TV Revenue Sharing in Major League Baseball

TELEVISION REVENUE SHARING AND SALARY CAPS IN MAJOR LEAGUE BASEBALL: AN EXAMINATIONAND A RESEARCH PROPOSAL

This research examines the related issues of television revenue sharing and salary caps in major league baseball. This examination provides (1) a brief history of team revenues, (2) a brief history of team salaries, (3) the major league baseball antitrust exemption, (4) a description and an analysis of television revenue sharing and salary caps as these concepts affect major league baseball, and (5) a proposed work model for television revenue sharing and salary caps in major league baseball.

Major league baseball teams generate revenues from a variety of sources. Although revenues from television contracts generate the greatest contemporary interest, ticket sales continue to be an important source of revenue in major league baseball. The national television contracts negotiated in 1988 represented a 102 percent increase in national television revenues over the prior contracts (Staudohar 33). Local television contracts provide substantial additional revenues for major league baseball teams located in large markets, while teams in smaller market benefit much less from such revenues (Bernstein 40). Total revenues in major league baseball increased from $718 million in 1985 to approximately $1.4 billion in 1990 (Zimbalist xiii).

Revenue generation in baseball began in the 1860s, when a few teams

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f that given team (Staudohar 33). The most frequently proposed salary cap is 67 percent of revenues from national television contracts and ticket sales (Collingwood 39). The intent of the salary cap is to preclude the financial ruin of major league baseball teams as a consequence of uncontrolled player salary increases. Salary caps are not an important issue for teams such as the New York Yankees who generate more that $50 million annually from the sale of local area broadcast rights. Salary caps are a life and death issue to teams such as the Seattle mariners, however, who generate little more that $5 million annually through the sale of local broadcast rights. Because of the differences in the financial capacities of large market teams and small market teams to pay exorbitant player salaries, the issue of revenue sharing becomes linked with the issue of salary caps (Staudohar 36). National television revenues and license sales revenues are already shared equally among major league baseball teams. Gate receipts are shared on an unequal basis between home and visiting teams. The goal of current revenue sharing proposals is to gain an equal division for all major league baseball teams of local market broadcast revenues. Thr

Category: Economics - T