Commentary

Revenue-sharing system gets exposed

Leaked financial documents show Pirates, Marlins made profit despite cries of poverty

Originally Published: August 26, 2010
By Jayson Stark | ESPN.com

Here at Rumblings, we keep forgetting to get our MBA degree. And boy, is that aggravating -- because an MBA sure would come in handy in weeks like this.

[+] EnlargeBud Selig
AP Photo/Mary AltafferBud Selig will likely be at the forefront when the next collective bargaining agreement is negotiated after the 2011 season.

Why? Because all of a sudden, over at deadspin.com, the most astounding top-secret team financial documents ever to sneak out of Bud Selig's vault were right there online for the world's perusal. And it would have been awfully helpful to be able look at those numbers and instantly know the difference between net operating income and, say, on-base percentage.

"I've never seen a baseball story with more numbers than words," quipped one baseball man after reading a piece about those documents. "It looked like the Pythagorean Theorem."

Well, does anybody want to guess what's happened since those Pythagorean documents -- for six different teams -- leaked out? Exactly what you'd think would happen: It's hard to say who's been screaming louder -- the fans or the politicians. Imagine that.

They were fuming in Pittsburgh, where the Pirates were revealed to have made $29.4 million in profits in 2007 and '08. And they were grumbling in Florida, after learning the Marlins took in $95.2 million in revenue sharing, central-fund and local radio-TV payouts in 2008 (before they sold a ticket) and turned a $29.46 million profit -- and had a $36.8 million payroll.

But here at Rumblings, we have a bigger picture on our minds. We have the next baseball labor deal to worry about. And friends, make no mistake about it: The release of this information has already rattled the Richter scales of that labor scene.

"This," said one prominent baseball man, "will be a massive issue in the next labor agreement."

So we can't tell you how this news will affect future Pirates season-ticket sales. But we can predict, with no reservations whatsoever, that this essentially guarantees the end of baseball's current revenue-sharing system -- as this sport's small-market outfits have come to know and love it, anyway.

Here's why -- and how:

• Because other teams hadn't seen these numbers

You might think that all clubs know exactly what each team is paying into the revenue-sharing pot and what each team takes out. But that's not true. MLB stopped circulating those numbers years ago. So some teams were surprised -- even shocked -- that a team like Florida was cashing nearly a $48 million welfare check in revenue sharing alone in one year (2008).

"We knew these teams were getting millions," said an official of one club. "But we thought 'millions' meant maybe $40 million. But not close to $50 million. We knew it was a lot. Just not to this extent."

But that wasn't the only surprise. Imagine the reaction of teams like the Red Sox, Yankees, Mets, Cubs and Angels -- clubs that are paying out major revenue-sharing bucks -- to the news that teams like Florida and Pittsburgh were turning hefty profits, in some cases even heftier profits than their own.

"One thing these documents said, I think, is that you can't cry poor and say you can't compete," Maury Brown, founder of the invaluable bizofbaseball.com, told Rumblings. "You'd be hard-pressed to say, 'We can't compete,' when you're showing a profit. To learn that these teams are making more of a profit than the Angels, that seems kind of backward. You say, 'Why should that be?'"

Hey, good question. And that's exactly what teams will be asking each other, possibly in very loud voices, before they even get to the bargaining table.

• Because the system has run amok

We've listened to the explanations from the Pirates' ownership and Marlins' brass of how they spent all this money. Fascinating.

The Pirates -- when they weren't distributing millions to their partners to pay their taxes -- did use a bunch of it to build a new academy in the Dominican, and they've outspent every team in the sport on draft-pick bonuses over the last three years.

The Marlins, meanwhile, said they had to pay off a hunk of the franchise's debt so they could make sure they qualified for the loan that will fund their portion of their new ballpark. And without that ballpark, they were doomed.

It's not up to us to judge whether those explanations wash. It's up to the commissioner's office and the players' union. And obviously, baseball was satisfied with the Pirates' explanation, because the Pirates have never been reprimanded for violating the revenue-sharing agreement.

Right now, we're sharing $450 million and very little of it is going to competitive balance. We need to get back to the original goal -- to provide enough money for small-market teams to spend an appropriate amount to be competitive.

-- An anonymous baseball executive

The Marlins, on the other hand, did get slapped on both wrists last winter by MLB. Their crime? Not spending their revenue-sharing money appropriately, even though the carefully worded press release didn't exactly say that. But the Deadspin documents say it loud and clear.

"After you read those documents, now you know why they picked the Marlins [to reprimand]," said an official of one club. "They were the best case."

