The Rime of the Ancient Sports Leagues

Money money everywhere and all the leagues did shrink
Money money everywhere and not a drop to drink

Ah, few things take me back quite like the poem based on Samuel Taylor Coleridge’s “Rime of the Ancient Mariner”… anyway, enough nostalgia. At some point, the NFL Players Association and the NFL owners will sign a new Collective Bargaining Agreement. It might be sooner and it might be later (my better half is hoping for later… she tolerates me watching American Football of any kind). Between “The Decision” of LeBron James and “The Manipulation” of Carmelo Anthony, the hard line taken by the NFL owners, and the sounding of Hank Steinbrenner, I think that there is a larger issue that is troubling all of the major professional leagues in North America. In the interest of full disclosure, I did feel the need to say North America instead of the United States because of the 8 teams (out of 122) that reside north of the border.

So what is the larger issue? That millionaires and billionaires can’t agree over who gets the money? I hate to be so blunt about it but if you are under the impression that this problem is a new one to the economic model of this country, you’ve obviously been living under a rock for the past few decades. What is the solution? Nationalize the whole industry? While that might be the answer for some problems, it is not the answer for this one (although it would probably help reduce the deficit significantly).

What I’d like to do is examine each sport and see where they stand with regards to the specific issues which are plaguing them publicly. I don’t delve into the inner workings of professional sporting leagues and it’s entirely possible that the biggest problem facing each league isn’t the one I mention. However, these are the issues that are getting the most play in the press and it’s there that I will focus this post.

Before we get into it, I have to apologize to all of you hockey fans out there. I don’t understand hockey and the only time in my life that I’ve ever watched a hockey game from start to finish was the 2010 gold medal game. Having said that, I don’t know what is plaguing the league other than the fact that it’s getting closer and closer to being replaced as a member of the “Big 4” club by NASCAR. I don’t follow hockey and I still say that would be a sad day.


NBA

Last summer we were bombarded by “The Decision”. Starting last year and going almost all the way up to the trade deadline this year we were treated to “The Manipulation”. The big picture issue is whether or not superstars should team up and form these trios in an attempt to win with three stars and ten role players. Many say that it started with Ray Allen and Kevin Garnett being traded to the Celtics to team up with Paul Pierce and has continued today with the Miami Heat and the New York Knicks (and you could probably throw the Lakers in there… especially if the rumors are true and Dwight Howard ends up there soon). The question is, is this good for the league?

I’ve heard and read about many former players that are condemning these actions, saying that they would rather beat the best than play with the best and I completely understand this mentality. However, how many titles did LeBron James win in Cleveland as the lone superstar? How about Dwayne Wade in Miami? How about Kobe Bryant in LA?

In this day and age, the titles follow the superstars and while that last example may not quite hold water (Kobe) that would depend entirely on your definition of superstar. While I personally would not put Pau Gasol and Lamar Odom into that category, I also don’t think they’re that far off.

Going back further, how many titles did David Robinson win as the dominant inside force he was before Tim Duncan came along? How many did Paul Pierce, Ray Allen, and Kevin Garnett combine for before they teamed up?

As I’m sure you can guess the answer to all those questions is zero. One player can’t take a team all the way in the NBA today and I would argue that the same has been true throughout the history of the NBA. In 1997, a panel consisting of members of the media, former players and coaches, and former and current front office members selected the greatest 50 players from the first fifty years of NBA history. By the logic exhibited by several former players, you would never want to team up with those guys; you would want to beat those guys. Of those 50, only 4 never played with another member of the exclusive club.

George Mikan
Bob Petit
Isaiah Thomas
Patrick Ewing

Another noteworthy factoid from that list; only once has a team has had five players that ended up being named one of the NBA’s 50 greatest players ever playing on the same team. They were:

1973-74 New York Knicks
Willis Reed
Walt Frazier
Dave DeBusschere
Jerry Lucas
Earl Monroe

Considering that Mikan and Petit played in an era where there were so few good players, much less stars, I think we can safely exclude their combined 6 championships from this discussion. Thomas and Ewing combined to play 30 seasons in the NBA and won two titles (both by Thomas). At that time the Lakers and Celtics dynasties of the ‘80’s were winding down and the Bulls weren’t quite ready for the spotlight yet, leaving a perfect void for a very good and tough team led by one great player.

