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View Full Version : Revenue Sharing, Yankees...the end is near



paulrichjr
10-10-2007, 11:13 AM
I have a theory. I think that the National League is not as bad as many people think but instead is very very balanced. Revenue Sharing has created a situation where teams in small markets can compete with the big ones fairly quickly. Teams are signing their players way before they get to free agency and making free agency almost an impossible way to "buy" a winner.

I think even the American League is becoming very balanced (save the Yanks and Red Sox and even they are having a much harder time than in the past). Personally I love this balance but it does seem to make things strange when the "BEST" team in the American League won something like 90 games and actually gave up more runs than they scored.

Now to my worry. Revenue sharing is going to come to a major halt real soon. The Yanks are about to move into their new stadium and when that happens the Yanks cash flow will be diverted from the Reds, Royals, and A's to paying off the new stadium. This could have the effect of the small market teams being put back into the situation like they were 10 years ago. I found an article that I will post on the next post that explains this situation. (I was reminded of it this week from a Gammons column)

My questions:
Is balance not bad teams causing this low win (Cards in 2006, D-Backs 2007) total each year?

What will be the effect of millions not going to the small market teams?

paulrichjr
10-10-2007, 11:13 AM
http://www.fieldofschemes.com/news/archives/2004/08/yankees_stadium_1.html

Yankees stadium-finance FAQ

And here we go again, answering real questions from fictionalized readers...

Q: Why are you saying that George Steinbrenner would be using "other teams' money" to pay for the Yankees' new $750 million stadium? Isn't it a legitimate business practice for companies to deduct expenses before reporting income?

Yes, and it would be here too, if baseball had "income-sharing" instead of "revenue-sharing." The way the 2002 collective bargaining agreement works, teams pay a percentage of their gross local revenues (i.e., before expenses) to the league, which redistributes the cash to low-revenue teams. This was the big concession that the union granted to owners in order to avoid a strike: by reduces the value of putting fannies in the seats (a $10 million-a-year player suddenly has to sell $16 million a year in tickets to earn his value to the team, since $6 million of that gets sent to other teams), a flat-percentage revenue-sharing plan makes owners less willing to spend money on players, thus reducing both player salaries and competitive balance, as Doug Pappas presciently predicted.

There is, however, an exception to the "before expenses" rule: Teams can deduct "stadium operations costs" before calculating their revenue for sharing purposes. And, as has recently been revealed, teams are allowed to count stadium debt as a "stadium operations cost." This means that any money spent on stadiums is effectively a deduction against revenue-sharing, allowing the team owner - in this case, Steinbrenner - to reduce his revenue-sharing check by millions of dollars a year, even if his actual revenue stays exactly the same.

A quick thought experiment reveals why this could end up creating a huge incentive for teams to knock down their old stadiums and build new ones, even if they're not needed. Let's say Joe Owner has a choice between two options: He can sign Barry Bonds Jr., the world's first shortstop-pitcher with a 1.000 on-base percentage, to a 30-year, $750 million contract, hoping that enough fans will come out to see him that he'll make his money back. Or he can spend that $750 million on a new stadium, knowing that he'll immediately recoup $300 million of that in reduced revenue-sharing, leaving only $450 million to be made back in increased ticket sales. Which would you pick?

KronoRed
10-10-2007, 02:10 PM
MLB should step in and prevent the yankees (and all teams) from claiming stadium expenses come out of baseball revenue, IMO that is just basic upkeep, otherwise the system is fatally flawed.

Have to give the Red Sox credit, they are making their old stadium work instead of building a fancy dancy new place with no history behind it.

NJReds
10-10-2007, 02:32 PM
Have to give the Red Sox credit, they are making their old stadium work instead of building a fancy dancy new place with no history behind it.

They did announce at one time that they would build a New Fenway Park near the current field. For one reason or another it never happened.

blumj
10-10-2007, 02:34 PM
MLB should step in and prevent the yankees (and all teams) from claiming stadium expenses come out of baseball revenue, IMO that is just basic upkeep, otherwise the system is fatally flawed.

Have to give the Red Sox credit, they are making their old stadium work instead of building a fancy dancy new place with no history behind it.

They do get to deduct stadium renovation costs, though.

blumj
10-10-2007, 02:38 PM
They did announce at one time that they would build a New Fenway Park near the current field. For one reason or another it never happened.
Because John Henry's ownership group never wanted to build a new stadium. The previous ownership and most of the other candidates to buy the team did.

NJReds
10-10-2007, 02:41 PM
Because John Henry's ownership group never wanted to build a new stadium. The previous ownership and most of the other candidates to buy the team did.

That makes sense.

redsmetz
10-10-2007, 05:32 PM
This is interesting. This might explain why the Reds were more ready to take on more of the construction costs of GABP than the Bengals were, although I'm not sure if the funding and building of the two stadiums coincides with the new bargaining agreement (as I'm typing this, I'm thinking not).

Chip R
10-10-2007, 06:15 PM
Of course they can only deduct that for so long until the debt is paid off. MLB rules says teams can only have so much debt. The more they deduct per year at first, the quicker it's paid off. On the other hand, the less they deduct per year, the more revenue they can share.