But we're not here to single out the Marlins, either. We're here to remind you why baseball invented the concept of revenue sharing in the first place. And it wasn't to pay off other teams' bills -- even their new-ballpark bills.

"The real goal is competitive balance," said one longtime baseball official. "It was not intended for big clubs to finance the operations of small-market teams. That never would have passed any vote [by owners], ever."

So the release of all this information is unleashing forces we actually predicted were coming as far back as last November. Big-market and some middle-market teams are now ready to revolt over the dysfunctionality of this revenue-sharing system. So we see major changes ahead. And by that we don't mean …

A salary cap.

• Because we need more taxes

More taxes? That may not be a campaign pledge you'll hear any politician make in the next couple of months. But mark this down: It will turn out to be the solution to this revenue-sharing mess.

Why? Because what these leaked financial statements show us, conclusively, is that baseball doesn't need to add more dollars to the $450 million or so in revenue-sharing money it's passing around now. If anything, it clearly could reduce those dollars. But mostly, it needs to make sure the dollars it's sharing are spent the way they were intended to be spent.

"Any calls for increased revenue sharing are going to be swept aside," said Brown, "especially after this information got out there."

Agreed. So first off, baseball needs a copy editor -- somebody who can tighten the wording of the current revenue-sharing agreement. It obviously isn't enough to say, as this agreement does, that teams have to spend those funds just to "improve [their] performance on the field." Is that vague enough for everybody?

Somebody else can figure out the wording. But the next agreement needs to specifically exclude stuff like paying off debts with profits that wouldn't exist without revenue sharing.

Beyond that, though, the entire revenue-sharing system needs a significant overhaul. And, for a change, it's now obvious that the focus of this system can no longer be just about trying to keep the Yankees from outspending Bolivia. It's time to target teams at the top and at the bottom. And let's not leave out clubs in the middle, either.

How? That's where we bring in the tax man.

For teams at the bottom of the payroll charts, the free ride needs to be over. Just as there's a payroll tax now on teams that go over a spending threshold, it's time for a tax on teams that show no interest in meeting even a modest minimum threshold.

Baseball can pick any "minimum-payroll" number it thinks is fair -- $50 million, $80 million, 79 cents. Doesn't matter to us. But it's time to come up with a threshold at the bottom and enforce it.

Here's the proposal Rumblings made last November, to shockingly high acclaim:

If a team like the Pirates, Marlins or A's feels it needs to blow up its roster, trade away veteran players, rebuild around young players and go below the threshold once, no problem. It's the nature of baseball. We'd impose either no tax or a modest tax if you go under once.

It's those teams that under-spend year after year after year that we're after. Go below the threshold two years in a row, and you lose 20 percent of your revenue-sharing money. Do it three years in a row, and you lose 30 percent. Four years in a row, and you get taxed at 40 percent. So you can still choose to go that route. But it will cost you.

Meanwhile, we're not sparing the teams at the top, either. It's just not healthy for this sport to have a $170 million gap between the highest payroll and the lowest. So if we're creating incentives to nudge the bottom teams upward, we need to do the same to nudge the Yankees and the biggest spenders downward.

Here's the most intriguing idea we've heard on that front:

Reduce the size of the regularly scheduled revenue-sharing pool substantially -- to below $400 million, maybe even as low as $300 million. That would essentially rebate money to the teams paying into the revenue-sharing pot -- including some middle-market clubs -- that they can turn around and use on payroll.

But if the Yankees want to take that "rebate" and jack up the payroll to $300 million, it would cost them. That's because baseball would also turn around and lower the tax threshold from the current $170 million. At the same time, it could raise the top tax rate from 40 percent to as high as 80 percent for clubs (i.e., the Yankees) that consistently go over the threshold. Or it could do some combination of both.

Then all the extra tax bills those teams have to fork over would be funneled back into the revenue-sharing pool -- and not necessarily to the neediest teams. If the middle-market clubs got a piece of that action, what's wrong with that?

Of course, that's a battle royal the clubs themselves have to fight before they ever drop a proposal on the players at the bargaining table. But that battle is coming. And ultimately, it has to lead to a better system than we have now.

"Right now," said one of the baseball men quoted above, "we're sharing $450 million and very little of it is going to competitive balance. We need to get back to the original goal -- to provide enough money for small-market teams to spend an appropriate amount to be competitive."

That might make the leaks to Deadspin slightly less riveting to dissect the next time around. But we can live with that, if it fixes a system that ran off the tracks years ago.