I fully understand that very few of the players on that list manipulated their way from one team to another or staged an hour long primetime special to say nine words but the fact remains that championship teams have always formed around the combination of great players with role players filling in the gaps.

So what is the harm with great young players wanting to team up in an attempt to win a championship? If they don’t care about winning and only want to set records and make money, they can easily go to a team like Cleveland or the Clippers, make $20 million a season and get the lion’s share of the ball. Instead, you have three young superstars in James, Wade, and Bosh who are all willing to take a slightly diminished role in order to play with one another. That, in this day and age of prima donnas, isn’t such a bad trait.

The problem I have is not that they wanted to team up, it’s how they did it; through the media. Carmelo Anthony very publicly wanted out and that drastically reduced Denver’s leverage in the trade negotiations as teams knew they were desperate to get something back for him. On the other hand, LeBron James wrangled a three ring circus and then left the Cavaliers with nothing.

Now you have the formation of an aristocratic class of teams in the NBA, the Heat, Celtics, Knicks, Lakers, and Spurs with the Bulls and Mavericks close behind, while the rest of the league is left high and dry.

Is there a solution? Yes.
Will the owners like it? No.
Why? The almighty dollar.


THE NFL

Whenever it comes to labor renegotiations in professional sports, you have to maintain some semblance of perspective. According to figures researched by Plunkett Research, LTD (a firm that looks into industry trends, statistics, and analysis of top companies) the NFL produced $7.8 billion in total revenue last year. The numbers vary slightly from year to year but the exact numbers aren’t really necessary; ballpark figures will suffice. Under the current collective bargaining agreement (hereafter abbreviated CBA) the owners take $1 billion off the top of that number to distribute amongst themselves. After that, it goes into a pool that is shared by the owners and players. Under the current agreement (if my memory serves me this today) the players cut of that is 60%. If we assume that revenue figure is accurate, that comes out to $4.08 billion that goes to the players, both past and present.

However, the owners are shrewd businessmen and like more zeroes in their bank accounts. They want to take another billion off the top before the revenue sharing kicks in. With these figures, the owners’ share of the pie would go from $3.72 billion to $4.32 billion. If we were to simply spread the remainder of the pie amongst the roughly 1,600 NFL players and we were to ignore things like pension plans, then the average salary in the NFL would drop 14.7% from $2.55 million to $2.18 million.

Again, we have a situation where millionaires are arguing with billionaires over a very large, lucrative pie. I’ll admit that there are certain issues that the owners have (such as a rookie salary wage) that make a lot of sense. However, trimming another 13% of their leagues revenues out for themselves is nothing short of ridiculous. The problem is it’s entirely possible that they’ll get it.


MLB

Is the league’s business model straying towards socialism? Perhaps, a little but I don’t have any problem with that. What I do have a problem with is teams like the Yankees and Red Sox paying vast amounts of money that eventually ends up in the hands of teams that simply deposit it in their bank accounts. The entire point of the revenue sharing agreement was for teams who didn’t play in a market that could justify a $100 million payroll (Pittsburgh, Kansas City, Tampa Bay) to have a $100 million payroll and compete directly with the likes of the Yankees and Red Sox.

First of all, I’m not suggesting that every team should be spending $100 million on its 25 man roster. However, it’s difficult to call the Yankees and Red Sox the problem when the Pirates have spent less money in the last five years (while posting a 321-488 record) than the Yankees did to go 95-67 this past year.

What is the solution? A salary cap? The problem with a cap of any kind is the players don’t want anything to do with it and the player’s union is the strongest of any of the Big 4 sports (in my opinion). What’s another solution?

What are the solutions to these problems?


ARE THERE SOLUTIONS?

All of them center on the almighty dollar. Everyone wants more money and they want to sacrifice less and less to the guys on the other side of the bargaining table. On top of that, none of the parties that are actually doing the bargaining (the player’s rep and the commissioner) want to appear weak by giving too much or else they’ll be out of a job very quickly and you must remember that these are not minimum wage jobs.

