First Pitch: MLB Has Two Major Problems, Only Cares About One

MLB LogoThere are two big problems for Major League Baseball that have come up over the last few days. The big story in all the national outlets is the most recent steroids scandal. The Miami New Times broke a story this week linking several top players to illegal steroids, including Alex Rodriguez, Gio Gonzalez, and Nelson Cruz. The steroid story has been an issue for the last decade, ranging from speculation to names being released, to the Mitchell Report, and now to this. MLB has taken a hard public stance against steroids, yet the problem obviously still remains, as we’ve seen in the recent news.

The other story hasn’t received as much news lately, even though it is a far bigger story. The Los Angeles Dodgers finalized a 25-year, $7 billion deal for their local TV rights. We’ve known they were going to be getting a huge deal ever since they traded for almost every big contract in the game. This is a huge problem for baseball, definitely bigger than steroids. It’s also a problem that has been public for much longer than the steroid issue. For the last 20 years the gap between big spenders and small market teams has been growing. That’s led to a huge advantage for big spenders. Ever since 1994, only one team has won the World Series with a payroll in the bottom half of the league. That was the Florida Marlins in 2003. Last year that mid-point was $97 M.

The Dodgers will receive $280 M per year, just from their local TV deal. To put that in perspective, if the Pirates had an $80 M per year TV deal, that would be considered huge for their market. That’s $80 M before they receive any ticket sales, revenue sharing, money from national deals (which is usually included in revenue sharing), or any other means. Even if they had a deal like that, the Dodgers would still have $200 M more. The Dodgers won’t get the entire $280 M each year, but that doesn’t change the fact that they’re starting off well beyond every other team.

As we’ve seen with the Yankees, out-spending every other team won’t get you a World Series every year. It will get you to the playoffs almost every year, and make you a favorite for most of that time. The Dodgers are also entering uncharted territory with their deal, going well beyond where the Yankees were spending. What happens if a few more teams make that jump? Then you’d have an even bigger divide between the big spenders and the smaller market teams.

MLB has taken a very public stance against steroids, but has ignored the competitive balance problem. In fact, they’ve made public statements that it isn’t a problem. Every time a small market team becomes an incredible story and makes the playoffs, Bud Selig points to that as a sign that baseball’s competitive balance is working.  You never hear anything when that team is eliminated. You also don’t get an explanation of why it’s always a huge story when small market teams have success, yet there’s nothing wrong with the competitive balance. If there was nothing wrong, then it wouldn’t be a story at all if the Pirates or the Athletics or the Rays had breakout seasons. It’s not the story of the year in the NFL when the Steelers, Raiders, or Bucs make the playoffs. MLB only cares about one of these problems, but they both have similar downsides.

Steroids is a black eye for the sport. It tarnishes records, and raises questions about how level the playing field is if some athletes are juicing. At the same time, we already know that the economic playing field is completely unbalanced. It seems silly for MLB to worry about whether some players may have an unfair advantage over others when a third of the teams in the league are at a clear disadvantage.

A concern with steroids is that it could drive fans away. If fans can’t trust the athletes, then why should they follow the sport? But I don’t think many fans would be driven away because their favorite player was busted for steroids. Most fans follow teams, not players. Once again, MLB has a third of the league at a huge disadvantage. That does drive fans away, especially when they know that their team starts with almost no chance of winning it all.

Think about the NFL and the teams that are consistently winners. It’s usually the smartest teams who draft well, have a system, add players into that system, know which players to keep, and know when to move on from an aging player. The NFL is set up so that every team has a fair shot at winning, and the smartest teams are consistently some of the better teams in the league.

Now think about Major League Baseball. The teams that are consistently good are teams who spend money. Not every team that spends a ton of money is good, but teams that spend $100 M or more have an advantage. They can cover up their mistakes with more money. If the Pirates saw Alex Rodriguez go down with a season ending injury, they’re not going out and adding a $12 M a year third baseman like Kevin Youkilis. If they were to just add one $12 M a year player, that would pretty much be the limit for them.

