Forbes and Yankees
Posted: April 19th, 2010 | Filed under: Baseball | 115 Comments »
Forbes has its awesome new Business of Baseball rankings up. I love these numbers for several reasons, one being that, year after year, within hours of them being released, people all over baseball will gripe that the numbers are WAY off. No, they are WAAAAAAAAYYYY off. We didn’t make that much money last year! Our team isn’t worth that much! And so on. This ALWAYS happens. And since I have come to believe over the years that baseball people simply do not have the capacity to tell the truth about their business numbers, this bellowing convinces me that the Forbes numbers are pretty solid.
The thing I want to focus on this year is the “revenues” column of the Forbes’ numbers. I have never hidden the fact that I failed out of accounting, but I was in it just long enough to learn that “revenue” is “money or something like that.” So, no, I didn’t really learn what it means. But, fortunately, there’s a Forbes key, and that key says that revenue is the income drawn by a team “before taxes, interest and “amortization.*”
*Whatever the heck that is.
This is just a little bit different. You know, we focus a lot here on team payrolls … and those payroll numbers can be pretty stark. This year, for instance, the Yankees $206 million payroll is $44 million more than any other team and at least double the payroll of 22 teams (and six times the payroll of the Pittsburgh Pirates).
But people who know a lot more about accounting and such have told me for a long time that payroll is not the issue — REVENUE is the issue. And when you look at the Forbes numbers, yes, it does seem to ring true that salaries are driven by revenue and not the other way around … that is to say that your ticket price didn’t go up because Roy Halladay got a $60 million extension, but instead Roy Halladay got a $60 million extension because of the price of your Philadelphia ticket (and all the other Phillies revenue streams — the Phillies made $233 million in revenue in 2009, sixth-most in baseball).
According to the Forbes numbers, every team in baseball, except the Florida Marlins (who are a WHOLE other story) spent at least 80% of their revenue on on baseball operations last year. There were differences in how much teams spent, sure. The percentages ranged from the Detroit Tigers (who spent 116% of their revenue — they lost almost $30 million in 2009), to the Marlins (who spent just 68% — the San Diego Padres are next at 80%). Seventeen teams spent 90% or more on baseball operating expenses, so at least in financial terms you would have to say that most teams ARE trying.
And, once you know how much a team spent on baseball, you can estimate pretty accurately how much they spent on payroll — it tends to be just a touch more than half. That’s about what it costs to pay for a Major League Baseball payroll. There are outliers, of course. The Cubs, using the win-now mentality that has won them so many World Series the last 90 years or so, spent the highest percentage of their baseball money on payroll, 62.1%. That’s what you get when you spend $100 million on Zambrano, Soriano, Ramirez, Lee, Lilly, Fukudome and Dempster.
And the Padres, as an example, spent only 34.2% of their baseball money on payroll … the Padres pared down payroll, as we know, and supposedly are trying to rethink they way they do things. They put more of their money into scouting and development — this is best seen by the Padres drafting and signing of Boras client Donovan Tate last year for, by far, the biggest signing bonus in team history.
But the whole theme that some teams TRY to win while other DO NOT TRY to win — well, even if there is some truth in that statement, it’s almost certainly overblown. Let’s put it this way:
– If you had to pick one team out there that is TRYING to win, you probably would say the New York Yankees.
– If you had to pick one team out there this is NOT TRYING to win, you would probably say the KC Royals.
OK, well, last year, according to the Forbes numbers, the Yankees made $441 million in revenue* and spent about $416 million on baseball. That means they spent 94.4% of their revenue on baseball, a nice high percentage.
And the Kansas City Royals? Well, they only made $155 million in revenue, and they spent about 146 million. That means they spent 94.3% of their revenue on baseball.
*According to Kurt Badenhausen over at Forbes, revenue figures INCLUDE revenue sharing — that is to say the Yankee revenue numbers are calculated AFTER the the $100-plus million they give to revenue sharing. And the Royals revenue numbers are calculated AFTER the $30-plus million the Royals took out.
So as impossible as it seems, according to the Forbes numbers, the Royals and Yankees in 2009 spent almost exactly the same percentage of available money on winning baseball games. Sure, there could be some accounting tricks involved — I’m not clever enough to pick these out — but even so I think this would absolutely shock most people. It shocked the heck out of me.
The truth seems to be that the Yankees are NOT spending some out of control amount of money on payroll. Quite literally the opposite is true. The Yankees payroll is almost exactly in line with their revenue.
Percentage of revenue spent on payroll:
League average: 46.6%
New York Yankees: 46.9%
So this is what we have here: The Yankee difference is that they make much, much, much, much, much, much, more money than any other team in baseball. I suppose everybody understands this on a gut level, but when you look at the Forbes numbers (and remember, this is AFTER revenue sharing) you see how stark it really is:
Top Revenue Teams
1. New York Yankees, $441 million
2. New York Mets, $268 million
3. Boston Red Sox, $266 million
4. Los Angeles Dodgers, $247 million
5. Chicago Cubs $246 million
Bottom Revenue Teams
30. Florida Marlins, $144 million
29. Pittsburgh Pirates, $145 million
28. Oakland Athletics, $155 million
27. Kansas City Royals, $155 million
26. Tampa Bay Rays, $156 million
Now, look at that again. The Yankees pulled in $173 million more the No. 2 team in baseball, their city mates. They Yankees essentially made $200 million more than the Chicago Cubs. This is mind boggling. And, of course the Yankees made about $300 million more than the bottom five teams.
Now, sure, some of this upsurge in revenue — no team has ever made anything close to $441 million in revenue before — is due to the new Yankee stadium. But basically, this is a good look at reality. The Yankees are the biggest team in the biggest city. The Yankees are a global brand. The Yankees have, through their own good efforts and their various other advantages, been the most dominant sports franchise in American sports. Yankees fans will point out that the team really built up this monetary juggernaut stone by stone … and it’s not their fault that other teams didn’t do the same.
Well, hey, you can decide for yourself just how much of the Yankees revenue is due to their location plus their television market and how much of it is due to their good business sense, but either way, when you actually look at the numbers you realize how ridiculous it is for Yankees fans to say that Kansas City and Pittsburgh and Oakland should just “try harder.” There is no trying hard enough to make up anything close to the gap. Yes, a few teams have the resources to at least battle the Yankees advantage — though the Mets’ horror show is living proof that you can screw up with a lot of money.
But it doesn’t matter how nice a ballpark they build in Pittsburgh, or how much they win in Oakland, or if they go to 3D baseball on television in Cincinnati. It doesn’t matter how much they may tinker with revenue sharing and luxury taxes … the Yankees’ revenue stream from is so enormous, it will give them a gigantic competitive advantage that should make them the favorites to win every … single … year. True, they won’t win every single year because of baseball’s quirks — the fluctuations of age, the vagaries of a short series, the forcefulness of a hot starting pitcher, the volatile state of free agency, the overconfidence that winning breeds and so on. And there will be shifts in baseball; that’s one great thing about the game. Nothing is permanent.
But it’s good to look at the Forbes numbers just to comprehend what’s really happening out there right now. Since the strike, the New York Yankees have won 57.9% of their games — that’s 94 wins per year. That’s the most in baseball — more even than the Atlanta Braves who were so dominant for so long. The Yankees have won 100 games five times. They have made the playoffs every year but one. They have won the toughest division in baseball 11 of the 15 seasons. They have won five World Series and two other pennants, and it took a Boston miracle to beat them in the Championship Series in 2004. And still, you get the distinct impression from many Yankees fans that they feel — they KNOW — that the Yankees have underachieved.
You know what? The Forbes numbers suggest those Yankees fans are right.
Loading ...
circle me, overrated yankees!
