Adjusting to life without revenue sharing

Revenue sharing is one of the bigger, yet less understood, items that comes up every time there are CBA negotiations. Since it’s mostly about how teams deal with one another, it’s not a particularly sexy topic. Yet it’s just as important as anything else, since the arguably biggest issue over the last 10-15 years has been how to address the economic disparity between small and large markets.

The A’s are in a gray area as far as how teams are defined. Oakland is considered a part of a large market, but the franchise is hampered by an outdated stadium that  hampers their ability to generate local revenue. Some have called the A’s a small market because of these conditions, others call the stadium an excuse to operate on the cheap. I prefer to call the A’s low revenue since it’s an acknowledgement of both the A’s current position and the potential for when a new ballpark occurs. How the A’s and MLB planned to address the franchise’s revenue position and how both failed to execute have led us to this point. That point, for all intents and purposes, is a reset.

To understand why that’s the case, it’s important to know what the climate was like going into the 2011 CBA negotiations. Like the 2006 talks, there was little drama and no major items to discuss. There were tweaks to the draft and compensation system, drug policy, and to revenue sharing as well. Thanks to teams’ expanding media deals and the continued construction of new ballparks, there were few disagreements between MLB and MLBPA as everyone was getting paid. Lew Wolff and John Fisher were well into their plans to move the A’s to San Jose, having released renderings and commencing talks with the City of San Jose more than a year prior. Bud Selig appeared to be working to arbitrate the territorial rights fight between the A’s and Giants. MLB and the owners, knowing about the A’s plans, tacitly approved them by writing into the CBA a schedule to ease the A’s off revenue sharing. I referenced it in the last post.

disqual

Wolff’s San Jose plans stalled, then fell apart with a lawsuit launched by the City of San Jose failing to sway The Lodge, leaving the franchise to head back to Oakland with no other clear choices for a ballpark in their East Bay territory. The A’s three-year run of success coincided with the beginning of the CBA. The final two years were marked by a selloff of veterans and the recent tanking regime. Some looked at the recent years as little more than profit-taking by Wolff while the A’s on-field product languished. I’d rather look at it as the Beane tendency to sell early. However many teams resented the A’s (cough*Giants*cough) for supposedly pocketing the revenue sharing checks, it wasn’t enough to change how the A’s would be treated under the new CBA. The new disqualification system is the exact same formula as last time. What I was worried about was the A’s getting cut off cold turkey, which would’ve raised serious economic difficulties for the franchise going forward. It’s not so much about setting the budget, it’s about what would happen if the A’s had another magical season like 2012. If they wanted to get a rental, the ownership group would have to dig into their pockets as part of a cash call to pay for a trade. Unlike the high revenue teams with huge season ticket and corporate bases, the A’s don’t get $150-200 million up front every year to pay for everything. Even if revenue sharing continued indefinitely, the check comes when MLB completes its annual audit after the end of the season, so they couldn’t use it for in-season moves if they wanted to.

What happens now that the revenue sharing scheme from the last CBA has carried over into the new CBA? There’s talk of greater urgency to build in Oakland, a sentiment supported by A’s officials including new team president David Kaval. But if the disqualification schedule is the same as five years ago, why wasn’t there talk of urgency back then? Did people not consider the ramifications if nothing got built? Did some expect San Jose to happen with less resistance? I know I did. There is a great sense of renewed optimism in Oakland, and early indications are that Mayor Libby Schaaf will provide real material support for the A’s instead of the posturing of her predecessors. However, with the plan now limited to Oakland, the circumstances can now be considered a new ballpark in Oakland, or bust. The logic is quite simple: the A’s have no other options. I really hope the A’s get a deal done in the next two years, because I personally don’t feel any more secure about the A’s future than I have before. If the A’s encounter more difficulty and Oakland has trouble getting out of its own way, MLB and Commissioner Rob Manfred will stop playing Mr. Nice Guy and they will ratchet up the pressure on the A’s and the City. Baseball is nearing peak TV-revenue, so they will look at other ways to grow the pie. Yes, that could mean moving the team to a different market. I still don’t think contraction (which would include the Rays) is in the cards given the optics of it, but I wouldn’t put it past Manfred, who was a lead negotiator for the 2001 CBA talks, the last time the threat of contraction loomed. Let’s all hope we never get to that fearsome point.

