Revenue sharing rollback?

Fox Sports’ Ken Rosenthal is at it again. This time he’s talking about that horrible, disgusting word that I loathe, the one that makes my skin crawl, the C-word.

That’s right. Contraction.

Rosenthal notes that some of the big market owners are grousing about having to send money to low revenue franchises such as the Rays and A’s, who conveniently don’t have new ballparks to help their revenue cases. Both teams should be the likeliest candidates because of this. However, all is not as it appears to be! Rosenthal walks back the threat in the context of upcoming CBA negotiations. To wit:

Such a threat would, however, change the tenor of the upcoming labor negotiations, raising the tension considerably. Yes, the owners always could pull back to extract other concessions, but if the A’s can be saved, why risk a work stoppage to eliminate one troubled franchise?

Naturally, he pivots to an A’s move to San Jose, which could (and should) resolve the A’s poor revenue position. In the grand scheme of things, improving the A’s financial stance may bump up total MLB revenue 1% on annual basis. That’s not enough to make Joe Fan notice, but if the game is as also about getting more owners to sign off on the financial model for the next 5-10 years, it’s an important battle to not have to fight.

Right now, MLB and MLBPA are set to go into CBA negotiations with several draft related items such as bonus slotting, a potential international draft, and the possibility of trading draft picks (yes please). Competition matters include increased replay and that extra playoff round. These items are only peripherally related to how the revenue pie is split, so the tension regarding those matters is projected to be minimal at best. That makes the biggest struggle not between players and owners, but rather between owner haves and have-nots. It has building to this ever since revenue sharing was introduced, and the financial document leaks of last summer only added fuel to the fire.

For a while I’ve been talking about how revenue sharing isn’t going to be expanded. It faces a rollback, strange as it seems, and the big market teams are pushing it. Bud Selig is listening, as his response to Hank Steinbrenner’s comments from earlier in the week shows:

“We have more competitive balance than ever before,” Selig said. “We have more competitive balance than any other sport.

“Now, look, is the system perfect? No. I didn’t say it was perfect, but I said that I think what exists today is pretty darn good. In the next labor negotiation, we have to tweak it in some areas, and it’s significant tweaks.”

What kinds of tweaks are we talking about here? There might be a tweak to the luxury tax, but that would only really satisfy the Yankees. Revenue sharing is defined as 31% of revenue minus expenses. Which means that teams keep more than 69% of their gate, local TV and radio money thanks to the ability to deduct stadium costs. Forbes had the Yankees 2009 revenue at $440 million after expenses and revenue sharing. By reducing the required share from 31% to 25%, the Yankees could see their net revenue approach $500 million, half of that excess likely going to yet another free agent pickup.

On the other end of the spectrum, a have-not team like the A’s could see its revenue go south by only a few million. It also means that other have-nots would take similar hits. In practical roster terms, this means not signing some like Grant Balfour. For a team that tends to hoard revenue sharing like the Pirates, it simply means they have less to hoard since they are forever playing the waiting game until their competitive window opens.

(You can stop your laughing now.)

Thankfully, the have-nots and middle class teams outnumber the big markets. They’re not going to take this lying down and they can lobby Selig just as effectively as the Steinbrenner brothers or John Henry (who once owned a have-not team in the Marlins). What to do then? As Rosenthal suggests, getting one team off the dole – namely the A’s – could be a big difference maker. The Twins are already there. The Marlins will be healthier starting next year. The Royals have a greatly renovated ballpark and a fantastic farm system which could literally pay dividends over the next several years. The A’s will be once they have a ballpark built (and they have the revenue streams to pay for it). That leaves the Rays as the only team that can’t lift itself up by its proverbial bootstraps. Knowing that the Rays probably won’t have anything done at least through this next CBA means they are the only team to worry about instead of four or five should the A’s situation be resolved. The sooner the owners make this happen, the sooner they can end this major internal distraction and rally in solidarity against their real enemy: the players union.

.

P.S. One other thing that Rosenthal touches on is debt or legal issues facing certain owners like Fred Wilpon, Frank McCourt, and Tom Hicks. It would seem that owning a team is a license to do some seriously crazy things, like investing with Bernie Madoff or buying a bunch of other franchises that one can’t afford. While Selig may look to enforce debt rules better, his reach doesn’t go as far as telling owners how to run their own personal finances. Is this recent history of individual owner financial troubles simply a remnant of the economic downturn or something else? I don’t know that any additional “screening” of potential owners would help. It’s not like choosing owners is going to become an open, democratic process overnight. They don’t call it The Lodge for nothing.

P.P.S. Ray Ratto also dismisses contraction.

30 thoughts on “Revenue sharing rollback?

  1. Well, I feel vindicated that my article of a few weeks back is not “tin foil hat speculation,” considering that big-market franchises are talking up the idea to Rosenthal. It’s being discussed, and not merely by me in my mother’s basement.

    One thing that Rosenthal and all of us common-sensers agree on: Getting the A’s a new stadium ends all contraction speculation immediately, and forever. That’s the power of having 29 of the 30 teams in a modern, acceptable facility and market.

