I Hate Parity

Paul SieversAnalyst IDecember 30, 2008


Ok, well maybe hate is too strong a word here. There are some pro sports that need to make great strides to level the playing field (see Premier League, English). Baseball was on this list up until August 30, 2002, which is when MLB and the player's union agreed to a new collective bargaining agreement.

While the new system does not have a hard salary cap like the NFL, it has provided baseball an unprecedented amount of parity as the sport has seen seven different champions in the past eight years.

Earlier this year, two “small market” teams, the Florida Marlins and Tampa Bay Rays, were able to sign their brightest young stars to long-term contracts with dollar figures that would have been unattainable without the new CBA.

Apparently, this is not enough parity. After the Yankees locked up three of this year’s prize free agents for a combined $425 million for 20 seasons of service, a cry went out for baseball to copy the NFL and go to a hard salary cap.

Apparently, what the Yankees were doing was criminal, despite the fact that their opening day payroll will actually be a few million dollars less than last years.

After sifting through dozens of articles on and off of Bleacher Report lauding the NFL and its parity, I felt obligated to take the unenviable task of *gulp* defending the system that created the Yankees as we know them.

Before I go into comparing the business models of pro football and pro baseball, I would like to make a few statements to help clarify the perspective I am coming from here:

Yes I am biased. I root for a big market baseball team (Mets) and an NFL team dumb enough to trade for the guy on the cover of Madden (Jets). I suppose much of the reason I prefer the MLB is that I know the Mets probably give me the better chance at rooting for a winner—much like a Pittsburgh fan knows the Steelers are his best shot at a winner. I will do my best to suppress my biases for the sake of my argument.

No, I am not taking the credit crunch into effect here, simply because we do not know what effect, if any, it will have on pro sports. If it does in fact widen the gulf between the haves and have-nots in baseball then baseball should do something to help competitive balance, but not a salary cap.

I am not trying to quantify how much of an advantage the Yankees have over the Royals and the other small market teams. Let's just all agree that it is an advantage and move on.

The Popularity of the NFL

One of the things that we keep reading in the wake of the Yankees' signings is how parity is the reason the NFL is great, and if baseball had the same parity, it would be neck-and-neck with football for the No. 1 sport in America.

Really? Are we sure parity is the reason? Fantasy, gambling, video games, tailgating, and violent collisions have nothing to do with it?

People love football.

There’s violence, there’s drama, there’s everything. Baseball is more of a thinking-man’s game that requires more than a 30-second attention span—something most of us don’t possess.

Football is easier and arguably more fun to watch. Even if baseball was the sport with the hard salary cap and football was a free market, I am willing to bet that the NFL would still be No 1.

The Structure of the NFL

The following statement is probably going to land me on a government list. When I look at the NFL I see some strong parallels between the NFL and communism. One can look no further than the NFL’s balance sheet to know that it is not a communist organization, but think about it:

The profitability of a franchise is insignificant. Most revenue is shared equally throughout the league and a salary cap limits the amount a team can spend on player personnel. Having a superior business plan does not give you an advantage on the field, it will only add a little bit of money to the bank accounts of the team’s executives.

Freedom of expression is harshly punished. Players are fined from transgressions ranging from an inappropriate end zone celebrations to not wearing their socks correctly.

The NFL has been labeled a “copycat” league, and for good reason. For the most part, teams employ very similar strategies in both personnel decisions and game-planning. After the Dolphins unleashed the wildcat formation in week three, half the teams were running it by week five. There are not a whole lot of free thinkers associated with the NFL.

What does that leave us? A league of 32 teams that are more or less equally matched. The main factors determining a team's success or failure in the NFL are injuries, team chemistry, and the abilities of the coaching staff. Two of those three factors are an absolute crapshoot, which is why predicting the NFL is such a mess. How can having no rational expectations for your football team be a good thing?

I love football; I just prefer to watch the game on Saturday instead of Sunday. I believe that differences in talent and philosophies make the game more enjoyable and the upsets more special.

The Popularity of Major League Baseball

Contrary to what seems to be a very popular opinion, Major League Baseball is doing just fine. In fact, league-wide attendance and revenue were at an all-time high in 2008.

No, the sport is not as popular as professional football, but as I argued earlier, I think this has less to do with the game’s governing bodies and more to do with the overall popularity of the respective sports.

The Structure of Major League Baseball

After I pointed out the NFL’s socialist tendencies you are probably thinking, “Paul, history has taught us that lightly regulated capitalism isn’t much better." I would agree with that statement and here is the biggest misconception regarding the structure of MLB: the market for baseball players is not void of regulation.

In addition to the Yankees’ exorbitant payroll, they will have to pay $26.9 million dollars in luxury tax money. Luxury tax money is used to ease the financial burdens of some of the smaller clubs.

As I touched on earlier, Hanley Ramirez and Evan Longoria, two phenomenal young players with extremely bright futures, were locked up to long term deals by their respective clubs, the Marlins and Rays. These contracts would not be possible without the market regulation provided by the MLB CBA.

Bad Markets or Bad Baseball Towns?

The counterpoint to the above argument would be, “Why is it fair that the Marlins have one large contract and the Yankees have seven or eight?”

Here is why:

Half of MLB’s revenue comes from ticket sales, while two-thirds of the NFL’s revenue comes from its television contracts. While some would like to argue that the NFL earned that contract thanks to parity, I would once again argue that football is better for television anyway. Especially when older baseball fans love to wax poetic about baseball on radio.

Because of baseball’s reliance on local revenue, they need markets like New York while the NFL is able to thrive without a team in Los Angeles. Since MLB cannot stand up to the NFL nationally, the league needs to make sure their strongholds are healthy.

If New York, Chicago, and Los Angeles were to fail, the league would be in shambles.

Those of you who love to rally around the underdog are probably thinking, “Great, so NY and LA are taken care of, where does this leave Pittsburgh and KC?”

I would argue, “Don’t blame NY and LA. Blame St. Louis.” The Cardinals play in one of the smallest media markets in the league yet have a payroll that is competitive with the Phillies, Cubs and Dodgers.


They were fourth in the league in attendance, and the team wasn’t even that good! St. Louis is a great baseball town, and the fans are rewarded appropriately.

Meanwhile, the Diamondbacks (a team that plays in a large market) had trouble selling out home playoff games in 2007. They are appropriately rewarded with one of the lower payrolls in the league.

Once you get past New York, Chicago, and Los Angeles (all three cities happen to be great baseball towns), there really isn’t a correlation between the size of the media market and payroll. Same cannot be said about attendance.

Is it fair that the Yankees can outspend every team in the league? No. But it also isn’t fair that they have to do so much to keep the league afloat. A hard cap would lower many of the league's best revenue streams.

How Baseball Can Remain Healthy

Baseball does have a little bit of work to do when it come to competitive balance. The international talent needs to be regulated—every team should have a fair chance to sign the best Asian and Latin American players.

The amateur draft also needs to enforce a slotting policy in order to avoid more J.D. Drew situations where a player refuses to play for the team that drafts him.

While teams should be able to spend their own revenue on players, every team should be given equal access to talent. Between these policies and the luxury tax, small market teams would have even greater resources to become and remain competitive without hindering the financial success of the league’s marquee teams.


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