Ready to rumble

• Life after Lou: Baseball men who have spoken with the Cubs' brass say their decision to name Mike Quade, and not Ryne Sandberg, as their interim manager was no slap at Sandberg or his qualifications.

Chicago Cubs

It was more a recognition that they'd just swept pretty much all the veteran players out the door and they were now a team capable of going about 9-28 the rest of the way. So why pin an ugly finish like that on poor Sandberg?

We're also getting the impression that while the Cubs clearly prefer their next manager to be a guy who has managed in the big leagues, they're not real high on chasing what one baseball man described as "celebrity managers." They just tried that route with Lou Piniella and Dusty Baker, and how'd that go?

So you can forget that Joe Torre or Tony La Russa talk. Unless Joe Girardi really wants this gig, the Cubs are more likely to focus on guys in the mold of Fredi Gonzalez or Eric Wedge, who have been there, done that -- but do it more quietly than their predecessors, and also go way back with GM Jim Hendry.

Another name that doesn't go away: former Pirates coach Gary Varsho, a one-time Cubs player who has spent eight years as a big league bench coach and five as a minor league manager.

• On second thought: Why did Derrek Lee say no to the Angels in July but yes when the Braves wanted to deal for him in August? It wasn't only about where those two teams sit in the standings, sources tell Rumblings.

It was a factor that the Braves were in first place at the time and the Angels weren't, those sources say -- but far from the only factor.

In fact, the single biggest game-changer was the sinkhole the Cubs became in the four weeks or so between when the Angels called and when the Braves called. Between July 24 and Aug. 18, the day the trade went down, the Cubbies went 5-18 and made it obvious to Lee that the rest of this season was going to be about as much fun as an appendectomy.

Meanwhile, his kids were ready to head home to California for school by last week. So a trade no longer posed any kind of disruption to his family.

Combine those developments with the Braves' great shot at playing in October, and Lee saw a whole different playing field than he'd seen when he vetoed his deal to L.A. of Anaheim. And next thing he knew, he was officially a name in the transactions column.

• Whereeeeee's Johnny: Here at Rumblings, we love Johnny Damon. But what the heck was he thinking this week? His decision to block a trade back to Boston made no sense. But worse than that, it could also cost him millions of dollars.

Johnny Damon
Damon

Damon's biggest selling point, as he heads into the market this winter at age 37, is that he's a winner, a guy who can rise up to meet any big September/October moment. But his chance to prove that was by going, not staying in Detroit.

"Maybe he believes he didn't need to prove that, that he's done that already," said one AL executive. "But it could only help his market to be on that stage [in Boston] in big games and perform."

So Damon's decision seems so illogical, it has some teams questioning whether he's completely healthy, and wasn't capable of being that guy down the stretch. While there's no physical evidence of that, he's hit .221 this month, with just a .287 OBP and .291 SLUG.

So we don't know what to make of that theory. But here's one myth we can definitely dispel: The Red Sox didn't claim him just to block the Rays and Yankees. Teams that have spoken to the Red Sox came away convinced they genuinely wanted Damon back.

• One too Manny: Manny Ramirez might be a ticking time bomb, but as time bombs go, there isn't one you'd rather have around in September. So it comes as no surprise to people in baseball that the White Sox, Rays and Rangers were all eyeballing him over the past week.

"He's not quite the same hitter he was," said an exec of one team where Manny wasn't a fit. "But when Manny wants to play, he's still a really good hitter. I wouldn't want him for six months. But for a month, in this situation, he's perfect. …

"The time you want Manny is now. You want him motivated, when he needs to play, when he needs another contract and when you're not the team that needs to give him that contract."

• Manny happy returns: But that assessment above leads to our next question: Would anybody give Manny that contract for next year if (as expected) he wants more than a couple of million bucks, plus incentives, to go DH somewhere?

Manny Ramirez
Ramirez

In last week's Rumblings, we speculated that a $1-2 million base was all that Manny might find out there. But the same exec quoted earlier predicted he could find work as a DH for somewhere in the neighborhood of Vlad Guerrero money ($6.5 million, counting his buyout), depending "on September and how he finishes."

Two winters ago, you'll recall, the Dodgers were the only team interested. But that came after Manny's conscientious-objector, which-knee-did-I-hurt-again act in Boston. And our man was still looking for $20 million a year back then.

"And $20 million is a lot different than $6-8 million," the same exec said. "You're eliminating 80 percent of the market at $20 million. At $6-8 million, you're only eliminating a handful of teams. Big difference.

