Economics of Baseball: Revenue Sharing
Economics of Baseball: Revenue Sharing
Major League Baseball is the highest level of professional baseball in the United States and Canada. The organization is comprised of a partnership between the National League, founded in 1876, and the American League, founded in 1901. There are currently 30 teams in Major League Baseball, 14 in the American League and 16 in the National League. "Since 1903, the best of both of these leagues have met in the World Series, with the winner of the best-of-7 series being declared World Champion" (Burnett). When the World Series ends, baseball 's business season starts. Receipts are tallied to determine how much the teams that earned the most will have to pay the teams that have earned the least. Large market teams like the New York Yankees, Boston Red Sox, Los Angeles Dodgers, and the Chicago cubs "have an overwhelming advantage over smaller market teams which created an uneven playing field" (Alice). Revenue sharing gives small market teams like the Kansas City Royals, Tampa Bay Rays, Florida Marlins, and the Pittsburgh Pirates, a better chance at success by providing more resources to improve their roster. In 1999, a "blue ribbon" panel commissioned by MLB found that "baseball franchises traditionally generate and retain a large majority of their revenue locally" (Jacobson) rather than nationally, causing a large and growing revenue disparity. Vince Gennaro, author of Diamond Dollars: The Economics of Winning In Baseball, found that 70 to 80 percent of a team 's total revenue is contributed to local revenue. Local revenues consist of gate receipts, local television, radio and cable rights fees, ballpark concessions, advertising and publications, parking, suite rentals, postseason, and spring training. Revenues that are retained locally are a problem because all teams participate in the same national labor market. MLB has no salary cap; therefore, it is the teams’ decision how much they spend on payroll. The
Major League Baseball is the highest level of professional baseball in the United States and Canada. The organization is comprised of a partnership between the National League, founded in 1876, and the American League, founded in 1901. There are currently 30 teams in Major League Baseball, 14 in the American League and 16 in the National League. "Since 1903, the best of both of these leagues have met in the World Series, with the winner of the best-of-7 series being declared World Champion" (Burnett). When the World Series ends, baseball 's business season starts. Receipts are tallied to determine how much the teams that earned the most will have to pay the teams that have earned the least. Large market teams like the New York Yankees, Boston Red Sox, Los Angeles Dodgers, and the Chicago cubs "have an overwhelming advantage over smaller market teams which created an uneven playing field" (Alice). Revenue sharing gives small market teams like the Kansas City Royals, Tampa Bay Rays, Florida Marlins, and the Pittsburgh Pirates, a better chance at success by providing more resources to improve their roster. In 1999, a "blue ribbon" panel commissioned by MLB found that "baseball franchises traditionally generate and retain a large majority of their revenue locally" (Jacobson) rather than nationally, causing a large and growing revenue disparity. Vince Gennaro, author of Diamond Dollars: The Economics of Winning In Baseball, found that 70 to 80 percent of a team 's total revenue is contributed to local revenue. Local revenues consist of gate receipts, local television, radio and cable rights fees, ballpark concessions, advertising and publications, parking, suite rentals, postseason, and spring training. Revenues that are retained locally are a problem because all teams participate in the same national labor market. MLB has no salary cap; therefore, it is the teams’ decision how much they spend on payroll. The
Cited: 2002-2010 Helium, Inc. 10 Dec. 2010. 2 Mar. 2010. Baseball America, Inc. 10 Dec. 2010. Business Insider, Inc. 11 Dec. 2010. Working for Major League Baseball? A Historical Perspective". The Sport Journal. Volume 12. Number 2. United States Sports Academy, 2009. 8 Dec. 2010. Gennaro, Vince Hingham, Massachusetts: Maple Street Press, 2007. "The Report of the Independent Members of the Commissioners Blue Ribbon Panel on Baseball Economics". The Official Site of Major League Baseball. MLB Advanced Media, L.P., July 2000. PDF. 11 Dec. 2010. Lewis, Michael Baseball Hurt By Teams Who Don 't Spend Money On Players." Suite101. 12 Nov. 2007. 11 Dec. 2010