Small Market Teams in Baseball: A League of Takers?

One thing I’ve done differently this off-season is to shut it down most weekends and take a few days off. After Thursday night’s First Pitch is done, I know I can go out with my friends that night and the rest of the weekend, along with catching up on all of the TV I missed throughout the week. I’m hoping this will avoid burnout in September, which seems to happen each year. If anything, it does mean that I get to stay current on The Daily Show and The Colbert Report.

Today I was watching Thursday’s episode of The Daily Show, which featured a great segment about the debate between “Makers and Takers”. I’ll start out by saying that I hate discussing politics. There are actually three things I hate to discuss with people: politics, religion, and sports. In my mind, those are the three things where people have concrete opinions that aren’t swayed by any facts you bring up in a debate. Of course I do break one of those rules with my job as a sports writer. I’m about to break another one here.

The “Makers vs Takers” segment discussed a growing problem in America, where the gap between the top income earners and everyone else is growing bigger at a rapid pace. This leads to debates: should minimum wage be increased, should tax cuts be eliminated, should extensions to unemployment end, should the government be involved in health care, and so on. The debate boils down to one side saying that the “Makers” should give up something in exchange for a stronger overall nation, while the other side says that the “Takers” shouldn’t get “free handouts” from the “Makers” at all. I thought Jon Stewart’s segment was a great take on the political side of that, and was also very funny.

But why bring up politics on a sports blog? Well, the answer to that lies back in 1994 at a McDonald’s. That was the year that McDonald’s ran a promotion where you could buy Field of Dreams (on VHS!) for $6.99 with an extra value meal. At the time I had never seen the movie, but I was a big fan of chicken nuggets (I was 11, and didn’t know what real food was yet) and convinced my parents to get the video. It was this speech that stuck with me throughout the years.

That’s an iconic scene, so that speech probably stuck with a lot of people. It’s enough to make you a baseball fan, and if you ever feel like you’re losing interest in the game, it’s enough to bring you back in. The part that interested me the most was the tie between American and baseball history. It’s fascinating how true that key statement is: “But baseball, has marked the time. This field. This game. It’s a part of our past Ray.”

When it comes to baseball and American history being tied together, I don’t think anything has changed. I think the biggest sign of this is the “Makers vs Takers” debate, which is definitely a key debate in the game of baseball. After I finished watching The Daily Show, I logged on Twitter and saw this article by Dejan Kovacevic. The article talked about the Hall of Fame voting controversy in the last week, but then moved on to what Dejan calls the biggest issue in baseball: the financial imbalance between large market and small market teams. If you’ve read my site for any amount of time, you probably know where I stand on this issue. There are times where I feel like I write an article per week discussing how MLB is unfair to small market teams. It might be more accurate to label them “low revenue teams” and include the mid-market teams. There are two reasons for this. First, you avoid the “City X isn’t a small market” debates. An even bigger reason is that the gap between the top income earners and everyone else is growing bigger at a rapid pace.

Wait, where have I heard that before? Oh yeah, four paragraphs ago.

Major League Baseball has the “Makers vs Takers” debate alive and well. There are currently five teams making about $100 M or more per year in local TV revenues, according to FanGraphs (the chart isn’t updated with the new deal for the Phillies, but I counted them). There are three teams making $150 M or more, and then the Dodgers are making more than any two teams combined. Meanwhile in Pittsburgh, the discussion is how the Pirates have a horrible deal at $18 M per year. Or maybe the discussion is that they actually receive more money, but where does that money go? The truth of it is that, even if the Pirates were getting an extra $12 M per year in local TV revenues, putting them on par with the Reds and Cardinals, things wouldn’t really change. They’d never be contenders for the top free agents. They wouldn’t be contenders for Masahiro Tanaka. They might be able to go a little harder after one middle of the pack free agent, and spend a little more to lock him in, but that’s about it.

If you want to see the inequality in baseball, just look at the recent history of $100 M contracts that have been handed out.

2013

Robinson Cano – $240 M by the Mariners ($115 M/year in TV revenue plus 50% equity in the network)

Jacoby Ellsbury – $153 M by the Yankees ($90 M/year plus 34% equity)

Shin-Soo Choo – $130 M by the Rangers ($150 M/year plus 10% equity)

2012

Zack Greinke – $147 M by the Dodgers ($340 M/year)

Josh Hamilton – $123 M by the Angels ($150 M/year plus 25% equity)

2011

Albert Pujols – $250 M by the Angels

Prince Fielder – $214 M by the Tigers ($40 M/year. Fielder was traded after two seasons to reduce salary.)

Jose Reyes – $106 M by the Marlins ($18 M/year. Traded the following off-season.)

2010

Carl Crawford – $142 M by the Red Sox ($60 M/year plus 80% equity)

Jayson Werth – $126 M by the Nationals ($29 M plus 13% equity)

Cliff Lee – $120 M by the Phillies ($35 M/year at the time, but just went up to around $100 M/year)

You have to go back to 2011 to see a $100 M player sign with a team making less than $90 M/year in local TV revenues. Those two teams only kept their big free agent for a year or two. The only team in the above list to keep the player for the long-haul with a smaller payroll was Washington with Jayson Werth. Even in that situation, it will be interesting to see what happens with that situation over the next few years as Washington’s young roster starts reaching arbitration and Werth starts hitting the $20 M/year portion of his contract.

If you follow a team like the Pirates, then the current system leaves very little hope when it comes to seeing Andrew McCutchen in Pittsburgh for his entire career, or even Pedro Alvarez in Pittsburgh beyond 2016. The reality is that there is such a massive gap in revenues between the top earners and everyone else, that it leads to a situation where teams like the Dodgers, Rangers, and Angels can drop $100+ M on a player, and not even bat an eye if that player struggles. The Pirates would have to do some serious budgeting to make that type of financial commitment, and if the commitment pulled a Josh Hamilton, they would be sunk.

