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Is Major League Baseball Headed Toward Its Own Financial Crisis?

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Is Major League Baseball Headed Toward Its Own Financial Crisis?
USA TODAY Sports
Teams like the Dodgers are thriving in MLB's financial climate.

In the so-called real world—at least the part of it concerning politics—the "fiscal cliff" is the urgent topic with which lawmakers and the reporters who cover them are obsessed. 

The fiscal cliff is all about tax increases, spending cuts, economic growth and the recession. It's the sort of stuff that makes us retreat into our baseball bubble, the happy place where we're preoccupied with where Michael Bourn and Nick Swisher might end up.

But is MLB also facing an eventual financial crisis?

Teams are spending incredible amounts of money this offseason on players that aren't superstars. Anibal Sanchez received a five-year, $80 million contract. Brandon League inked a three-year, $22.5 million deal. Kevin Youkilis signed to be an eventual part-time player for $12 million. 

Yet those players wouldn't receive that kind of money if it wasn't available. And MLB teams are swimming in money right now. The ones fortunate enough to get billion-dollar TV deals or have their own regional cable networks are taking cannonball plunges into cash. 

Fueled by $2.5 billion in TV money, the Los Angeles Angels can hand out contracts like the $240 million deal Albert Pujols received last winter. One year later, the Halos agreed to pay Josh Hamilton $125 million. 

The Los Angeles Dodgers will get even more money from their TV deal, reportedly worth $6 billion. That's allowed the team to give Zack Greinke a $147 million contract. It enabled the Dodgers to take on $260 million in player contracts from the Boston Red Sox in August. 

Not all MLB teams are getting loads of cash from their local TV contracts, of course.

Victor Decolongon/Getty Images
Local TV revenues allowed the Angels to sign Josh Hamilton.
Market size plays a large role in that, and the clubs that happen to be in smaller cities don't receive the same benefits. The Milwaukee Brewers get $12 million annually from their TV deal. The Cleveland Indians' TV contract yields $30 million per year. 

But all 30 clubs will get a major infusion of money from the new national TV contracts MLB signed with ESPN, Fox and Turner Sports this year. All three networks doubled what they had been paying for the broadcast rights for MLB games. 

According to USA Today, ESPN re-upped with MLB for $5.6 billion, or $700 million per year.

Fox agreed to annually pay $520 million to broadcast the World Series, one League Championship Series, the All-Star Game and its Saturday Major League Baseball Game of the Week telecasts. Turner Sports (which also purchased Bleacher Report this year) will pay $325 million per season for two divisional series, an LCS and a weekly Sunday telecast. 

That comes out to $1.5 billion getting pushed across the table to MLB each season. Divided equally among 30 teams, each club will receive $50 million from these national TV packages. That almost covers the entire 2012 payrolls of the Oakland Athletics and San Diego Padres.

Figures like this are why Kansas City Royals fans get furious when owner David Glass says he'll limit the team's payroll to $70 million. It's why Miami Marlins fans are outraged that Jeffrey Loria sold off his most expensive players to the Toronto Blue Jays.

Where are these owners putting that money if they're not investing it back into their baseball teams? That's probably a discussion best left for another article. 

The point is, as Lt. Aldo Raine said in Inglourious Basterds, "business is a-boomin'." (I wonder if MLB commissioner Bud Selig said just that during the owners meetings in November.) 

Business is also a-boomin' at the ballpark. Despite teams paying so much money for TV rights and the game looking better than ever on local and national broadcasts, fans are still going out to support their favorite teams. 

Steve Mitchell-USA TODAY Sports
Bud Selig has to be smiling at MLB's financial success.
MLB had its highest attendance numbers since 2008, drawing 74.8 million fans. That also represents the fifth-highest regular-season attendance figure in the sport's history. Nine teams drew three million fans this year. The Philadelphia Phillies and New York Yankees attracted 3.5 million ticket buyers at the gate. 

A major reason for the increased attendance was a greater number of teams in contention for the postseason. The extra wild-card spot in each league had something to do with that, keeping playoff hopefuls alive later into the season. But breakout successes like the Washington Nationals and Cincinnati Reds resulted in high attendance figures as well. 

Greater competitive balance throughout the major leagues is also a testament to the success of revenue sharing, as explained by MLB.com's Paul Hagen. Smaller-market teams now have more resources available to assemble stronger rosters.

Additionally, the luxury tax has kept teams from spending huge money year after year. Rather than chase marquee free agents, the Yankees are looking for bargains this offseason. Their primary concern is keeping their payroll below the $189 million luxury-tax threshold for 2014. That's given other teams a chance to sign the top players on the open market. 

There's no talk of going over a fiscal cliff in baseball. The sport is as successful as it's ever been, bringing in more revenue than ever. According to Forbes, three teams are valued at $1 billion or higher. The Yankees and Dodgers are listed among the top 10 most valuable sports franchises in the world. 

Does MLB face a financial crisis? Not so much. How about the complete opposite? All major professional sports should be this healthy and thriving. 

 

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