Is the Massive Gap Between Big-Market vs. Small-Market MLB Teams Leveling Out?
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Major League Baseball just isn't fair. There are rich teams on one side of the fence, and poor teams on the other. The rich teams don't always get their way, but at least they never have to worry about poor teams beating them at the spending game.
Such is life when there are big-market teams, small-market teams and no salary cap. As long as the big-market teams can spend more money than the small-market teams, they will.
And lest you get any radical ideas, not much has changed recently.
If it feels like more teams are spending more money, that part is true. We don't know what clubs' Opening Day payrolls are going to be just yet, but Cot's Baseball Contracts is keeping tabs on the money that each of MLB's teams has committed for the 2013 season. By my count, 13 clubs have over $100 million committed for 2013, and there are only two clubs with less than $50 million committed.
To put that in perspective, USA Today records show that there were only three teams with payrolls over $100 million in 2005, compared to eight clubs with payrolls under $50 million.
But don't get too carried away. The proper perspective on the situation has little to do with how much money is being spent, but who's spending it and how much.
Consider the following table, which shows how much money has been spent on payroll by all MLB teams in a few key years, and how much of it has been spent by the 10 biggest spenders, the 10 middle spenders and the 10 bottom spenders.
|Year||MLB Total||Top 10 Teams %||Middle 10 Teams %||Bottom 10 Teams %|
The figures for 2000, 2002, 2005, 2010 and 2012 come from USA Today. The 2013 figures are the payroll commitments from Cot's Baseball Contracts.
And now for some context.
The year 2000 is significant because that was the year the New York Yankees won the third of three straight World Series titles. Not surprisingly, they were also baseball's biggest spenders that year.
2002 is significant for two reasons. That was the season that Michael Lewis' bestseller Moneyball covered, and it was also the last year before MLB's luxury tax went into effect.
2005 was the first year in which the Yankees payroll eclipsed $200 million. It was still over $200 million in 2010 five years after the fact. 2012 was obviously the most recent full season, and now here we are in 2013.
The pattern you'll notice is that things really haven't changed all that much. The amount of money spent by the top 10 spending teams in the league has been consistently in the high 40s, while the middle 10 teams have sustained themselves in the low 30s and the bottom 10 teams have sustained themselves in the 20 percent range.
The glimmer of hope for the small spenders came last year when their portion of MLB's total payroll dollars crept up to 22.7 percent, but that's on the verge to go down this year for a couple reasons.
Among the most significant are what the Houston Astros and Miami Marlins are doing. The Astros have cut their costs from over $60 million down to below $15 million. Similarly, the Marlins are going from over $100 million to about $38 million.
The Astros and Marlins are both reminders that there are very few teams in the league that can spend whatever they want in order to avoid rebuilding. Most other clubs have to deal with rebuilding phases now and then, and it simply doesn't make sense to spend big during the process.
It's essentially the same question fans find themselves asking when rebuilds happen: Why waste hard-earned dollars on a lousy product?
As for the typical small-market teams, most of them are staying steady. The Oakland A's look like they're going to keep their payroll in the $55-ish million range. The Tampa Bay Rays have cut a little payroll. The Cleveland Indians and Seattle Mariners were among the more active teams during the winter, but Seattle's payroll has actually decreased while Cleveland's has increased only slightly. The Pittsburgh Pirates have also made modest additions to their payroll.
And so on and so forth. There's one thing small-market teams absolutely cannot change, and that's the whole "small-market" thing. They're always going to be dealing with a limited amount of revenue, and that means they're always going to have to be very measured with their payrolls.
Big-market teams don't have to worry about such restrictions. Teams like the Yankees (who will once again have a payroll over $200 million in 2013), Boston Red Sox and Philadelphia Phillies have been spending big for years, and a couple notable teams have decided to make like them in recent months.
The newly rich Los Angeles Dodgers have upped their payroll to over $200 million. The Toronto Blue Jays, decided to assert themselves financially this winter by upping their payroll from well below $100 million to over $110 million.
This was bound to happen. The Dodgers play in one of the country's largest media markets and they just inked a local TV deal worth $7 billion. Toronto isn't New York or Los Angeles, but it's a big market all the same and the Blue Jays' deal with Rogers SportsNet pays them a respectable $35 million per year.
The Dodgers and Blue Jays are largely responsible for the fact that the 10 biggest spenders in the league this year are on track to be responsible for more than 50 percent of MLB's total payroll. And as long as teams like them are spending money like they can, it's going to be very hard for the bottom 10 spenders to close the gap.
Hard, yes...but impossible?
Perhaps not. The league has a pair of national TV deals set to kick in starting in 2014, and those will be worth a total of $50 million for each of MLB's 30 teams. That money won't necessarily give the poor teams a leg up on the rich since all will be getting the money, but it certainly won't hurt them in the spending game.
In addition, the Yankees' desire to get under and stay under the $189 million luxury tax threshold will help level things out between the haves and have-nots at least a little bit. There could come a day when the Dodgers also decide that's a good idea, in which case the luxury tax threshold will be serving as a salary cap of sorts.
Things will be leveled out even further once the Astros and the Marlins start spending again. The Astros will be able to afford a payroll over $100 million once they start fielding competitive teams again, and the Marlins could field a payroll that large again if they field competitive teams capable of drawing fans to their new ballpark.
Would a salary cap make MLB's product better?
As for those key small-market teams, the A's and Rays will be able to catch up to the big-market clubs if they find themselves in new stadiums a few years down the line. The Indians already have a new local TV deal worth $40 million a year, and the Mariners will be able to opt out of their deal with ROOT Sports following the 2015 season should a more lucrative deal present itself. They could very well do so as part of an effort to help pay Felix Hernandez's record extension.
It's hard to envision a scenario that involves the bottom 10 spenders in the league being responsible for something like 30 percent of the total payroll dollars, but going from 20 to 25 percent isn't too much of a stretch. The trick would be for key big-spenders like the Yankees and Dodgers to come back to the rest of the pack a little bit, and for the small spenders to actually use the national TV money and whatever other sources of revenue they can get their hands on.
Total balance is something that will be a foreign concept on MLB's financial landscape as long as there's no salary cap and each team has a different revenue stream.
Simply achieving more balance is the best the league can hope for, and that's by no means a fool's hope.
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