If Major League Baseball was fair, the Rays would have won a World Series by now. Instead the Rays made the World Series once (lost 4-1), and were eliminated in the ALDS twice against the bigger spending Texas Rangers. The fact that they’ve won 90+ games in four of the last five years, all with the limited budget they have, shows how smart they are. The smartest teams in football don’t go through those kinds of stretches where they make the playoffs every year and fail to win a Super Bowl. Unless they’re located in Philadelphia.

Unfortunately this isn’t going to change. MLB isn’t going to do anything about this because there’s no outcry. You don’t hear anything from the owners, other than the token “We’re going to address that” from the small market teams. In reality, it would take a Wellington Mara-type owner from a big market team who would have to lead the way to change for the long-term good of the league. MLB has never been about the long-term though. They’re only about the short-term money. That’s why World Series games start after 9 PM on a school night. Sure, a generation of fans down the line will be gone, but right now you get bigger advertising dollars. The sport just brought in almost $14 billion dollars between the National TV deals and the Dodgers deal. I don’t think anyone is going to be rushing to change things.

There’s also no public outcry, unless you count small market bloggers. This isn’t an issue that impacts the big markets, and the national media usually caters to the big markets. You’d need the national media to create some serious public outcry, and that’s not happening. That’s especially not happening when the national media celebrates it when a small market team has a surprise breakout season, while ignoring that if the league was fair, there would be no reason to celebrate any team having a big year.

There is national attention with steroids, and that’s the only reason MLB does something about it. There were grumblings in the 90s, but MLB was able to look the other way. They only started dealing with things when it became impossible to look the other way. Even then, the problem isn’t solved. There’s no real downside to taking steroids. Just look at Melky Cabrera. Cabrera took steroids, but has made $12.6 M in his career. Even after being busted for steroids, he received a two year, $16 M deal. So what’s the downside? You’re going to get millions of dollars, but if you get busted you’ll have to sit out a portion of the season, only to get millions of dollars when you return.

Even if MLB comes up with a way to void contracts, there’s still no downside. If Alex Rodriguez gets his contract voided by the Yankees, he has still made $325 M in his career. And if the Yankees void his deal, he’s going to get signed by another team. It probably won’t be for $30 M a year, but if Kevin Youkilis can get $12 M, then A-Rod won’t be hurting.

Worst case scenario for steroid users is that they are tested early, before they have the chance to make big dollars. But if you have a drug that could help you make millions of dollars, I’d have to think players would take that risk.

In reality, MLB isn’t really dealing with the steroid issue. They’re giving the appearance that they’re dealing with it, but the punishment doesn’t fit the crime. It’s like giving out $5 tickets for speeding. It’s a slap on the wrist, and I don’t think it’s going to make players think twice about steroids. The only reason they’re taking this approach is because it has become a national story. They’re forced to take action. That’s the biggest difference between the steroids story and the competitive balance story. There’s no national story about how baseball isn’t balanced. Therefore, there’s no reason for MLB to do anything about the issue. You could argue that the lack of competitive balance is a much bigger issue than the steroid issue. Unfortunately, the reaction to steroids is much bigger than the reaction to competitive balance. So don’t expect anything to change until the competitive balance is so broken that MLB is forced to make a change.

Links and Notes

**The 2013 Prospect Guide is now available. The 2013 Annual is also available for pre-sales. Go to the products page of the site and order your 2013 books today!

**Last day to save 20% on the eBook version of The 2013 Prospect Guide! The eBook is also available through our publisher. They also have a discount code during the month of January that allows you to save 20%. Use the code JANBOOKS13 to get the discount. This code is only valid on the eBook on the publisher’s web site, and not the books on the products page of the site.

**Pittsburgh Pirates 2013 Top Prospects: #3 – Gregory Polanco.

**Pirates Receive Another Favorable Rating From Their International Signings.

**Charlie at Bucs Dugout had a good article about giving up draft picks. Too often you see people saying “they can afford to lose a draft pick because they have two of them”. Charlie makes a good argument of why one draft pick shouldn’t have any impact on the value of another draft pick.

Tim Williams

Author: Tim Williams

Tim is the owner and editor in chief of Pirates Prospects. He started the site in January 2009, and turned it into his full time job during the 2011 season. Prior to starting Pirates Prospects, Tim worked with AccuScore.com, providing MLB, NHL, and NFL coverage to various national media outlets, including ESPN Insider, USA Today, Yahoo Sports, and the Wall Street Journal. He also writes the annual Prospect Guide, which is sold through the site. Tim lives in Bradenton, where he provides live coverage all year of Spring Training, mini camp, instructs, the Bradenton Marauders, and the GCL Pirates.

