Over the past two decades, as the hyper-monetization of sports occurred, an element of politics entered into the conversation. Suddenly, the difference in sports franchises stopped being measured in success on the field and started becoming a function of “market size.” In a nutshell, the argument works like this; the “small market” teams cry they can’t compete with the “big market” teams as the “big market” teams have a financial advantage. In the “Big Four” major sports leagues, the tone of this argument varies greatly, and the reasons for that variance actually lie at the soul of the discussion.
First of all, it is is crucial to understand the criteria upon which market size is determined. Contrary to popular belief, the size of the market is not determined by population. The primary criteria is the amount of television money a team can generate. Granted, there is a connection between population and money, but it isn’t a direct correlation.
This fact helps to explain why there is a major difference in the volume of this discussion amongst the four major sports leagues.
- National Football League: Volume Level 0 – because there is no individual TV money; everything is controlled by the league and therefore shared across the league. Market size matters little.
- National Hockey League: Volume Level 2 – because revenue distribution isn’t the NHL’s problem; it’s total revenue. The NHL spends more than it makes. Market size matters somewhat.
- National Basketball Association: Volume Level 5 – Only because there is a new Collective Bargaining Agreement coming, and it seems everything will be fair game in the negotiations. Market size now is marginally important.
- Major League Baseball: Volume Level 9 – Because baseball has the greatest disparity between “big and “small,” and that difference is base on television revenue, ticket sales, and merchandise. Market size is a major factor.
For the sake of this discussion, let’s look at the polar opposites; in sports, football and baseball, and in philosophies, revenue sharing vs. a laissez-faire model. Upon looking at this, it doesn’t take long to see where this quickly becomes a clash of political ideologies. Revenue sharing makes perfect sense to those of a liberal persuasion; it is the classic redistribution of wealth model that has given them an economic hard-on ever since Robin Hood. Meanwhile, so-called conservatives are proponents of a laissez-faire system.
The liberals believe that competitive ability is tied directly to the dollar, and that having parity amongst the franchises is good for the entire league because nobody is ever really eliminated from competition. The revenue sharing proponents point to the model of the National Football League. They believe that eliminating the difference between rich and poor and leveling the economic playing field drives growth by giving equal opportunity to all. The National Football League has the most thorough revenue-sharing arrangement of any sport, and it’s the most successful by far. Too many people would have you believe those two facts are connected; they absolutely are not.
The fallacy of the NFL’s revenue-sharing/salary cap model works like this – since all the revenue from television is controlled by the league, the size of a team’s home market is irrelevant. Proponents of this system point to the Super Bowl champion Green Bay Packers and the perennial play-off contender Indianapolis Colts as examples of the “small-market” team being allowed to compete as market size has been removed as a criteria for success. You will note that proponents of the NFL’s current system absolutely never mention three facts:
- The NFL has created a nice bit of revenue for itself at taxpayer’s expense through public financing of stadiums, then they doubled-down by charging “personal seat licenses;” essentially forcing fans to pay for the right to buy tickets.
- The NFL has gotten fat ($9 billion per year) pedaling an incredibly TV-friendly product, hence why it’s television revenue outstrips the other sports. In other words, football is huge because television made it huge. It’s no accident that football developed two multi-billion dollar vendors (The NFL and the NCAA) after the advent of cable television in the late 1970’s.
- The “parity” that the NFL prides itself on because of it’s revenue sharing model is a myth.
When you put it all together, the NFL would have you believe that it doesn’t have money troubles because of how egalitarian it is with its money.
Except there’s two problems with that theory: The NFL owners are, as we speak, crying a tune about poverty in their lockout situation with the player’s union. Face it, $9 billion is “Titanic-proof” money, especially when you add to it all the off-book revenue having somebody else build your stadiums is worth. What that means is when you are dumb enough to run into the iceberg again, you’ve got enough money to where you can literally plug the holes with wads of $100 bills and keep on sailing.
Then there’s whole “parity” myth; let’s look at how that doesn’t hold water. Since the advent of the NFL salary cap in 1994, while there there have been eleven different teams to win the Super Bowl, the vast majority of playoff appearances in that time belong to a select group of teams. In each conference in that time frame, half of the playoff spots have been captured by five teams; in the AFC, it would take the combined playoff records of seven teams to match the number of playoff appearances of the Indianapolis Colts. The NFC boasts a bit more “parity;” it only would take the combined records of four teams to equal the trips into January made by either Green Bay or Philadelphia.
