Is the MLB Unfair?

Is America’s pastime unfair?  Are some teams at a disadvantage when compared to other teams?  Over the years, the MLB has become the most unfair major professional sport in America, and is clearly more favorable to certain teams.  There are many causes to these advantages, including the payroll flexibility of teams, the new collective bargaining agreement that limits teams’ abilities to add amateur talent, and the separations of the markets and revenues between teams .  Unlike the NHL or NFL, the MLB does not have a salary cap, so teams are basically free to spend whatever they want to acquire talent, unless it’s with amatuer talent.  This problem could easily be fixed in the near future, but action is needed from the the MLB itself, especially commissioner Bud Selig.  But if the league remains as it is, the MLB will continue to favor teams that have the ability to spend, and leave the rest of the teams trying to catch up.

In 2013, MLB payrolls will total over $3 billion.  That’s an average of over $100 million for the 30 teams in the league.  Fourteen teams are over that $100 million mark, while nine teams are under $81 million.  The New York Yankees, with a payroll of $228,995,945, have the highest payroll in the major leagues.  In contrast, the Houston Astros have the lowest payroll at $24,328,538.  That’s a separation of $204,667,407, which could fund over eight Astros teams.  How can a team like the Astros compete against a team that can pay over $200 million more to players that have proven they can perform?  The top five payrolls in the majors are the Yankees at approximately $229.0 million, the Dodgers at $216.3 million, the Phillies at $159.6 million, the Red Sox at $159.0 million, and the Tigers at $149.0 million.  The separation between the top five teams and the bottom five is also staggering, with the lowest payrolls being the Astros at $24.3 million, the Marlins at $39.4 million, the Rays at $57.0 million, the Pirates at $66.3 million, and the A’s at $68.6 million.  Over the past fifteen years, these separations have been very evident in the World Series matchups.  Out of the thirty different teams that have made the World Series in the past fifteen years, twenty six of these teams were in the top fifteen payrolls.  Seventeen of those 26 teams were in the top ten payrolls.  For the fifteen teams that won the World Series, all but one of them were in the top fifteen payrolls, with nine of those teams being in the top ten.  Basically, teams that are in the bottom half of the league in payroll have virtually no chance of winning the World Series title, or even competing for it.  Players take notice of this, and pounce on the opportunity to make more money, along with a better chance to win.  As a free agent, teams will be much more attractive when they can pay you $20 million a year and give you a great chance at the playoffs this year when opposed to the team that would have trouble offering you $12 million a year, with an outside shot of making the playoffs in a few years.  This makes it very hard for smaller market teams to bring in talent to contend, and with the limitations of the new Collective Bargaining Agreement, talent acquisition is very difficult for teams that can’t spend the big bucks.

Major League teams can spend any amount of money they want for players, as long as they have the resources to do so, and that has been very evident in the last few years.  In 2008, the New York Yankees signed Alex Rodriguez to a ten year, $275 Million extension.  In 2012, thirteen different players were making over $20 million.  It’s important to note that the new collective bargaining agreement (CBA) came into effect during the 2012 season.  This new CBA limits teams’ spending ability when they are dealing with amateur talent, whether that be in the draft or in the international player market.  With amateur talent, there are now pools in which teams are slotted a specific amount of money that they can spend on a draft pick or international free agent.  For example, in the 2012 draft the Houston Astros had a slot amount of $7.2 Million for the first pick, and the New York Yankees had a $1.6 Million slot for the 30th overall selection.  If teams exceed these slots, they are harshly punished with taxes and/or loss of a draft pick.  If a team exceeds its slot by 5%, it is taxed 75% on the overage.  When a team spends 5-10% over its slot amount, it is taxed 75% and loses a first round draft pick, and when they spend 10-15% over slot, they are taxed 100% and lose a first and second round pick.  The most severe penalty occurs for anything over 15%, and in this case teams are taxed 100% and lose their next two first round picks.  A major example of how the new CBA will limit teams’ ability to acquire amateur talent can be seen with the Pittsburgh Pirates situation in the 2012 draft.  Mark Appel, arguably the best talent in the draft, fell to the Pirates, who had the eighth overall selection because of his signing bonus demands.  The Pirates had a slot of $2.9 Million for that pick, which is much less than the $7.2 Million slot Appel could’ve received if he went number one overall.  The Pirates offered Appel $3.8 Million, the most they could without losing a future first round pick, but he didn’t sign in order to receive more money in the next draft.  This is just the first example of the new CBA where a team cannot afford to pay the top available talent in the draft without being penalized.  The Los Angeles Angels can spend $240 Million on Albert Pujols without any penalties, but the Pirates can’t spend over $3.8 without being taxed and losing a future first round draft pick.  The MLB claimed they tried to even the playing field with the new spending limits in the draft, but teams have never been farther apart.  The markets of teams only furthers this separation.  