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  • http://twitter.com/MichaelVelaTTU MichaelVelaTTU

    I still believe that the new CBA will help out a lot with fairness around MLB.

    This is its first year in effect, it will take some time to have its presence felt around baseball. It will reduce spending big time. Free Agent prices will drop and we’ll see more team-friendly contracts allowing small market teams to keep their big name players

  • http://twitter.com/Spazaru Spazaru

    I have been a Pirates fan since 1976. I will always root for them, but I agree with you Tim. This issue is turning me off of MLB. Last year, I think even when the Bucs were riding high, we all really knew they weren’t a playoff team, and that even if they made it, they’d get eliminated immediately. Plus, in these times of so much struggling in America, the constant discussion of how rich MLB players and owners are is just off-putting. I don’t follow MLB nearly like I used to. I watch and follow college baseball instead. The big school still have advantages and money still matters, but it doesn’t scream from the headlines every day. You can actually watch baseball like in the old days. It’s no wonder, as you say, the NFL is so much more popular. I don’t find it all that entertaining, but at least in most cities you don’t start the year every year with no hope. I don’t buy MLB tickets. Unless everyone else starts staying away, I don’t see this problem being solved. The players and owners are getting obscenely rich. It’s working out great for them.

    • Dropkickmurphys

      The NFL is proof that salary caps don’t promote competitive balance. The NFL put in near complete revenue sharing in the 1960s. They didn’t have a salary cap until the 1990s. For that 30 year period, they not so amazingly had competitive balance. They also saw their product become the King of sports entertainment.

      • joe g.

        Not sure what you mean by your first sentence. Am I wrong to think that a salary cap helped the NFL with competitive balance? Since 1990 22 0f the 32 teams have participated in the SB including, Pittburgh, Green Bay, Buffalo, Oakland, San Diego, Seattle, Baltimore, and Indy which would be considered small markets.

        • Dropkickmurphys

          No it hasn’t. In the first 25 Super Bowls, you had 20 different teams in the big game. There were also fewer teams in the league and fewer teams made the post season. Salary caps really changed nothing that the NFL pervasive revenue sharing had already accomplished.

          The only thing that the salary cap accomplished was to increase profits of owners.

          • joe g.

            maybe you are right, but I think you need to look a little deeper. there was no salary cap those 20+ years you sited, but there also was no free agency. what would the impact be if there was free agency with no cap? even though there is revenue sharing in the NFL, it does not include every aspect of generated revenue. Just some good for thought.

            • Dropkickmurphys

              There was free agency but it generally cost a team 1 or 2 high picks to sign the free agent. NFL had free agency before baseball.

              • joe g.

                MLB essentially had free agency around ’75 or ’76. NFL free agency came in the form of plan B in ’89. Plan A free agency went into effect in ’93. When you say that free agency existed in the NFL, you are technically correct. However, it was subject to the Rozelle rule, which required the signing team to compensate the team that lost the player, usually in the for of draft picks. The system was so restrictive, that less than 40 players changed teams over a 12 year period. I do not believe that the old system is a good comparison to what we’ve had over the last 24 years under plan b and a free agency.

        • laamoe

          A lot of people say the NFL salary cap helps maintain competitive balance. But come on, the NFL doesn’t even really have a salary cap. It is all smoke and mirrors. Teams can cut players and not have to pay them. Pro-rate bonuses over years that the player won’t even be on that team.

          What keeps the NFL working properly is a NATIONAL TV contract that pays a gazillion dollars and it split between all teams. Comparing NFL and MLB is apples and oranges.

      • http://www.piratesprospects.com Tim Williams

        I would argue that salary caps have been more important in the last 20 years. Using baseball as an example, the top team spent $23 M in payroll. The bottom team spent $9 M. Last year entering the season the top team was spending $197 M, while the bottom team was spending $55 M.

        The gap between teams has seem some massive growth in the last 20 years.

