What Do MLB’s Leaked Documents Reveal about Revenue Sharing?

Here is my take in The New York Times.

Baseball’s revenue-sharing system was designed to increase the competitiveness of small-market teams that presumably lack the financial muscle to compete with wealthier franchises. Redistributing wealth would give poor teams more resources to improve their rosters, and richer clubs would have less money to extend their financial advantage. The cumulative effect would be to spread good players around the league to achieve a level of competitive balance where “every well-run club has a regularly recurring reasonable hope of reaching postseason play” — the standard put forth by the Commissioner’s Blue Ribbon Panel on Baseball Economics.

Despite the good intentions behind revenue sharing, doling out money to baseball’s have-nots has the unintended consequence of creating a disincentive to win. Though the correlation is not perfect, winning tends to attract fans, which increases local revenue. But a healthier bottom line means drawing less from the revenue-sharing pool. The quandary faced by poor-and-losing teams is that using the added wealth to improve their clubs increases local earnings, but these gains may be offset by reducing revenue-sharing payments.

A lengthier explanation is available in my upcoming book.

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