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Are Some MLB Teams Profiting While Living on Welfare? PDF Print E-mail
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Written by Maury Brown   
Thursday, 03 December 2009 16:43
Coonelly
Frank Coonelly defends how the Pirates
spend their revenue-sharing funds

Yesterday, the torch was officially passed at the MLB Players Association as the PA’s Executive Committee unanimously voted Michael Weiner as the new executive director of the MLBPA, a position Donald Fehr had held for 26 years. Fielding questions from the media, Weiner was immediately hit with questions regarding MLB’s revenue-sharing policy.

"We're concerned when we have clubs that are not using the receipts for the purpose to which they were intended under our contract. It's the players' job to enforce that provision,” said Weiner Mike & Mike in the Morning. He added that the union would need to consider adjusting the provisions in the CBA "whether or not we need to add some more specific guidelines" as it pertained to the use of revenue-sharing funds.

Questions have been circulating for years as to how some clubs that take in revenue-sharing are using their funds. Whether it has been the Marlins, the Royals, or the Pirates, the notion that clubs are taking in more in revenue-sharing than they are spending on MLB player payroll, while showing a profit, raises eyebrows, not only from the MLBPA, but those that are doling out the funds, such as the Yankees and Red Sox.

In 2008, the Pittsburgh-Tribune reported:

The Pittsburgh Pirates turned a profit in 2007 -- the franchise's fourth consecutive year in the black -- and will do so again this year, regardless of how many games they win or lose.

Team President Frank Coonelly said the profit will be used to pay down the franchise's debt, which will help field a better team in the future. The Pirates have endured 15 consecutive losing seasons.

According to Forbes Magazine's annual team valuations, the Pirates' 2007 operating income was $17.6 million. That ranks 18th among the 30 major league clubs. Forbes estimated the team's value at $292 million, putting it at No. 28 among the 30 major league clubs.

"Their numbers are never right," Coonelly said Thursday. "But, we are profitable."

Coonelly add that the Pirates' actual profit was much lower,” taking into account annual interest payments of "over $5 million, maybe approaching $7 million" on the franchise's $100 million-plus in debts.”

That was then, this is now, and the story remains the same.

Coonelly yesterday defended the practices of the Pirates.

"The Pirates have used all of our revenue-sharing receipts and all of our local revenue in an effort to improve our performance on the field," Coonelly said.

When asked about the Pirates and other clubs that are posting profits while taking in revenue-sharing with low player payroll levels, Weiner, once again, voiced his concerns.

"The basic agreement requires clubs to use revenue sharing to field a competitive team," Weiner said. "We've had discussions with the commissioner's office (about) various clubs for many years under the revenue-sharing plan. I would imagine that again will be an issue in 2011."

The CBA is vague in its reference to how revenue-sharing dollars are to be used. It simply reads that the funds should be used “in an effort to improve its performance on the field.“ That means that many clubs choose to pour the funds into player development, as opposed to the Major League roster.

Or, are some clubs pocketing the funds?

If the premise is that clubs can’t compete with their large revenue-making partners unless they are subsidized, then there’s an argument to be made there. But, those same clubs should not be baseball’s most profitable.

Coonelly argues that Forbes’ figures are off, but they are a very good barometer. If we look at the Forbes figures – specifically Operating Income, a measure of profitability – you’ll find that the clubs with the lowest player payrolls, and receive the lion’s share of revenue-sharing, are some the league’s most profitable.

Based on data from Forbes from 2002 to the most recent figures released in 2009, clubs that receive the most in revenue-sharing have seen profits in most, if not all years:

Forbes Valuations (By Operating Income, in Millions)
Club 2009 2008 2007 2006 2005 2004 2003 2002 TOTAL
Rays 29.4 29.7 20.2 20.3 27.2 7.5 1.4 -6.1 129.6
Pirates 15.9 17.6 25.3 21.9 12.2 -0.3 -1.6 9.5 100.5
A's 26.2 17.6 14.5 16 5.9 11.2 1.4 6.8 99.6
Marlins 43.7 35.6 43.3 -11.9 3 -11.6 -14 1.4 89.5
Royals 9 7.4 8.4 20.8 3 6.6 -11.2 2.2 46.2

Is the revenue-sharing system in MLB nothing more than welfare? The MLBPA has the right to challenge the financials around the system, but to date, has not. The idea that some clubs are paying down stadium debt, such as the Pirates have admitted to, seems in violation of the agreement. At the very least, some clubs are not adhering to the spirit of the provision.

Some clubs, such as the A’s and Rays, have legitimate needs; their stadium is substandard. Soon, the Marlins will no longer have the crutch to lean on. The Royals have a newly renovated stadium, so they can’t use that excuse, either. The Pirates haven’t had that excuse since 2001. Based on the Forbes figures, the Pirates seem to be profiting quite. The only year that Forbes shows them posting a loss was 2002.


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Maury BrownMaury Brown is the Founder and President of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey. He is available for hire or freelance. Brown's full bio is here. He looks forward to your comments via email and can be contacted through the Business of Sports Network.

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