How Small-Market Teams Survive Baseball Economics
Senior Editor, CNBC
The recipients, however, can spend the money any way they wish, says Vrooman.
"Midmarket clubs like Pittsburgh, Miami (Florida) and Kansas City have had in the recent past, payrolls lower than their revenue-sharing payment," he says. "There needs to be strict assurances that the revenue-sharing money is spent on payrolls. Right now, there isn't."
But even with all the money from revenue sharing and streamlined economics, big is better, says Jim Juliano, a sports lawyer with the law firm, Nicola, Gudbranson & Cooper.
"When a talented young player hits free agency, the smaller-market teams will say goodbye and watch the largest-market teams outbid them for the now-mature talent that helps them win," says Juliano.
The latest change in uniform has the small-market Milwaukee Brewers seeing their star first baseman and slugger Prince Fielder sign an eye popping nine-year deal for $214 million. with the bigger market Detroit Tigers—who are now at 8-to-1 odds of winning the World Series, according to Las Vegas.
But a fat payroll with stars is no guarantee.
Even with the highest payroll in baseball — some $200 million in 2011 — the Yankees have won just a single World Series in the last five years, while smaller market teams — the St. Louis Cardinals, San Francisco Giants, Colorado Rockies, Rangers and Rays — have played for or won a world title.
The current playoff formula, with a short, best-of-five-game series in the first round — makes winning iffy for any team, big or small. A bad ruling by an umpire or the sudden slump of a batting champion can be decisive.
But it's that randomness and hope of winning that can keep the smaller-market teams in the game financially — as long as they keep their eye on their bottom line, says Chad Walters, a sports business consultant who has worked with the Atlanta Braves.
"A team without much money can help keep costs down by being efficient with their resources," Walters adds. "They can get additional revenue 'bang' by going lean, without simply cutting [deep]. That could mean the difference between a season net gain and a season in the red. Of course, it's also helps to win games."