        I also think that any talk of a salary cap has to include a salary floor. Players wouldn’t accept a cap, because that reduces the money they’d get. Owners wouldn’t take just a floor, because that increases what the players get. You’d need a cap/floor compromise, and total revenue sharing to make sure every team could afford those numbers.

        • Dropkickmurphys

          Why not have the owners do what the NFL under Rozelle did, and institute league wide revenue sharing without a cap. It worked pretty well for 25 years in the NFL.

          • Blue Bomber

            I also always felt that this would go a long way to solving MLB’s balance issues. More than a cap. Pool all the revenue and divide equally. Until the league decides to do this, things will stay as they are. A cap really just limits what the players can make, it doesn’t deal with the huge variance of revenue streams.

            • Dropkickmurphys

              Exactly. A cap does nothing about revenue. Revenue is the immediate problem.

            • joe g.

              You need both revenue sharing and a cap, because Teams will never agree to full sharing of revenue. It’s one thing to share national TV money. It would be a coup if they agreed to share local cable money. There is no way that they will share gate, parking, food money. The Red Sox, Yankees, Cards put work into getting fans on the seats, then they give up some of their revenue to Tampa? No way, so they would still have a fiscal advantage. The way to curb that advantage is to add a salary cap.

  • http://twitter.com/DJCarozza77 DJ Carozza

    This pretty much sums up exactly how I feel about Major League Baseball. Great article!

  • Dropkickmurphys

    This might be the best piece you’ve written. While MLB hasn’t approved the Dodgers’ deal, the most likely will because Bud works for the owners.

    Here’s what will happen. The focus, as you said, will be on PEDs. The owners will find any way they can to demonize the players because, they believe it will help them manage contract costs.

    To some degrees this demonizing the players works because fans buy into it. If they didn’t most of the competitive imbalance talk wouldn’t center on salary caps. Fans think players are more overpaid, more spoiled than owners.

    Baseball has a revenue problem not a cost problem. As long as the focus stays on cost (player salaries) the owners are happy. They know that salary caps to nothing but raise owner profits and the discussion of caps takes the discussion away from the real issue, revenue disparity.

    Bud will play the knight in shining armor, coming to slay the PED dragon beast. He will do this because he wants the media and fans focusing mythical dragon, and not the raging revenue animal that is getting ready to destroy the baseball village.

    • Ron Zorn

      Very interesting point, and I think quite valid.

  • http://wkkortas.wordpress.com wkkortas

    It’s OK that the Dodgers and Yankees can have $200 million payrolls, but God forbid you should have the Pirates able to spend a few million over slot on amateur signings! As Dropkickmurphys wisely notes, MLB’s financial disparity is more a revenue problem than anything else (although a salary cap/salary floor mechanism is necessary as well); it’s odd that the Steelers can be the most successful team in post-merger history, the Penguins can compete for a Stanley Cup on a regular basis, but the Pirates–playing in the same market–are at a significant and permanent fiscal disadvantage. Ownership in markets like Pittsburgh, Cleveland, Kansas City, et al need to realize that the enemy is not the MLBPA–it’s ownership in New York and Los Angeles, and they need to act as a bloc to ensure something closer to revenue equity, and if that means shutting down the game for a year or two to get it, so be it. That’s a pipe dream of course, but it’s going to take something akin to a revolution to correct the problem.

    • http://www.facebook.com/steve.zielinski.169 Steve Zielinski

      Owners in the low-revenue markets do not consider owners in the high-revenue markets enemies per se. So long as the low-revenue teams turn profits and have their franchises inflate in value they will not destroy the current league structure.

      As currently structured, the economics of baseball show the MLBPA and MLB colluding to keep salaries high. The reason: The super-high-revenue teams will remain competitive year after year because they can afford to pay the going rate for the best players. That rate is exceptionally high and mostly out of reach for the low revenue teams.

      Jerry Jones and a few other NFL owners once wanted to rid the league of its salary cap. They wanted to do so because they made so much money that they too could act as magnets for the best players.

      The great thing about the Dodgers’ situation? They’ve spent way too much money on players on the downside of their careers. The Dodgers’ new owners will have to pay down the debts of that franchise, the debts left by the previous owners and the debts they incurred when they bought the team for $2B.

      • Dropkickmurphys

        The MLBPA and the large market owners are colluding, not the small market owners.