    Looking very long-term: With only one substandard market/facility, the league can use the Rays as an opportunity to try a new temporary foreign market (San Juan, Puerto Rico, Monterrey), or as leverage with burgeoning domestic cities that are vying for a major league franchise. Those are tangible opportunities to grow the game, and they benefit the league as a whole.

    Whereas having two substandard markets/facilities is a drain on the game, as Rosenthal’s article reflects.

  2. More competitive balance than any other sport? Huh?
    I don’t think so, Bud. Try the NFL and the NHL.

  3. Contraction is a hollow threat, which is why this speculation is coming from Rosenthal and not from anyone in Selig’s office. Contraction would require overcoming all sorts of state law obstacles (think the St. Petersburg city fathers will take it lying down?) and THEN negotiating an agreement with the MLBPA over the effects of contraction (distribution of player contracts from the contracted teams, changes to roster sizes, draft, etc). For all practical purposes it is impossible.

    In 2001-2002, MLB included a number of franchises that were actually losing money, unlike today. MLB owned the Expos outright and could do whatever they wanted with it. And they had a willing owner of the Twins, who volunteered his club to be contracted. And with all that, they still couldn’t pull it off. It was blocked by a Minnesota judge in that case, but even if it hadn’t been stopped there, they never would have cleared the other hurdles.

    Contraction talk is for sportswriters and people like us to have fun with. Selig’s real goal, at which he has been fantastically successful, is to put all 30 teams in state-of-the-art, money-printing ballparks.

  4. MLB owners complaining about revenue-sharing and then caging the A’s into an unprofitable situation when a profitable one is 30 miles away are just plain hypocrites.

    • MLB owners complaining about revenue-sharing and then caging the A’s into an unprofitable situation when a profitable one is 30 miles away are just plain hypocrites.

      Patience pj, patience my brotha!

  5. Baseball is 90 percent misery. The other half is waiting.

  6. Agree with Simon. Contraction will never happen, and Rosenthal even acknowledges that.

  7. If revenue sharing is rolled back I would expect the luxury tax to be strengthened, by lowering the ceiling, by increasing the penalty, or both. Unlike revenue sharing, luxury tax money goes to the players and to programs designed to expand the game’s influence. The net effect is the players are happy because they are getting a bigger piece of the pie and the mega market teams (aka Yankees) are, hopefully, better kept in check. The only real losers would be the low revenue teams. However, I’d expect the institution of hard slotting and of an international draft will be used to compensate for that loss.

  8. nsj, I agree with you nearly 100%. I do think the C-word talk is ultimately originating from Selig, and it’s only value is as a threat to the MLBPA in CBA negotiations — and, again, my theory is that Selig has held up the A’s ballpark committee in large part to preserve some element of plausibility for the C-word threat (not real, genuine potential — I think everyone agrees that it would be nearly impossible to implement). Again, we won’t see the A’s stadium situation resolved until after the CBA is finalized.

    • nsj, I agree with you nearly 100%. I do think the C-word talk is ultimately originating from Selig, and it’s only value is as a threat to the MLBPA in CBA negotiations — and, again, my theory is that Selig has held up the A’s ballpark committee in large part to preserve some element of plausibility for the C-word threat (not real, genuine potential — I think everyone agrees that it would be nearly impossible to implement). Again, we won’t see the A’s stadium situation resolved until after the CBA is finalized.

      Maybe you’re right MB about the CBA finalized stuff. But considering ground doesn’t need to be broken until September of 2012 (for April 15 Opening Day), it’s not really a bad thing (unless of course you want an answer from MLB on SJ tomorrow). In the meantime SJ can get Diridon 100% ready and Mr. Wolff can line up the construction/architectural side via Earthquakes SSS process.

  9. And meanwhile, A’s fans from the south and east bay are quarreling with each other over the fate of the team and we don’t know if our team will be around here in 5 years. Selig doesn’t really care how all this affects A’s fans from a perspective of enjoying our team, obviously.

  10. Even though we’ve known for a while that was possible MLB might wait until after the CBA negotiations before resolving this issue, my concern is having obstacles arise in the meantime, such as the future of RDA funds. At this point, we know surprisingly little about the Wolff/Fisher private financing. With the San Jose possibility being so close we can almost touch it, it’d be heart breaking to see complications arise from investors backing out San Jose being unable to fulfill some aspect of their preparation. I’m just taking the cautious stance, but it feels like we’re in a house of cards that could collapse if anyone breathing too hard.

  11. @ML or ALL: Do you know if there are any restrictions on how teams can spend the revenue sharing dollars they receive?

    • @Briggs – Judge for yourself.

      (5) Other Undertakings
      (a) A principal objective of the Revenue Sharing Plan is to promote the growth of the Game and the industry on an individual Club and on an aggregate basis. Accordingly, each Club shall use its revenue sharing receipts (from the Base Plan, the Central Fund Component and the Commissioner’s Discretionary Fund) in an effort to improve its performance on the field. Each Payee Club, no later than April 1, shall report on the performance-related uses to which it put its revenue sharing receipts in the preceding Revenue Sharing Year. Consistent with his authority under the Major League Constitution, the Commissioner may impose penalties on any Club that violates this obligation.

