Salary Caps Are A Bad Idea
In the wake of the free agency splurge conducted by the New York Yankees, there seems to be a new wave of uproar among baseball fans, writers, and even a team owner regarding the spending habits of the Steinbrenner clan.
Collectively, the Yankees will be dishing out $423.5MM for the services of Mark Teixeria, C.C. Sabathia, and A.J. Burnett, which would be excessive even if the global economy wasn’t going through the worst downslide in history.
But guys, I think we need to take a deep breath here and be rational.
Firstly, the idea that you can “buy a championship” has been disproven. We shouldn’t be having this conversation right now since a) the Rays and Red Sox still have a good shot at leaving the Yankees home in October once more, b) the Yanks haven’t won a World Series since 2000 despite the fact that they’ve had the highest payroll in baseball every single year since 1999, and c) we’ve been talking about this same topic for way too long and we’ve gotten nowhere.
Salary caps are not the answer and I don’t understand why we want to make the owners any wealthier than they already are. If they can’t spend the money they make, they’re going to keep it. And no, this won’t mean that ticket prices will go down because the market’s already been set. People are willing to shell out X amount of dollars for a seat so that’s the price. It’s unrealistic, and quite frankly, anti-capitalistic to expect anything else. Plus, if there’s even a whiff of a pending cap, the MLBPA will shut down baseball for god knows how long. And who does that benefit?It doesn’t help the owners, the players, and certainly doesn’t help the fans.
A steeper luxury tax is a possibility, but really, it’s Yankee-proof. Why? Because unlike many other owners, the Steinbrenners actually spend the money they earn to make it worthwhile for the fans. Say what you will about the family but they are not exactly cheapskates. According to Forbes Magazine’s annual list of the 400 richest people in America, George Steinbrenner’s net worth ($1.3B) trails those of Carl Pohlad (Twins – $3.6B), Ted Lerner (Nationals – $3.5B), Mike Ilitch (Tigers – $1.6B), Drayton McLane (Astros – $1.6B) and Tom Hicks (Rangers – $1.4B). And this doesn’t even include the major conglomerates like The Tribune Company (Cubs), Liberty Media (Braves), Rogers Communications (Blue Jays) and Nintendo (Mariners).
And in 2007, the Yankees spent roughly $190MM on payroll – and reported an operating deficit of $47.3MM, by far the worst return in all of baseball. So what did they do in response? RAISED their payroll to $210MM in 2008. Of course, the Yankees do not want harsher luxury taxes. But their past behavior indicates that they will not compromise their on-field talent as a result of it. On the flipside, 27 of the 30 teams profited in 2007. The Nationals, Marlins, Mets, and the White Sox all made over $30MM a piece. So all that will end up happening in a luxury tax scenario is a redistribution of wealth among the owners – from ones willing to spend to the ones that don’t. This doesn’t sound like it’s in the best interests of baseball.
So let’s consider what the fans are demanding here.
Parity – the idea here being that if payrolls were more evenly spread, teams such as the Pirates, Royals, Nationals and Orioles will be competitive. This is wrong. All of these teams have internal personnel issues that prevent it from succeeding. They’ve made bad decisions, plain and simple. The Orioles have gotten better and restocked their minor league system that should bear fruit over the next few years. But the others are still hopeless and have no one to blame but themselves. The A’s, Rays, Twins, Indians, Marlins, Rockies, and Brewers are just some of the small market teams that have competed over the last couple of years primarily through their farm systems.
Affordability – to an extent, this one may end up fixing itself, at least temporarily. Baseball owners know how to make money. And no matter how high atop a mountain their residences may be, they know that those below haven’t been raking in the dough. They’ll do what’s best for the organization and either stabilize or even lower the cost of attending games. Whereas the Mets and Yankees will be raising them due to their new stadiums’ abilities to generate additional revenue. This is capitalism (by the way, it’s kind of funny how people who were so afraid of socialism embrace the idea if it benefits them).
I know that this makes me sound like a blue-blooded jackass. Trust me, I’m no blue-blood (but I cannot prove that I am not a jackass) and only have a very rudimentary knowledge of economics. But the alternatives just don’t make sense to me. Why shouldn’t the most popular teams be able to reward their fans’ loyalties with a winning product? Why do we attack the Steinbrenners for spending their income to do so? Shouldn’t the Nationals fans (all four of you) be angry that their team had a 2007 payroll of $37MM when the organization made $43.7MM? To me, that’s far more offensive than what the Steinbrenners are doing.
Who knows how the 2009 Yankees will perform. They may end up winning the World Series, they may end up out in the cold, or somewhere in between. But if someone bet you $100 that the Yankees will win their 27th championship next year, wouldn’t you be pretty confident? I mean, that’s 29 other teams that could net you $100. Baseball’s a funny game. The best teams don’t win as often as we think. No matter how much money exchanges hands.
December 26th, 2008 at 6:32 pm
As I Royals fan, I am disgusted with the Yankees.
But, you have very compelling points.
The Royals, in particular fits your statements to a tee. They are not in a position to take advantage of any solution at present, because of the way they have run their franchise.
The only real solution is for the Players and owners to be totally honest and share the revenues between them. That will happen. I wouldn’t trust either party. The players should look out for number one. The owners should look after the game.
