Tying Revenue Sharing to Attendance?

[FellsPointOsFan]

An interesting proposal for adjusting MLB's revenue sharing formula in the NY Times...

To create a more balanced playing field, revenue-sharing payments should be increased for teams that attract more fans. I have devised an approach for doing this based on a statistical analyses of teams’ payrolls, winning percentages and attendance. It takes into account the size of the team’s local population, to acknowledge that teams in places like New York and Chicago have greater financial incentives to invest in players than teams in places like Milwaukee and Kansas City do.

Here’s how my formula would have affected the revenue-sharing payments to the Pittsburgh Pirates, which last year filled only 60 percent of its seats but received $25 million in revenue sharing. If the team could have increased its attendance rate to 70 percent, its payments would have grown to $29 million, and if attendance had gone up to 80 percent, the payments would have reached $33 million. My formula would have had even more significant consequences for the Devil Rays. Based on the team’s 38-percent attendance rate, its revenue-sharing payments would have been reduced from $33 million to $13.5 million.

Full Story: http://www.nytimes.com/2007/11/03/opinion/03lewis.html?_r=1&oref=slogin

I'm not good at math. Would this sort of thing be good for the Orioles?

[DrungoHazewood]

I'm not sure, but if he's tying payments to the percentage of the stadium that's filled, I'm building a 45-seat stadium.

[BaltimoreTerp]

I'm not sure, but if he's tying payments to the percentage of the stadium that's filled, I'm building a 45-seat stadium.

Maybe the Orioles can pull a Jacksonville and get gigantic vinyl section covers for the upper deck

Personally, I still like the idea of salary-cap and -floor based on 1/30 of combined media revenues.

[ElToro75]

Maybe the Orioles can pull a Jacksonville and get gigantic vinyl section covers for the upper deck

Personally, I still like the idea of salary-cap and -floor based on 1/30 of combined media revenues.

I totally agree. I floor is definitely needed as you have teams that have had their entire payrolls be lower than the amount of revenue sharing they were given.

If I'm an owner, especially the ones paying into the revenue sharing program, I want to be ensured that the money I am paying into the pot doesn't just go into another owners pockets.

You've got teams like the Pirates, Royals, Devil Rays, Marlins, etc. that have payrolls below, or barely above, the amount of revenue sharing "income" they receive.

Example: The Devil Rays total 2006 payroll was $35,417,967, they received $33 million in revenue sharing payments.

[RShack]

I think it would be both a lot easier (in terms of the sense of it, not the politics of it) and a lot better (in terms of fairness) to just make each team split the revenues (all the revenues) for each game 50-50 with whoever they're playing. If you don't play somebody, you don't make a nickel. Let whoever comes into Yankee Stadium get half the dollars earned from that game, and let the Yankees get half the dollars of whoever they visit. That would still let the MFY's be twice as rich as everybody, but that's better than being 10 times as rich. Plus, it would give a built-in incentive to make competitive teams that draw crowds both home and away, both at the ballpark and on TV, etc.

[geschinger]

I think it would be both a lot easier (in terms of the sense of it, not the politics of it) and a lot better (in terms of fairness) to just make each team split the revenues (all the revenues) for each game 50-50 with whoever they're playing. If you don't play somebody, you don't make a nickel. Let whoever comes into Yankee Stadium get half the dollars earned from that game, and let the Yankees get half the dollars of whoever they visit. That would still let the MFY's be twice as rich as everybody, but that's better than being 10 times as rich. Plus, it would give a built-in incentive to make competitive teams that draw crowds both home and away, both at the ballpark and on TV, etc.

You have brought up the most sensible solution I've seen. I have no problem with payroll disparities as long as they are within reason. This solution is a fair one in that the big media teams are making lots of money selling a product that relies on having an opposing team which IMO deserves a cut. Implement a plan like you suggest or really any kind of equitable revenue sharing arrangement and salary caps are unnecessary.