Joe, how dare you? The Yankees succeed because of timely hitting, intelligent managing, and, most importantly, the indomitable will to win. Money has nothing to do with winning in baseball. Look at the Marlins in ’03! Look at the Rays!
(rolls eyes)
I know where all that Yankee revenue comes from: renting the World Series championship to other teams for a couple of years.
This is interesting, if a bit short on math. There’s a ton of information that isn’t present in the numbers you’re showing, namely the revenue sharing data.
The “the yankees don’t win because of their circumstances, they win because they’re better at this than everyone else” argument, to me, is like the NFL overtime argument.
Logical people can look at both situations and go “yeah, that’s not how that should be.” But then there are those that want to give statistics about how the first team to touch the ball in overtime doesn’t win and the Yankees don’t win every year, so obviously both systems are fine.
Yeah, that’s not how that should be.
@ 4, before i get capped, let me say that i didn’t see his disclaimer that they include revenue sharing #s. my bad!
Isn’t “amortization” the tax procedure by which teams can get breaks on what they have to pay of their REVENUE to the tax man? Don’t they get to write off some of their depreciating assets, such as fungo bats which have a limited life span, old popcorn machines, aging ballplayers, etc.?
If you get a chance, check out the following article:
http://itsaboutthemoney.net/archives/2010/04/18/the-ecret-to-our-uccess-2/
Larry@IIATMS does a great job talking about how tremendous the GATE revenue of the Yankees is, and how it seems to be the driver of revenue for almost all teams.
Joe, I have long advocated for this solution to the competitive balance problem in MLB:
Allow franchises to move to wherever they see fit, WITHOUT the approval of the other franchises. Over time, teams will settle in such a manner/location, as to divide revenue more evenly.
Look at New York – approximately what, 7-10 times the market size of KC? Why isn’t there at least 5 or 6 teams there? Wouldn’t that level the playing field all by itself?
Think of it this way – does it make any sense for there to be only twice as many McDonald’s in New York as KC? Then why does it make sense for there to be only twice as many baseball clubs? After all, we’re talking about the same thing – both are franchises, paying franchise fees, per se, to support the national marketing provided by the corporate office.
I don’t really see the point. First of all, the Royals try to win, they are just really really bad at it so they aren’t a good comparison. The Pirates and Marlins are the teams that have been accused of caring more about the bottom line than the standings so a comparison with either one of those teams might have been more interesting.
Also, maybe I’m in the minority but I’ve long been aware that the Yankees spend like they do because of the revenue disparity. The Royals can’t just spend $200 million, start winning baseball games and hope their revenue stream increases. The market can’t support it. So I guess the point is that the Yankees have an advantage because of their market. Well, that’s not really news. Now, it would be interesting to look at this again taking into account revenue sharing numbers.
@#9:
You bring up an excellent point. Why are there only two teams in NY? Look at the EPL. Depending on the year (due to relegation) you have 5 or 6 out of 20 teams located in London.
The major problem with this is fan loyalty. If a third team were to relocate to NY, how long would it take to build a fan base?
very interesting…. of course those are the surface numbers, but then again.
It is interesting that there is a certain perception that small market teams aren’t “trying” – it seems that they are quite equally (yes, Marlins excepted). 90-95% of money spent on baseball operations seems quite logical in business. In that sense, these numbers aren’t surprising at all.
But it’s always been that way with the Yankees – I’m not a fan of how they buy pennants, at least as a “fan”, but for 90 years they’ve had this same advantage. Certainly the Mets do show that you can throw away money pretty easily, but then again, the Royals probably can’t afford Brian Cashman either. But Ron #9 has it right – there should be more than two teams in NYC, however, the way these things work, Joe DiMaggio is still bringing in a little revenue for the Yankees. Another team would make a reasonable dent, sure, but the Yankees are still the Yankees, and their “goodwill” (frightening accounting term) has got to be absolutely enormous.
It’s way past my ability to assess such things, but I’ve long had the impression too that the Yankees actually underachieve – it’s all guesswork, but with their approach I’ve always been surprised they don’t win 110 games year-in, year-out.
I pity the Jays and the Orioles – not that they haven’t been badly run, but they don’t have a chance in hell. As a fan, I really don’t like that.
Re Yankees underachieve, yes, they are in a lot of ways. However, they have probably lead MLB in # of meaningless games for decades. Everyone can guess even now they will make the playoffs as a wild card at worst. Motivation levels must be tough to maintain.
Re franchise relocation, I’m all for it! A cynic (and current owners) probably would say it’s socialism or communism.
One thing not clear form the post-does Forbes consider broadcast revenues for team-owned cable networks? Becuase the Yanks, Sawx, Mets, Braves and Cubs do not get rights fees like they did in the old days(this may be true of other teams, those are the ones I know of for certain). At one point Nelson Doubleday stupidly signed a long-term deal with Cablevision that cost the Mets millions in rights fees. Now the same ownership group is the rights holder and the broadcaster. YES and NESN(Yanks and Sawx) are printing money that probably never hits the teams’ bottom lines.
The Yankees had a .624 winning percentage (a 101-win average over 162 games) from 1947-64, also known as “the good old days” of baseball.
The solution is simple: Put Isiah Thomas in charge of the Yankees.
“The Cubs, using the win-now mentality that has won them so many World Series the last 90 years or so”
Great line. But let’s not forget that, since October 14, 2008, anyone is perfectly entitled to write”100 years or so”.
Come to think of it, I’m disappointed that I must have missed the Cubs’ 100th anniversary celebrations…
Ron @11
I agree it could take some time for a 3rd, 4th and 5th team moved to the greater NYC area to build up a fan base . . . but let’s say you live in suburban Connecticut. It takes what an hour, maybe longer to get to Yankees stadium, where for your family of 4 you spend $500.00 for a game. Now the Pirates move to New Haven, you can get to the game in a 1/2 hour, even drive yourself rather than take public transportation and spend half the money. Maybe you might still be loyal to the Yankees, but I bet in about 10 years, your kids won’t be. Same story for the Newark Royals, the Long Island Reds and the Staten Island Athletics.
Spud @15
You do realize that the Yankees had a signficant revenue advantage over many teams from 1947-1964 too, don’t you? The A’s, Browns and Senators simply couldn’t compete revenue wise then either. The Yankees were able to spend that money in different ways before free agency (player development), but they still had a larger revnenue stream.
And when Connie Mack ran out of money, he simply sold players off to his rivals to create some cash flow. I am sure the same story could be told in D.C. and St. Louis, as well as probably a couple of National League cities.
When Branch Rickey suggesed NFL style revenue sharing back in the 50′s, he was derided as a socialist (with the Yankees leading the charge). If the NYC revenue won’t be sent to the other teams, then let the teams be sent to NYC!!!!
It’s a facenating idea, except who would the citizens of KC, Pitt, Maimi, etc root for??
The Hoboken Pirates? The New Jersey Royals??
I the the other owners should just vote the Yankees out of their league. The team value would plummet if they didn’t have anyone to play against
The people of KC and Iowa and other places west of the Mississippi and East of the Rockies would do what my Kansan grandfather did in 1940s and 50s. Root for the Cardinals. Heck, many of the older people in “KC Royal” territory still do anyway.
Complain all you like. But there is absolutely no reason why the Yankees shouldn’t win the World Series every year. They have tried it several times before, most recently in the late 1990s, and it always seems just fine to me.
Kind of off-topic, but the Marlins are such an outlier with this stuff. Miami is actually NOT a small market – its metro area is about the same size as Philly or Atlanta. It has some peculiar demographic characteristics that would probably make it punch below its weight, and the horrible summer weather doesn’t help, but still. The primary reason that the Marlins make no money is that ownership doesn’t care.