As long as “buying a championship” continues to fail, the game is fine.
Again as a Royals fan it warmed my heart to see the Tigers and Yankees watching TV along with the Royals and Twins.
Wise men will win, the fools will either overspend (Yankees) or line their own pockets (Royals).
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December 26th, 2008 at 8:00 pm
Contrary to what people may believe a salary cap would least benefit the owners. First off, baseball players are paid 52% of what the owners make that is the lowest of the major 3 sports. Yes, those other sports with the salary cap have to pay the players a larger percentage of the profits, players don’t suffer from the cap. The other point is that teams could also be forced by the players to have a minimum payroll and be forced to spend a higher percentage of earnings. Currently the teams receiving the money from the luxury tax aren’t being forced to spend that money under a cap they most assuredly will. What people also forget is the owners want to do whatever they can to keep their finances private, if there is a cap they will have to open their books to the players. They do not want this to happen. Some smaller market GMs are complaining about the Yankees but they don’t realize a cap is not in the best interests of the owners. Personally, I think a cap would be a good thing if it forced the owners to admit how much they make and pay out a greater percentage of that money to the players. A cap would actually increase payroll not decrease it.
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December 26th, 2008 at 8:13 pm
Contrary to what people may believe a salary cap would least benefit the owners. First off, baseball players received 52% of league wide revenue last season, that is the lowest of the major 4 sports. Yes, those other sports with the salary caps have to pay the players a larger percentage of the profits, players don’t suffer from the cap. In the NFL the players received about 59%, NBA players were at 57% and the NHL players stood at 56.7%.
Teams could also be forced by the players to have a minimum payroll and be forced to spend a higher percentage of earnings. Currently the teams receiving the money from the luxury tax aren’t being forced to spend that money under a cap they most assuredly would be required to do so. In the NFL teams are required to have a minimum payroll, it’s safe to assume MLB players would be able to get the same arrangement.
What people also forget is the owners want to do whatever they can to keep their finances private, if there is a cap they will have to open their books to the players. They do not want this to happen. Some smaller market GMs are complaining about the Yankees but they don’t realize a cap is not in the best interests of the owners. Personally, I think a cap would be a good thing if it forced the owners to admit how much they make and pay out a greater percentage of that money to the players. A cap would actually increase payroll not decrease it.
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December 26th, 2008 at 8:46 pm
How do you explain that a salary cap works in the NFL
where every team has a chance
sorry pal but you are the one that is wrong!!!!!!!!!!!
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December 26th, 2008 at 8:58 pm
Over the last 30 years, 20 different teams have won the World Series, and only four — Cubs, Mariners, Rangers and the Expos/Nationals — have failed to get there.
By comparison, NFL teams that have not made the Super Bowl the last 30 years include: The Jets, Browns, Chiefs, Saints, Cardinals, Lions, Jaguars, Texans and Vikings, That’s 10, almost one-third of all the teams in the NFL.
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December 26th, 2008 at 11:05 pm
You are exactly right.
It’s a joke that people complain about the Yankees’ payroll. Meanwhile, those teams don’t reinvest the 30 million they get from the Yankees back into their own team. Rather, they choose to be greedy and basically pocket all of it.
Cheap owners are also ruining baseball. At the very least, they are helping the Yankees.
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December 26th, 2008 at 11:42 pm
Actually I think a salary floor would be a better idea than a salary cap. I say this because in addition to putting money in the players pockets, the Yankees will also be putting more money into the pockets of teams like the Pirates, Royals, etc. Teams that do not spend on players, but will take Yankee money and put it right in their balance sheets. There should be a minimum amount that teams HAVE to spend on players. That will at least help keep the Yankees from buying an all star team
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December 26th, 2008 at 11:50 pm
as a pirates fan, yes i am definitely in favor of a cap that would lead to an opening of the books, as mentioned earlier. i absolutely hate it when people mention the As or Twins or Rays as small market teams that stay competitive. i don’t want to stay competitive, i would like to have a realistic shot at winning AND keeping the players that got me there. it is depressing being an As or pirates fan to know that you will fall in love with a great player just to see him end up on the yankees or redsox because your team cannot afford to have every starter on your team making over 10 million, because your team does not have its own television network with the largest market in baseball. baseball is irrelevant now in 2/3 of all cities. espn will show you yanks/sox/dodgers/cubs, and that is it. the nfl has it the best of all sports, and that is why it has stolen the title of America’s pastime. i will gladly sit out a multi-season strike if it meant that a cap (and sanity) restored baseball.
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December 27th, 2008 at 12:03 am
What kind of league has one team (Yankees) spending 200 million and another spending (Marlins) 30 million? Look at the NFL which is the wealthiest and strongest league in the world and put in a salary cap and take away guaranteed contracts. Explain the harm in trying to be more like the NFL and NBA which have better economic systems and hence better leagues.
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December 27th, 2008 at 12:32 am
Speaking in general in terms of revenue in a big market vs small market and how much a team can make in a year really illustrates how difficult it is for smaller markets to “reinvest” in their teams. The majority of people in a given city root for their local sports teams, either by attending games, buying merch, etc. The New York City area has a population of roughly 8.3 million people. It’s nothing for them to have an attendance number of 3 million per year. We’re talking that 1 in about 3 people every year need to attend ONE game to meet that milestone.