      • Each Payee Club, no later than April 1, shall report on the performance-related uses to which it put its revenue sharing receipts in the preceding Revenue Sharing Year.

        .

        Short of pocketing the monies, the verbiage looks pretty lenient with the only operative language being “performance-related uses.” There’s a viagra joke that I’ll just leave alone. I’m just wondering if revenue sharing receipts could be put towards something like property or radio stations.

  12. Selig thought being commissioner would be all about watching baseball from the front-row box in all the ballparks. Oh boy! He didn’t think he’d have to deal with actual, tough issues like steroids and a common-sense relocation of a franchise to a more tenable situation in a city 30 miles away, after MLB stupidly locked itself out of that city.

  13. @pjk – I know we share a passion for the A’s, but damn dude … you say the same thing in every thread …

    The owners are trying to make a profit. I don’t trust anything they have to say about the numbers. The players are in it for themselves too, the difference is: they are the game!

  14. A couple weeks back ML asked monkeyball what item “would be so hotly contested that the word contraction would appear in the (CBA) talks?” Is the answer territorial rights? Maybe Selig is confident that he can handle the threat deftly enough so as to not ruffle too many feathers before pulling the bait and switch. It wouldn’t be the first time Selig has used the threat of contraction to move a team into a new stadium. Maybe he feels that explicit support from the MLBPA for an A’s to SJ move could sway enough owners to allow Selig to hold the vote, especially if that support is coupled with some concessions that would meet the approval of all owners. Throw in a rollback of revenue sharing that will please the clubs most likely to be opposed to TR modification and, basically, the Santa Clara county TR could be modified as part of a package deal in the upcoming CBA.

  15. @David–agreed. You have no players, you have no game. You can do without these greedy, slimy owners. I wish the fans/communities own their teams, ala Green Bay. Pump profits back into the team and stadium, not line millions more in the owners pockets, and also prevents teams from leaving their communities.
    @TonyD–just say “patience my brotha” one more time. Jeez!!!

  16. More competitive balance than any other sport? If Selig actually believes that, which I suspect he does, one needs to marvel at how out of touch with reality a leader can be.
    How can a well thought out Blue Ribbon Commission report be expected when Selig shows himself unable to look at reality?

  17. re: @pjk – I know we share a passion for the A’s, but damn dude … you say the same thing in every thread …

    What’s that old saying about the pot calling the kettle black? It’s explained why Oakland won’t work as a place for a privately funded ballpark and that Oakland doesn’t have the money to build the ballpark with public funds. But you disregard all of it and continue insisting that Oakland has such a good chance to keep the A’s despite these amazing obstacles.

  18. @pjk – yes, i have an opinion. This ain’t the soviet union. You get to have an opinion also. But, your opinion is always expressed the same way. The same phrases, time after time. Mix it home boy!

  19. @gojohn10: At the time, I responded to ML that I didn’t know, b/c I wasn’t knowledgeable enough as to what would actually be on the table.

    IIRC, though, I argued (and if I didn’t then, I do now) that individual details didn’t especially matter, because it would merely be an issue of bringing maximal firepower in order to gain as many rollbacks against the players as possible, regardless of how contentious they would appear initially.

  20. @MB – The problem is that right now “rollbacks” don’t affect players. They only affect teams and owners. MLB is not going to institute restrictions or caps on free agent signings. The players don’t care so much how much they get as a whole as long as their elite can continue to get nine-figure deals. When something truly contentious comes to the forefront I’ll believe it. For now contraction is like a sleeping bear – best not to poke it.

  21. “Soviet union”?”Mix it up homeboy”? What year and world are ProOaklanders living in these days? Truth and consistency always wins, not emotions and fantasy…..

  22. I wish this blog had diaries… I have never said SJ isn’t “fit” for anything. I just say, I want my A’s in Oakland. I don’t talk smack about SJ.

    ST- i referenced the soviet union, because you couldn’t have an opinion there.

    “Truth and consistency always wins”? sure dude.

    @ML – Can a pro-Oaklander have a green handle?

    • @David – Of course. As I said before, just click the login link and hit Register. You know the rest.

      I don’t plan to implement diaries or further expansion until this political business is over.

  23. Will you still support them if they end up in San Jose? I already go to games in Oakland and will happily continue if a new ballpark is built there. But the odds are so stacked against it that it seems San Jose is the only realistic option left in the Bay Area.

  24. MLBPA head Michael Weiner is going to be on XM 175 at 10:30. I tweeted the host and requested that he ask about rumors of contraction and whether the union has a stance on a possible A’s move to SJ. He tweeted back that he will ask. Unfortunately, I didn’t drive and don’t have XM access today 😦

  25. MLBPA head Michael Weiner is going to be on XM 175 at 10:30am PT. I tweeted the host and requested that he ask about rumors of contraction and whether the union has a stance on a possible A’s move to SJ. He tweeted back that he will ask. Unfortunately, I didn’t drive and don’t have XM access today 😦

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