Good breakdown — though from where I sit (in my Mariano Rivera jersey) I’m not sure where we go from here.
Where’s the article about how lousy Kansas City’s opera is compared to New York’s? Where’s the hand-wringing about how Milwaukee’s Modern Art Museum can’t get Richard Serra’s attention? The movement decrying how much better the theater is in New York than Baltimore?
It doesn’t exist because it’s silly to be surprised that a bigger lump of people can afford a better opera or museum or support more theaters or restaurants. Why would anyone be surprised — or sympathetic — that the same is true in baseball?
New York is a difficult place to live, which is why so many people shudder at the thought of living there. I got tired of it eventually. But if you *can* live there, one of the benefits is that you’re part of a market that can support the best in community-funded cultural institutions — from museums to baseball teams.
Why shouldn’t this be the case?
As a Jays fan I more than anybody else realize the fultility in the competitive balance in MLB. It’s not just the Yankees of course but the Sox as well. Everybody points to the Rays as an example that it can be done. Sure it can. All you have to do is be the worst team in baseball every year for a decade. Then you get to go to the Series once and have your division rival, so obviously thrilled at your success, buy the best hitter and 2 best pitchers on the market which sends you back towards the bottom of your “cycle”.
Revenue sharing needs to be massively overhauled as I’m sure the Yankees would make far less without, you know, other teams to play. The other teams are half of the product they should get half the revenue. This would still leave the big market teams with an advantage but would potentially even the playing field enough for well run teams to be competiive more than once a decade.
Henry @23 – The problem with your analogy is that the opera New York doesn’t need the opera in KC in order to survive. People in New York who like opera will always go to the opera as long as it exists, whether KC happens to have its own opera or not. People in New York who like the Yankees CANNOT got to Yankee games if the teams in other markets finally give up because they can’t compete. I suppose the Yankees could just play their Triple A team every day, but what’s the point of that?
Re: comment 14
I’m not sure if this was your point on team owned television stations, but it sounds like the Yankees, Mets and Red Sox are able to skirt even more money that should be shared revenue. The teams may not receive the licensing fees to broadcast but the owner makes a lot of money in advertising, much more than potential rights fees, that don’t go to revenue sharing, and instead line the owners’ pockets.
I hate the yankees, but it all does seem to make sense to me. It seems to me the other teams have their windows. Before the Phils got their new stadium they made their splash by showing the world they’d pay for jim thome and billy wagner, after they were long gone, they made their choices and got lucky(in the sense anybody has to be lucky to win). You can see the same thing is happening with the Twins, though they are better than the Phillies were, they are starting to quietly spend huge junks of money. if they win, and with that new stadium, they could be great for awhile.
To me it stinks to be a team like the Blue Jays, who spend but cant make the big jump.
The fact that the Yankees, Red Sox, Mets and other big market teams continue to fail to understand is that WITHOUT suck-ass teams like the Royals, Pirates, etc, there can be no BILLION DOLLAR ENTERPRISE. Unlike the NFL, where there is no dominant team and the playoffs fluctuate by 50% every year, in TODAY’S business of baseball, the Yankees WILL make the playoffs 14 times every 15 years and the Red Sox will make the playoffs 12-13 of those years. No matter how good the Rays look, they will lose their good young players to the Mets, Yankees, Red Sox, Phillies, etc. and have to refurbish the farm system. They have made very good picks, but really, are they going to contend more than 7-8 years every 15?
Without complete revenue sharing in Baseball and without a salary cap in baseball, the system will eventually fail. It has to. There’s no way what little fans Pittsburgh and Kansas City have are going to stay with the team year after year when they are out of the race before the first pitch is thrown.
@23
That’s silly.
What was the score the last time the New York Opera played the Kansas City Opera?
They’re not competing against one another. You left the reason sports exist out of your whole argument.
I
And this, ladies and gentlemen, I why I’ve pretty much ceased caring about any baseball team other than my beloved fantasy team, the Hamsterdam WMD’s. At least my fantasy league is fair.
@ Henry: It shouldn’t be the case because the Yankees, believe it or not, still rely on the existence and competitiveness of the other teams.
If the Yanks continue to win 25% of all World Series, the “national pastime” should continue to be a fairly popular spectator sport. But it appears that that percentage is actually trending upwards; and there simply must be a point—40%? 45%?—at which the Yankees become so dominant that the appeal of the sport is fundamentally (if not irreversibly) damaged.
Also: Think of this like the public education system, which is—like fine art museums, opera companies, and all the other things you mention—a form of cultural distribution. Nobody begrudges NYC the right to attempt to build the greatest public education system in the country; and as a large, wealthy city, it is fair for New Yorkers to expect an excellent education system.
But the quality and success of the NYC public education system doesn’t necessarily *decrease* the quality and success of the Baltimore public education system. The Guggenheim’s amazing collections need not diminish the Nelson–Atkins’ world-class collection of Asian art.
Museums, theatres, and restaurants are not zero-sum games. MLB is.
A hard cap is a joke. You want to take money from the millionaire players to make the billionaire owners richer? That’ll fix the game.
Ben @30 – World class “Wire” reference. Well played, sir.
@13:
Actually, franchise movement is the opposite of communism/socialism — it would be the free market solution. Perhaps paradoxically, baseball needs a mix of free market (team mobility) and command economy (salary cap/floor). That d@mn interstate commerce exemption. . . .
If you all feel like sending the Giants and Dodgers back, that would actually be fine with me.
@13: “Re franchise relocation, I’m all for it! A cynic (and current owners) probably would say it’s socialism or communism.”
They may say that, but they’d be incredibly wrong. Franchise relocation would actually be the furthest thing from socialism or communism. If MLB functioned as a perfect free market, there would be more teams in the areas where there are the most fans, so NY would have multiple teams, and not necessarily at the expense of the KC’s and Pittsburgh’s of the world (if there was enough money to support all of them, why not have dozens, even hundreds of teams!).
The problem is that MLB is NOT a free market, and is in fact about as far away as one can get. It’s incredibly protectionist, in that each team can block another team from moving, or new teams from popping up. It’s also socialist, in that the teams currently have revenue sharing.
For the record, I don’t think MLB actually _could_ function as a free market. A league needs structure and predictability, and the free market doesn’t offer that. If we really want the best MLB possible, we probably need a more equitable financial structure, with greater revenue sharing, etc.
@28: But there *is* a billion dollar enterprise, and the teams you mention (KC, Pittsburgh, etc) are profitable, if I’m understanding the numbers correctly. For baseball owners, there may simply not be a reason to change the way they do things.
#34, I personally agree with you that franchise movement is capitalism. I’m just saying the detractors/cynics will disagree and they may be NYC MLB owners. The more I think about franchise relocation, the more I like it!
I also agree with #32, a hard cap is not the answer. If MLB had one, the Yankees and others would just spend the money on player development (if they wanted to win) or pocket it (if they didn’t care). The NHL already has an issue keeping star players on a particular team for a long period of time (see Hossa, Marion)
I think this just emphasizes the fact that perhaps the best solution is to put at least one more franchise in New York. Looking at another sport, the EPL has also been accused of being top-heavy, and has 4 super-teams that consistently vie for the league title. This is not ideal in the least, but certainly brings more fairness than the MLB model where one team has an extreme revenue advantage over everyone else. I recently went to London and was surprised to find that Arsenal, West Ham, Chelsea, and Fulham are all based there (there could be more, this is just what I noticed on first glance). While only Arsenal and Chelsea are heavyweights, London and NYC are comparable cities. New York needs at least one more MLB team.
