August 24, 2000

The Imbalance Sheet

Ticket Prices, Part II

by Keith Law

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Last week, I covered the technical problem behind revenue sharing: it's so toxic to the penalized owners that it's unlikely to work. Trying to convince an investor that he has already made enough money is like trying to convince Pat Buchanan that the last great anti-trade crusade gave us the Great Depression. It's a fool's errand.

Revenue-sharing proponents do have one ace up their sleeves, and on the face of it, an oddly appealing argument. They say that the Yankees owe the money to the small-market teams, because without the Royals, the Devil Rays and Expos, there wouldn't be any baseball.

But where emotions are long, memories are short. Indeed, there was baseball long before the Royals, Devil Rays and Expos--yes, I cheated and picked three expansion teams--and It Was Good. In 1959, baseball had just 16 teams and things were just fine. In fact, it was better for the Yankees, since they were just reaching the end of a run that had already seen them win eight World Series titles in an 11-season span, and that would net them two more before imploding after 1964. If I'm George Steinbrenner--and I'm not, because I can't stand navy blazers--and the Marlins and Brewers try to extort money under threat of folding, I'd advise them that the door is heavy and they should be careful on their way out.

One doomsday scenario to consider, should MLB persist in its shakedown of the most successful teams, is a schism, kind of like the reduction scenario in reverse. The high-revenue clubs could try to split from the remainder and form their own league. Many clubs would follow to avoid losing the revenue that they gain from their association with the most famous and successful teams, which results in direct and indirect revenue gains that would be lost without the Yankees, Dodgers and Braves in the fold. It's not likely, but it's a weapon the biggest teams will probably wield in words.

Another common refrain is that the other sports have enacted revenue sharing and/or salary caps and seen wonderful results. The NFL is the most commonly cited example, but the NBA and NHL also come up as points of evidence. This is all preposterous.

The NBA is the worst argument for salary caps and similar arrangements one could imagine. The league has yet to find a workable system. The proof is in the pudding here. The past 20 NBA championships have been won by a total of seven teams (Boston, Los Angeles, Philadelphia, Detroit, Chicago, Houston and San Antonio). Five of those teams accounted for 18 of the titles; L.A. and Chicago alone accounted for 11, 12 if you go back one more season to 1980.

Los Angeles, the Yankees of the NBA, just won the championship on the giant back of the league's handsomely compensated MVP, Shaquille O'Neal, bought and allegedly tampered away from Orlando. Now, Orlando has come back with a vengeance, clearing room under the NBA's joke of a salary cap and setting out to buy a championship by attempting to acquire the league's top two free agents this offseason. Imagine the outcry if Alex Rodriguez and Manny Ramirez were to both go to the Mets this fall.

The NHL isn't much better, with salaries exploding since the advent of free agency, players routinely holding out for more money (Alexei Yashin, Pavel Bure) and the worst record of any of the four major sports for championship parity. Since 1971--the first post-expansion year where the Stanley Cup finals weren't a sweep--only 12 teams have won the Cup, and three teams (Montreal, Edmonton and the New York Islanders) accounted for 17 of the championships. The four finalists in the playoffs this year had all won at least one Cup championship before; only Philadelphia, a contender all decade, hadn't won one in the 1990s.

The NFL has the best case, particularly coming off the All-Parity Super Bowl this year, but even so, the case for its revenue-sharing program is mixed at best. In the ten years before the Rams beat the Titans, one of the Yankees of the NFL, the Dallas Cowboys, took three titles, while another one of the Yankees of the NFL, the 49ers, took another. Denver nabbed two titles to cap a 15-year run of near-constant contention. The 1992 Super Bowl winner, Washington, has spent its way to contender and perhaps favorite status for next year's title.

The NFL's case rests on its also-rans, as perennial doormats Indianapolis and Tampa Bay have used the draft and shrewd management to become contenders, while the hapless Atlanta Falcons managed a Super Bowl appearance in 1999. So it appears that revenue sharing has brought contention to the also-rans of the league, but it isn't clear whether it will really pay off in Super Bowl appearances and championships.

We don't have much data to go on, so I don't mean to make a mountain out of this molehill of examples. But I don't think it's an exaggeration to say that revenue sharing and salary caps have not produced the boost to the least successful teams that some commentators seem to expect.

Keith Law can be reached at klaw@baseballprospectus.com.