        Jones and Dan Snyder did want to break the model but the commissioner and a couple influential owners put them in their place. You don’t have that in MLB. Large market owners in MLB call the shots and Bud lets them.

        I don’t think any owner in MLB really worries about their debt for two reasons. In general, they own their own debt. They borrow from themselves to fund the partnership. The other reason they don’t worry is they know that the equity gain will pay off the debt or that the next owner will simply assume the debt, just like the current Dodger ownership group did.

        • http://www.facebook.com/steve.zielinski.169 Steve Zielinski

          “The MLBPA and the large market owners are colluding, not the small market owners.”

          The low-revenue owners are also colluding when the fail to change the system that makes their franchises uncompetitive on the field over the long term. They tacitly collude with the baseball aristocrats in the MLBPA and with the high-revenue teams who hire the player aristocrats when they reach free agency.

  • kevin21

    I’m not even going to look at the news about all this until they release the final findings. The first article lists Gio with substances NOT banned in MLB baseball. Ok… Cutch had a steak also for lunch, Proteins not banned, should he be on the list too???
    * I do know that now they are saying he/his dad ordered some T-boosting cream… I’m just going to stay away and count the days until pitchers report.

    • http://www.piratesprospects.com Tim Williams

      I think if Cutch got a steak from a steroids dealer, then there should be some questions.

      • kevin21

        If he took something that was not on the banned list then why is this an issue?

  • TonyPenaforHOF

    Tim – I give you a ton of credit for pointing this out. Not only are you taking on the real issue, but you are doing so against your own financial interest. Speaking truth to power is always risky and making MLB mad is never a good idea since media sites need access. Your site keys in on the future more than the present – which is exactly the selling point MLB has chosen for the small market teams.

    Kudos to you for writing as a fan, even when it goes against your own interests.

  • http://www.facebook.com/lee.young.161 Lee Young

    I agree with all the clamor, but I have serious doubts anything is ever gonna get changed. Call me pessimistic.

    • http://www.facebook.com/lee.young.161 Lee Young

      You think Selig wants the Bucs and Rays in the World Series? Just think about the lousy TV ratings they’d get nationwide.

      Now Yankees and Dodgers??? Cha Ching.

      • Dropkickmurphys

        Selig will turn MLB into the NBA. The NBA has had, I think, 9 different teams win the championship since 1975. The Lakers and/or Celtics have been in something close to 70% of all the championship series. That’s happened even with a soft cap.

      • Blue Bomber

        This is true, but I think it’s also shows how bad of a job MLB does at marketing their product. NFL post season ratings are really independent of what teams are playing. In MLB, big market teams dominate the nationally televised games, and fans only get familiar with those players. Think if a player as good and personable as Cutch played in the NFL. He’d be marketed like crazy all over the place. MLB still uses Jeter and Ortiz for their promos.

  • http://www.deanmanifest.blogspot.com Dean Manifest

    This whole local television model never made sense to me.

    When you stop and think about it, the Dodgers aren’t selling the rights to 162 “Dodger games”. They’re selling the rights to six “Dodger-Pirate games” and six “Dodger-Cardinal games” and nineteen “Dodger-Padre games” and so on and so forth.

    Could the Pirates go to another cable network in the LA area and sell them the rights to the six games they play against the Dodgers each summer? Why not? It’s a “Pirate game” every bit as much as it is a “Dodger game” isn’t it? So why can the Dodgers sell the six games to the LA market for $10,370,370 while the Pirates only get to sell them to the Pittsburgh market? Because the Dodgers hat says LA on it? So what?

    In my view that $280,000,000 should be divided by the 162 games that it pays for (it comes to $1,728,395 per game). The two participating teams in each game can then split that game revenue (as well as the game revenue from the other team’s market).

    You can argue that teams like they Yankees and Dodgers bring more eyes to televisions than they Bucs or Padres (as reflected by their local deals) and should get more of the money, just like Floyd Mayweather gets more money than the guy he fights. But they still will. The Dodgers will still end up with $140,000,000 every year from this deal (while the Pirates will get half of the paltry Pittsburgh deal). They’ll also get a small piece of every other local tv deal based on the games they play that are shown in Pittsburgh, St. Louis, San Diego, etc. (plus their share of MLB’s national TV deal).