Maybe because Joe didn’t include them in his post, but I am somewhat surprised that everyone is eager to compare the Royals situation to the Yankees or Red Sox when a better comparison is just down I-70. Forbes says the Cardinals’ gate revenue is $94 million a year compared to the Royals $37 million, but the St. Louis metropolitan area is not 2.5 times larger than KC, the difference is less than 1 million (and there’s that competing draw in Chicago). That extra revenue, of course, is the reason the Redbirds can continue to employ both Pujols and Holliday and both Carpenter and Wainwright (heh, and Joe Mather, too). When I was growing up in Sedalia our loyalty shifted to KC when the Royals came long and stayed for a long time (we had tried the A’s, but that was a bust) because the Royals were competitive and 2 hours closer, but that has nearly all gone back to the Cardinals now as far as I can tell, for pretty obvious reasons.
As for those comparisons between New York and Kansas City – KC has infinitely more Walmarts than NYC (which has 0).
I just noticed that no station in Sedalia appears to be carrying the Royals games (the Royals don’t list one, anyway), but my old employer there, KSIS, is carrying the Cards. This strikes me as a real problem when a team can’t attract a station in a town just a little more than an hour away, but the Cards can get one there even though the town is over 3 hours away from St. Louis. There’s even a station in St. Joe carrying the Cards.
The Mets are # 2 on this and joe, you are right … they are a horror show. But year after year we have seen many Triple A teams take the field against the yanks! Last year’s Cleveland team… did it !
And the Nationals, Royals and several others… to mention a few!
There is no rating system of owners, or ownership … unfortunately. If there were, heaven forbid, most fans would be so disgusted by the Lose Shares… that gosh… they would not even attend !
the forbes’ numbers have always fascinated and confused me. take the yankees, for example. forbes says that they have $1.424 billion of debt (89% of a franchise value of $1.6 billion). even if they don’t have to pay any principle and have a 4% interest rate, that’s still $57 million a year in debt payments. yet forbes says their ebitda (earnings before interest, amortization and taxes) is just $24.9 million. so is their cash flow really in the region of minus $32 million after accounting for interest payments?
doing the same math on other franchises shows a lot of negative numbers. looking at it another way, the debt to ebitda ratio of the yankees is 64 to 1. is that acceptable to any lender? comparing that ratio to public companies with similar revenue levels, it looks way out of whack.
Pretty much sums up the issue. You don’t have to be an accountant to realize that the system is unbalanced. That’s not news but it’s good to get some actual analysis based on real numbers by a national writer that has some cred.
Regardless, baseball is still ran by the same egotistical, greedy billionaire owners who have their own bought-and-paid-for, hand picked commissioner to peddle the company line that “baseball is fair.” As a group, they have no solidarity except to the all-mighty dollar. The only way this situtation gets fixed, whether it’s revenue sharing, salary cap, salary basement, abolishment of free agency, etc, is for ownership to band together and take control of their league from the baseball union. The result will be what should have happened in 1994/95. A lockout/strike and shut the game down until they fix the root cause no matter how long it takes. A year. Two yrs, whatever. The owners could care less about the fans. They know that we’ll come back no matter how long the work stoppage lasts. We have every time. Attendance might be down for the 1st yr but it will come back. If the owners play it right, they can make the players out to be the bad guys by explaining to the public that they’re trying to save the game and cast the players as the greedy bad guys. The only reason the owners folded in ’95 was that they were too greedy to let the thing play out and break the players union. When they emerge from the other side, we’ll have players that are paid in-line with what they’re worth, teams that can’t exponentially outspend other teams and, most importantly, owners that won’t refuse to spend enough to keep up with the joneses. Owners like David Glass need to be rooted out and forced to spend enough AT THE MAJOR LEAGUE level or asked to sell to a buyer (or group) capable of maintaining an established spending basement. Glass might be spending a large percentage of his revenues but after mismanaging the team for 15 yrs, he should be required to overspend for a period to keep the major league club viable until the farm system HIS NEGLIGENCE DESTROYED is fixed. Right now, this slimey snake-oil salesman is simply throwing trash on the field at the major league level and hoping that in a few years, the money he’s (finally) spending in the minor leagues translates to major league players with cheap salaries.
Unfortunately, this scenario will never happen because you can’t ask a leopard to change its spots. These men didn’t get to be billionaires because they were adept at putting the industry (an industry they compete in) ahead of their own interests. The NFL has the same billionaire owners but fortunately for NFL fans, the seeds were sewed long ago to keep the balance of power skewed toward the owners (business people) and away from the players (that may soon change). In baseball, the owners sold their power away and now the inmates run the asylum.
That list is very telling. The top 5 revenue earners are all in the biggest markets in the country. That gives them a decided advantage because of the city. Especially the fact the Royals and Yankees spend a close percentage of their revenue. Purely by the fact that New York has 5 or 6 times more people living there than in Kansas City should not give them such a huge advantage.
What I don’t understand is why so many people applaud the parity in the NFL but defend the big team spending in baseball. I’m all for the Steinbrenners making gobs of money off the Yankee’s, but the playing field needs to be evened.
The Yankees may have more money than everybody else, but they also field the best product. They have a winning team with lots of star power. What more can you ask for as a baseball fan? Putting this product on the field makes them able to sell more tickets, sell more merchandise and get better TV ratings. It’s not like they are in a big market and the money flows in automatically. They are conducting their business the right way, investing their money wisely, and reaping the benefits.
As for the Royals or Pirates, they are perennial losers with no star power. What reason would anyone have to buy that product, other than brand loyalty?
One thing the article doesn’t mention is the Yankees hide a bunch of their profits in their cable network so it’s not subject to revenue sharing, so the $440 million understates their actual revenue.
Clearly the Yankees have more and spend more. They reason they have more is quite simple… more people watch their games and more people buy their jerseys and such. It seems only fair that those baseball fans that spend money on the Yankees can count on that team being in the hunt year in and year out.
While Yankees fans are incorrect in saying they built this franchise up entirely with superior management, you can has that superior management (over the last 100 years) has lead to the $180 million difference with the Mets. As a matter of fact, as the Yankees were building that dynasty, they also chased teams out of the city (the Giants and Dodgers). The Mets will likely stick around because with their management style the team would fold in any other city.
Nobody who have ever watched a baseball game could possibly say that one team should be favored over all the other teams combined. While the Yankees are the most likely of the 30 teams to win the WS most years, that doesnt mean they are better than 50%. Even the Yankees mighty Yankees would statistically be more like a 15% to 20% favorite in their BEST years (2010 might be one of them). But that means that the one of the other 29 teams is still 4 times as likely to win.
[...] Joe Posnanski » Blog Archive » Forbes аחԁ Yankees [...]
“As for the Royals or Pirates, they are perennial losers with no star power. What reason would anyone have to buy that product, other than brand loyalty?”
Did you read the article? It seems to me there’s no way you make that statement after reading the article.
The Royals and Pirates don’t have star power and are perennial losers BECAUSE they don’t have the revenue the yankees have. Is that really hard to comprehend?
“But if you *can* live there, one of the benefits is that you’re part of a market that can support the best in community-funded cultural institutions — from museums to baseball teams.”
One ballet company is not in competition with the other. Your comparison maybe the dumbest in the history of man-kind.
Jack – The Royals and Pirates dont have the revenue because the fans are providing them with it. Every time one of these teams raises ticket prices the fans scream bloody murder. The fans make the Yankees the best by watching the games (ad revenue) and buying their products. I think they call that capitalism.
Mark Daniel @46: “…It’s not like they are in a big market and the money flows in automatically…”
Actually, yeah, that’s exactly what it’s like. The Yankees maximize that through good management (now), but look at the Mets. Big market, horrible team and management, and yet the money still flows automatically.
