NEWSLETTER
All the Cubs money stuff this offseason is set against a much larger backdrop, and it’s useful to keep that context in mind: although we can justly debate whether the Cubs are extending themselves enough financially during this window, they are spending on player payroll like drunken sailors compared to much of the league.
For reminders you don’t need, I’ll reiterate that, since the installment of the new Collective Bargaining Agreement, the offseason pace has slowed markedly, the lengths of contracts have shrunk, and last year, for the first time in 14 years, player payroll spending went down.
Things were already dodgy on the labor front before that last one, but we were betting it figured to get a heckuva lot worse if league-wide revenue did what we were expecting it to do – i.e., just keep going up and up and up (along with franchise valuations).
And, what do you know:
BREAKING: MLB Sees Record Revenues Of $10.3 Billion For 2018 via @ForbesSports https://t.co/BGHBiUoqoY
— Maury Brown (@BizballMaury) January 7, 2019
Although revenues were already over $10 billion for the 2017 year, and growth in revenue thus slowed in 2018, you’re still talking about a 16th consecutive year of revenue growth, and an expectation that revenue is going to jump quite a bit in 2019 thanks to new TV deals and new sponsorship relationships (hello legalized sports gambling).
Philosophically, I have trouble when sports teams are run strictly like traditional businesses, taking advantage of a fanatical and irrational customer base to maximize profits for owners. That said, I’m a realist, and I also do not have a problem with owners of sports franchises making money on the enterprise so long as they are (1) legitimately trying to entertain their fans and compete, and (2) spending about half the league revenues on the players of the sport.
On that second one, the league has recently efforted to show that half of the revenues or more are consistently reaching the players, though that will be a tougher story to sell if revenues keep climbing and player payroll spending flatlines. We’ll see what happens in the coming years.
Even thinking about the league and its teams strictly as a business, though, I do worry that an increase in profit-taking at the ownership level league-wide is gonna be one of those short-term wins for a sport that persistently needs to be focused on the long-term. This all relates to a lack of competitiveness by many clubs, for whom the promise of guaranteed TV dollars and revenue-sharing money make it less and less important for them to spend aggressively in free agency, since they probably aren’t going to make that money back in gates and concessions just by winning 80 games instead of 70 games. That kind of thinking makes business sense in the near-term, but if the sport gets increasingly less competitive and less interesting over time, how many of those huge TV deals are still going to be there in 15 or 20 years? How much revenue-sharing money will still be there?
A rising tide floats all ships. I suspect that every team does better in the long run – from a purely business perspective – if the league is more competitive. That, in turn, means more spending on players, and a much better relationship between them and the owners of their teams.
Hey, good luck everyone in those 2021 CBA negotiations …