There are thirty different teams in Major League Baseball, meaning there are thirty different markets.  A few teams have the same city that they claim as their homes, including the Yankees and Mets in New York, the Cubs and White Sox in Chicago, and the Dodgers and Angels in Los Angeles.  Not surprisingly, those are the three biggest cities in the nation population wise.  The Yankees, Mets, Dodgers, and Angels are the only teams with media markets over ten million people, with the Los Angeles teams over fifteen million people and the New York teams over twenty million.  Ten teams have markets with five to ten million people, six teams have markets between three to five million, and the remaining ten teams have less than three million in their media markets.  Out of the last fifteen World Series winners, eleven have been in the top fifteen markets in the league, with eight of those being in the top ten.  Only two of the World Series winners came while in the bottom ten markets.  Both of those winning teams were the St. Louis Cardinals, meaning only one team in the bottom ten markets in the past fifteen years has won a World Series title.  Having a larger market gives MLB teams the opportunity for more revenue, which they can use to add talented and expensive players to their payrolls.  The New York Yankees, with the largest market in the majors, had a revenue of $471 Million in 2012, $135 Million more than the Boston Red Sox, the second largest revenue team, and $304 Million more than the Tampa Bay Rays, the team with the lowest payroll.  A large portion of these revenues comes from the teams’ TV deals, and no deal will have more of an effect or give a larger advantage than that of the Los Angeles Dodgers.  This deal with Time Warner Cable, which was made official in early 2013, will give the Dodgers between $6-7 Billion over the next twenty five years.  That means the Dodgers could earn $280 Million per year over that time, and when added to the revenue that comes from ticket sales, stadium advertisements, team apparel sales, and many other sources that generate income, the Dodgers basically have unlimited resources to go and sign players or take on a player’s salary in a trade.  Many teams don’t have this luxury of a major TV deal, as at least seven teams receive $20 Million a year or less from their local TV deals.  Lower revenue leads to lower resources to obtain quality major league players, and with the large separations in team revenues and proven success of teams who can spend more money, smaller market teams are left looking for ways to stay in competition.  

There is a growing disparity between teams in the MLB, and the league has to act on this situation quickly before teams begin to take advantage of the differences on a larger scale than they already have.  The league has tried to address this problem recently in the new CBA by evening each team’s chance of acquiring amateur talent, but that has only handicapped the main manner in which small market teams can truly add top-end talent.  A simple solution to the problem that the MLB faces can be found in every other major sports league: A salary cap.  A salary cap would put a limit on what teams can spend, while giving smaller market teams a chance at signing quality talent for cheaper prices.  Teams like the Yankees or Dodgers wouldn’t be able to give multiple players over $20 million a year, so these players would have to lower their price demands, which would allow teams with lesser revenues to jump into the bidding for their services.  It would make sense to have a cap around $130-150 Million, as twenty three teams have payrolls below $130 Million, and four teams have payrolls that exceed $150 million.  Not only will this salary cap give more teams the ability to add talent through free agency and trades, it will avoid player salary demands from increasing more than they already have.  The MLB average player salary in 2012 was at a record $3,440,000, up from the $1,441,406 average in 1998, which is a 139% increase.  Also, within this solution the league must lessen the limitations on draft spending.  The pools would remain, as it is logical to assume that teams with higher draft picks will spend more money to sign their players.  But, the taxes on the overages must be lessened so teams aren’t forced to stray away from drafting the best available talent for economic purposes, as we saw with the Mark Appel situation in the 2012 draft.  The team with the first pick, and therefore the highest bonus pools, should be allotted 10% of the league’s salary cap, which would be somewhere between $13-15 Million.  Adding a salary cap and lessening draft limitations will not eliminate the advantages larger market teams have over smaller market teams, as teams with larger revenues will still be able to allocate their resources in other ways, including their scouting and player development departments.  But, the salary cap and lesser draft limitations will allow more teams to have the opportunity to add and keep talent moving into the future.

As it stands today, Major League Baseball is not a fair league.  Teams that are in larger markets use their resources to their advantage by adding expensive players that have proven success, and this has led these teams to win the majority of the World Series titles over the past fifteen years.  Large payrolls, the collective bargaining agreement that limits teams’ ability to add amateur talent, and the separation of markets and revenues between teams have led certain teams to gain an advantage over their competitors.  These advantages can be limited, however, by simply adding a salary cap and lessing the draft spending limitations.  These actions won’t eliminate the problems within the league, but they will give small market teams a chance to add the talent that they couldn’t add in the past.  The economic advantages that large market teams are able to enjoy will never go away, but they can be limited, and that will open a world of opportunities to teams that haven’t had the resources to stay in competition.  

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