Meanwhile, major league baseball plays the other side of the ideological coin. Baseball sticks to a conservative model, where for the most part, anybody is allowed to get rich, but if a team gets too successful, they will be taxed. Baseball even calls its version of a salary cap a “luxury tax.” It is even graduated like the current American progressive income tax. Its based on the conservative “trickle-down” theory; that growth generated by the franchises most capable of generating it eventually provide a benefit as the wealth generated today will be distributed over time so long as there are no encumbrances on the generation of wealth.
The fallacy of this model in sports comes straight out of the mouth of the “small market” guy; the guy who will point to a team like the New York Yankees and say “they can buy any player they want, how can that be fair?” It sounds good, and it appeals to that populist “David vs. Goliath” mentality, but it misses two points.
First of all, it is the only model currently in play amongst the four major sports leagues that allows a little guy to become a big guy. If you are an owner of an NFL franchise, your salary expenditure is capped, but so is your revenue. This means if an another owner decides he wants to put his “persona”l fortune behind an investment (Jerry Jones/Robert Kraft, I’m looking at you…), he takes us right back to the big guy/little guy discussion despite any revenue sharing. In other words, no matter what you do, there’s always going to be a guy with more dough who is willing to throw it around.
This means under the current NFL model, you cannot have an ascension like that of the Los Angeles Angels. Under Gene Autry, the-then California Angels were the red-headed step-child of Southern California baseball. 20 years ago, despite being in Southern California, the Angels were the definition of a “small market team,” inasmuch as the Dodgers choked them out of television money. But a cash infusion under the ownership of Disney, then a purchase by an owner who funded both a marketing campaign to capture a market shared with the Dodgers and build-up to make the team competitive on the field has transformed the one time “little brother” into a team that gets mentioned alongside the Yankees, Red Sox, and Cubs when it comes to franchises that have the wherewithal to sign “big time” free-agents.
Then there’s that whole concept of “fairness.” It always blows me away when I hear sports fans inject “fairness” into this conversation. The world of sports is full of stuff that isn’t fair; hell, the world is full of stuff that isn’t fair. Like the old saying, nobody said life is fair. Making a lot of noise about “fairness” is just wasting everybody’s time because money doesn’t equal success. Let’s look at the teams that made the baseball play-offs last season relative to their payroll rankings:
- New York Yankees – #1
- Philadelphia Phillies – #4
- San Francisco Giants – #10
- Minnesota Twins – #11
- Atlanta Braves – #15
- Cincinnati Reds – #19
- Tampa Bay Rays – #21
- Texas Rangers – #27
Now, look at the top ten teams by payroll and their resultant won-loss record:
- New York Yankees – 95-67, 2nd place – Wild Card, lost ALCS to Texas
- Boston Red Sox – 89-73, 3rd place, 7 games back
- Chicago Cubs – 75-87, 5th place, 16 games back
- Philadelphia Phillies – 95-67, won NL East, lost NLCS to San Francisco
- New York Mets – 79-83, 4th place, 18 games back
- Detroit Tigers – 81-81, 3rd place, 13 games back
- Chicago White Sox – 88-74, 2nd place, 6 games back
- Los Angeles Angels of Anaheim – 80-82, 3rd place, 10 games back
- Seattle Mariners – 61-101, 4th place, 29 games back
- San Francisco Giants – 92-70, won NL West, won World Series
This clearly shows money isn’t the only criteria for success. Anybody who can’t see what damning evidence that is against the “money is everything” argument can’t be convinced otherwise. There are as many play-off teams in the bottom half of the payroll list as in the top half, and out of the top ten in total payroll, only three teams even qualified for the post-season. Worse yet, half of the top ten weren’t even competitive, finishing at least double-digit games behind their division leaders.
Just like in the political arena, a populist idea like a luxury tax gets traction by demonizing the “big guy,” and in the case of the Yankees, a loudmouth like Hank Steinbrenner makes it all too easy.