[Migrant Redbird]

Instead of tying revenue sharing to attendance, I'd just require that a team's total payroll equal at least the minimum payroll ($15.6M in 2008; $390K times 40 players) plus the full amount of the previous year's revenue sharing. Any shortfall would have to be returned to the revenue sharing pool for the current season.

[square634]

I think it would be both a lot easier (in terms of the sense of it, not the politics of it) and a lot better (in terms of fairness) to just make each team split the revenues (all the revenues) for each game 50-50 with whoever they're playing. If you don't play somebody, you don't make a nickel. Let whoever comes into Yankee Stadium get half the dollars earned from that game, and let the Yankees get half the dollars of whoever they visit. That would still let the MFY's be twice as rich as everybody, but that's better than being 10 times as rich. Plus, it would give a built-in incentive to make competitive teams that draw crowds both home and away, both at the ballpark and on TV, etc.

That assumes that gate receipts are the largest source of revenues. And baseball does implement a system in which the visiting team gets a portion of the gate receipts as it is (IIRC the visiting team gets 1/3).

[geschinger]

That assumes that gate receipts are the largest source of revenues. And baseball does implement a system in which the visiting team gets a portion of the gate receipts as it is (IIRC the visiting team gets 1/3).

It should be media revenues that are split as well. I don't see any reason why it would be unreasonable for example the Blue Jays to get a cut from the revenues generated by Yes televising a Yankees Blue Jays game.

[Migrant Redbird]

That assumes that gate receipts are the largest source of revenues. And baseball does implement a system in which the visiting team gets a portion of the gate receipts as it is (IIRC the visiting team gets 1/3).

I was under the impression that MLB did away with the visiting team getting a share of gate receipts about the time that they implemented revenue sharing.

This 1995 SABR presentation states that AL visiting teams received 20 percent of local gate receipts while NL visiting teams received a paltry 46 cents per ticket, regardless of ticket price. That changed in the mid nineties.

Can Money Still Buy the Postseason in Major League Baseball?

A 10-Year Retrospective on Revenue Sharing and the Luxury Tax

Apparently, the 2002 Collective Bargaining Agreement provides that each team contribute 34 percent of all "Net Local revenues", which presumably includes gate receipts, shares of concession sales, and local broadcasting revenues, into a pool that's divided equally among all teams. The catch is that it's local revenue after subtraction of related expenses such as stadium operations, which means that some teams probably contribute nothing for games which have low attendance. Also, the local revenue goes into a pool to be divided among all 30 teams, which means that the Yankees only get 1/30th of the local revenue share generated by their visits to Camden Yards.

[RShack]

I think it would be both a lot easier (in terms of the sense of it, not the politics of it) and a lot better (in terms of fairness) to just make each team split the revenues (all the revenues) for each game 50-50 with whoever they're playing. If you don't play somebody, you don't make a nickel. Let whoever comes into Yankee Stadium get half the dollars earned from that game, and let the Yankees get half the dollars of whoever they visit. That would still let the MFY's be twice as rich as everybody, but that's better than being 10 times as rich. Plus, it would give a built-in incentive to make competitive teams that draw crowds both home and away, both at the ballpark and on TV, etc.

That assumes that gate receipts are the largest source of revenues. And baseball does implement a system in which the visiting team gets a portion of the gate receipts as it is (IIRC the visiting team gets 1/3).

No it doesn't. Look at the parts I just bolded. For it to work, you need to factor in all the revenue, including TV. That's the hardest part, since MLB treats TV like an individual team-specific thing that they can mask with obvious (and perfectly legal) accounting maneuvers.

Regardless of my scheme vs. other ideas, if MLB ever achieves sane economics, it's not a salary cap that's needed but rather getting a sensible and transparent approach to the TV money. As things are, the TV money is a shell game, plus it ignores the fact that every team needs to be playing another team to make a nickel. The MFY's aren't worth 10 cents if nobody plays them.

