A while back, I wrote about why salary caps and floors can be so damaging to small market teams. The inspiration was a post Mark Cuban wrote on the subject, which detailed why the NFL opted out of its CBA with the players.
This is all very counterintuitive, given the conventional wisdom in the media, and the industry for that matter. If the top teams can only spend so much on payroll, the bottom teams will be much more apt to compete.
Here’s the problem: if the Yankees increase local revenues by $75 million next year in their new stadium, and the Mets increase local revenues by $50 million in theirs, the total pool considered for a hypothetical salary cap woud have increased by $125. So even if the Pirates and Royals get slammed by the economy, they would still be forced to increase payroll (either through a heightened salary floor, or by the players being guaranteed a certain percentage of revenues, or both).
That’s a very bad situation to be in, and a free market for players (as MLB currently has, for all intents and purposes) will better reflect the economic climate.
The question is, how will the economy affect revenue sharing? In my piece at Baseball Analysts this week, I wrote the following:
Imagine trying to set a budget for next year, when much of your income relies on the performance of others. For a big market team, this means possibly writing a larger check, even in the face of declining revenues. For a small market team, it means having no control over a huge chunk of earnings. Of all the unknowns going into 2009, this may be the biggest one.
This isn’t nearly as dangerous as a cap/floor, but it still leaves teams as slaves to their counterparts. I haven’t heard anyone else talking about this, but I wouldn’t be surprised if it becomes a bigger issue come next fall.
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