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Article about MLB and a possible salary cap.


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I'm not sure that I agree with the author's premise.

According to Forbes, the average National Football League team, which operates under a salary cap with non-guaranteed contracts, is worth $1.04 billion. In baseball, only the Yankees are valued at more than $1 billion, and the league average is just $472 million.

In 2005, MLB had a total attendance which was 71 percent higher than the NFL. However, the average NFL ticket price in 2008 was $72.20, compared to an average MLB ticket price of 25.40! This means that the average NFL team takes in about 66 percent more for their ticket sales.

However, even if total ticket revenues were the same, baseball teams have to open up their stadiums 81 times per season, compared to 8 regular season and 2 exhibition home games, making baseball's stadium operating costs significantly higher. To what extent those greater stadium operating expenses are offset by the revenues from food and souvenir concessions is something which I don't know.

Also, the NFL TV viewing audience is about 38 percent larger than that for baseball. This means greater broadcast revenues for the NFL, which are shared equally among the teams, avoiding much of the disparity in revenue which exists in MLB.

In addition, baseball teams spend a significant amount on player development, far more than football teams have to spend. All major league sports use the NCAA as a minor league system, but college baseball players require considerably more additional development than the average college football or basketball player.

The bottom line, which is clearly stated by Forbes in its articles on the business of major league sports, is that NFL franchises are considerably more profitable than MLB or NBA franchises. The NFL franchises yield about a 16 percent profit on operating expenses, compared to only about 3 to 5 percent for MLB or NBA franchises. That's why NFL teams are worth so much more than MLB teams, on average.

This is true even though NFL teams pay a higher percentage of their gross revenue to players than MLB does. It's all about the relative expenses of operating the teams; the NFL can afford it, while MLB can't.

That doesn't mean that MLB shouldn't try to do more to equalize revenues among the teams, to level the competitive playing field. The best way would be to require each team to contribute an equal percentage of revenues -- gate, broadcasting, and memorabilia sales -- into a common MLB compensation fund, from which all players would be paid according to their performance. The cost savings from eliminating player agent commissions and reducing the administrative overhead for teams would allow players to pocket more money while still reducing team costs.

That still wouldn't be enough to equalize the average values of MLB and NFL franchises, but it would take a significant step in that direction.

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