The current gate-sharing scheme misses way too much of the money. If the gate-sharing factor is one-third (I don't know if it is), I think a third ain't enough, but that's not the main thing. To fix the economics, all the owners need to gang up on the MFY's (and maybe BOS... and one day in the future maybe the O's-and-their-Gnats-subsidized-MASN) to handle the TV money in a non-crazy way. As it is, they focus on the gate (like it's 1933) and act like team-specific TV-money doesn't even exist, which is nuts.

[square634]

I was under the impression that MLB did away with the visiting team getting a share of gate receipts about the time that they implemented revenue sharing.

This 1995 SABR presentation states that AL visiting teams received 20 percent of local gate receipts while NL visiting teams received a paltry 46 cents per ticket, regardless of ticket price. That changed in the mid nineties.

Can Money Still Buy the Postseason in Major League Baseball?

A 10-Year Retrospective on Revenue Sharing and the Luxury Tax

Apparently, the 2002 Collective Bargaining Agreement provides that each team contribute 34 percent of all "Net Local revenues", which presumably includes gate receipts, shares of concession sales, and local broadcasting revenues, into a pool that's divided equally among all teams. The catch is that it's local revenue after subtraction of related expenses such as stadium operations, which means that some teams probably contribute nothing for games which have low attendance. Also, the local revenue goes into a pool to be divided among all 30 teams, which means that the Yankees only get 1/30th of the local revenue share generated by their visits to Camden Yards.

My fault. You're right, there is a difference between net revenues and just gate receipts. However, every team does indirectly get a share. Personally, I don't think revenue sharing should be linked to net revenue in the first place. If instead the amount of money shared was linked to marginal cost, then teams would still have maximum incentive to increase revenues. At the same time, teams in larger markets and/or teams that spend a lot are forced to share due to their larger costs. Then to give an incentive to put a competitive product on the field, there could be a tax on losses. That way an owner couldn't pocket money by fielding a minimum payroll team every year that loses 100+ games. The combination of these two taxes would give owners the incentive to field a winning team at a low cost, while at the same time maximizing local revenues through sponsorships, etc.

Edit: Obviously for this to work, there would have to be a way to get an accurate assessment of costs, including the costs of running a regional sports network if applicable.

[giantfan]

Thats not a good idea, then teams who dont attract fans will have no incentive on improving their product.

[RShack]

You have brought up the most sensible solution I've seen. I have no problem with payroll disparities as long as they are within reason. This solution is a fair one in that the big media teams are making lots of money selling a product that relies on having an opposing team which IMO deserves a cut. Implement a plan like you suggest or really any kind of equitable revenue sharing arrangement and salary caps are unnecessary.

Exactly.

The thing I like better about my idea is that it would be based on competition, not on arbitrary limits to protect the owners from themselves at the players' expense. Maybe instead of 50/50, they should split each game's revenues 60/40 based on who wins the dang ballgame. Then dollar-counting owners would have a dollar-counting reason to want to actually win ballgames. Plus, as an added benefit, it would mean that *everybody* would be gunning for the MFY's even more than they do now ;-)

[DrungoHazewood]

Thats not a good idea, then teams who dont attract fans will have no incentive on improving their product.

Imagine that... pay teams lump sums based on how low their payroll is, and the teams tend to stick with a tiny payroll and pocket the cash every year.

Incentivizing excellence should be the goal of any revenue redistribution scheme in sports. I've long been in favor of market size-based revenue sharing in baseball. Set a baseline, probably based loosely on something like Nielsen market sizes translated into expected wins. Basically, big market teams would be expected to win more than small market teams. Huge markets like NYC would probably be expected to win 95 games a year. Milwaukee and KC would probably have a baseline in the 70s.

If you fall short of your expected wins you pay into the pot. If you exceed your expected wins you get money.

If revenue sharing is really about leveling the playing field this works a lot better than telling teams they'll get more cash if they slash payroll. It also avoids telling owners they can't slash payroll - they just have to win while doing it.