All of these problems are easy to solve one of two ways (though really it just ends up as one big problem) as long as you don’t include the players in the decision making process… or the owners for that matter.

In the NBA, eliminate the salary structure that is now in place. How much help will that provide with regards to keeping players in smaller markets? Quite a bit. The difference right now between a max contract in Miami and a max contract in Cleveland is one additional year. The Average Annual Salary (AAS from now on) remains roughly the same. Now imagine that the Cavaliers were able to offer a contract worth an additional $10 million per season… or $20 million. Would that be enough to offset the desire to go to more tourist friendly cities? Absolutely, but here comes the problem… payrolls explode and now, the Cavaliers can’t afford that kind of payroll and neither can the Clippers or the Kings or the Nets. Finally, after much consternation and realizing that all the great players end up in big markets anyway, the NBA eliminates four teams.

In the NFL, the player’s union records some landmark deals in order to secure more of the revenue pie for active players but also much more for retired players and the NFL owners are exposed as the 19th century businessmen that many of them are, putting profits ahead of the well-being of the workers. Salaries continue to escalate to the point that some teams can keep the high priced players and some can’t. In a stunning move by what has been for years the most popular sport in America, Commissioner Roger Goodell announces that he will be contracting four teams.

In Major League Baseball, Hank Steinbrenner wins his argument and in an amazing turn of events, the owners are no longer forced to pay a luxury tax on their high payrolls or share revenues with the less fortunate teams. After a Cinderella run to the ALCS, the Kansas City Royals (who have a nice trim $15 million payroll) lose to the monstrosity that is the Yankees (with their $400 million payroll) and the Yankees go on to win yet another World Series. Admitting that eliminating the luxury tax was a terrible idea, the commissioner of baseball decides to contract four teams in an attempt to level the playing field.

There is one other solution other than contraction and that would be moving the teams to markets that will actually support a professional franchise. However, in this day and age of being able to choose any one of dozens of leisure activities, how many franchises can these major markets support? New York currently has seven teams and they all seem to prosper. Los Angeles has five with a glaring lack of an NFL team and again, they all seem to be well supported. Can other cities support that many teams?

Like I said, the solutions are all tied together but the roots of them all lead back to the same place.

The almighty dollar.

Salary Structure in Major League Baseball

In light of the fact that we might be within a year of having the upper end of the salary scale in Major League Baseball redefined, I wanted to throw out two statements. The point of these statements is to get you in the right frame of mind for the numbers that I’m going to be throwing at you.

The salary structure in Major League Baseball is absurdly out of hand.

A salary cap would go a long ways to helping fix MLB’s salary problem.

THE NUMBERS

In 2001, Major League Baseball teams spent $1.66 billion on payroll and in 2009 the teams spent $2.23 billion, an increase of 34.2%. Considering that this represents an increase in average team payroll from $55.4 million up to $74.4 million, it doesn’t really sound like an extraordinary increase. However, when its compared with the Consumer Price Index, one of the most commonly used tools to measure inflation, that rate of payroll increase is well over the increase in the CPI (20.6%).

Does this mean that MLB salaries are getting too high? Not necessarily. Over the same time period, NFL payrolls have increased by 55.7% while NBA payrolls have gone up 69.8%. The difference between Major League Baseball and those other two leagues is that they have a salary cap while baseball does not. So why then are their payrolls numbers rising faster than the league that has no salary cap?

Is it because revenue streams are better in the NFL and the NBA? Not really. Major League Baseball has had record setting revenues the past few years. Is it because of labor uncertainty that has caused baseball owners to be more reluctant to hand out dollars to players? Nope. In fact, Major League Baseball is the only of these three leagues that is not heading into uncertain waters with regards to labor negotiations between the players and the owners. It is entirely possible that the dramatic rise in payrolls figures in the NBA and NFL are contributing to their current labor situations.

Basically what all of that says is that if the Major League Baseball salaries are rising at alarming rates, then salaries in the NFL and NBA are rising at an even more alarming rate. So then the question becomes whether or not there is any truth to the first statement above and most of that answer depends on what your definition of “absurdly out of hand” is.