Right, in the history of the Yankees there has been bad management (about 1/3 of the Steinbrenner reign), but the history of Babe Ruth, Gehrig, Berra, Mantle, Maris, and Dimaggio are too much for history to erase. Follow that up with Jackson, Rivera, and Jeter, and the franchise remains in a class of itself in Baseball…. (and dont forget the 27 rings).
Jack @50. I know. I agree. They can’t compete with the Yankees. But they can compete with the rest of their division. And, at the beginning of the year, when tickets go on sale, they can compete in their fan’s minds. As they say, everybody is a contender in March. But not the Royals. Not even close. Nobody thought they would be in March, and nobody thinks they will be now.
People are complaining about revenue, and rightly so, but you have to keep in mind that the Royals have the large disadvantage of being in a small market and are trying to counteract that by fielding a non-competitive, wholly uninteresting team.
The saddest part about the Royals is the fact that Zack Greinke and Billy Butler are going to be lost to Baseball fans everywhere. They are two of the very best young players at their positions, but the team is completely incapable of putting a team around them to even give them a slight chance to compete. And Soria would be fun to watch on a contender as well.
Paul White. I’m don’t disagree with you. The Mets and Yanks have a huge advantage. But it’s not exactly that way. The Mets are only a few years away from being in the playoffs. Two years ago they were in a pennant race. Ten years ago they were in the World Series. They have a brand new stadium. They have Jose Reyes, Jason Bay, Johann Santana, David Wright and Francisco Rodriguez to draw in fans. They have a huge advantage being in New York, it’s true. I’m not discounting the fact that the revenue is horribly unbalanced in baseball. It’s not fair to the Royals and other small-market teams. But it’s not like the Royals are doomed to last-place finishes in perpetuity because they are based in KC. There are things a team can do to provide the illusion that they have a shot at competing. The Mets signed Jason Bay. The Tigers signed Johnny Damon. Maybe that’s all wasted money, but it might have spurred ticket sales a bit. Tickets go on sale way before the season starts, well before teams fall out of contention.
Everyone seems to assume a salary cap would cause the players to make less money. This is not the case.
Right now players make 46.6% of the revenue. This is the lowest figure in a major sport. With revenue sharing and a salary cap, (and floor) the players union will be able to negotiate a better figure than this, and would insist that hidden broadcast revenue be included. In 2009 the average revenue, not including hidden #’s was $ 196.6 million, Average payroll $91.6 million.
When you include the hidden money, and realize that the union would probably want to make the Salary floor 45%, and it would be at least 40%, and the cap would be somewhere between 50% and 55%, you realize that salaries would go up as a whole.
They should also stop the long term guaranteed contracts. The first year should be guaranteed or vested when the player signs, and the following years would guarantee (one at a time) if the player was still in the organization at the all star break (or the trade deadline). Any major league player traded mid season would automatically have the following season guaranteed,(if the contract went that long), but would become a free agent at the end of that full season.
They would have a rookie/draft slotting system, and would have an international draft as well. To make up for that money, they would do away with arbitration, reducing free agency to 4 full years of major league service, and upping minimum raises for any 1 year deals in years 2,3 and 4, as well as the minimum MLB salary.
Under that system, although the Yanks and a couple of other teams would be hurt, more than 80% of teams would see their revenue increase, and MLB revenue would increase as well, as fans would flock to see teams with an even chance.
Before long you would see more young baseball fans in cities where most people entering the real world and earning real money have grown up in an era where their team has been without hope.
Without real change, the gap will continue to widen.
Not to be a dick, but how is it news that the Yankees enormous revenue stream dwarves that of other teams?
Move another team to New York and eliminate the concept of divisions.
I love the proposals Khazad. I think that your analysis is mostly correct except for one major point. I am not convinced that taking away the advantage that the Yankees have (provided to them by their fans) will actually help baseball as a whole.
[...] post: Joe Posnanski » Blog Archive » Forbes and Yankees Categories: Accounting Tags: absolutely-enormous, Accounting, accounting-term, accounting-terms, [...]
Using the NFL model of revenue sharing/”competitive balance” as an example of what MLB should follow is ludicrous and I wish people would just think about it logically for a few minutes before saying it.
Parity in the NFL is an illusion created by a 16 game season with 12 playoff spots. Look at what the 3 top/bottom team records look like over their last 160 NFL games (10 Seasons):
Top:
Indianapolis Colts: W115 L45
New England Patriots: W112 L48
Pittsburgh Steelers: W103 L56
Bottom:
Oakland Raiders W62 L98
Cleveland Browns W57 L103
Detroit Lions W42 L118
BTW the Yankees winning percentage for 2000-2009 is .597, good for < 97 wins a year.
In both leagues 14 different teams made the World Series/Super Bowl. In both leagues only 4 teams made more than 1 appearance. In both leagues only 1 team made more than 2 appearances. So just admit that the results aren’t really what concern you, just that you hate the Yankees.
I believe that baseball, as a 21st century entertainment option, would not be much less viable without its most competitive teams and biggest stars in the larger markets. If you want to really hurt baseball’s popularity, then I would suggest evening the playing field and see what’s left of the league if the Yankees/Red Sox/Cubs/Dodgers miss the playoffs for 5-10 straight years. The owners KNOW this. They are not going to intentionally hurt their sport.
As for practical solutions, what do you guys think of organizing the divisions yearly or bi-yearly by revenue or payroll? Aside from increasing travel time for divisional games, what are the drawbacks? Would teams intentionally make/spend less $ to increase chances of getting to the postseason? Or would they spend more so that they could get extra games with Yankees/Red Sox/Cubs/Dodgers and increase attendance?
Edit:
“I believe that baseball, as a 21st century entertainment option, WOULD BE much less viable without…”
@anon and others:
“Museums, theatres, and restaurants are not zero-sum games. MLB is.”
See, we’re going to disagree here. The game, obviously, is zero sum. But the business is not. Now, obviously they’re related, but Joe P’s entire point is that the economics are the root cause — and in the end, even if all boats rise together, the tri-state area’s boat is going to be the biggest. That’s not a baseball issue.
Re: the Yankees needing other teams, well, yes. However, they only need them to be so good, and to date it seems that the rest of the league is good enough to keep the money rolling in.
Ethically, this isn’t a discussion — we either have this emergent unfairness or we have an enforced, league-wide cap, which is unfair to residents of large markets. It’s like Spock said in Star Trek 2: there’s more people in Brooklyn than than the entire state of Kansas. If one or the other has to be treated unfairly and wind up miserable, well, sorry Kansas.
We all know the right answer: contract KC and put it in Hoboken, and contract Florida and put it in Lowell, MA. Am I right?
You ever been to Hoboken….??? Where in the world are you going to put a stadium? If you want a team in NJ (my home state) put it at the Meadowlands (East Rutherford). And if it is the god damn Royals please just give the team to Jon Corzine to run.
Re: the Newark Royals, Long Island Pirates, etc.
Who says that you have to snatch existing teams from their current markets to create more NY teams?
Thirty teams is a tough number of teams, because of the league split-ups…in order to make sure that there aren’t a high number of off days, you need to have unbalanced leagues (NL-16 teams, AL-14). By adding 2 teams, you immediately solve the balance problem. You also add huge money to the pockets of the owners (didn’t they charge $95 million per franchise for the last 2 expansion teams, the D-backs and the Rays?).
And how could the Players Union be against two new teams, thus creating 50 new MLB jobs for their members? It’s a win-win-win scenario. Obviously, you put both of the new teams in the NYC area, which, BTW, could easily find fan support.
Owners happy.
Fans happy.
Players happy.
Competitive-balance lovers happy.
Yankees not happy, but they’ll STILL have a gigantic advantage…just less so.
