Is This Heaven? No, It’s I.O.U.: Why Major League Baseball Must Modify Its Current Revenue-Sharing and Luxury-Tax Procedures

In August 2010, Deadspin.com, a sports and entertainment website, published leaked financial records for a number of Major League Baseball (MLB) clubs, including the Pittsburgh Pirates, Florida Marlins, Tampa Bay Rays, and Los Angeles Angels of Anaheim.  According to these documents, the Pirates, one of the league’s worst teams, raked in an operating profit upwards of $14.4 million in 2008.  MLB’s current revenue-sharing system aided in the Pirates’ accumulation of such a robust profit margin.  These leaked financial statements served to demonstrate what many baseball commentators have bemoaned for years: the current MLB revenue-sharing system is clearly dysfunctional, as evidenced by the fact that smaller market teams are realizing substantial profits while remaining consistently uncompetitive.  Parties on both sides of the collective-bargaining process believe that the Pirates embody the “core problem” with a system that has been implemented over the last two decades, “step by arduous step.”  In other words, the revenue-sharing structure that MLB ostensibly created to increase parity has simply produced “a welfare class of teams that can turn significant profits by keeping payroll down.” . . .