Tuesday, February 24, 2015

A's Revenue Sharing Funds Could Dry Up After 2016

It seems so long ago, but Major League Baseball's current Collective Bargaining Agreement (CBA) is inching closer to its expiration at the end of the 2016 season. For most fans, this governing document is the inside-baseball of baseball and something that is hardly given a second thought, let alone a first one -- especially in an era of labor peace. However, as discussed here, the CBA contains an expiring provision that greatly impacts the assumedly Coliseum-dwelling Athletics:



The 2012 agreement sunset revenue sharing for "Big Market" clubs, carving out a notable exception for the Athletics. It's worth noting that this was necessary as the Bay Area is objectively not a "Small Market." Those who drafted the CBA were optimistic that the A's would have a new home by 2016. By all indications, the team may be either in the limbo it is in now with the Raiders, or counting down the days until it must vacate the Coliseum for a Raiders-centered "Coliseum City." The third option, that the A's are developers of "Coliseum City" is possible, but seemingly the least likely given ownerships public stance. And a fourth, a move to San Jose, seems highly improbable based on today's outlook.

One other outcome is that the players involved vis-a-vis ownership could shift. However, you don't name a training facility after yourself (as Lew Wolff did) if you are thinking about cashing out.

The Athletics received $32M in revenue sharing in 2011(the latest year data is available) and 2014 team revenue per the annual Forbes "Business of Baseball" report was $187M. This means that fully 17 percent of the club's revenue -- on a very good year attendance-wise -- is tied to funds that may evaporate come the start of the 2017 season.

Looked at another way, Forbes pegged the team's operating profit at $27.4M in 2014, meaning the loss of revenue sharing -- assuming a similar payroll -- would make the team a money-loser at the tune of -$4.6M. As Wolff and Co. have noted that they are only interested in running a profitable ballclub, one can safely assume that payroll would be capped much lower in a world without revenue sharing.

It's a sad state of affairs when a team sitting in the Metropolitan Statistic Area with the highest median household income needs its own personal welfare provision in a billion dollar league. However, that's what you get for a decade plus of studying without action.

Assuming the "A's Stadium Exemption" isn't inserted into the next CBA, the Athletics payroll will likely have a shorter ceiling and may create a non-virtuous revenue cycle:

less money = fewer quality players = more trading, more rebuilding, shorter competitive windows = decreased attendance = less money.

The simple answer is to put the Athletics on a solid path to a new stadium.

2 comments:

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