“We’ve got to do something about [revenue sharing]… At some point if you don’t want to worry about teams in minor markets, don’t put teams in minor markets or don’t leave teams in minor markets. Socialism, communism — whatever you want to call it — is never the answer.”– Hank Steinbrenner
Forget about whether his point on ideology is valid. Rather, look at why it doesn’t work in sports. Essentially, what Steinbrenner is saying that he would rather get rid of teams rather than pay a luxury tax. He tries to cover that sentiment by offering the idea of relocation, but let’s be honest, it simply isn’t feasible to have 24 teams in New York.
So, let’s play the contraction game. First, the obvious targets would be the “small-markets” which for openers would be the bottom five in attendance – Kansas City, Pittsburgh, San Diego, Oakland, Milwaukee, and Cleveland. Minnesota and Tampa Bay are also “small-market” teams, but they’ve managed to be competitive on the field. However, they were both in the contraction discussion when it was happening for real a few years ago, so we can axe them. Nobody lives in Cincinnati, so they can go too.
Is this enough to satisfy Hank? Probably not, because there’s more weak franchises out there. The Marlins, Astros, Rangers, Rockies, and Diamondbacks are in major markets, but their fan bases and financial resources are clearly “small-market.” We’ve already cut one of the markets with multiple teams, so there’s no reason to have any multiple-team markets. Now we can get rid of the Dodgers (because they are a train-wreck), the White Sox (because the Cubs still make money), either the Nationals or the Orioles (because the Washington/Baltimore market simply doesn’t need two teams), and the Mets (they are going to become a financial black hole, and then Hank gets New York all to himself).
I don’t think we are done yet. Let’s be honest, Detroit is merely on life-support as long as their owner is keeping them competitive by spending lots of money. That won’t last forever. Seattle also spends a lot of money, but their heyday was a decade ago. Besides, that is such a long flight from New York.
Now, we have Major League Baseball down to ten franchises: The Yankees, Red Sox, Cubs, Phillies, Angels, Giants, Cardinals, Braves, Blue Jays, and either the Nationals or the Orioles. Let me ask you a question, Hank… How many franchises do you think baseball needs to stay relevant? What a guy like Hank fails to realize is the Yankees need the teams like Cleveland and Kansas City, otherwise baseball will become something more resembling the Harlem Globetrotters and the Washington Generals. Not to mention how much interest in the sport would drop off with the majority of this country not being anywhere near a major league franchise.
I’m not here to debate the efficacy of those approaches in the socio-economic world. In the sports world, it is clear they are both wrong.
The “revenue-sharing approach” fails in sports because it is based on a false premise. Money is only one piece of the competitive puzzle. Being a competitive franchise in any sport involves developing, acquiring, and retaining on-the-field talent, and the size of your bank account really only involves two of those three. The laissez-faire approach fails in sports because it fails to realize that the Royals and the Yankees are franchises in the same business; it doesn’t help one McBurgerQueen to run another McBurgerQueen out of business.
As of yet, I haven’t figured out all the parts that would be included in a model that works, but I do know three things a successful model would include:
1) The Freedom to Fail – The best way to get a lot of mediocrity is to reward it. This is the problem with revenue-sharing plans as they exist now, like baseball’s luxury tax; it removes the incentive for a team to be competitive because they can still be profitable by keeping salaries low, such as in the cases of Florida, Kansas City, and Pittsburgh. It is time to let the “bad” owners fail and be forced to sell. Don’t tell me baseball wouldn’t be better off without owners like Fred Wilpon and Frank McCourt. The same can be said for the NBA and Donald Sterling, or the NFL and William Clay Ford.
2) Eliminate Salary Maximums and Minimums – Because they don’t work, every owner and agent seeks ways around them when needed, and they aren’t where the problem is anyway. It isn’t the cost of stardom that is killing sports; big-time jocks have always been paid high salaries. Rather it is the cost of mediocrity that is a drain; Alex Rodriguez getting $32 million is one thing, Nick Swisher getting $9 million is another because there are a lot more Swishers than A-Rods. The worst part is salary restrictions are simply a canard used by owners to hide from the fact they created the salary problem in the first place.
3) Change the Culture of Ownership – This hopefully happens with #1. In short, sports in this country needs more owners like Mark Cuban, guys with new ideas and the energy to get them done.
No matter what, one thing we have to realize is that the current model has outlived its usefulness. If something doesn’t change in the near future, the world of professional sports may look very different ten years from now.