Solving Baseball’s Money Issues

baseballmoneySelig has proposed that teams put 50 percent of locally generated revenues in a pool to be redistributed equally to all teams.

Makes sense in theory, but winning teams often parlay their success into additional revenue. Selig’s plan discourages such effort: The more revenue a team produces, the higher its contribution will be.

The solution is to base each team’s contribution on projected, rather than actual, revenue. Say the Yankees’ projected revenue is $220 million, but their actual revenue in a championship season turns out to be $280 million. They would keep the extra money.

The deeper problem is the inequity of franchise values. The Red Sox’s new owners paid a $660 million premium for the lucrative Boston market, but the value of their investment could decrease if their revenue-sharing contribution increases.

It might be necessary to compensate such franchises, counterproductive as that seems. On the other hand, NFL franchise values keep rising, in part because extensive revenue sharing has made the league so strong.

* Minimum payroll. An absolute necessity if MLB is going to increase subsidies to low-revenue clubs. To achieve greater competitive balance, the high-revenue clubs must spend less and the low-revenue clubs more.

The Twins received more than $19 million in revenue sharing in 2001, but their $24.8 million payroll was the game’s lowest. It’s an outrage that they pocketed the money. They were able to turn a small profit, according to MLB.

* A revamped Rule 5 draft. The competitive-balance draft that Selig proposed last winter was unrealistic. By allowing the bottom eight teams to select, over a three-year period, players from a pool supplied by the top eight, MLB would be penalizing success and rewarding failure.

A draft with teams ranked by revenue also is unrealistic. High-revenue clubs would oppose it, viewing it as another form of revenue sharing. The best idea, then, is to rework the Rule 5 draft.

As it stands now, the draft consists of players not on 40-man rosters. Teams pick in reverse order of their records, paying $50,000 per selection. Drafted players must remain in the majors the entire season or be offered back for $25,000.

The blue-ribbon panel suggested that, before the first round, each club with a bottom-eight record draft one player from one of the eight postseason clubs in the preceding year.

Using records over a three-year period would better prevent teams from trying to maneuver their way into the draft. The rule that the players must remain on major league rosters should be eliminated, ensuring that low-revenue teams keep their picks.

The teams that lose players should receive a fee for drafting and developing the talent. That fee should be paid by MLB, not the selecting clubs.

* A worldwide draft. A revamped Rule 5 draft would help prevent high-revenue clubs from stockpiling minor league talent. A worldwide draft would enable low-revenue teams to select international players currently available only to the highest bidder.

Some low-revenue teams would need to devote part of their revenue-sharing proceeds to international scouting. MLB also would allow the trading of draft choices. Why shouldn’t a struggling team be allowed to trade the rights to a top pick for two or three players?

* The elimination of draft-pick compensation for free agents. Teams that lose top players receive two picks under the current system. With many free agents moving from one high-revenue club to another–Chan Ho Park, for example, went from the Dodgers to the Rangers–the wrong teams benefit.

The link between free agency and the draft subjects the draft to collective bargaining, and the union opposes a cap on amateur bonuses. The union, however, could not practically oppose the elimination of compensation, which would amount to a free-market restriction.

With a cap on bonuses, the clubs could redirect the money to major league salaries. Rather than give $5 million to high school catcher Joe Mauer, the Twins could use the money to buy a proven major leaguer.

These solutions aren’t perfect, but they’re a start. There are enough lawyers on both sides to figure the rest out.

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