Since my column was posted on Baseball Prospectus on Friday, a lot of people have been asking me about the ‘Zumsteg Plan’ for revenue sharing. It was introduced by Derek Zumsteg on BP in 2002, and still seems to have a lot of fans. Here’s the overview:
Now, here’s the good stuff: figure each franchise should be making $23 per capita. Only 10 teams are below that, it’s a nice low number and if anything it’s generous to the guys we’re about to hit up for money. Multiply $23 by the number of people in the market; that’s how much they should be taking in. Now, if their markets had the optimal number of teams, they’d make 4,000,000 people * $23 = $92,000,000. The difference is the free money they’re getting for being in their cozy, lucrative markets. We take half of that, for a total of $367MM.
On its surface, this plan was created to be fair, and it’s at least possible that the resulting incentives could lead to a positive outcome.
But here’s the problem: the plan fails on one major level, before we even consider the incentive structure.
Imagine that you are buying a home in the middle of Montana. You’ve really done your homework, researched all possible factors, and determined that the value of that property will rise in the coming years. Even though housing prices are still crashing, you’ve found an area where you think real estate will appreciate, for whatever reason. And for the next several years, it does, just as you expected.
But then people in Florida get upset, since their housing market still stinks. Florida homeowners lobby Congress about this “inherent unfairness,” claiming that it makes no sense that the price of your home is rising while theirs is falling. They say that your investment is only doing well because of where it is located, and not because of “merit.” Congress agrees, and levies a fixed, permanent tax on all homeowners in your area.
In that climate, would you want to buy a home… anywhere? Me neither.
The same can be said about a sports franchise, if it’s subject to radical, arbitrary rule changes. The Zumsteg Plan drastically changes the value of just about every Major League franchise, essentially picking winners and losers among team owners that have already invested billions of dollars based on the current system’s economics.
Whether the plan would achieve its stated goals if implemented, I’m really not sure. But it could never be applied to an existing, functioning league, without sacrificing all existing franchise values. It could only work if you are starting the league from scratch, or everyone is hemorrhaging money to the point where the league is about to fail.
Baseball, obviously, is far from that point. Which is why I recommended leaving the current system as is. Baseball is not “broken,” as some seem to suggest almost by habit. In fact, I don’t know if it’s ever been healthier.
Feedback? Write a comment, or e-mail the author at shawn(AT)squawkingbaseball.com
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