Awesome proposal Garrett. The Yankees would pretend to resist it, but they would agree to this in a second (and negotiate that the revenue sharing would hold for a long time).
The truth behind the Yankees have more fans has less to do with the size of the TV market and more to do with the fact that the Yankees are the second favorite team in EVERY other TV market in the county. So in KC, it’s the Royals and then the Yankees… in LA it is the Dogders, well then maybe the Angels, but THEN the Yankees. And get this, in Miami and Tampa it is the Yankees first and the Marlins and Rays second!!!
Putting another team in the NYC market would by no means damage the Yankees long term. I mean they still have Ruth, Gehrig,… and the 27 World Series Championships.
For the record, in addition to being the second favorate team all over the country they are the MOST hated team in virtually every City… maybe even NYC. Being hated so much probably makes them money too.
Which just makes me think “HOLY COW!” about the Rays… extremely small revenue but they’re managing to compete in that division.
If two teams are to be added to MLB and both are to be located in or around NYC, then one of them should be in the NL to balance the four NY teams. Therefore, which NL team moves to the AL?
Perhaps they could also switch back to 8-team divisions.
Forbes is referring to reported revenue. Since many ballpark revenue streams are cash — beer , snacks, parking — I doubt its all being counted up.
It doesnt matter.
You can count all the shekels you want yankee haters but the Yankees are the best because God just likes it that way.
You haters been tryin to explain it and rationalize it financially forever.
But it sounds like adolescent complaints about rich kids.
Listen– The Yankees got the money because of the winning , not the winning because of the money.
I love the Yankees , and I am proud to be a Yankee fan. Yankee history is a part of American History.
For me, it all started when Chris Chambliss hit that home run…
The whole “Let’s add teams to the New York market and things will even out!” argument is ridiculous. It would take probably decades before any new New York teams had enough of a fan base to even approach that of the Yankees and Mets. In that time, those franchises would be total failures, unable to compete in either AL east or NL east, making attracting fans even harder. For it to work now, someone would need to invest what would probably be billions of dollars in order to house, build, and advertise an additional New York team. Not a good investment.
And remember, there WERE two other baseball teams in New York. Those teams moved to the west coast because there was money to be made out there. If you want to cry about the Yankees and Mets having such a huge market to themselves, do it to the people that moved the Dodgers and Giants to California.
WELCOME TO THE BRONX
They call it the World Series but we usually play it here.
*******
The Yankees aren’t successful because they have the most money. They’re successful because they have the most money and they spend it wisely. That extra money doesn’t allow them to field a 50-man roster while everyone else is restricted to 25. When they take the field against the Royals, the Orioles or whoever it’s still nine against nine.
The way small market teams can compete is to be smarter when and how they spend their money. Put more money into scouting, coaching, player development. Steer clear of star players, build a star team. Get guys who play with a chip on their shoulder. Foster an us against them mentality. “A champion team will always beat a team of champions” may be trite but it’s true nonetheless.
Cricket teams occasionally study baseball teams and use some of their methods – f’rinstance, the current New Zealand throwing coach is a guy who spent time in Atlanta’s organisation. Maybe some of those underachieving baseball teams could study cricket now and then. Find out how New Zealand (poulation four million, players drawn from guys who lacked the physique for rugby and the cash to buy a yacht) can compete with India (population 1000 million, where cricket is a religion).
The Royals, last time I checked, plays in the Central division of the AL. Their direct competition are the Twins, the Tigers, the Indians and the White Sox. Last time I checked, the Royals need to be better than these 4 teams to make the playoffs. They don’t need to be better than the Red Sox, the Yankees, the Dodgers or the Mets. The Yankees are an easy target and it makes the majority of baseball fans feel good to excoriate them. So why would Joe not do a comparative study on the competitive discrepancy between the Royals and their direct division rivals?
@ Damon #69:
Obviously the Brewers should move (back) to the AL. It’s where they belong.
And 8-team divisions would be OK with me, but why not 4 divisions of 4 teams each (N, S, E, W), a la the NFL?
Except then get rid of the wild card, we don’t need another round of playoffs.
“And 8-team divisions would be OK with me, but why not 4 divisions of 4 teams each (N, S, E, W), a la the NFL?”
I do not think the three likely powerhouses in the AL East — Yankees, Red Sox, and other NY AL team would like the idea of all of them being in one division and thus only one advancing to the post-season.
But if you have two eight-team divisions, with a Wild Card structure, then they might play along.
Fewer divisions, not more. The WC is here to stay, so if you make more divisions, you expand the playoffs. Boo in my book. I definitely prefer the two-division plan, if not a no-division plan. One of the things I love about baseball is the exclusivity of its playoffs. Let’s keep that.
[...] Joe Posnanski digs into Forbes’ team revenue numbers, noting that the Yankees made $173MM more than any other team. [...]
Why are people talking about adding more teams in NY? Other crazy people keep talking about the soccer league in Europe. In Europe winning the Premier League is NOT the major goal. The top four teams in England go to the European championship. Because the European Championship is so imporant, you want a system that has only a few really, really good teams. The goal of the Premier League is to get the best teams possible to compete in these other tournaments.
In the NFL, Green Bay can compete. We do not know who will make the playoffs and who will not. Who knows, even the Chefs could be the best team over the next few years. If you want competition on the field, you have to have revenue sharing. The NFL has gone from a small sport to THE SPORT!!! I firmly believe baseball could be the number one sport again. Baseball could dominate the other sports, if they would just do revenue sharing. If your team really did have a shot every year, people would LOVE baseball.
I just wish Stienybutt would take over the Yankees again. Look at how poorly he ran the team. Yes, they had great success the first couple of years of Stienybutt’s reign. Then they when 15 years without winning a World Series. Stienybutt got banned from a day to day standpoint and they built one of the best teams of all time. Stienybutt came back and ruined a perfect team. Now, we do not have Stienybutt to ruin the Yankees. They could win every year. If they do maybe, just maybe we will get revenue sharing.
their winning % is at 57.9 (best of all teams). an earlier comment said they were at 62.4% back in 1947-64. So things have got fairer right? Meaning more teams winning more games, we’re all happy right?
at 57.9 is only 8 points better than even, in the day to day play it’s not overwhelming. If you are rich enough to see the the Yankees play 6 times you will see 3 wins and 3 losses. In English football/soccer, Chelsea has played 35 games and lost 6 – there is almost no doubt what the result will be.
Man. Every time I start to think Yankee fans are people too, I read comments like these and the illusion is ruined.
“Re: the Yankees needing other teams, well, yes. However, they only need them to be so good, and to date it seems that the rest of the league is good enough to keep the money rolling in.”
Just. So. Wrong.
“Ethically, this isn’t a discussion — we either have this emergent unfairness or we have an enforced, league-wide cap, which is unfair to residents of large markets. It’s like Spock said in Star Trek 2: there’s more people in Brooklyn than than the entire state of Kansas. If one or the other has to be treated unfairly and wind up miserable, well, sorry Kansas.”
First of all, Spock said that while sacrificing HIMSELF. As far as I know, the “entire state of Kansas” has yet to stand up and say, “You know what? You take it, New York. The needs of the many outweigh the needs of the few. Or the one.”
But the big problem with the post, of course, is that Kansas doesn’t even have a major league team anyway. So what the hell are you talking about?
Also: One just has to love a group of people who see a potentially even playing field as “unfair to residents of large markets.”
Same flaw here as in the earlier stories on this site about the Yankees and money–it assumes that an unequal playing field automatically equals unfairness.
No reasonable person would say that the Yankees and the Royals compete on a level playing field. What a reasonable person can say is that it is fair for the Yankees to have a much better chance than the Royals, because the Yankees have many more fans (for the obvious reason that they are in a much bigger city/metro area). More fans are rewarded for their fandom when the popular, large-market team wins. The Forbes numbers only back this–the Yankees are only putting the fans’ dollars back into the team.
