial creation of the revenue sharing pool to maintain the integrity of Major League Baseball and the continued operation of the small market teams. The paper also explores the implementation of the luxury tax and the impact that it has had on the payrolls of larger teams.

Major League Baseball’s Revenue Sharing

Every professional sports league or organization has the responsibility to both the players, coaches and fans to provide each team the opportunity to be competitive on the field as well as sustainable based on the market size and the potential revenues that are available. During the 1990’s and 2000’s this responsibility was called into question as for many of these years the same teams would earn a position in post season competition as well as win the championship. These teams included the Atlanta Braves, Boston Red Sox, New York Yankees, San Francisco Giants, and Los Angeles Dodgers. All of these teams are considered to be in large markets where television revenue as well as sponsorship allows these teams to incur a larger payroll which incentivizes the best players in the League to join these teams in order to help achieve championships.

Background

Prior to the 1997 Major League Baseball collective bargaining agreements revenue sharing was dictated by a straight percentage split between the home team and the visiting team on a per game...