Much Ado About Money (What else?)
A number that journalists have liked to toss around this off-season is $423.5 million. That’s the total amount of money the Yankees committed to CC Sabathia, A.J. Burnett, and Mark Teixeira this winter, in an attempt to fill the holes in the club, partially caused by the departures of Mussina and Giambi. Keep in mind, the Yankees aren’t paying them all of that money in one season. In fact, the 2009 payroll will be lower than the 2008 figure. That little tid bit is often glossed over, for whatever reason. That hasn’t stopped people from complaining. Brewers owner Mark Attanasio said this in an e-mail to Bloomberg News:
“At the rate the Yankees are going, I’m not sure anyone can compete with them. Frankly, the sport might need a salary cap.” (source)
In response to that, I give you this. Also against the Yankees free spending ways is Astros GM Drayton McLain, saying, “We would love to have a salary cap, but the (players’) union has been very resistant to that.” As a way to curb the Yankees’ free spending ways, a salary cap would seem to do the trick. But would it? Yes, the Yankees couldn’t spend whatever they wanted and afford to cover up whatever mistakes they make (a certain Carl Pavano comes to mind). But other than hurting the Yankees, how does it help the poorer teams? Why do the Brewers and Astros care what the Yankees do? By my count, those two teams play the Yankees a combined ZERO times next season. So how would curbing the Yankees spending somehow help the Brewers and Astros? I have no idea.
It’s not even like McLain and Attanasio are looking out for the best interests of the sport either–the Yankees generate a ton of revenue for baseball by being such a marketable club. With a salary cap must come a salary floor. And poorer teams are hurt by salary floors more than they are helped by salary caps. Shawn at Squawking Baseball contributes this in a piece for Baseball Prospectus:
Imagine being Frank Coonelly in this situation. Coonelly, the Pirates‘ team president, has publicly supported a cap. Had our fictional cap/floor arrangement been instituted last year, the Pirates would have needed to increase their Opening Day payroll by $28 million. Not only would the team have taken a big loss, but Neal Huntington’s long-term strategy would have been sabotaged, since the team would have had to sign a number of veterans just to meet the minimum payroll.
Now fast forward to 2009. Let’s say the Pirates’ sales staff runs into major headwinds, with the team struggling and the economy sinking. The team’s top line takes a hit, falling $10 million from 2008. The Mets and Yankees, meanwhile, open their new ballparks, and each team increases its local revenue by $50 million. If the twenty-seven other teams are flat, total industry revenues rise by $90 million (not including any appreciation in national media revenue). Forty-five percent of that, of course, goes to the players. So even as the Pirates’ purchasing power decreases, the payroll floor actually rises.
In other words, without a more egalitarian distribution of income, the system crumbles.
Shawn goes on to talk about why keeping the current system is the best option for baseball to take. But even as a Yankee fan, I don’t completely agree. I think a better system of revenue sharing is the cure for what ails these billionaire owners. If I were voting on what to implement, I’d look for a system that provides strong incentives for teams to win (even more-so than the current system), and that didn’t force teams like the Pirates to spend money that they don’t want to spend. In a piece from way back in 2002, Derek Zumsteg lays out such a system, which rewards teams that get the most out of their respective fanbases. I urge you to read the article in its entirety, but here is a taste:
Owners should love it: it doesn’t punish them for spending on their teams, it doesn’t punish them for working to maximize revenue. It’s proportional, so it’s just, and if you expand or allow another team to move close, it’s almost a relief.
For the players, this is the greatest plan ever: there’s no drag on payroll at all. If the Yankees want to go buy their pennant, hey, no one’s stopping them. They won’t be able to do it for long with their reduced revenues, but not many people are going to complain about that.
Just to be clear, there’s probably less than a 1% chance that this would happen. I personally love this proposed system, and I think any economist will tell you that it correctly assigns incentives. Even though it’s not going to happen, we can still dream, can’t we?