In New York, the Yankees are used to being on top. The team has won more World Series than any other in baseball history, and they’ve done so by spending more money than everyone else. In fact, in the decade that just ended, the Yanks spent $1.685 billion to reach the playoffs nine times, appear in the World Series four times and win the trophy twice.
Elsewhere, teams do not enjoy widespread wealth. They play in metropolitan markets with fewer people and a lesser television audience. They aren’t world-renown brands or international symbols of success. Many of the teams scrape by economically. They take advantage of baseball’s generous revenue sharing system to help fund the product on the field while owners struggle to break even or make a profit. And then we have the Marlins.
The Florida Marlins, purchased by Jeffrey Loria with help from MLB in a three-way deal that saw the Expos land in the hands of baseball and the Red Sox in the lap of John Henry, are among baseball’s most successful teams. They have never lost a playoff series; they’ve won two World Series titles since 1993; they are the game’s top profit-maker; and they have the city of Miami building them a stadium. Yet, all is not well in the state of Florida (shocking, I know).
As we covered briefly in the spring, the Marlins pocketed over $40 million in 2008 and probably did so again in 2009. Despite average just 18,770 fans per game, second worst in the Majors, the team is shoveling in the dough, largely through revenue sharing payments. By some accounts, the Marlins have now earned more money from MLB’s revenue sharing pot than Loria paid to buy the team in 2002. Today, this profitable house of cards Loria built nearly came crashing yesterday.
The fun started in the morning with a Clark Spencer article in the Miami Herald. Spencer reported that officials with both the Commissioner’s Office and the MLB Players Association were urging the Marlins to spend more money. According to Spencer, some unconfirmed reports claim that the Marlins, with a 2008 payroll of $27 million, took in $35 million in revenue sharing payments alone. Technically, then, all of the revenue sharing money was going to the on-field product, as mandated by the Collective Bargaining Agreement, but every other revenue dollar generated by the team was pure profit.
Later in the day, the MLBPA, MLB and the Marlins announced a semi-confidential agreement that nearly mandates the Marlins to spend more money on player contracts. Michael Weiner, the new executive director of the PA, issued a statement:
“In response to our concerns that revenue sharing proceeds have not been used as required, the Marlins have assured the Union and the Commissioner’s Office that they plan to use such proceeds to increase player payroll annually as they move toward the opening of their new ballpark. Today’s agreement, which covers the period 2010 through 2012, calls for ongoing communication among the Marlins, the Commissioner’s Office and the Union as the Marlins proceed with that plan. It also permits, after consultation among all parties, adjustments in the Marlins’ plan to respond to unforeseen developments, and calls for arbitral intervention if disagreements arise. We greatly appreciate the willingness of the Commissioner’s Office and the Marlins to engage with us and ensure that all terms of the Basic Agreement are met.”
The Marlins added their two cents. “The Marlins have consistently made every effort to put the best product on the field and our record supports the fact that we have been successful in that regard,” team president David Samson said. “Throughout the discussions, the Marlins maintained that there had been no violation of the Basic Agreement at any time. While we know that the Marlins will always comply with the Basic Agreement, we were happy to work cooperatively with the Union and the Commissioner’s Office on this matter.”
Samson’s statement is very telling, and it highlights the complicated economics of the situation. On the one hand, the Florida Marlins are very adept at building a very good team for little amount of money. As TSJC said earlier tonight, the Marlins have simply decided not to spend on players after free agency and instead have built a farm system where they can get top talent on the field for cheap. They won 87 games last year and weren’t eliminated from the playoff hunt until the end of September with a $38 million payroll. They pay approximately $436,700 per win while the Yankees paid over $2 million per way last year.
On the other hand, the Marlins barely make an effort to supplement revenue sharing viz-a-viz their payroll. If Loria and Co. bit into their profits and spent another $15-$20 million on the field, Larry Beinfest could probably build a playoff team, and the Front Office would see added revenues from playoff games and a pennant race. In fact, it might not make economic sense for the team to be so stingy with its money. It’s hard though to question the Marlins’ own brand of efficient team building.
And so we arrive at the question of the hour: What does this has have to do with the Yankees? The Yankees are the game’s number one payer of revenue sharing funds. Maybe the team, if it has to dole out some dollars, doesn’t want its opponents to put a product on the field that is too superior. After all, the Yanks have suffered through a World Series defeat at the hands of a Marlins team with a $63 million payroll.
But beyond that seemingly superficial reason, the Yankees and the Red Sox and the Mets and the Dodgers and the other big spenders should fear a salary floor. If the Marlins are forced to spend, who is to say that they will spend wisely? Nothing is stopping the Marlins from fulfilling their MLBPA-mandated payroll quota by signing some utility player to an overinflated contract and sticking him on the bench. That is, after all, what the union should want. As these role players make more money, though, the salary ramifications echo up to the top of the food chain. Suddenly, top-flight players can demand even more money, and everyone suffers.
Right now, it’s far too early to know how this move will pay out, but it’s an opening salvo in a war that will erupt between the haves and have-nots when the CBA expires in December 2011. Big-market teams shouldn’t see other owners pocketing the revenue-sharing profits, but enforced spending isn’t the answer. As baseball steps nearer to this abyss, the economics of it all could get very, very interesting.