P.S. – Sometimes I wonder how much the A’s stature within the Lodge would’ve been improved if they didn’t trade Josh Donaldson and Yoenis Cespedes. If one of the problems with the A’s was their cheapskate tendencies, would simply having a larger payroll by retaining key veterans have changed the detractors’ views of the A’s? Or was it more about the fundamentals of the A’s not making progress of the stadium, even though many within the Lodge actively blocked the A’s efforts? It should be the latter, though the former came up frequently in news reports. 

P.P.S. – The A’s revenue sharing check is speculated to be some $34-35 million. The A’s gate revenue, as reported by Forbes last year, was $43 million. Kaval will have to work some magic to make up for the lost revenue sharing at the existing Coliseum. 

24 thoughts on “Adjusting to life without revenue sharing

  1. I find it misleading that the “Oakland only” crowd are casting the revenue sharing phase-out as a “good thing” for the team. It might well add additional urgency to the ballpark search/negotiations, but it’s not like the team was just content with operating with limited resources indefinitely – they’ve been looking for a new stadium for decades now, under two separate ownership groups!

    A lot of that crowd are also pointing to the hiring of Kaval as “proof” that Fisher had some kind of major change of heart/strategy – I find this dubious. Wolff moved on because a) he is old, b) he sold his shares in the team at the peak of their value before any uncertainty about revenue sharing really kicked in, and c) because the team has been backed into an Oakland-only corner in their ballpark search and since Lew was largely reviled in the East Bay, getting a younger, more dynamic face of the effort was great for optics, but the team strategy largely remains the same. Fisher remains the money man and I believe he is still going to pick the site that offers the least resistance to build – he hasn’t gone from the miser Ebenezer Scrooge to a Walter Haas-like savior willing to dip into his personal fortune to build a palace in a location that will require a decade to “make right”…

    On the perception of the trades of Donaldson & Cespedes: you would hope that at the ownership level, the Lodge appreciate the constraints Beane has perpetually been forced to operate under, though that might have changed slightly when he was given an equity stake, though I doubt it. Hell, most of the owners have hired some sort of Beane acolyte for their front offices at some point or another. I have a hard time thinking they’d hold any baseball-related decision against the team, especially since these trades in particular brought these particular superstars from one of the smallest stages, to two of the biggest. It’s arguably much better for the Lodge as a whole to have the best players playing in the highest profile markets, rather than having every team spending a certain amount of money to retain one or two core guys in obscurity…

    On the baseball side, Beane has operated a certain way his entire career. He’s tried to real-in premium free agents with legit offers (Beltre, Furcal, Headley come to mind) but it’s not his fault that the team’s facilities and profile have deteriorated precipitously over the course of his tenure making the brand toxic to pretty much every FA who has an equitable option somewhere else…

    • @ Taj Adib

      “Wolff moved on because a) he is old, b) he sold his shares in the team at the peak of their value before any uncertainty about revenue sharing really kicked in, and c) because the team has been backed into an Oakland-only corner in their ballpark search” And, perhaps d) He never really wanted to build in Oakland in the first place.

      I’m sure you’re a, b, and c have plenary of merit, and there are probable other factors we are not even aware of (and will never know), but you don’t have to be an “Oakland-Only” fan to believe that Wolff may not have ever wanted to build in Oakland, and perhaps wasn’t even willing to do so. I’m defiantly not an “Oakland-Only” fan, I consider myself an Oakland-first Bay Area-Only fan, that is hopeful with Wolff out of the way something may finally get done in the Bay Area for the A’s.

      • Sure – very true. I think he was genuinely prepared to do a deal on the Coliseum property, but you’re right, it wasn’t his 1st (San Jose), 2nd (Fremont) or even 3rd (Warm Springs) preference. And with his negative perception of any Oakland site NOT the Coliseum so well known, it was best for all parties to get a new face to lead the Oakland effort. As a developer with Oakland experience and a remaining small ownership share, I’m sure he might even remain a behind-the-scenes player in these “new” efforts – but yeah, his part as the key mouthpiece of this group is done.

