Baseball Salary Cap?

Joel KochSenior Analyst IJanuary 15, 2009

The New York Yankees just spent $423.5 million on three players. Does that mean there needs to be a salary cap in baseball?


Some owners of small-market clubs have been pushing a salary cap since Mark Teixeira signed with the Yankees for $180 million over eight years. Their complaint is that if the Yankees and other teams are willing to spend outrageous amounts of money, the small-market clubs cannot compete.

Owners of small-market clubs, meet the Tampa Bay Rays.

The Rays went to the World Series last year with a payroll under $50 million. Ever heard of the Colorado Rockies? They went to the World Series in 2007 with a payroll under $60 million. Maybe the Florida Marlins and their $45 million payroll in 2003 (when they last won a World Series) can be part of a compelling argument?

There is no reason for a salary cap in baseball. Here is the bulk of every argument against a salary cap: Minor Leagues.

Major League Baseball has a Minor League system, which really negates any need for a salary cap. The National Football League and National Basketball Association don't have a Minor League system, where they can harness the talent of their younger stars before exposing them to the real pro's.

In Major League Baseball, there is a choice. You can either spend a lot of money on overpriced free agents, or develop your own talent and keep them for six years on a cheaper salary. That can make a major difference in pay.

Why is this even a big deal anyway? The Yankees have spent large amounts of money for years. What has that got them so far? They haven't won a championship since 2000, and haven't been to a World Series since 2003. Heck, they haven't even won in the first round of the playoffs since 2004.

The Yankees can spend all the money they want, it won't make them better. Plus, they have the money and they can spend it however they want.

The Steinbrenner family has a lot of money. How much? Well, George's shipping business brings in over $1 billion a year. Forbes Magazine has valued the Yankees at $1.3 billion, and now have a $1.2 billion stadium opening in less than three months. In other words, the Yankees aren't hurting for money.

Besides, the Yankees do things the right way. I'm not saying every team should spend hundreds of millions of dollars every offseason, but I am saying that owners need to get over a "small market."

Let's look at something.

Lets assume that every team brings in 3 million people a season. If the average ticket is $20, that right there is $60 million a season. If 50 percent of that 3 million buys $5 worth of concessions, that's another $7.5 million. If 30 percent of the 3 million people spend $10 on merchandise, that's another $9 million in revenue.

If you're keeping up, that's $76.5 million in revenues. Then, you also have sponsorships from companies, plus television and radio contracts that bring in money. Let us not forget that naming rights on stadiums bring in a lot of revenue. So, let's say that all of that brings in $23.5 million in revenue. That's $100 million in revenue per season.

On top of that $100 million, there are other factors (I'm just not going to list them all).

Now, why is it that some teams keep their payrolls low, while others spend? Let's think of that.

First and foremost, most teams don't bring in 3 million people a season, which cuts the revenue of the team down. So, that can affect the payrolls of smaller market teams.

Then, I'm reminded of this saying, maybe you have heard of it before? It goes something like this, "If you build it, they will come."

If you spend money on a top tier free agent, people will come to see them. If you build a winner, people will come to see the team (the 2008 Rays are an example of this). And when those people come to see the team, more revenue will come in. With more revenue coming in, you can spend more money.

So, why don't more teams do what the Yankees do (which is, to say, have a payroll in the $100 million range)? Owners like the bottom line, and that bottom line is the money that is coming back into their pockets.

Those owners keep their team's payroll low so they keep more of the revenue (and the luxury tax money that baseball sends their way).

That isn't how you should run a team.

Sorry, this article just did a complete 180. It went from a salary cap to owners and how cheap they are.

Anyway, a salary cap would be a horrible idea for baseball, and it will never fly. Owners want a salary cap because they are tired of other teams spending a lot of money on players, which makes their fans ask why the payroll for their favorite team is so low, which in turn, makes owners look bad.

Another problem with a salary cap is: What would you make it? Would they make it $120 million? Well, a few teams would have to release players (which the union would void; we'll come back to aspect) or trade high-priced veterans for one or two minor league players because they are forced to deal them, not because they want to.

As I just said, the union would have a fit over a salary cap. With a salary cap in baseball, players would be unable to sign with certain teams because those teams would be at the limit. So, those players would have to settle for considerably less money with a losing team, or stay without a job.

Salary caps are a good idea...In sports without Minor League systems. Those sports can't replace aging, high-priced veterans with cheap, younger players whenever they wish. They have to wait for a draft, and even then stay under a certain numbers of players, or keep those drafted players on their roster and never use them (like in the NFL).

Baseball is fine without a salary cap. There is no need. If owners feel like there should be one, then those owners have a problem with spending money instead of making it and should get out of the game. You buy a team to have it win, not make you more money.

No salary cap. Bud Selig, represent the best interest of real owners and say no to salary cap.