In that case, why have salaries been in the news so much in the past few years? Well, a lot of it has to do with the Yankees and other than that, it mostly has to do with the high profile signings of the past few years. Joe Mauer, Ryan Howard, Matt Holliday, Cliff Lee, Carl Crawford, and Troy Tulowitzki are just a few of the players who have signed contracts or contract extensions worth an amount in excess of $100 million. On top of that, three high profile players are going to sign very large contracts within the next year; Adrian Gonzalez, Prince Fielder, and the man who will be resetting the curve when it comes to large contracts, Albert Pujols.

Maybe this is the question we should be asking. Overall payrolls in Major League Baseball have been climbing at a much steadier rate through the past ten years than those of the NBA or the NFL. However, the higher end of MLB contracts has skyrocketed to the point where the highest paid player now makes roughly ten times the league average. Is the payroll situation in baseball getting its reputation because of the aristocratic class of players that are getting paid much more than the league average?


FORMATION OF AN ARISTOCRACY?

In 1997, Albert Belle became the first player to earn $10 million in a single season and he earned exactly that amount. In 2010, 79 different players were paid at least $10 million and Alex Rodriguez was paid more than triple that amount ($33 million). Over that time period, the overall salary figure in MLB has jumped from $969 million to $2.61 billion, an increase of 169.5%.

That’s great and all but the active roster of a Major League Baseball team is 25 players and if we assume that as many as 8 or 9 players get included into the payroll numbers, that still gives us a pool of roughly 1,000 players. If only 8% of players are earning that amount of money, can it really skew the payroll numbers that much? The answer is absolutely.

If we assume that there is a pool of 1,000 players that go into baseball-reference.com’s payroll numbers that means that 999 players earned less than $10 million in 1997 and that number shrunk to 921 by last year. In the past 14 years, the amount of money paid to those players has gone up from $959 million up to $1.46 billion. This represents an increase of just 52.7%, far below the overall increase.

Here’s the amazing part. Last year, the 79 players who earned over $10 million were paid a grand total of $1.15 billion, or 43.9% of the total money paid out in salaries. In 1997, that was just 1.03%.

An aristocracy is a system of government where the power is consolidated amongst a few of the citizens. If the question is whether or not a sort of aristocratic class has developed in Major League Baseball, the answer is an emphatic yes. If there is a problem with the salary structure in baseball, it lies in the fact that the top 8% of wage earners are earning 44% of the money being paid to players.

Is a salary cap a solution to this “problem”? The problem with imposing a salary cap on Major League Baseball is that it provides no disincentive to teams wanting to sign a player to a contract worth $20 million per season. Teams will simply start paying one player that much money and the rest of the roster will be filled with players somewhere on the lower end of the payroll spectrum. If they want to reduce the salaries of the top tier of players, they would need to institute rules in the collective bargaining agreement limiting the maximum size of a contract a player can sign, much like the NBA. Being the highest paid player in the NBA isn’t that big of a deal anymore because the amount of money the top tier of players are getting paid is all the result of an equation based on how long they’ve been in the league.


CONCLUSION

Does the salary structure in baseball need fixing? In my opinion, it does not. Teams that have enormous revenue streams from ticket sales, merchandise sales, advertising, and broadcasting contracts can spend whatever they want on a team. However, if they spend too much too often, they have to pay the luxury tax which goes to teams that do not have the type of revenue streams that the Yankees and Red Sox have.

This system works for baseball and would not work as well for the NBA or the NFL. In the NBA if you have the best player at every position, you’re probably going to win 75 games and win the NBA title. If you have the best player at every position in the NFL, you’ll win 14-15 games every year and play in the Super Bowl more years than not. If you have the best player at every position in baseball, it will give you an excellent shot at the playoffs every year but not necessarily the World Series. From 1996-2001, it can be argued that the Yankees didn’t have one player on their roster that could be considered the best at his position and they won four World Series title in those six years and played in another. Baseball is all about having good players at every position with as few holes as possible. In other words, no matter how much money you spend on putting together the best roster in the history of baseball, it still doesn’t guarantee you a World Series title.

For all of you out there who think the system is broken and a salary cap is necessary, don’t forget that in the last ten years, only one team with the highest payroll in baseball has won the World Series (the 2009 Yankees).

The system isn’t broken, it just might need a tweak or two…