Where does the Yankee Revenue go?

business of baseball

If you wondered where all the Yankee revenue goes (other then the obvious) the answer is Jeffery Loria's pocket. Via the Biz of Baseball;

"The Marlins’ payroll for 2008 is projected to be around $20 million, the lowest in the league and $10 million lower than last season.

“It’s a function of revenues, and we were not really able to derive any revenues out of this facility,” Loria said of the team’s current home, Dolphin Stadium. “As we get closer to the (new) stadium, those things will change. We need to be in that facility.”

On the player payroll at $20 million, that would be $5 million less than what the club will receive in revenue-sharing, which is projected to be $25 million. Apparently, a “function of the revenues” is to make a mockery of the revenue-sharing system, and do a good bit of profit making.

Forbes estimated that the Marlins posted $43.3 million in operating income last year. That operating income included earnings before interest, taxes, depreciation and amortization. How did the Marlins rate in terms of operating income – a measure of profit – compared to their other 29 counterparts? They were first with the Dodgers in second at $25.5 million, a difference of 41 percent.

If there is one thing that Bud Selig has failed at in his tenure as Commissioner (no, not steroids) it's the abuse of the revenue system by certain clubs - most notably the Marlins. I posted an article awhile back stating that the current system rewards teams that are not successful locally. Basically, pocket the revenue money and your profits grow; invest it in your team and your revenue sharing number and your margins shrink.

As a Yankee fan, I understand our revenues are so enormous that we have to contribute some to level the playing field. When that money is used instead to make owners rich, however, I have a real problem with it. I imagine The Hank must feel even stronger about it. I am glad to see that some of the money will be taken away from the Marlins with their new stadium.

It pays to be the Devil Rays...

business of baseball

I came by a piece in the NY times that covered Revenue Sharing;



"The problem is that the teams receiving payments have come to use them as a primary source of income — rather than to build winning teams. The most extreme example has been the Tampa Bay Devil Rays. In 2006, this team had a payroll of about $35 million, $42 million less than the 2006 league average. Not surprisingly, it won only 38 percent of its games and filled less than 40 percent of its seats for home games. It also collected more than $30 million in revenue-sharing transfers. This past season, the team reduced its payroll to $24 million and had about the same level of success"


The basic premise covered in the article is if you are guaranteed the money coming from revenue sharing you can actually soundly predict more profits by spending less on payroll. What the author suggests is tying some portion of revenue sharing to attendance figures, therefore giving smaller market teams some incentive to try and run a better business. Interesting idea, worth a read.