In Milwaukee, however, there is about 1.5 million people in the metropolitan area, meaning the EVERY resident in the metrolpolitan area would need to attend 3 games each.
I think that’s a perfect illustration of how much more difficult it is for small market teams to gain revenue, not even touching on additional revenue through streams such as the YES network.
Don’t get me wrong, there are many owners who would rather pocket any profits instead of putting them into the team. But at the same time, there are also owners in smaller markets that will voluntarily push the financials into the negative for a year for a shot just to make the playoffs. Looking at a net worth of an owner doesn’t mean that all of that money is disposable for their baseball teams. In many cases, this is more of a hobby to them than an actual revenue stream.
Small market teams that build through the draft and farm system do so because it’s the only option. At best, that creates a window of MAYBE 3 or 4 years if you’re lucky to make a run at the playoffs… not necessarily even having a legitimate shot at the World Series. Then most of those teams spend a few years rebuilding just to hopefully be lucky enough to repeat that cycle again, but in most cases that doesn’t happen. NYC will always think the small markets are just full of bad management, cheap owners, and cry babies, but the reality is that the density of the populations and ability to gain popularity of bigger markets is not there. Although the story had some good points, there should be both a cap and minimum set for payroll and I, as a die hard baseball fan, would be willing to watch a strike if it means saving baseball for the future.
As a side note, am I jealous that the Yankees signed 3 of the top free agents so far? Yes, anybody would be stupid not to admit that. They dwarfed a record offer from the Brewers and showed just what they can do. I just hope I get to see them choke on their spending spree. ;o) Enjoy having CC as a part of your team. He is truly a class act!
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December 27th, 2008 at 1:00 am
A couple of points: One, I highly doubt the Yankees lost money. No owner is in this to lose money. I believe the figures you have do not include the YES network revenue, which is usually the case with those numbers. It’s hidden, but there is a profit there. Two, that other owners have more net worth than Steinbrenner is irrelevant. What are the franchises worth? How big is their market and how much revenue can they generate?
Otherwise I completely agree with your stance against salary caps.
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December 27th, 2008 at 3:01 am
Kevin, what makes those leagues better when the parity of MLB outshines them both?
The crazy thing about baseball is that the Yankees can spend 200MM and not even make the playoffs, while the Marlins can spend 10% of that and win the whole thing.
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December 27th, 2008 at 7:34 am
You speak about capitalism, but don’t understand how it works. The idea behind capitalism is to make as much money as you legally can. You are however critical about owners making 47 some million dollars. Why should only the players make ungodly profits? Why shouldn’t someone who took a risk to buy and run a team make 47 million dollars? This is especially true when that is probably split between multiple partners. In addition, the Yankees do not lose money on basesball. They make many millions on Yes and other ancillary ventures. They also probably cook their books. I also believe in an upper and a lower cap. The Yankees are ruining baseball because they bid against themselves and their actions blow the value of players out of proportion. I think the days of ordinary families visiting a New York stadium are over.
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December 27th, 2008 at 8:03 am
While I believe in the free market, the damage a team does in spending the amount the Red Sox, Yankees seem to spend year after year kills interest in baseball. A small market team like the Rays, Royals and other teams only has a cjance to compete thru the draft and development of players, they cannot ever hope to spend with the “big boys”. If baseball is TRULY interested in reestablishing itself as our national past time, then what better way than with a HARD salary cap like the NBA has, or like the NFL does. Competetive balance means more to me than the feeding of the Yankess/Red Sox owners and fans egos.
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December 27th, 2008 at 9:05 am
Kevin,
What? How are the NBA/NFL better leagues? NFL is probably the #1 sport in America, but baseball is right there with it. For all the criticism of recent spending, baseball is as wealthy as ever. They are obviously doing something right.
Also, salary caps don’t work as well as you think.
Raiders are at 150 million, Chiefs at 83. Knicks at 97, Memphis at 51. Essentially, the disparity there isn’t as great because the bottom feeding teams are still spending money. Like many have said, if you force the Marlins to reinvest the luxury tax money they get from the Yankees, they would also be around 50-60 million in payroll at least. Instead, he chooses to pocket it.
Closer yes, but there are ways for big market teams to create the disadvantage anyway. Cowboys and Redskins, anybody?
Besides, look how boring those two leagues are in terms of trade deadlines. It would kill the excitement in that regard as we know it.
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December 27th, 2008 at 1:25 pm
Whoa, lots of comments.
Jim, how can you say that this is killing baseball when the sport is as profitable as ever? It’s not killing interest at all. It’s a gut reaction that people go through but they’ll get over it and watch games again. Remember, the steroids scandal was supposed to ruin baseball forever. And yet, here we are, still talking baseball.
Jonathan, save the preaching elsewhere. Where did I criticize owners making money? I criticized fans who blame the Yankees for spending while giving the owners who don’t a free pass. And for the record, even with the economy in the crapper, the season and partial season tickets have been selling at incredible speed at both Yankee Stadium and CitiField. But thanks for the unnecessary lesson.
And nic, I never said that Yankees Global Enterprises lost money. As you point out, cable networks don’t count as operating revenue. The Yankees, the franchise, had an operating deficit. They’re two different entities. It’s not “hidden”.
