It is important to note that the amount a team receives is based on local revenues, not market size. Michael Lewis recently wrote an excellent op-ed piece that examines this issue (Michael Lewis, "Baseball's Losing Formula," The New York Times, 3 November 2007). He argues that the system disincentivizes success. He proposes basing revenue sharing "on a statistical analyses [sic] of teams’ payrolls, winning percentages and attendance." While Lewis does not elaborate at length on his formula (which is understandable since The New York Times is not the best place for statistical analyses), he focuses on rewarding teams that improve attendance.
I agree with Lewis's criticism, but let's see if that's born out in the data. Here's a table sorted by market size including 2005 revenue sharing income. Unfortunately, 2005 is the last year I can find a complete data set for. If you have more recent data or know where I can find it, please let me know: Revenue Sharing data comes from (Stefan Fatsis, "Playing Hardball," The Wall Street Journal, 28 April 2006)
|Market Size Rank||Revenue Sharing Income Rank||Team||Market Size||2005 Revenue Sharing Income|
|1||30||New York Yankees||10988112||-76000000|
|2||26||New York Mets||10988112||-24000000|
|3||21||Los Angeles Angels of Anaheim||8887992||-11000000|
|4||25||Los Angeles Dodgers||8887992||-20000000|
|5||29||Boston Red Sox||7465634||-52000000|
|12||2||Toronto Blue Jays||5113149||31000000|
|14||23||Chicago White Sox||4862658.5||-18000000|
|19||22||San Francisco Giants||3614474||-14000000|
|22||15||San Diego Padres||2941454||5700000|
|25||24||St. Louis Cardinals||2858549||-19000000|
|26||1||Tampa Bay Rays||2697731||33000000|
|29||4||Kansas City Royals||2034796||30000000|
1. The Philadelphia Phillies and Detroit Tigers received a large amount of revenue sharing funds, but this is likely due to the ability to incorporate debt service into their local revenue calculation.
2. The Toronto Blue Jays also received an unexpectedly large amount of revenue sharing funds, but this is likely due to the formerly weaker Canadian dollar (particularly since their payroll was in U.S. dollars). However, now that the Canadian dollar has reached parity, this shouldn't affect calculations in 2007
3. Despite being the 10th largest market, the Florida Marlins received the 3rd most in revenue sharing.
4. It's interesting to compare the revenue sharing data of the Oakland Athletics and San Francisco Giants. Despite sharing a very large market, the Giants have a relatively new stadium, and I would speculate, a larger fan base. It'll be interesting to see if the Athletics' planned new stadium will change the revenue sharing picture.
5. The Cardinals more than pay their share, undoubtedly in part to an extremely large fan base.
There are many:
1. I'm mixing different years' data. In each case, I tried to get the best and latest available, but I haven't been able to find it.
2. The market data is somewhat arbitrary. Some teams have fan bases that far exceed their home territories, and dividing shared markets in half is an approximation at best.
3. I don't have complete revenue data. Obviously, neither Major League Baseball nor its teams have an interest in letting the general public examine their books.
4. I am an amateur. I have no experience with statistical evaluation, and am not a trained economist.
5. There is no direct cause & effect relationship between payroll and winning.
I don't think there's any strong, definitive conclusion that can be reached, but I do think this study points out that being a "small-market team" is too often an oversimplified excuse. The Phillies, Rangers, Astros, Braves, Marlins, Tigers, and Blue Jays all have home markets of over 5 million people. The Minnesota Twins are the 21st largest market, which puts them closer to the middle than the end. Obviously, there are many other factors that contribute to a team's revenues and its success. However, I think that we, as baseball fans, should be more critical when teams ask for taxpayer subsidies for a new stadium or when a team claims to be unable to keep a player because it is in a "small market." I would suggest that what limits a team's payroll is more the effective utilization of its resources and less its market, a point Michael Lewis made in Moneyball, and one worth repeating. Again, this is far from a definite study, but I think it may provide a little to think about.
For further reading:
1. Brown, Maury, " Interview - Andrew Zimbalist - New CBA," The Biz of Baseball, 19 November 2006, http://www.bizofbaseball.com/index.php?option=com_content&task=view&id=470&Itemid=35 , Accessed 3 December 2007.
2. Brown, Maury, "The Upcoming CBA and the Battles Within it," The Hardball Times, 27 February 2006.
3. Gustafson, Elizabeth and Hadley, Lawrence, "Revenue, Population, and Competitive Balance in Major League Baseball," Contemporary Economic Policy, Vol. 25 No. 2, 250–261.
4. Lewis, Michael. Moneyball: The Art of Winning an Unfair Game, New York: W.W. Norton, 2003.
5. Maxcy, Joel G, "Progressive Revenue Sharing in MLB: The Effect on Player Transfers," Working Paper Series, Paper No. 07-28, October 2007.