        My diatribe against the “Oakland only” crowd has more to do with the fantasy land reasoning that by putting the A’s into a revenue corner, the LIKELIHOOD of a new park actually changes – the URGENCY changes, but not the odds of actually getting something done. And by taking away the “patient approach”, the team is further limited in options for this whole thing…

      • @ Taj Adib

        Yes, I agree with you 100%. The urgency is wonderful, but that doesn’t change the circumstances. Hopefully they get something done, but people should confuse the urgency of them wanting to do something, with their ability to do so.

        The San Francisco Giants wanted more than anything to build in San Francisco, yet it took two failed attempts in the South Bay, and the threat of leaving to Tampa Bay to get it done. The San Francisco 49ers first preference was to build in San Francisco, yet they are in the South Bay. The Golden State (I mean San Francisco), Warriors first preference is to build in San Francisco and it looks like it may actually be happening now, but not after other attempts to do the same were not successful.

        My point is, just because Oakland was not Lew Wolff’s first preference, or second, or third, or fourth, or not at all, doesn’t meant it’s going to magically happen now that he is not the face of that effort. (or lack thereof).
        There is still a lot of work to be done, and unfortunately it still may not happen. I do believe (and agree with you), that it was best for all parties that he not be the face of whatever the club was trying to do next.

      • “The San Francisco Giants wanted more than anything to build in San Francisco, yet it took two failed attempts in the South Bay, and the threat of leaving to Tampa Bay to get it done.” Not quite. It took them deciding to build it privately rather than insisting on public funding to get it done. If they had offered private funding during either of their South Bay proposals, they be playing in the South Bay now. Which is fortunate for them, since they inadvertently waited out the multipurpose era and get the retro stadium model to design from.

      • Yes, good point.

  2. The A’s have not had a New StDium of their own since Philadelphia in 1914 and so it continues. What just happened was the Oakland A’s and their fans got screwed again. The subsidy is coming to an end and the A’s are no closer to a New Stadium then ever before. There were several other events that happened that hurt the A’s as well. 1: The fire: There is so much anger at Mayor Schaff, that it makes it harder for her to get a deal done because of the idea of “Corporate Giveaways” until after the next election. 2: The tax increases coming in the State of California ( even beyond what Jerry Brown wants) will make a New Stadium far more expensive to build. I think even the Tampa Bay Rays are closer to a New Stadium for the A’s. It will be the Coliseum As Is or moving out of the Bay Area.

    • “There is so much anger at Mayor Schaff [sic], that it makes it harder for her to get a deal done because of the idea of “Corporate Giveaways” until after the next election.”

      Taken prior to Ghostship fire but “Oakland Mayor Libby Schaaf has a 68 percent approval rating among registered voters, putting her well ahead of predecessor Jean Quan.”

      http://www.sfgate.com/bayarea/article/Voters-like-Oakland-Mayor-Libby-Schaaf-new-poll-6614078.php

      Whatever anger exists for Schaaf is limited mostly to people who have disliked her since 2014 and before aka anarchists and anti-capitalists. The particulars of any deal will obviously affect its political viability but there is no existing groundswell as you describe.

  3. What MLB should do is continue the revenue sharing for the A’s so long as the Bay Area is carved into, separate territories – 7 counties for the Giants, and 2 counties (and the poorest, least amount of corporate money) for the A’s, and the Giants should fully pay for the A’s check (along with their regular revenue sharing portion), since it is them who so handsomely profits from this ridiculous arrangement.

    Either that, or MLB should just make the Giants pay for the A’s new stadium.

    Or, they could do the sensible thing – make the Bay Area a fully shared territory, just as it should be. Then, even if the A’s didn’t ultimately build in San Jose, they would at least have leverage with Oakland to build something there.

  4. “What happens now that the revenue sharing scheme from the last CBA has carried over into the new CBA? There’s talk of greater urgency to build in Oakland, a sentiment supported by A’s officials including new team president David Kaval. But if the disqualification schedule is the same as five years ago, why wasn’t there talk of urgency back then?”

