Competitive balance is a problem that baseball has addressed at great length, yet can never solve – and, truth be told, may not want to solve.
By Ken Rosenthal FoxSports
By any reasonable measure, these are baseball’s glory days.
Attendance is booming, revenues are soaring, performance-enhancing drugs no longer seem to be as prevalent. Since 2000, all but three of the 30 clubs have reached the postseason, and nine different teams have won the World Series — one more than have won the Super Bowl during that time.
So, if you’re commissioner Bud Selig, what should worry you the most?
Competitive balance, a problem that baseball has addressed at great length, yet can never solve — and, truth be told, may not want to solve.
Well-run low-revenue teams reach the postseason often enough, or at least they have lately. But as high-revenue teams benefit from increasingly lucrative regional TV contracts, the financial gap will only widen, leaving clubs such as the Tampa Bay Rays, Cleveland Indians and Pittsburgh Pirates in greater peril.
The growing disparity could influence the choice of the next commissioner if Selig retires as planned after the 2014 season. It also could jeopardize labor peace when the current agreement expires in ‘16. The low-revenue teams already fear that they could become Washington General-style patsies for the high-revenue Harlem Globetrotters.
The way to better level the playing field is by giving low-revenue teams greater advantages in the draft. But the latest labor agreement already includes changes to the draft that are intended to benefit low-revenue teams — changes that are still in the early stages.
The first question, really, is whether baseball wants to maximize competitive balance, or if it prefers high-revenue teams to enjoy certain advantages, given that the success of those clubs helps drives the value of national TV contracts.
Let’s be clear – the current system is not a fair fight. Not when local revenue drives baseball economics. Not when the Dodgers’ reported cut in their proposed deal with Time Warner will be $280 million a year, while the Rays’ annual income from local media revenue, TV and radio, reportedly is only about $15 million.
All teams contribute 31 percent of their local revenues to the revenue-sharing pot, and the money then gets redistributed. The portion of the Dodgers’ deal that would be subject to revenue sharing is in dispute, but suffice it to say that regardless of the outcome, they’ll end up filthy rich.
The complaint of some low-revenue executives is this: A poorly run high-revenue team gets rewarded by securing a higher draft position and larger bonus pool, while a well-run, low-revenue team gets penalized by drafting lower and receiving a smaller pool.
Consider the Cubs, who are wealthy enough to invest $52 million in a mediocre free-agent pitcher such as Edwin Jackson. Their financial advantages also enable them to sign an unrestricted amateur such as Cuban outfielder Jorge Soler, hire top minor league coaches and assemble a large staff of statistical analysts. Yet, the Cubs drafted sixth overall in 2012 and will pick second in ’13, due to their poor performance on the field.
Now consider the Rays, who are at the other end of baseball’s economic spectrum.
The Rays continue to be a force in large part because of left-hander David Price and third baseman Evan Longoria, both of whom were top-five picks. But once the 2013 draft is complete, the team will have selected at an average of No. 24 over the past five years (the Rays also drafted Tim Beckham over Buster Posey when they had the No. 1 overall choice in ’08, but that’s another story).
Yes, the Rays may be good enough again to make their four postseason appearance in six years, and perhaps that is all any team can ask. But the effect of their low positions compounds year after year, and ultimately will create a down cycle.
Rising salaries, of course, also can trigger such a cycle. The Indians went boom when they reached the ALCS in 2007, then bust when they could not afford to keep their players. This offseason they spent heavily, trying to create another boom. But almost inevitably, they again will go bust.
Meanwhile, perennially downtrodden low-revenue teams such as the Royals and Pirates operate under the mistaken belief that winning will solve their problems. It won’t: Once such teams enter a down cycle, they find it difficult to maintain their fan base.
So, what’s the solution?
Well, baseball thought it came up with a few in the most recent labor agreement, capping spending on domestic and almost all international amateurs and adding “competitive-balance picks” for small-market and low-revenue clubs.
Some question whether the spending limits actually will benefit low-revenue clubs — the Pirates and Royals restocked their farm systems under the previous system by signing draft picks to huge bonuses.
The competitive-balance picks — six at the end of the first round, six at the end of the second, as determined by a lottery — come with their own problems. Two traditional powers, the Cardinals and Tigers actually were eligible for such picks this year.
The MLB Draft follows the same model as the NFL Draft, with teams selecting in reverse order of record. But baseball uses a different economic model than the NFL, which operates with a salary cap and derives the bulk of its income from national TV revenue that is divided equally among all teams.
Baseball can’t ask high-revenue teams to share more money. It can’t help the low-revenue teams better compete in the free-agent market. The draft, then, is the most logical vehicle for the sport to address the growing imbalance between the haves and have-nots.
Conduct the selections in reverse order of revenue. Award low-revenue clubs an even greater number of picks. Or do some combination of both.
Such ideas were discussed during the most recent labor negotiations, according to major league sources. A revenue-based draft order would address the complaints of agent Scott Boras, who has accused some teams, notably the Astros, of deliberately building non-competitive teams in order to secure high draft positions. But naturally, certain high-revenue clubs want no part of such a plan.
Those clubs say that sticking them to the bottom of the draft would force them into the notoriously inefficient free-agent market, which would not be good for baseball. Low-revenue clubs respond by saying: We only wish we could afford those free agents.
And around and around we go.
Competitive balance is baseball’s unsolved mystery, and perhaps always will be. But the sport, even in heady times such as these, should aspire to do better.
That means rewarding smart low-revenue clubs, and withholding rewards for high-revenue clubs that cannot get out of their own way.