Greg, please reread. I will never treat small market teams like some monolithic entity. I will never purposely group the A’s and Pirates together because that’s an insult to Oakland. And when did I say I was a Yankees fan? Why do you assume I am? Just because I defended their actions? It’s called being fair and rational. For the record, I hope the team implodes. It’ll be good for a laugh.
James, when’s the last time the Pirates even had a great player for you to get attached to? The Pittsburgh scouting and development departments have come up empty time and time again. And that’s their problem. Not the Yankees.
And can we stop talking about how much fairer the NBA and NFL are economically? Look at the data dispersed right here in the comments section and tell me which league has more parity. You’re believing in lies. Baseball is fine. I’ll watch it. You’ll watch it. And people will still be complaining about this same thing in fifty years.
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December 27th, 2008 at 2:23 pm
The part I don’t get is that salary cap supporters always tend to talk about how *recent* Yankee spending is killing the game, and that’s why the NFL is doing better. But the thing is, the Yankees have *always* spent like this, even when baseball was far and away the national pastime. I mean, how did they get Babe Ruth? They bought him. How did they get all those other great players? They spent more. How did they win 26 World Series Titles? By far outspending all the other teams, for a whole century.
Look, I hate the Yankees as much as the next guy. But gods forbid we get rid of the Yankees. Baseball is so much better for having such an arch-villain.
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December 27th, 2008 at 5:34 pm
But the thing is, the Yankees have *always* spent like this, even when baseball was far and away the national pastime.
You just have no idea what you are talking about.
First off, prior to recent history the discrepancy between the top team and the 2nd or 4th (or whatever) most expensive team was pretty small. The giant discrepancy is only in recent history.
For example:
1998 payrolls
1 Baltimore Orioles $74,170,921
2 New York Yankees $73,963,698
3 Texas Rangers $62,755,368
Almost no difference between #1 and #2, a far cry from the Yankees outspending other teams by millions and millions.
This brings us to our second bit of history lesson: The Yankees have not always been the highest spending team. You’d have to be pretty ingorant of baseball history to think so. Look again at that 1998 payroll, it isn’t hte Yankees on top.
That is just one example.
Others: 1992 payrolls
1 Toronto Blue Jays $1,719,694 $49,427,166
2 Oakland Athletics $1,446,650 $48,029,667
3 New York Mets $1,381,298 $44,009,334
4 Boston Red Sox $1,430,586 $42,138,665
5 Los Angeles Dodgers $1,431,760 $42,050,166
6 Pittsburgh Pirates $1,206,012 $36,228,647
7 Atlanta Braves $1,280,689 $35,853,321
8 Cincinnati Reds $1,227,669 $35,429,559
9 New York Yankees $1,111,895 $34,902,292
The Yankees weren’t even in the top 8!
Many teams have outspent the Yankees through the years. It is ineed only recent history where they have dominated financially.
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December 27th, 2008 at 6:26 pm
Everyone needs to stop using the NFL as the bar to rank every other sport until you look at how NFL players are compensated, during and after their contracts. I might be wrong, but when a MLB players contract is severed, either through assignment, retirement, non-tendering, etc., they’re much better off then an NFL player in the same circumstance. So, until the NFL starts treating it’s employees as well as the MLB treats theirs, you cannot compare the two.
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December 28th, 2008 at 1:21 am
Amen on the salary floor.
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December 28th, 2008 at 9:58 am
All I am saying is, and this is MY opinion, when you try to center and monoploize(?) all the talent is a few places, sooner or later the other parts begin to not care. You say baseball is in great shape, I say baseball has forgot about the FANS. Try and go to a World Series games with your family, try to keep your child interested in a game when the MOST important games are on so late, they can’t watch them. Will the Yankees or Red Sox signing and outspending the rest of the league kill baseball. no. What will kill baseball is baseball’s TOTAL approach, from not trying to have balance, and I disagree with whom ever said baseball is growing. It is in just a FEW places, most places where there is no chance of competing are really beginning to get tired of those who think that buying success is the way to go. Should there be a hard salary floor, YES, just as there should be a HARD salary cap.
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December 28th, 2008 at 11:35 am
The ironic thing about the killing baseball argument is that the better the more traditional powers are, the healthier baseball ratings are. When the Yankees/Red Sox/Angels/Mets/Phillies/Cubs/Dodgers/Giants are good, so is baseball. For all the talk about America loving the underdog, it’s just not true for the casual fan. We may love it, because we’re fans of the sport, but most people don’t seem to care as much.
So when talent is monopolized in those areas, and those teams are good, fans seem to eat it up.
It’s the same in pretty much every sport too. That Boise State/Oklahoma game? The ratings were terrible. Hawaii/Georgia? Terrible. George Mason in the NCAA tournament for basketball? Terrible. The list goes on.
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December 28th, 2008 at 12:22 pm
If people want to argue that the game needs more competitive balance they shouldn’t be arguing for a salary cap they should be asking for greater revenue sharing of local tv revenue and a salary floor. If you make the Yankees and Red Sox share their local tv money with the weak sisters and force those teams to spend that money you would have a more even playing field. Of course, that won’t happen and those teams will say they shouldn’t have to share that money. The conflict arises from the fact that the big market teams need those smaller market patsies to play in order to have a broadcast product. Part of what has created more equity in the NFL is the fact that they divide the tv money equally amongst all markets. Fans of smaller market teams at least have the illusion that their team can compete even if they are only mediocre.