"So does he play well in September? Is he healthy enough to play? Is he motivated to play? If the answer to all those questions is yes, I think he gets a deal similar to what Vlad got."

But not everyone agrees. An official of one NL team, who has seen a lot of Manny this year, says what's become apparent is that the guy can still hit -- in short bursts. But the more he plays, the more he wears down. And the more he wears down, the more likely he is to break down. So he's "just not a full-time player anymore."

We agree with that. But we sure don't expect Scott Boras to market him as a part-time player this winter. So bet on Manny to sit out there on the unemployment rolls for a long, long time.

• What's the deal: While we're busy predicting the future, let's play this game with two pitchers who will be free agents this winter -- one who's had a good year (Bronson Arroyo) and one who's had a disastrous year (Kevin Millwood). This week, two scouts weigh in on whether they'd recommend those guys to their clubs.

Arroyo: "I'd sign him. He's been in a big market [Boston] and he's done well in a smaller market [Cincinnati]. He knows how to pitch, and he's fearless. Of course, he's got to be fearless with that slop he throws up there."

Millwood: "He'd have to get to a place like San Diego. The guy still competes, and he still gives you some veteran experience at the back end of your rotation. So in the right setting, in a pitchers' park, it might work out OK, but strictly in a complementary sense. He can't pitch in a smaller park anymore. He leaves so many four-seam fastballs up in the hitting zones. I don't know if he doesn't realize he can't pitch up there anymore. But if he doesn't, I don't know why he doesn't -- after all the long balls he's given up."

• L.A. state of mind: Teams have been waiting all month for the Dodgers to put Ted Lilly back on the waiver wire, with the assumption they'd be happy to move him and get something back at the end of a lost season. But teams that have felt out L.A. on Lilly's availability report they don't think the Dodgers are interested in trading him. If anything, after watching him win all five of his starts since the trade, they'd like to re-sign him. Which tells us that, at the very least, they probably would have no fear of offering him arbitration this winter.

• Waive goodbye: Every once in a while, this August waiver system works for the benefit of nobody. And the Cody Ross "deal" was the perfect example.

Cody Ross
Ross

The Marlins had a bunch of teams interested in trading for Ross in July, but hung on to him because they were still alive in the wild-card race. But those interested teams did not include the Giants, the team that was awarded the claim on him when the Fish finally put him on waivers in August.

So the Marlins couldn't make a deal with a team that didn't want Ross in the first place. And in the end, they decided to, essentially, punish the Giants for all their aggressive blocking activity this month -- by sticking the Giants with a player they didn't want or need and forcing them to pay all $1 million of his salary.

Maybe this winter, the Marlins can turn that $1 million into a free agent as useful as anyone they could have traded Ross for. But considering all the interest they had in him a month ago, we're not real certain of that.

• Split decision: The Phillies announced the surprise hiring of Bruce Sutter this week, ostensibly to work with their Double-A and Triple-A arms for the rest of the season. But sources said there was more to that move than just adding another minor league instructor to the old flow chart.

First, Sutter was brought in specifically to help tutor flame-balling right-hander Scott Mathieson on the art of throwing a splitter. Mathieson has come back from two Tommy John surgeries to light up radar guns and whiff 78 in only 59 1/3 Triple-A innings this year. But his lack of a second pitch has kept him stuck in the minor leagues, even though the Phillies have had yearlong bullpen issues.

But in the big picture, Sutter's hiring is a sign that the Phillies are concerned they may not have enough payroll flexibility this winter to upgrade their bullpen with veteran arms, and may not even be able to afford to keep any of their free-agent relievers (Chad Durbin, J.C. Romero and Jose Contreras). So they may have no choice but to find answers in their system. Which means they'd heave a sigh of relief if Sutter can make any kind of impact on potential 2011 bullpen options like Vance Worley, Michael Stutes, Michael Schwimer and J.C. Ramirez.

• Leaning left: When the Astros were dangling Roy Oswalt last month, their No. 1 target in the Phillies' system was 19-year-old Class A first baseman Jonathan Singleton. But the Phillies stationed Singleton at the top of their untouchables list, even though they're going to be set at first base (with Ryan Howard) through 2016. One scout recently called Singleton (currently hitting .295/.393/.483 at Lakewood) "one of the most exciting prospects in the entire minor leagues."

But for Singleton to ever play in Philadelphia, he's going to have to change positions. And scouts who have passed through Lakewood recently report that Singleton has begun taking fly balls in left field in pregame work. The Phillies also plan to send him to the Instructional League this fall to work more extensively on learning to play the outfield.

