can bupropion get you high xeloda overnight pharmacy comprar seroquel 300 mentat generic 2013 drugs how to import windows live mail account to outlook 2010 what is ranitidine for babies with reflux quanto costa cialis da 20 mg diclofenac discount no prescription finpecia without a prescription from australia buy synthroid viagra for sale northern ireland where purchase celexa myambutol coupon code lotrisone ointment research nolvadex buy what do amantadine capsules look like genuine fosamax best price entocort ec coupons trimox 100mg buy online rx drugs how often to take pyridium ventolin solution pediatric dose fucidin tablets price what does xenical do natural antibiotics for horses buy robaxin without rx voveran sr discount medications prednisona kern pharma 10 mg efectos secundarios buy fincar without rx best price for premarin cream adalat without a script depakote birth control online india buy diclofenac 50 ramipril generic for altace canadian family visa processing time buy cheap drugs net allopurinol and azathioprine interactions buy rumalaya forte mg online uroxatral cost in canada can buy dutas online reviews on wellbutrin for anxiety lasix drug for sale pharmacy brand name ayurslim online buy suprax lowest price accutane direct pharmacy can order moduretic canada get azulfidine toronto where xenical tofranil tablets us online sertralina vademecum peru buy altace 5mg what is the over the counter equivalent to protonix is avalide available over the counter kegunaan obat voltaren what is kamagra chewable for levitra dosages cheap synthroid arjuna buy without tegretol generic side effects can i buy biaxin in canada can order zithromax online who hash the best prices for viagra forzest without insurance bioidentical testosterone cream bodybuilding rosuvastatin order by phone benzac no prescription canada buy nitrofurantoin online no prescription us discount mentat generic form of baclofen flonase without a prescription from us colchicine tablets side effects of zovirax 800 mg buy generic lamisil online drugs lanoxin low dose birth control perrigo tretinoin cream .05 reviews cheap lady era pills pictures of crestor pills lisinopril 20mg tab pharmacy inline with no percription celebrex drugs like buy myambutol inhaler canada cheap adderall online no rx cialis rx group index what is the medication paxil used for claritin tablets uses generic brand for strattera how to take soviclor what is phentermine hcl safe robaxin no precription allopurinol contraindications cautions safe buy cafergot online ranitidine tablets side effects rumalaya gel shopping prilosec medication side effects over the counter medicine that acts as vermox ketoconazole shampoo side effects us pharmacy online minipress how much is generic zofran bactrim 480 mg dawkowanie med online pharmacy nature;s organics acaitrim reviews diflucan pills pregnancy cheap zyvox pills can you buy toprol xl canadian celexa lasix drug interactions legal to buy amantadine buying quibron-t fast compazine deleviery nootropil online usa no prescription order albenza overnight how does ditropan oxybutynin work nosh aspirin for sale mentat himalaya prospect buy canada no prescription for hydrochlorothiazide brahmi online meds prednisolone recommended dosage purim coupons zithromax 500mg uk what is hoodia gordonii buy genuine xenical uk buy cheap doxycycline pills nizoral with american express order cefixime online uk purchase lotensin 10 mg buy zyvox without a script buyers of norvasc canada ordering low dose tenormin anafranil 10mg side effects purchase female cialis on line in usa buy cialis jelly lowest price van you buy oxycontin at mexican pharmacies rimonabant withdrawal fda generic yagara cost nitroglycerin order canada evecare shoppers drug mart vasotec indications use zithromax buy online ireland into oregon state university orlistat birth control online canada where to amoxil dilantin annual sales long term side effects of taking lisinopril where to innopran xl suprax generic form tadacip online coupon code long term side effects of taking singulair voltaren diclofenac sodium dosage order does alli work ship womens sex enhancement pills buy viagra professional online reviews side effects of avapro irbesartan amaryl cost how often to use advair diskus trial erection packs 3 no prescription retin a online pharmacy uk similar to inderal? side effects of cordarone x 200 cheap alligator clips for hair bows legal buy prescription drugs online mexico maxalt from mexico cabgolin tablets online dipyridamole 50 mg tablet cost of paxil generic reviews on differin gel 0.1 generic pharmacy franchise price is it safe to take viagra while drinking alcohol best price antivert buy maxalt visa can your buy cialis professional in ireland online drug shop purchase minocycline cheap generic asacol generic 2013 yagara for purchase betnovate rd ointment in pregnancy what does saas mean alli simpson difference between viagra professional and viagra super active amaryl comments can you take levitra daily ventolin express canada buy lioresal paypal canada rx online reviews powakaddy sport lithium best price
Home All Articles Solving Baseball's Financial Inequities

Like Shoot to Thrill - An AC/DC Tribute on Facebook!

An authentic tribute of AC/DC that covers the best of the Bon Scott era and the best of Brian Johnson's material

Who's Online?

We have 1455 guests online

Atom RSS

Solving Baseball's Financial Inequities PDF Print E-mail
User Rating: / 2
PoorBest 
Articles & Opinion
Written by Adam Holzman   
Tuesday, 15 April 2008 19:54

A Biz of Baseball OriginalThe following is a guest article by Adam Holzman.

Since the introduction of free agency in the mid-1970s, the salaries of Major League Baseball players have risen without limit. The abolishment of the reserve clause, which bound a player to his original team for the duration of his career (barring a trade), forced MLB owners to compete with each other in attracting premier players to play for their teams, driving up player salaries. As a result, many small market teams find it difficult to compete in a market where large market teams can offer substantially larger sums of money to free agents. While the reserve clause unfairly restricted the salaries of MLB players, free agency has threatened the competitive balance of the game. However, is a salary cap an appropriate solution to create balance in the playing field?