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December 28th, 2008 at 2:39 pm
Jim, what team was in the world series this year representing the AL? how did they get as far as they did? by following the Yankees / Red Sox model? People in smaller markets have already come to the conclusion that you need to have the right people identifying and developing talent at the earliest (cheapest) levels, you don’t have to be the Yankees and spend spend spend. The fans have followed suit, and you’ve seen more knowledgable fans in these markets, ones who are faster to accept Moneyball theory as Dogma.
There is TALENT throughout the league. i think you’re equating TALENT more with SALARY. Have you seen the UNBELEIVABLY team favoring contract Evan Longoria signed with Tampa this year? He’s drinking from the Kool Aid, he’s with a team that “gets it”.
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December 28th, 2008 at 11:01 pm
I’m glad someone finally brought up Evan Longoria. Yes, small market teams *can* keep star players, if they’re willing to buy out their arb years — look at the contract Ryan Braun signed, or the one just signed by Dustin Pedroia. And in fact, Pedroia plays for a big market team — but the Red Sox are smart enough to recognize a good strategy when they see it. They’ll have Pedroia for his peak, not his decline (like the free agents the Yankees sign).
I wrote about this situation in my last Metro column, and I made some quip about the Yanks and their champion ship team spending “in the 90s.” But a reader corrected me — actually, the Yankees didn’t have a big payroll in the 90s comparatively speaking. They won those championships because guys like Jeter and Posada were in their primes. It’s since they let their core players get old, and since they started buying up aging, expensive free agent talent that they have “struggled” (according to Steinbrenner standards).
Paul — I think the Pirates fans are pissed about losing Nady to the Yanks and Bay to the Sox. Small market teams don’t just lose good players to free agency; they lose ‘em to trade if the team thinks they won’t be able to re-sign them.
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December 28th, 2008 at 11:14 pm
It’s not like Nady was home-grown. He played in San Diego and in Queens. Plus, if you get attached to Xavier Nady, that means your team lacks actual talent. Jason Bay’s a very good player, but he was never elite. Even if Pittsburgh had been able to afford to keep those two, where’s the rest of the talent? Where would Bay and Nady gotten them when their pitching has been so bad?
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December 29th, 2008 at 11:19 am
I can’t argue my points as well as others have written, so I will point out a few books:
1) Lords of the Realm – anyone who wishes to gripe about player salaries must read this book.
2) Baseball Between the Numbers – has an excellent chapter on evaluating free agent talent, and the effect of rising salaries on ticket prices (guess what, there is no correlation – it is new stadiums that increase ticket prices).
3) Marvin Miller’s Whole Different Ballgame – which is a different view on the union battles that lead to the current era of free agency.
One of the Baseball Prospectus annuals had a good fungo article on team salary vs. championships.
I say – let people make as much money as they can. I make as much money as I can, and I hope everyone here does as well. I don’t care that athletes are obnoxiously paid, I think it’s a good thing. A career where the workers make a majority of the money and the managers make less, is a dream job to me.
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January 9th, 2009 at 9:49 am
Jim Says:
December 28th, 2008 at 9:58 am
“Try and go to a World Series games with your family, try to keep your child interested in a game when the MOST important games are on so late, they can’t watch them.”
Ah, Jim, try to go to an NBA Finals or Superbowl game with your family, where the tickets last year were in the four figures. This isn’t a baseball issue, it’s the nature of professional sports.
“What will kill baseball is baseball’s TOTAL approach, from not trying to have balance, and I disagree with whom ever said baseball is growing. It is in just a FEW places.”
Jim, that’s just laughable, the assertion that MLB is seeking an imbalance. MLB can’t control (nor should it) how their individual franchises run their business. Are you convinced that the Pirates ownership with the Red Sox bank account would be competing year to year? By the way, both the Minnesota Vikings and Arizona Cardinals needed an extension last week to sell playoff tickets and avoid local TV blackouts. Again, it’s not a baseball issue.
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January 9th, 2009 at 10:21 am
One thing that I never see mentioned is the cost of what it takes to run a franchise from top to bottom. When one mentions a payroll of $37m and a profit of $43.7m shouldn’t we take into consideration what it takes to run the minor league program, scouting, paying the front office etc.? The owner I doubt it pocketing any of that *profit* that is mentioned.
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January 9th, 2009 at 10:35 am
Are all you fans of a salary cap, dirty commies? Redistribution of wealth, give me a break. I’m a pirates fan, they suck because they’ve had idiots running the team for 18 years, not because they don’t spend. Wow, we could keep Bay and lose 90 or trade him and lose 95 and get prospects. Tough call there. Will some of you nlf lovers please tell Detriot they have a chance to win a Super Bowl, thanks.
FYI Paul, Neyer link to this.
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January 9th, 2009 at 10:43 am
There are a lot of different financial terms that get thrown around in this debate — profit, revenue, cash, operating deficit, etc. The Yankees have enormous streams of revenue coming in from YES and other ventures. My understanding is that allows their baseball operations to run at a deficit; basically, they have so much money from other revenue streams that they don’t need to ensure their baseball operations run at a profit. That’s definitely an advantage that other teams don’t have, but a salary cap won’t necessarily fix that.
