Friday, January 16, 2009

It's about the FLOOR, stupid

Yet more discussion (read: proof) why a salary cap in baseball won't work or fix things. See, it's not just me:

Using 2008 as an example, the thirty teams took in about $6 billion (not including MLB Advanced Media revenue), for an average of $200 million per team. Forty-five percent of that (the players' share) is $90 million, which we'll use as the midpoint between our floor and cap. If we want to make the floor 75 percent of the cap (a low-end figure, relative to the other leagues), we can use $77 million and $103 million, respectively.

With a $103 million cap, nine teams would have been affected last year, and a total of about $286 million would have had to be skimmed off the top. Since total salaries have to remain at existing levels, the bottom twenty-one teams would have had to take on this burden, which had previously been placed on the
Yankees, Red Sox, et al. On the other end, fourteen teams would have been under the payroll floor, by a total of $251 million. Even discounting the Marlins' $22 million payroll, the other thirteen teams would have had to spend an average of $15 million more just to meet the minimum. Some of those teams might be able to afford it; most wouldn't.

Imagine being Frank Coonelly in this situation. Coonelly, the
Pirates' team President, has publicly supported a cap. Had our fictional cap/floor arrangement been instituted last year, the Pirates would have needed to increase their Opening Day payroll by $28 million. Not only would the team have taken a big loss, but Neal Huntington's long-term strategy would have been sabotaged, since the team would have had to sign a number of veterans just to meet the minimum payroll.

Now fast forward to 2009. Let's say the Pirates' sales staff runs into major headwinds, with the team struggling and the economy sinking. The team's top line takes a hit, falling $10 million from 2008. The
Mets and Yankees, meanwhile, open their new ballparks, and each team increases its local revenue by $50 million. If the twenty-seven other teams are flat, total industry revenues rise by $90 million (not including any appreciation in national media revenue). Forty-five percent of that, of course, goes to the players. So even as the Pirates' purchasing power decreases, the payroll floor actually rises.
Yay, salary cap!


tHeMARksMiTh said...

You keep this up, and Mark Attanasio is going to put a hit out on you.

tHeMARksMiTh said...

That's the type of thing that happens in New York right?

Pete Toms said...

Agreed, I'm not in favor of salary caps either.

A minor quibble, I think you and Shawn ( whose blog is fantastic ) are wrong about the current percentage of revenues being doled out to players. I read that it is about 52% and if you include player development costs it climbs into the high 50's ( commensurate with the other stick and ball leagues ).

And caps aren't about parity, they are about depressing salaries.