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The Money Pitch

The Widening gap between rich and poor teams means only a handful will have a shot at the World Series
Ken Shouler, Austin Merrill
From the Print Edition:
Cuban Spy Scandal, May/Jun 02

(continued from page 1)

Marvin Miller thinks it was harder for most teams to win the World Series 50 or 60 years ago, unless they were one of a few elite teams. "The Yankees won 14 American League pennants in 16 years [1949—1964] and most of the World Series in that period. And in those years, it didn't matter what your payroll was.

"The problem today is nowhere near as unbalanced competitively as it was then. We're sitting here with the most recent season, when an expansion team, in business for what, four years, and they win the World Series and beat the Yankees! Regardless of payroll, it is not tougher now for a low payroll team to win a World Series than it was when a few teams dominated the game in both leagues."

Zimbalist thinks that neither the present situation nor the 1950s is optimal for the game. "The good old days of the last Yankee dynasty were not that good for baseball. In that span, average attendance at games grew by less than 3 percent over the entire 16 years [1949—64], even though real ticket prices remained virtually flat [they increased by less than half of 1 percent per year]."

Some observers point out that baseball intelligence matters as much as small or large payroll. Your front office still has to make the right decisions in picking talent, and your players must stay injury-free. So teams like San Francisco in 2000 and Oakland in 2000 and 2001 combined to win five playoff games despite being in the lower half of the payroll rankings. "The only reason that they were able to do well was they [had] players that had less than six years of experience [and thus had not earned the right to free agency], and by happenstance, were able to get a good group of them together," says Charles Link.

Agent Scott Boras agrees. "When you talk about lower payrolls, the only way you're going to have talent on it is if it's young talent," says Boras. Boras represents Alex Rodriguez, who signed a 10-year deal with Texas for $250 million last season, and Barry Bonds, who signed a five-year pact with the Giants for $90 million, despite being 37 years old. But there is a drawback. "Young talent never wins," he says. "And the first element is that a lower payroll club does not pursue veteran talent. So experience in sports is wholly related to success."

Moreover, pointing to poor teams that succeed doesn't make a convincing case against the importance of money. They are exceptions, nothing more. The reason we can cite the poor teams that conquered adversity is that there are so few of them.

What is the formulaic elixir that will fix this situation of so few haves and so many have-nots? The remedy for baseball's economic ills is not easy to come by.

Major League Baseball tried to right the problems of competitive imbalance in 1996, when the last collective-bargaining agreement was signed. The approach then was to level the playing field with a revenue-sharing system and a luxury tax on those teams with the five highest payrolls in the two leagues. Thus, in 2000, the bottom three clubs in revenue (the Expos, the Twins and the Marlins) received $24 million, $22 million and $16 million, respectively, in transfers from the revenue sharing system.

But to Zimbalist's way of thinking, this falls short in an un-expected way. "Given that the bottom half of teams recognize that they have no hope to compete in the free agent market, their best profit-maximizing strategy is to lowball their payroll, perform poorly, and collect large transfers from the rich teams," he says.

"One of the things that's happened with the revenue sharing is that some of the teams that are getting it are using it just for their everyday operations and not to pay the salaries to be competitive," adds Link. It's possible that one of those teams is the Montreal Expos; in their 81 home games last year, the Expos drew a Major League low of 642,745 fans, less than six Double-A and Triple-A minor league teams.

"So what baseball needs to do is one of two things, in addition to expanding revenue sharing," contends Zimbalist. One option, first espoused by sportscaster Bob Costas, is to "either set a minimum threshold, where they say, 'You either spend $40 million on your players—or whatever the threshold is going to be—or you don't get any revenue-sharing transfer,'" the professor says.

The second solution to the revenue-sharing issue, advanced by Zimbalist himself, seems to embrace all the relevant factors. "You take an equation that estimates team revenues in baseball on the basis of the team win percentage, media size and stadium conditions, and you plug into that equation the assumption that every team has a .500 winning percentage. You use this estimated equation and see what a team would earn in revenue if it had a .500 winning percentage, along with the advantage of its city and the advantage of its stadium conditions. So, for argument's sake, let's say that if the Yankees were .500, that instead of generating $240 million in revenue, they would, at .500, generate $170 million. You would then tax the Yankees for the advantage they have because they are in New York. That is, you tax them on the $170 million.

"Now the net local revenue sharing rate is 20 percent, though the owners are talking about lifting it to 50 percent. Let's say it's 50 percent. You would tax them 50 percent of $170 million, the amount they would earn if they were an average team. And if they only earn $140 million, they still have to pay the tax on that difference of $30 million. On the other hand, if they are very successful, and they generate $240 million, they still only pay a tax on $170 million."

The idea may sound complex to a mind untutored in economics, but Zimbalist insists it is quite doable. It would need to be embraced by the players association and the owners, with a little give and take.

Until that time comes, enjoy the game. This season begins with interesting possibilities. Who will be this year's Seattle and Oakland and outperform their fans' expectations? Will the Braves or the Mets capture a division crown? Can the Red Sox rebound from a season of injuries to overtake the Yankees? Can the Yankees take back their crown and win their 27th World Series? Can the A's or the Cardinals win their 10th?

Baseball is still the grandest game, bar none. It will be grander still after it is tinkered with and structured more fairly.

Kenneth Shouler is the author of The Major League Baseball Book of Fabulous Facts and Awesome Trivia (HarperCollins). Data for this article was provided by Sean Lahman.


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