Buster Posey
Posey

• Busting loose: How 'bout this amazing stat on Buster Posey, which was passed along to us by loyal reader Daniel Rathman: In 334 career plate appearances, Posey has never made an out on a pop-up to the infield. Never. But that isn't even the most impressive thing about him.

"Most mature young guy I've ever seen in my life," teammate Aaron Rowand told Rumblings. "He gets it. It's all about winning with him, and doing things the right way. And that's something you don't see much anymore, especially with a guy as good as he is. He's got the talent and the brains."

• Tricks of the trade: When we outlined potential changes to the June draft in last week's Rumblings, we never got to one of our favorite ideas -- allowing teams to trade their picks. That still might not be imminent, but there's more support for doing it now than at any time since we've covered baseball.

"Just about everyone I talk to is in agreement with that," said an official of one AL team. "There's no reason not to do it anymore. The NFL and NBA do it. I think if we allowed trading picks, it would add sex appeal to our draft, which I think would be great."

• Moyer's hope: Most of the planet is assuming his season is over, and possibly his career. But Jamie Moyer hasn't gotten that memo. Even though he's 47 and had to walk off the mound in St. Louis last month with a serious elbow problem, he told Rumblings he hasn't even given up on pitching again this year.

He knows it's a long shot. He has a sprained ligament in his elbow. He hasn't been allowed to throw for over a month. He hasn't even been cleared to begin physical therapy yet. And there's only 5½ weeks left in the regular season, plus the postseason if the Phillies get there. Yet still, Moyer isn't giving up.

Jamie Moyer
Moyer

"I'm going to give myself the best chance I can to come back," he said. "Is it going to work? I don't know. But I think I owe it to myself to do everything possible to give myself that opportunity."

Moyer has had the elbow examined by Phillies doctor Michael Ciccotti and famed orthopedist Lewis Yocum. And both told him they saw no reason he shouldn't try rest and rehab instead of surgery, which would shut him down until 2012, when he'd be 49. So even after all these years, Moyer isn't ready to give up.

"I never envisioned my career ending with an injury," he said. "I always thought I'd know when it was time. But I don't want it to end this way."

The Rumblings Scouting Bureau

Once again this week, we check in with some of America's greatest scouting minds:

On Derrek Lee: "He can still hit a little, but not against guys who throw hard. He hits average pitching, and worse. But he doesn't hit the good velocity guys unless he guesses right. His bat's slowed down too much."

On Bill Hall: "I used to call him fool's gold. I guess now I'm fooled. He's had a chance to play more for this team [Boston] than he's had in the past, and it's brought out the best in him. He's still not a great hitter, but right now he's not missing mistakes."

On Gio Gonzalez: "I've watched him since high school, and I'm convinced he came out of the womb with a curveball. But now he's really maturing as a pitcher. He's got more confidence now. He doesn't lose his poise out there when somebody squares one up. He doesn't rattle like he used to and try to throw the next one 100 miles an hour. He pitches now. I'll tell you, he could be one of the surprises in baseball next year."

Quotes of the Week

From the great John Kruk, on Lou Piniella's abrupt retirement Sunday:

"I don't blame him. I've seen enough of the Cubs this year, too."

From Rays manager Joe Maddon, on whether he thought Johnny Damon should waive his no-trade clause and accept a trade to Boston:

"I think he needs to really, really understand what a great community Detroit is. It would be a great place to raise a family, even if he explores some of the suburbs -- for instance, Birmingham. It's a beautiful little enclave over there."

From Brewers broadcaster Bob Uecker, after the team unveiled its new statue of commissioner Bud Selig:

"Now, we've got to find out how to pay for this thing. I don't know. We'll pass the hat or something."

Tweet of the Week

Time for another greatest hit from the hilarious Twitter files of our go-to tweeter, "Late Show" genius Eric Stangel (@EricStangel):

MLB Fact: Kerry Wood has been on DL 14 times in his career. 1 more & he gets a free baseball signed by Mike Hampton!

Headliner of the Week

Finally, this just in from the witticists at sportspickle.com:

DESPERATE RED SOX SIGN JOHN FOGERTY
TO PLAY CENTERFIELD

Jayson Stark is a senior writer for ESPN.com. His latest book, "Worth The Wait: Tales of the 2008 Phillies," was published by Triumph Books and is available in bookstores and online. Click here to order a copy.

Jayson Stark | email

Senior Writer, ESPN.com