Basically, the Yankees are actually best thought of as Yankees, Inc. They are a giant corporation that just happens to field a baseball team.
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January 9th, 2009 at 10:46 am
This article is based on some pretty obvious logical fallacies. You seem to think that because the Yankees didn’t make the playoffs, while lower-payroll teams can make (and indeed win) the World Series means that high salary somehow doesn’t confer a massive competitive advantage.
But that is just ridiculous. Certainly a large payroll will never guarantee anything, and there are plenty of examples of small-market teams having success, but is there anyone who would argue that the Twins wouldn’t be better if they could afford to keep Johan Santana? Again, that isn’t to say that keeping him would have gotten them to the Series, but it almost certainly would’ve resulted in at least one more regular-season win, which would have put them into the playoffs.
You’re right that teams cannot ‘buy a championship’. But that has nothing to do with why I want to see a salary cap. I want one because a high salary can ‘buy a contender’, or at the very least a .500 team.
Similarly, you are right in pointing out that internal personnel issues are often more important than salary, and that a cap wouldn’t fix that. Yet once again, I feel like you’re missing the point. The salary cap isn’t supposed to fix any of those problems. The idea is simply to put teams on a more level playing field (figuratively).
You do make a good argument about teams repaying their own fan’s loyalties with a winning product. But in so doing, aren’t you admitting that a high payroll will help create wins? And isn’t that exactly the opposite of the rest of the post?
I’m not saying that a salary cap is necessarily the best way to tackle this issue. But it should be considered, and the debate should be over what will best benefit baseball in the long run. And if large-market teams are consistently able to have high payrolls, they will probably be (to some degree) better than small-market clubs (on average) over the long run. This will probably hurt the smaller-market teams (in terms of success on and off the field). So we should really ask ourselves: is it better for baseball to allow teams to have a competitive advantage based on their market size, or to actively encourage parity and competitiveness? Honest people can certainly disagree on that question.
(As an aside, the sentence, “This is capitalism (by the way, it’s kind of funny how people who were so afraid of socialism embrace the idea if it benefits them).” is pretty f’n snarky and short-sighted. The opposite is absolutely true of anyone who claims to love free markets AND got a public education. Or works in the financial sector AND received a bailout. OR is a fan of any sports team that receives any type of tax incentive or benefit from the government. [Hint: absolutely every single one does.])
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January 9th, 2009 at 10:49 am
timmy, sorry to have to be a jerk, but salary caps wouldn’t redistribute wealth so they wouldn’t be communist. The luxury tax currently in place actually does that. Salary caps just force the teams to only spend a certain amount on player salary, no matter their revenue. So, teams like NY and Boston who have a lot of revenue would just have to keep it or find another way to spend it (elaborate scouting outposts across the globe?).
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January 9th, 2009 at 11:23 am
Wealth transfer from players to owners seems like redistribution of wealth to me.
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January 9th, 2009 at 11:50 am
Wealth transfer, or good jobs at good wages? You decide. The players fought hard for their right to make whatever the owners feel like paying them. That’s about as American as it gets.
Another point on salary caps, and the luxury tax – a few select teams (cough, the Marlins) – tend to POCKET much of the $$ they are given from profit sharing, instead of actually spending money on improving their team. SHOCKING – an owner exploiting the system for their benefit. What next, publicly financed stadiums?
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January 9th, 2009 at 1:08 pm
A few items:
1. While the Red Sox have in years past been big spenders, since Henry & Co. have taken over the team in 2002, their salaries have tended downward overall. This past season the team was 4th, behind the Yankees, Mets and Tigers.
2. The reason why good, smart teams like the Twins don’t or didn’t extend Johan Santana is because the team couldn’t afford it. The team somehow was able to spend almost $50M on Joe Nathan last winter. The reason why “established, elite” players tend to leave smaller markets is because the ROI that those teams will get on those players vs. the money the spend doesn’t make any season. Why would the Twins lock up Santana to a 6-year deal that would consume anywhere from 20-35% of annual budget? That’s just not smart baseball. ESPECIALLY since you’re locking up Santana in the years most likely after his prime. A time like the Twins can get a better return on their money focusing on locking up younger players like Mauer, Morneau or other prospects coming up in their system. Much like the Brewers and Rays have done recently.
3. Going back to Red Sox real quick, it should be noted that the team has experienced its recent success because of its renewed focus on its scouting and development system. Before that happened, the Red Sox would typically blow most of their money on big name players (Manny Rameriz, Pedro Martinez, Roger Clemens, Mo Vaughn) and then fill in the rest of their roster with players who were no more than replacement level players. So they team, while it had star, elite players also had serious holes.
4. I also would have to agree that poorly run teams have a larger effect on parity than salary caps or floors. A great example is the Baltimore Orioles, a city rich with a baseball tradition with a fairly large fan base in the Mid-Atlantic region. Yet the team struggles to fill its stadium, even with divisional rivals like the Red Sox and Yankees visit. Why? Because their owner has run that team into the ground, placing people in positions they shouldn’t have been. With Andy MacPhail aboard, the Orioles are starting to turn it around but they are still years away from building a solid, competitive team since their scouting and development was so horrible for so long.
The Rays are another recent example of this. The team has always had talented players, but it wasn’t until the team’s new owners took over in 2006 did the team start to turn it around. And that looks to be competitive for another 5 or so years given how they’ve looked up their talent.