Certainly, small market teams are disadvantaged in the free agency market. In Moneyball: The Art of Winning an Unfair Game, author Michael Lewis explains how Doug Pappas, the late, great sabermatrician, measures the quality of a team’s front office by determining the team’s “marginal wins” (all wins above the 49th) and “marginal salary” (all payroll dollars spent above $7 million). Dividing marginal wins by marginal salary gives the team’s financial efficiency for a given year. From 2005 through 2007, the median financial efficiency for MLB teams was $2,265,414.99 per marginal win. In 2007, the minimum number of wins needed to make the playoffs in the American League in 2007 was 94, or 45 marginal wins. (see a detailed breakdown of the 2007 Marginal Wins/Marginal Payroll here on The Biz of Baseball). Therefore, a team operating at the average efficiency level would have had to commit to a marginal payroll of $101,943,674.60, or a total payroll of $108,943,674.60. Since most small market teams cannot afford to spend this much on payroll, the general managers of these teams are forced to find ways to operate at higher levels of efficiency in order to compete with large market teams. Clearly, small market teams have an inherent disadvantage in free agency.

Select Read More to see the rest of this orginal article.

However, before we declare that a salary cap is a viable measure to fix the problem of competitive balance, we must consider its feasibility and its consequences. Firstly, the hope that a salary cap will be implemented in the near future is unreasonable. Not only would large market teams be reluctant to concede their financial advantage in the free agency market, but the Major League Baseball Players’ Association (MLBPA), the most powerful union in America, would not accept any measure that would decrease the amount of money being spent on player salaries. If the commissioner’s office were to attempt to install a salary cap, the decision would almost certainly be followed by the most prolonged strike in the history of major league sports.

In addition, the question must be asked: would a salary cap actually provide us with a more entertaining league? In the NFL (which has a salary cap), team quality fluctuates drastically from year to year, and the final standings of each season are almost impossible to predict. I may be in the minority, but I find a league with a greater degree of continuity to be much more entertaining. To me, one of the most appealing aspects of being a fan of a certain team is being able to watch the front office construct a contender or a dynasty from a previously hopeless club. I worry that a strict salary cap, while fixing the problem of competitive balance, would create too much parity throughout the league.

A stronger luxury tax system is most likely the best possible available method for leveling the playing field among large market and small market teams. While large market teams will still have the option to spend higher amounts of revenue on payroll, they will be taxed a certain percentage of their total payroll. This tax revenue will then be distributed amongst teams that do not surpass a predetermined payroll threshold.

However, out of this system of revenue redistribution arises another question: how can MLB administration prevent the owners of small market teams from pocketing the redistributed funds and refusing to spend it on payroll? Contrary to conventional wisdom, an owner’s ultimate goal is not necessarily to construct a winning team, but to make a profit. Because these two goals often go hand in hand (winning teams should increase team popularity and, therefore, team revenues), the distinction is sometimes overlooked.

One must consider the incentives presented to small market team owners in producing winning teams. When a small market team competes with a large market team for a high profile free agent, the small market team would inevitably have to spend a higher percentage of its total revenue in order to win the players’ services. Even if the small market owner decides to make this financial commitment, the financial returns on his investment will be less than what they would have been for the large market team. For argument’s sake, let’s assume that whichever team signs a certain high profile free agent will receive attention from an additional 2% of the team’s metropolitan area. In other words, 2% of the area’s population who previously could’ve cared less about the team now begins to spend money on tickets, jerseys, etc, because of the attraction of the newly-signed player. For a team in New York, this would signal an increase of about 376,370 local fans (2% of 18,818,536 total people in the metropolitan area), while, in Milwaukee, the team would receive increased revenues from only 30,200 additional fans (2% of 1,509,981 total people). If I am the owner of a small market team, why would I invest a greater percentage of my revenues in a player that will produce less increased revenue for my team than he would for a large market team? Small market owners, such as those of the Florida Marlins, are often criticized for a lack of commitment to producing a winning team, but, in reality, there is a lesser amount of financial incentive for the Marlins’ ownership to construct a winner than there is for large market teams.

The solution to the problem produced by the incentive disparity is twofold. Firstly, in addition to the luxury tax threshold described above, a salary “floor” should be implemented. Teams with payrolls below this floor would not be eligible to receive the redistributed luxury tax revenues, creating an incentive for stingy owners to spend more money on payroll. Secondly, the redistributed revenue should act less like a donation and more like an interest free loan. If the owners do not spend the added funds on team payroll by the end of the season, the money will be returned to the commissioner’s office. In other words, if a team receives $8 million in redistributed funds but only spends $5 million on payroll, the owner of the team will not be allowed to retain the extra $3 million. This removes any incentives that small market owners have to restrict team payroll. As a result of this plan, small market teams should become more financially competitive in the free agency market relative to large market teams.

Most importantly, the MLBPA would not be opposed to this plan. While an NFL-style salary cap would reduce the total amount of money spent on player salaries, the luxury tax plan may, in fact, promote increased spending on payroll. Although the ability of large market teams to agree to astronomical contracts would be restricted, small market teams would simultaneously begin to commit more money to team payroll. Because more teams would have a legitimate chance to sign high priced free agents, the competition among owners to sign such free agents would increase. Such competition would increase the negotiating leverage of the players, naturally driving up player salaries. All things considered, this luxury tax system appears to fix the problem of competitive balance between large market and small market teams, preserve the ability of a team to produce a consistent contender, and satisfy the MLBPA’s demands. I doubt that a salary cap would have the same level of success. 


OTHER NEWS ACROSS THE BUSINESS OF SPORTS NETWORK


Adam Holzman is a senior at Amity Regional High School in Woodbridge, CT., and is a guest contributor to the Business of Sports Network. He will be attending Yale University in the fall.  

 
 
Banner

Poll

Should MLB Force Jeffery Loria to Sell the Marlins?