    I don’t understand this comment. The disqualification schedule is not the same for the A’s now as it was under the previous CBA. The old CBA clearly exempted Oakland from the disqualification schedule as long as they had no new stadium. They never built a new stadium, so they were never disqualified from RS during the life of the previous CBA. Now in the new CBA they have no such exemption, and they will receive diminishing RS shares each year no matter what they do or don’t do regarding a new stadium. So how is the disqualification schedule the same as it was five years ago for the A’s? If it is not, as it seems, then they are under pressure to replace that lost revenue, which they were never under before since the RS money kept coming regardless.

    One of the ways for Fisher to relieve the pressure to replace the lost RS money is 1) to actually build a new stadium in Oakland. Other ways include 2) selling the team or 3) moving. Since Manfred has only endorsed #1, there is clearly pressure to get the new ballpark done here. And the sooner they get it built, the sooner they will be in a position to replace the (increasing) lost RS money. Of course if this somehow still fails, then I imagine that after a certain amount of time, Manfred would be more willing to support #2 or #3. So I agree that there are clearly some risks that the team will move, although that is longer term.

    • We have the Giants and MLB to thank for this mess. The A’s should already be playing in a new, privately financed ballpark in downtown SJ. The Giants blocked the move hiding behind their territorial rights, which were given to them by the A’s when the Giants tried to move to SJ back in the 90s. MLB bet that the Raiders would leave, and the A’s would get the Coliseum. They are about to lose that bet!

      • That’s true, but the A’s ownership perched the team knowing San Jose was off limits and could stay that way, so there is plenty of blame to go around.

    • In both cases the assumption is that a ballpark is around the corner. People are saying that the A’s now have this pressure to build, but the CBA ends in 2021. MLB could just as easily kick it down the road if the A’s encounter difficulty beyond their control.

      • Not sure if you were referring to my comment or not (not that you have to obviously), but I’m not assuming any ballpark is around the corner.

    • If you look at Atlanta it took several years to build the New Ballpark. That does not include things like land acquisition, a “Master Plan” environmental regulations, financings and everything involved with getting a Stadium started and completed from start to finish. Probably the easiest place to build is the Coliseum Site ( like Minnesota did with the Vikings) But even there you need the Raiders to Las Vegas after this Season ( no guarantee), and the A’s being able to play @ AT&T while they build in Oakland. I have not even gotten into the political aspects of this ( including local and State Elections less then two years away, so unless shovels get into the ground within the next year, good luck until 2019 ( at the earliest). I actually think the Rays are closer to a New Stadium in Florida then the A’s are in Oakland.

  5. I hate to sound direct here but here goes: What do you mean by Kaval will have to work some “magic”? Can you point to any new sources of revenue in this range that would materialize in the next few years? I can’t foresee any such major increases in revenue to make up for this lost revenue sharing.

    • The main thrust of Kaval’s work with the Quakes early on was going into the community, getting sponsorships, and building up the fan base including suite/club seat buyers. He’s doing much the same work now for the A’s.

  6. If MLB’s goal is forcing the A’s to build in Oakland, the team may be better there than SJ anyhow. The A’s have basicially been a triple A last place team for two years, playing in the worst stadium in major pro sports, while averaging 20K fans per game ( respectable considering the circumstances) Contrast that with the Cleveland Indians, for example, playing at a fairly new (20 year old) baseball only ballpark, with a world series team, averaging only 1,000 fans per game more than the A’s

    . If MLB is attempting to contract the A’s – that’s total lunacy and demonstrates that MLB owners are a bunch of complete idiots. It’s unbelievable how MLB is doing the Giants organization so many favors and shafting the A’s , also that many MLB owners are ok with doing it.

    • @duffer- Money walks and talks in MLB. They will not hurt the Giants and their revenue streams to help the A’s or anyone else. The Giants are essentially paying the A’s to stay in Oakland after revenue sharing.

      A stadium can be done in Oakland, at the Coliseum with the Raiders in one shot. Wolff refused to do it, hopefully Kaval and Fisher see the light.

      • True, there are plenty of franchises that make more MLB revenue than the Giants though. The A’s could be one of them if they get a new ballpark built. The giants get too many breaks from MLB. Also, the Giants are overdue for a long postseason slump, it will be interesting to see how their attendance does after several .500 or below seasons.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s