5. Lastly, Lord help us if we ever get a salary cap system like the NBA where you had the Dallas Mavericks trading a player like Keith Van Horn who hadn’t played at all that season but was still on the books to the Nets because the Nets just wanted to clear cap space. And the NFL isn’t any better. Players can be cut on a team’s whim to clear cap space without needing to pay the rest of their contracts. I don’t think MLB is perfect. The system could use some work. But I would be hesitant to automatically assume that the reason NFL is king is because of salary caps. Honestly, the sport is made for TV. Have you ever watched a NFL game live? Oh my word its boring. On the flip side baseball games on TV can be kind of boring but really exciting in person.
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January 9th, 2009 at 1:15 pm
Am I missing something? Why shouldn’t the owners make money? Aren’t they the ones risking money? If baseball folds who loses money? Only one person…the owner. Screw all these premidona players who play a game for a living and make jokes of the rest of us poor saps. Put in a Salary Cap and let the owners make millions upon millions…they’ve earned that right!!
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January 9th, 2009 at 1:15 pm
I agree with you on one point: teams like the Marlins are worse for baseball than teams like the Yankees. The rest of your argument, however, does not follow. If MLB were to adopt the NFL salary cap, players, NOT owners would benefit.
In 2007, for example, as best I can tell, MLB’s revenues were around $6 billion. That same year, total team salaries were around in the neighborhood of 2.5 billion. Thus, players took in just over 40% of the total revenue.
That same year, NFL players received 57% of the league’s revenue. How? because the salary cap also includes a minimum floor (that year it was around 85% of the cap).
So here’s the reality: if you applied the NFL rules and percentages to baseball, in 2007, players would have received north of $3.4 billon. More importantly, while the cap would have had to be around $120 mil or so, the floor would have been around $100 mil. Thus, the Steinbrenners would have made more money, but the Jeff Lorias of the world would have been forced to spend some. Net result? More competitive balance.
Obviously, the big issue with such a cap is that baseball’s revenue sharing pales in comparison with that of the NFL. That disparity would have to be addressed by owners or a CBA to make a cap work.
I do agree that a salary cap would not help with affordability, but it does not follow that it would not help with competitive balance.
For those arguing that MLB’s system is better than the NFL’s based on the number of teams to make certain rounds of playoffs, there’s a simple answer. In football, coaching decisions make up for a much larger percentage of what happens on the field of play than in baseball. Thus, teams (like the Patriots) with good coaches and management will almost always succeed, while teams with bad coaches and management (like the Lions) will almost always fail.
Even with a cap, teams like the Pirates would suck. But that would be because their management sucks, not because their are structural inequities built into the game.
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January 9th, 2009 at 2:12 pm
Joshua, you make good points. It’s not smart baseball to sign past-their-prime free agents to big money. The Yanks haven’t actually had much success since that became their predominant business model. But owners still say, “Oh, we just couldn’t pay Joe All-Star as much as the Yankees, players are such mercenaries these days, we need a salary cap,” and it seems to convince the fans to point their anger somewhere else.
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January 9th, 2009 at 2:13 pm
And Matt M, that’s another good point — salary caps and floors (there is at least a type of floor in place, actually — the league minimum salary) would also mean that bad players make more money. That’s sort of lame.
I would much rather see baseball overhaul the draft system.
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January 9th, 2009 at 2:53 pm
“Certainly a large payroll will never guarantee anything, and there are plenty of examples of small-market teams having success, but is there anyone who would argue that the Twins wouldn’t be better if they could afford to keep Johan Santana? Again, that isn’t to say that keeping him would have gotten them to the Series, but it almost certainly would’ve resulted in at least one more regular-season win, which would have put them into the playoffs.”
This is the kind of illogical thinking that tends to fuel these debates, and I’ve never understood how they persist. Let’s first clarify that in the NFL, they use a HARD salary cap, and in the NBA, they use a SOFT salary cap, contrary to what commenters keep saying. The difference is that in the NFL, if you exceed the max, you pay an exhorbitant fine, I believe, every day you are over that number. On the other hand, in the NBA, you can go over that number to pay your players, but you still are charged a more reasonable luxuary tax. The fines in the NFL are so harsh that it makes it economically impossible to break the ceiling, but in the NBA, a team like the Knicks can be over the cap every year while fielding a god-awful team.
What this poster and most others have been asking for is a HARD cap, like the NFL has. Great. But what makes you think that will allow the Twins to keep Santana? First of all, Pohlad (or now his heir) is in no way required to go anywhere near the maximum allowed. Second of all, even if he wanted to (highly unlikely), if he is fielding the kind of team that is primed for a WS, and you think payroll confers quality of players, it’s not unreasonable to assume that the Twins payroll would already be high in such a situation. This happens to NFL teams all the time, which is why good, even great players, often play for multiple teams. Teams MUST cut quality players year after year to keep themselves from hitting the cap, or else to operate where the owner prefers. Cheap owners DO exist in the NFL, and if you look at the payroll breakdown between all the teams, you will see that some teams have no qualms about being near the cap, while other teams act as if the cap is 40 or 50 milion lower than it really is. The Marlins will still central fund money in any system you put them in.
