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In 2000, three seasons after the institution of a revenue sharing plan, Major League Baseball commissioned the Blue Ribbon Panel to assess competitive balance within the league. Their report found that small market teams are at a considerable disadvantage due to the larger revenue bases of teams located in more heavily populated areas. However, these results have often been challenged. This thesis builds upon existing models in an attempt to determine the extent to which market size and local revenue independently affect competitive balance. Additionally, it seeks to analyze any effects of baseball's revenue sharing plan on competitive balance. While the findings support the claim that revenue sharing enhances competitive balance, they fail to establish market size as a positive determinant of local revenue.
Starting with a major survey of the economics of sport, this volume involves primarily a comparison of the European and American models of sport, how to restructure leagues to make them more competitive, the analysis of gate-sharing mechanisms, the economic impact of promotion and relegation and a comparison of broadcasting regimes.
There has been an inequality in payroll among Major League Baseball teams for many years that became increasingly evident in the late 1990s. Revenue disparities among teams cause a competitive imbalance for the league and make it harder for small-market teams to compete with large-market teams with much higher payrolls. MLB has attempted to alleviate this disparity, but the implementation of revenue sharing and the competitive balance tax alone is not enough for small-market clubs to build a competitive team. There are a number of ways that small-market clubs can build a competitive team despite limited resources, including employing the moneyball hypothesis, quantifying market inefficiencies, utilizing the team’s farm system, taking advantage of trade opportunities, and making intelligent contract decisions.

Baseball's Revenue Gap

United States. Congress. Senate. Committee on the Judiciary. Subcommittee on Antitrust, Business Rights, and Competition

Published: 2001

Total Pages: 98


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As the season draws to a close and postseason play begins, this book offers a fascinating look at the ledgers that prop up America's favorite sport. Zimbalist chronicles the evolution of the baseball business from the Civil War through today in this eye-opening account of greed, abuse of the public trust, and poor management that threatens the future of the game. Index.
Fans of baseball, football, basketball, and hockey have long been exploited and oppressed by the monopolistic practices of team owners. The time has come for a revolution in the organization of major U.S. sports! Fans of the World, Unite! is a clarion call to sports fans. Appealing to anyone who is in despair due to the greed and incompetence of team owners, this book proposes a significant restructuring of sports leagues. It sets out a rational program for a revolution that will serve the best interests of the fans and of the sport itself. But Stephen F. Ross and Stefan Szymanski are no Marxists: they show how a revolution in the organization of sports might even benefit the owners. By harnessing the power of markets, sports leagues can be made both more responsive to the needs of the fans, and more efficient. Ross and Szymanski have spent many years evaluating the ways in which leagues work across the globe. Drawing on their extensive study of leagues, the authors boil down their plan to two major reforms. Borrowing from NASCAR, they propose that team owners should not own sports leagues as well. Rather, league ownership should be separate. Their second proposal is drawn from soccer: introduce competition through a promotion and relegation system. In this type of system, the worst teams in the league are kicked out at the end of the season and replaced by the best performing teams in the next division down. This gives poor performing teams incentive to step up their game, and allows fresh blood to enter the leagues if the poor performers fail to do so. The main goal of these reforms is to align the financial interest of those who own the league with the best interests of the fans and the sport. Having laid out the problem and the solution, the authors skillfully address practical implications of introducing their scheme, suggesting how leagues might at least make some changes, if not all of those suggested. The time for change has come! Armed with this book, and with fairness on their side, fans can set forth to begin a revolution.