    This still isn’t close to what the NFL does. The NFL sells broadcast rights for the entire league to a few networks, who decide which games to show in which markets. The 32 franchises split the revenue from those deals. The NFL doesn’t care how many people were rooting for the Giants and how many we’re rooting for the Chargers……because they all tuned in to watch “the Chargers-Giants game”.

    • Dropkickmurphys

      No the Pirates can’t go to other markets and sell their rights. Each MLB team has exclusive rights to their territories.

      What the Pirates can do, is to tell the Dodgers that they won’t agree to have their games against the Dodger televised. But the small market teams never do this.

      The NFL model was started by Rozell in the 60s. It made the game what it is today. MLB is missing the boat by not distributing revenues equitably first, then going after salaries.

    • http://wkkortas.wordpress.com wkkortas

      Excellent points–people aren’t watching the Dodgers to see intra-squad games. Why shouldn’t the Pirates and Marlins and Padres receive a significant amount of that TV money?

      • Dropkickmurphys

        Because large market owners don’t want to give up the local revenues.

        • http://www.deanmanifest.blogspot.com Dean Manifest

          Anyone know how changes are made within MLB? You know how we always hear the cliche about democracy- what if 51% vote to enslave the 49%? Could the 20 poorest teams push something like this through against the protests of the 10 richest? I frankly have no idea….

      • http://www.deanmanifest.blogspot.com Dean Manifest

        Another thought….
        .
        All 30 teams negotiate their own local tv and radio deals. Some believe that the Bucs, and presumably others, have failed to obtain the best deal for themselves. Should MLB consider negotiating these deals themselves on the teams’ behalf? The league is well-positioned to identify the best people for the job, and should have greater leverage than any one team would individually.

        • Dropkickmurphys

          That’s a great idea. Then do an entire league or a division at a time. That way the next division can make the next incremental step in increases. Just like the teachers unions do in Western Pa.

  • MaineBucs

    I will concur with others that this is a well conceived article and covers a subject matter which all too few national writers will avoid.

    In short, exactly why should the Dodgers be able to take on the salaries of Gonzalez, Crawford, Ramirez, and others within the span of a few short weeks, when most other teams could not afford even one of the above players? The disparity among the ‘rich’ and the ‘poor’ teams in ML baseball is growing, not shrinking, and the net effect is that fans of team like the Pirates have to hope for that one or two magic seasons in a decade when their team makes or at least competes for the playoffs rather than experiencing sustained periods of success. I find it sad that younger Pirate fans have no real understanding of what it was like to be a Pirate fan in the late 60′s and through-out the 70′s when the Pirates were near the top most every year, and not because of what they paid their players, but because they built an organization that could compete with anyone and they finances of baseball were not yet so out of whack that they could compete.

    I also will concur that nothing – for the positive – will soon change. For example, the changes to the current draft system likely hurt franchises like the Pirates. And, the increased revenues that the Pirates will receive through the new national television contract will do little for the Pirates when other teams receive similar amounts.

    While the new stories about PED’s are a concern, all fingers will point to the players and how they are abusing the system. Sadly, none of the blame will fall on the owners and how they have condoned and in many ways, encouraged, PED use. Much easier to write about and to cast shame on the players than the owners.

    Thanks for the article.

  • leadoff

    I don’t think I want to write a novel on this issue, but revenue sharing is the biggest issue in MLB. When I look at revenue disparity, I have to think the Pirates have an outstanding management team in place just to compete at all and still pay the bills. No matter what anyone thinks, the Pirates could win 2 world series in a row and still would not even dent the income of the big teams. Also despite what some think, if the Pirates played the Yankees in the WS, the ratings would go through the roof, if they played the Royals no one would watch.

  • ctalboo

    I would love a sports reporter to ask Bud Selig (on national tv) to explain how such enormous payroll inequity in baseball is good for the game. He is the man that can begin the process of brokering a change to establish somewhat of a competitive balance in our national pastime. Tim, promise the PP brotherhood that if you get access to the great Poo-bah you ask him about this issue.

  • leadoff

    Imagine if the Steelers and Packers had to work under the same handicap as the Pirates, you can bet there would be 2 quarterbacks missing from their lineups.