So you say, fine, a soft cap then. But if you say that, how is that different then what we have now? The biggest difference is that the Twins would make a bigger profit while demanding Minnesota pays for its new stadium, and the Yankees pay their luxuary tax as usual.
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January 9th, 2009 at 2:56 pm
“The Marlins will still central fund money in any system you put them in.”
That should be, they will STEAL central fund money in any system.
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January 9th, 2009 at 3:47 pm
A couple other reasons I can add:
-Teams (okay, the Yankees) have money committed to long-term contracts, and it’s really not fair or logical to establish a cap until those contracts expire. That means a salary cap couldn’t go into effect until 2018 (when A-Rod’s deal will finally be done).
-I really don’t think the arbitration system would work with a cap…teams would need to know what they’re paying a player next year (or at least a ballpark figure) to be able to manage their cap.
-I really don’t see any reason for MLB to step in and demand a salary cap, revenue-wise. The most popular (and, I assume, richest) league in the world is the EPL, which is the worst example of parity that you could come up with (only four teams ever have a chance at the title).
http://blogs.timesunion.com/whitaker/?p=463
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January 9th, 2009 at 4:03 pm
Paul says fans want parity and affordability, but I think they want one more thing: familiarity. Look at the Marlins. They’ve won two World Series titles. They were competitive in 2008 and will be legit contenders in 2009. As for affordability, I’m going to go out on a limb and guess Marlins tickets are some of the cheapest in baseball. Yet the fans don’t show up. Why? Ownership will tell you it’s because the team plays in a crappy stadium, but I think it’s because every time a Marlins player makes an all-star team, they trade him. Maybe that’s what you’ve gotta do as a small market team to compete with the big market teams. But it obviously doesn’t do much to encourage fan loyalty.
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January 9th, 2009 at 4:10 pm
http://www.baseballprospectus.com/article.php?articleid=8409
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January 9th, 2009 at 5:05 pm
Why does BP do everything better than me? Oh wait. That’s right. They’re smart.
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January 10th, 2009 at 4:37 am
The Yankees didn’t report a $47.3M loss in 2007 and then raised payroll. They have not publicly reported their financials ever that I know of. Perhaps you are picking up the Fortune estimates, but those exclude their affiliated ownership of the YES Network. Given that the Yankees’ ownership is rational, they wouldn’t raise payroll if they were losing tons of money. Given that teams’ resale value rises over time, that’s even better evidence that they are not losing money.
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January 10th, 2009 at 8:01 am
The Yankees and Mets can afford to pay out more in salary than other teams because they split the biggest baseball market in the world. To level the playing field, a third team in NYC is an answer. Would the Mets and Yankees allow it? Of course not. They’re all for free enterprise, but only if it’s free for them, and them alone.
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January 10th, 2009 at 7:17 pm
To Brad: Getting beyond whether the Mets or Yankees would “allow” a third team, I’m curious as to why you think that would change anything? You know NY used to have three teams before the 60s, right?
Further, you mention NYC is the biggest market in the U.S. This is true. But then a reader like you might turn around and refer to a place like Florida as a small market. I don’t know by what standards you are determining market size, but you should know most of the teams labeled as “small market” actually operate in fairly big markets.
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January 11th, 2009 at 10:29 am
We can always complicate the salary cap argument by saying the Nationals are poorly run, a cap is anti-American or the “look at the Twins” argument. Every one of those points can easily be countered, but that only complicates things further.
However, its not that complicated. I think everyone would agree that having more payroll than anyone else is an advantage on the field. That perpetual advantage is unfair – its as simple as that.
Advantages should be born of superior scouting, evaluation of talent, on the field managing and the play of the players. These advantages should not come from the balance sheets of their corporate owners or from the TV networks allowed by their geography. While 99% of Yankee fans think a cap is not needed now, if Bill Gates decided to devote his wealth to a baseball team those fans’ opinions would quickly change.
Extra payroll is not just about getting the next big free agent, but its the ability to recover from mistakes (Pavano, Brown), spend in a pinch (Clemens) and outspend others by so much the player can’t say no (CC). Extra payroll gives your fans off-season excitement of the hot stove league, and every reason to think your team will compete next season.
Baseball is broken. Its not destitute, but its broken. Like the boiling frog, MLB is slowly sliding into obscurity in smaller markets throughout the country.
Check out http://WWW.BANBASEBALL.COM for salary cap news and comments. Its a pro baseball site that just wants to be sure baseball stays around.
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January 11th, 2009 at 9:12 pm
Hi Jesse. Funny that you should mention Bill Gates. While he did make a lot of money (despite famously dropping out of Harvard) Microsoft is now under fire from Google — a company that started out as very “small market” about 10 years ago. You say that the arguments against salary caps are easily countered, but that Yankee fans (and presumably, fans in other “big market” areas) would switch their arguments if a richer owner took over a competitor. I could just as easily claim that you would change your argument if your team’s owner started spending more money.
As Karl pointed out, even teams called “small market” teams operate in fairly large markets. I mean, Florida is pretty damn big, yet both Florida teams are considered small-market clubs. Meanwhile, Boston is not even one of the 20-largets cities in the US, and yet all of New England supports the Red Sox enough to grant them a huge revenue stream. Why? Because we love baseball. And we loved it even through 86 years of futility.
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