Is that unfair to KC? Unquestionably it makes it very difficult for KC to keep up, but if KC isn’t large enough to support a team that can compete in the majors, then the fair options are (1) be happy that you have a major league team at all, or (2) get a AAA team instead, like other regions too small to support a major league club.
Some suggest here allowing more clubs to locate to the New York region to balance things out. This is many ways would be very fair and, in time, could reduce NY’s advantage–but those regions like KC should be careful what they wish for. It might be your team that moves to NY.
Others argue here that the Yankees owe it to the KCs of the world to support them to a greater degree than they currently do, because NY’s success is based on having teams to play, but that really doesn’t hold water. Yes, NY needs someone to play, but that doesn’t mean they need to play the small market teams. More people show up to see NY play other big-market clubs. If the KCs of the world disappeared, it’s hard to see where NY would suffer.
The revenue sharing models in MLB and the NFL are more similar than most people realize. National media revenue and merchandising revenue are shared. Local media is not. Gate is shared by the teams in each game.
The difference of course is that MLB teams realize vastly more income from local media than NFL teams.
And while I’m for more competitive balance in the regular season, I have yet to hear a really compelling argument for sharing the local media money. What right does one team have to 3.3 percent of the money another team makes by marketing and selling their product within their own market?
Well, I could be wrong, but I believe “amortization” is an old, old wooden ship that was used during the Civil War era.
A history lesson for Socrates @ #48:
With all due respect to the Yankees – who I believe are actually managed and run well in addition to their built-in revenue advantage, I really can’t pass without responding to your suggestion that the Yankees, via their success, ran the Dodgers and Giants out of New York. Yes, the Yankees were outdoing them at the time, but those franchises moved out west because MLB wouldn’t do the right thing and sell expansion franchises to the big California cities in a timely manner.
Bottom line – Dodgers and Giants could have remained in greater New York, remained hugely successful, and the new franchises in California would have been successful as well. MLB historically has INTENTIONALLY maintained fewer franchises than the current US market could reasonably support. Why? Simple supply and demand.
What do I offer as proof for my supposition? Well, it wasn’t very long (<10 years) before they DID grant an expansion franchise, TO NEW YORK, to replace one of the two they allowed to move.
How exactly did all this make sense? I mean, why not grant the expansion franchise (the Mets) to either SF or LA in the first place? Simple – they all made more money doing it the way they did – and the FANS BE DAMNED.
A half century later, and MLB's attitude is still the same – THE FANS BE DAMNED.
3: Zachary said at 8:55 am on April 19th, 2010:
I know where all that Yankee revenue comes from: renting the World Series championship to other teams for a couple of years.
—
This made me laugh. I approve of this comment.
Mike R. @ #83
“If the KCs of the world disappeared, it’s hard to see where NY would suffer.”
Did you read the post? It’s becoming that the revenue difference between KC and Boston is 56mil less than the difference between Boston and NY.
In NY’s world EVERY team is a KC.
There is a straightforward, even simple, approach to making revenue more accurately reflect participation and that includes eliminating the so-called revenue sharing luxury tax.
Right now the two teams playing a game share the gate for tickets bought to see the game; it has been like that since the game began essentially. Or so it seems anyway. I don’t know the percentages used to split it but I am sure it isn’t split 50-50 with the home team getting the larger share.
Yet TV revenue is not shared in any way (except indirectly via the luxury tax of course) despite the fact that there would be no TV revenue if there were no opponent.
Consequently the fairest thing to do is to split the TV revenue with opponents on the same percentage split as the gate.
Of course this would often mean that the Pirates wouldn’t get any part of the Yankees gate, since they don’t play every year but that is still fair.
I have said many times that if I were the owner of a team that had to play the Yankees while not getting any share of their revenue representing the fact that I was an opponent, I would announce at the start of the year that my team would not be going to play the yanks until the rules were adjusted to pay me IN FULL for my participation.
There should be no splitting of revenue for merchandise sales or even concession sales, since those are more directly related to the quality of the Yankee players and how hungry Yankee fans get. But the Yanks would make no money from TV at all if they had no opponents.
So toMike R I say, yep if one team went away it wouldn’t much affect the Yanks but if they suddenly had no opponents, they would have no revenue as well. Nobody would, yet they would for the first time be on a fair footing.
Of course I think the Yanks would agree to the sharing arrangement if they were forced in this fashion; after all they would still have a truly big advantage over their opponents due to their location and brand name.
Forget Las Vegas or Portland, its pretty clear that the largest market for relocation is the NY metropolitan area.
The Yankees made the playoffs 14 of the last 15 years. After the one year they didn’t make it, 2008, what did they do? They went out and spent $500 Million on the 2 biggest pitchers and the biggest hitter in the free agent market. Then they won the World Series in 2009.
What if the Tampa Bay Rays had the Yankees money? After losing the 2008 World Series to the Phillies, they add Texiera at first, then bolster their already strong young staff with even just C.C. Do they at least make it back to the playoffs in 2009? I think they probably would have. Would the Yankees had done what they did in 2009 without C.C. and Tex? I think not.
Money makes the world go around. It doesn’t guarantee victory, but lack of money makes it next to impossible for a team to CONSISTENTLY compete year after year.
@89 – The clubs have an opportunity to earn media revenue from their road dates by selling media rights within their own market. Why should the Royals get a cut of what the Yankees make in their own market?
It’s not accurate to say that TV revenue is not shared in any way. The Fox, ESPN, and Turner contracts are shared equally. That’s over $20m/year to each team, and those contracts actually benefit the smaller-revenue teams that rarely appear nationally but get an equal share of the contracts.
[...] about $300 million more than the last place Marlins brought in AFTER they took the Yankees money. Joe Posnanski wrote a great piece analyzing the difference between the Yankees and the rest of the [...]
Relocating teams to the largest market is the worst solution. ESPN already believes MLB starts and ends on the I-95 corridor between New York and Boston. Moving teams to that area not only validates this theory, but deprives fans in Pittsburgh, Milwaukee and Cincinnati of their teams.
The best solution is a revenue sharing model similar to the NFL’s. All earnings go into one pot and are divided equally between every team. Sure, the Yankees, BoSox and Cards may be hurt in the short run (just like the Skins, Giants and Cowboys), but everyone profits in the end. When fans believe their team has a chance, they spend more money.
@Ron
“The major problem with this is fan loyalty. If a third team were to relocate to NY, how long would it take to build a fan base?”
Um, 15 minutes. The NY Mets as an organization make so many of their fans absolutely sick, that I’d say a fair share of them would jump ship if the had a viable alternative. I would. Please, bring me something new.
“What a reasonable person can say is that it is fair for the Yankees to have a much better chance than the Royals, because the Yankees have many more fans (for the obvious reason that they are in a much bigger city/metro area).”
Wow. Just . . . wow. For your information: No reasonable person could say that.
So you’re saying that if the world we live in suddenly changed and MLB shuffled revenue around so that the only things affecting the odds of a team winning were luck and skill (both on-field and front office), such a new world order would be UNfair?
@94: I agree with everything you say, until this:
“Sure, the Yankees, BoSox and Cards may be hurt in the short run . . .”
I don’t see how the Cardinals would (or even should) be the ones to be hurt by a leveling of the playing field. I mean, their tremendous recent and historical success really *is* attributable to skill and luck, instead of revenue. I mean, Forbes lists them at less than 200 mil.
“Why should the Royals get a cut of what the Yankees make in their own market?”
Because they aren’t competing as businesses. They’re competing as baseball teams.
