John Henry calls out the small markets

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There’s a small amount of buzz surrounding Red Sox owner John Henry’s e-mail to the Boston Globe, published yesterday. In the letter, Henry takes certain unnamed small market teams to task for riding the revenue sharing gravy train.

“Change is needed and that is reflected by the fact that over a billion dollars have been paid to seven chronically uncompetitive teams, five of whom have had baseball’s highest operating profits,” Henry responded in an e-mail. “Who, except these teams, can think this is a good idea?”

The Chronicle’s John Shea thinks Henry’s referring to the A’s among those teams, which stands to reason since they received $32 million in revenue sharing and made $26 million in operating profit in 2008. Off the top of my head, the other gravy trainers are the Pirates, Nationals, Twins, Rays, Royals, and ironically, Henry’s former team, the Marlins. The A’s don’t fit into the “chronically uncompetitive” milieu, so perhaps the Orioles or Reds are being lumped in instead. I doubt that Henry reviewed a leaguewide ledger before making the comment, so it’s not worth picking it apart.

ESPN’s Rob Neyer chose not to take Henry at face value, pointing out a few factual inconsistencies. Among them are Henry’s assertions that Boston is merely the 16th biggest market and the MLB is itself a pure bastion of free market capitalism. However, Neyer was intrigued with Henry’s concept of abolishing revenue sharing and replacing with entirely with payroll taxes, distributed directly to low revenue teams. The purpose is to bring the have-nots up to a new salary floor. Of course, this isn’t exactly an altruistic move as it would allow the Red Sox and other have’s to retain even more of their local revenue.

“It’s a very simple approach in which payroll tax dollars replace revenue sharing dollars and go directly to the clubs that need revenues in order to meet minimum payrolls that should be imposed on each club receiving revenue. Further, players would have to be protected with a guaranteed minimum percentage of overall revenues. This would be a very simple and effective method in reducing top payrolls and increasing bottom payrolls with no tax on revenues,” Henry wrote.Henry added that “The World Series should be determined by fully competitive teams on the field – not by how much particular clubs can afford to spend. A better solution is to address competition directly so that clubs can generate revenue more equally as teams become competitive across baseball.”

I find the idea interesting too. According to Plunkett, MLB brought in $6.2 billion in revenue for the 2009 season. Henry doesn’t specify how much the “guaranteed minimum percentage of overall revenues” is, but it certainly won’t be 1/30th of the whole pie. My guess is that it’ll be around 1%, or $62 million per team. That’s slightly more than an even split of national revenue. Beyond that, teams would be left to their own devices, or rather their own local revenue. I haven’t had a chance to run the numbers, but it’s no stretch to think that the A’s would be worse off until they got into a new stadium (keep in mind that the current CBA runs through 2011). I’d venture a guess of $15-20 million less than what the A’s are currently getting with revenue sharing, though at least they’d get most of the money upfront instead of waiting until the end of the season for the revenue sharing receipt as they do now.

Whether or not Henry is speaking out of school, I have every reason to believe that revenue sharing will move more in his preferred direction, especially as the remaining teams without new stadia get their situations resolved. With Bud Selig reaffirming his intention to retire by 2012, it’s likely that the commish feels that things are lining up properly to cement his legacy and he feels that his work is just about done.

8 thoughts on “John Henry calls out the small markets

  1. Henry’s idea of a salary floor isn’t without merit. Unfortunately as Wolff points out it neglects the fact that teams like the A’s also use revenue sharing cash to invest in their minor league operations as well. A salary floor sharing situation would eliminate that and leave teams like the A’s with less to invest in their minor league ops at the expense of their major league teams. You’d end up with the small market teams having less and less home grown talent and having to just buy the castoffs of the richer teams… which would make an already less than competitive league even less competitive.

  2. There’s a simpler solution to all this. And it’s closer to Henry’s belief that “MLB is itself a pure bastion of free market capitalism.” Let teams move to wherever they want (the NY area could easily support 2 more teams). And let the small markets that can’t support a MLB team become minor league cities. Yes that means places like Kansas City, Tampa Bay, Pittsburg, and *gasp* Oakland would probably loose their team.

  3. Very interesting. I wonder what kind of relationship Henry and Selig have? I think, based on Henry’s comments, we can tab one vote in the “yes” ledger for a realignment of Territorial Rights.

  4. Boxscore: A new poll shows San Jose voters equally split over the idea of the Oakland A’s relocating to their city.

    The poll of 400 Santa Clara County voters found that the half living in San Jose were split, 45 to 44 percent, on whether they approve of the A’s moving to town.

    Countywide, support for the move was slightly better, 45 to 37 percent.

    The survey was conducted Oct. 26 to 28 by Oregon pollster Rick Lindholm, who tells us he added the A’s question to a broad survey of Santa Clara County opinion “to get a benchmark of what was going on.”

    The survey pretty much mirrors what the Giants, who are opposing the move, found in their polling – but sharply differs from what A’s boosters in Santa Clara found in their survey.

    A Giants poll of 528 county voters, including 275 from San Jose, conducted from April 21 to 27 found respondents leaning 2 to 1 against the move if it meant spending public money, and rating a new ballpark as dead last among seven possible spending priorities in the county.

    “I think that’s going to be a hard sale,” said Giants pollster Peter Hart.

    Santa Clara County Assessor Larry Stone, however, tells us his booster group’s poll – taken three months ago – showed “surprisingly strong support” for the team moving, though he didn’t provide details.

    Whatever the case, we’re told that San Jose officials have had two meetings with the Major League Baseball committee reviewing the A’s possible move. At this point, that’s probably the only group that counts.

    Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/12/01/CMK01ATEF3.DTL#ixzz0YeCrIjQV

    • Seems to me the two sides are likely spinning their polls to their views since they both conform to their views (ie the Giants poll considers “public money” which has not been mentioned by the A’s or San Jose as on the table) and don’t provide actual percentages (and in the SJ booster case don’t even provide any kind of numbers). I’d say the Boxscore poll is likely a better gauge of reality with support evenly split in SJ proper and support for the move outside the city itself being ahead.

  5. A floor is fine, as long as it comes with a cap. I’d hardly call the Twins chronically uncompetitive, either.

  6. Seems to me that the key word here is “operating.” Why qualify the profits teams receive? I’m sure if you factored in revenue from other sources, such as media contracts and merchandising, the teams with the highest profit margins would be much different.

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