The problem with baseball is that the power lies with the “Makers”. Baseball isn’t trying to make the game fair for all 30 teams. In fact, a lot of the moves that baseball has made have hurt small market teams. They restricted the spending in the draft and international markets, which were two areas where small market teams could afford to spend and could use to compete with big market teams over the long-term. They place draft pick compensation on the top free agents, making it so that small market teams can not only struggle to afford the free agent, but also sacrifice a key draft pick in the process. On the flip side, in order to try to get draft compensation, a small market team has to tender an offer that represents a massive percentage of their payroll.

To borrow a page from Jon Stewart, let’s compare the two situations. The Pirates spent almost $50 M over a four year span in the draft, and that spending was considered so out of control that MLB overhauled the entire draft to make sure it never happened again. The Angels have spent over $500 M in the last four years on the free agent market, but that’s not considered out of control at all, and no changes have come to free agency.

The Rays were tendering offers to tons of qualified free agents back when an accepted qualifying offer wouldn’t seriously restrict a small market team. As a result they were getting a lot of compensation picks in the draft, which was seen as an abuse of the system leading to big changes in the process. The new changes now create a system where big market teams see one of two things happening: they either get a draft pick when another big spender signs their qualified free agent, or they see that free agent return to them at a reduced rate thanks to no market. Meanwhile, small market teams have a harder time extending a qualifying offer, and can’t afford to sign guys like Kendrys Morales, even when no other team is going after those types of players. Note: I’m not saying the Pirates should sign Morales. I’m thinking more about AL teams who have a DH where Morales would be a good fit.

Going back to Dejan’s article, he mentions that baseball should have a salary cap, a salary floor, and points to the 50/50 revenue sharing in other leagues. The salary cap is the most popular thing mentioned when this topic comes up, but the truth is that you need all three. You need a cap to reduce spending at the top. You need a floor to make sure teams are actually trying to compete. And you need equal revenue sharing to make sure every team could afford to spend between the cap and the floor.

That’s kind of where the “America vs Baseball” comparison ends on this topic. I wouldn’t suggest that everyone in America should be making the same amount of money, with everyone able to purchase a Lamborghini or whatever luxury car is your preference. The parallel stops with the general idea that in each situation, the few at the top need to give up some of their revenues to make sure that everyone below them can have a shot at success. When it comes to sports, this situation leads to a stronger league overall.

If you want to see the numbers to support that, look no further than the comparison in ratings between the NFL and MLB. The World Series saw one of the biggest markets and one of the most popular teams in baseball win it all this year. The Red Sox and Cardinals drew an average of 14.9 million viewers per game in the World Series, which aired on FOX. That was the fourth worst total in history for a World Series. Meanwhile, the Green Bay Packers and San Francisco 49ers drew 47.1 million viewers in their Wild Card game, which was also aired on FOX.

Think about that for a second. The first round of the NFL playoffs, between a team from San Francisco and a team from Green Bay, drew over three times as many viewers as the average World Series game between the two teams that are supposed to have the best fans in baseball. It wouldn’t work the other way. Can you imagine the low ratings a Giants/Brewers Wild Card game would draw compared to your average NFL regular season game?

The reason the NFL is so successful is because the playing field is even. It doesn’t matter if you’re from Pittsburgh, New York, Tampa Bay, or Los Ang…oh wait, they’re such a strong league that they don’t even need a team in Los Angeles. No matter what city you’re in, you’ve got the same chance to compete as any other team. The only thing stopping teams from competing are bad decisions. The smart teams win, and the stupid teams lose. That’s not the case in baseball. The smartest team in the game would probably be the Rays. Then you’ve got the Dodgers, who spend a ton but have made some stupid moves in the process. Yet the Dodgers have a sizeable advantage over the Rays. If MLB was set up like the NFL, then the Rays would be the New England Patriots, and the Dodgers would be the Washington Redskins. I guess that would mean Yasiel Puig=RG3?

But that’s not going to happen, because change needs to come from the top. The only people that can bring change in baseball are the big earners like the Dodgers, the Yankees, and the Red Sox. That’s just not going to happen. You’ve got the Red Sox owner making “Taker” comments about small market teams receiving revenue sharing and accusing them of big profits. There’s the Yankees trying to stay under $189 M to avoid paying luxury tax, which became much easier after the Alex Rodriguez suspension. And even though the Dodgers received a massive deal that was much higher than any other team, they still worked hard to make sure they were giving up as little as possible of that money to other teams under MLB’s revenue sharing program. These don’t sound like teams willing to split revenue equally across the league

When you’ve got less than half a dozen teams with massive TV deals, it creates a situation where Major League Baseball becomes “A League of Takers”, to borrow the term from the political landscape. The gap between the “Makers and Takers” will only continue to grow, making it harder and harder for low revenue teams to compete with the big spenders — especially with the restrictions on the draft, international market, and free agent compensation.

In the political landscape, there’s a debate about “Makers” and how they got there due to hard work. That argument doesn’t exist in sports. There’s no reason why a sports league should allow teams to benefit or perish based on the fortunes/misfortunes of where that team is located. The Dodgers didn’t work hard to get their TV deal. They were just lucky enough to be located in Los Angeles. The Rays aren’t a low revenue team due to any fault of their own. They’re just unfortunate to be located in St. Pete, where 100 people watch them each night. There’s no reason at all why baseball should mirror America when it comes to the divide between “Makers and Takers”. And it’s not going to be good for the game’s overall long-term health if that divide is allowed to continue to grow.

Unfortunately, it doesn’t look like there’s any end in sight to the current problem.

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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