I think the reason people would pick the KC Royals as “not trying to win” is because they got sued for pocketing their revenue sharing as profit and not spending it on payroll.
Joe would know more about that than I would.
[...] Pos: Forbes and Yankees So as impossible as it seems, according to the Forbes numbers, the Royals and Yankees in 2009 spent [...]
Joe Po…what exactly is your point? The Yankees are the most powerful team in baseball. We all know that. It has been that way for 90 years. Baseball has thrived throughout most of that time period. Are you suggesting we have a problem?
Also, the last time I checked the Pirates and Royals were in different divisions, so the Yankees should really be the least of their problems. If anything, the Yankees are more likely to sign players away from their middle market competitors, so having the shark in the pool prevents the other fish from becoming too strong.
Finally, yes, the Yankees to play to a different standard. While most teams play to make the playoffs occassionally and win a championship every now and then, the Yankees mandate is to win every year. In a sense, it is the Yankees versus the field. That formula works for the Yankees, their fans and all of baseball. I am sorry if you disagree.
Also, this same situation exists in the beacon of balance that is the NFL. The only difference is the NFL uses the mirage that is a salary cap to disguise the fact that higher revenue teams spend a lot more in REAL dollars (not phony salary cap dollars that have more loopholes than corporate tax law).
[...] Joe has a new post up on his blog and it’s another winner. You should read [...]
I have begun to fight back against arrogant Yankee fans … by not caring as much. Major League Baseball’s complete disregard for me has finally worn me down.
I mostly consume the game as highlights, now. I suspect in a few years I won’t even bother with that.
By World Series time, when I’m supposed to be enthralled, I’ve long lost interest. My attention perks back up in the Spring, but less each year.
I can’t imagine cultivating my children’s interest in the game now — which is nearly inconceivable to me, since I spent most of my youth striving to be a professional baseball player.
Right now I’m more entertained by Joe’s take on baseball than by baseball itself.
I suspect there are millions more like me.
Perhaps in a few generations the Yankees can win all the championships and it’ll mean about as much as whoever wins in lacrosse.
The rest of us will have moved on.
[...] great baseball writer Joe Posnanski has an awesome look at revenue and spending in baseball. Poz points out that the Yankees spend almost exactly the same percentage of their revenue on [...]
Just want to say that barry @43 made some amazing comments. Revenue is what it is. The real question is — are these teams making money? If the Yankees are making so much more but losing money, this problem will fix itself eventually …
I think that player’s stats are essentially retrospective; a sort of “ratio ex-post facto”.
But team’s financial numbers have predictive power. A lot. These are the stats we should be looking for, if we want to understand the game.
@106: Good points…Joe Po used EBITDA, which is a non-GAAP metric used to compare basic profitability. As you mentioned, it does not an indicator of cash flow. What this post ignores is the Yankees have taken on heavy debt to both start YES and build a new Stadium. In other words, there massive revenues have come at a cost, which isn’t factored into this discussion. Of course, the Yankees intend on reaping the benefits of the significant risks they’ve undertaken. If MLB adopted an economic structure that removed incentive to take risks, the game would stop growing at the significant rate it has enjoyed over the last decade.
Unfortunately, not many people understand the economic concepts involved, so their “solutions” wind up being very naive.
“It doesn’t matter how much they may tinker with revenue sharing and luxury taxes … the Yankees’ revenue stream from is so enormous, it will give them a gigantic competitive advantage that should make them the favorites to win every … single … year.”
Dadgummit Joe, this piece is so on the money (all puns intended) that it is almost criminal. Thank you so much for writing this.
[...] about $300 million more than the last place Marlins brought in AFTER they took the Yankees money. Joe Posnanski wrote a great piece analyzing the difference between the Yankees and the rest of the [...]
[...] great baseball writer Joe Posnanski has an awesome look at revenue and spending in baseball. Poz points out that the Yankees spend almost exactly the same percentage of their revenue on [...]
Fans that complain about the “greed” of players and owners have a simply remedy–don’t go to the games. No one forces you to watch. The idea that the owners should “take control of the game from the union” is simply saying let the owners have the money and screw the players. Until 1975, the owners controlled players absolutely and suppressed salaries artificially and, guess what, the Yankees won 20 World Series. I have no patience with people that blame the players for actually wanting to get paid and to have some control over their working conditions. I guess I’m a socialist that way, huh?
I agree that it’s a problem that the Yankees can spend so much relative to other teams, but it’s not as if they win the WS every year. If you look at it, they have won fewer championships (ie, WS) since the advent of free agency (a period of about 35 years) than they did between 1947 and 1964, when the game wasn’t “controlled” by the evil union. Granted, this is largely because of the playoff structure, but it’s not as if the Yankees can write in their spot in the World Series every year.
[...] * Joe Posnanski goes over the Forbes data on baseball teams and revenues. [...]
One last thought about this, because the debate is important (and fun):
A recurring theme of the comments above, at least amongst those in support of the Yankees’ revenue-based competitive advantage, is that even though the Yankees have that massive edge over every other team in baseball, they are also the host of the largest fanbase (or home market), and so it is “fair” for them to have that advantage.
This word, “fair”, does not mean what I think you think it means. It is not “fair” for one team to have an institutional, built-in advantage over a team with fewer fans. The word you are looking for is probably “unsurprising”. Or perhaps “natural”, or maybe even “reasonable”, or “predictable”.
You see, I agree with you all that it “makes sense” that the Yankees would have this competitive advantage. And I even agree with the more dubious assertion that the Yankees winning the World Series in any given year produces the greatest good for the greatest number. (This is dubious only insofar as many of the baseball fans who are not Yankees fans actually gain happiness *whenever* the Yankees don’t win the WS, even if their individually-preferred teams don’t win it, either.)
What I cannot agree with is the unfounded conclusion that such a competitive advantage is therefore “fair”. Fairness certainly allows for a franchise to be perennially better than any or all other franchises. But fairness precludes institutional—that is, “built-in”—inequalities.
Think about it like this. Let’s say that there was one baseball franchise made of, and run by, a Homo Habilus community and another franchise made up of, and run by, a Homo Sapiens community. Clearly we would expect the Sapiens Sabers to succeed more often than the Habilus Hawks. We could even be excused for WANTING the Sabers to defeat the Hawks, if only for evolutionary purposes.
But such a league is exactly the *opposite* of fair. If the Sabers supported the idea of fairness; if the Hawks didn’t take insult at the idea; and if, after all is said and done, the game was meant to be played in a spirit of mutual respect and friendly competition; they might come to some sort of agreement to improve the competitive balance of the game.
I don’t know, maybe let the Hawks use a DH or something.
But my point is there is no plausible amount of success that the (say) Royals could experience over the next (say) twenty years that would so increase their yearly revenue to a point where they could expect to compete on a level playing field with the Yankees for the next twenty years. This imbalance is emphatically NOT something that the smaller franchises can be blamed for creating (or worsening) by being talentless hacks.
They clearly ARE talentless hacks. We know they’re talentless hacks. And we wish they weren’t. But even if they were all cloned copies of the Yankees’ players and staff, they would STILL be dramatically less likely to succeed long-term.
And that is not what “fair” means.
Heck, this debate is really no different than the smaller one over park effects.
Yankees fans whining that revenue sharing is unfair are taking the same position as fans who complain about a player “losing” an MVP (or Rookie of the Year) award “just because he plays in a better hitters park.”
We have to adjust for park factors to determine which players are actually producing at the highest level. The stats of a hitter in Fenway are going to be unfairly increased above a similar player’s stats in Kauffman. The players have no individual control over those factors. The comparisons between players are “supposed” to be based on their actual skill and production, not over factors beyond their control. So, we adjust the Fenway’s numbers down somewhat to compensate.
Same thing.