The MLB Revenue Totals Raise Questions–Just Not The Ones You Think

For all the concerns that the demise of baseball is imminent, it’s clear the game’s problems haven’t hit the bottom line. On Monday, Forbes reported that MLB saw a 16th-consecutive year of record revenues, hitting a mark of $10.3-billion this year. That number only includes baseball-related revenue, and does not include the sale of BAMTech for $2.58 billion in 2017.

Yet while Rob Manfred and the owners are proposing a celebratory toast, it’s hard for casual fans of the game to find the silver lining. While revenues have hit record highs, the total payroll of MLB teams dropped by $110 million, the first drop since 2004. Attendance at MLB ballparks fell by 4% in 2018. The highly-anticipated free agent class of the 2018 offseason has sputtered into another anemic Hot Stove. Manny Machado and Bryce Harper remain on the board, and thus far only Patrick Corbin has signed a nine-figure deal.

The easy conclusion is to say that MLB and team owners are a bunch of Scrooges, laughing gleefully while sitting atop mountains of money bags while fans and players pay the consequences. There is some truth to this. Baseball is a business; owners are in it to make money. Success on the field is not a prerequisite for profit off of it. Jeffrey Loria sold a miserable Marlins team for $1.2 billion. Peter Angelos, the owner of baseball’s worst team in 2018 (the Baltimore Orioles), is still worth over $2 billion. There is an argument to say that owners don’t care about winning because, at least in terms of profit, they don’t need to.

But owners do care about winning. Look at the joy on Jim Crane’s face when his Astros won the World Series in 2016, or on John William Henry’s when the Red Sox won last season. Look at how hard Mike Ilitch was trying to bring a World Series back to Detroit. These guys (and, unfortunately, team owners are predominantly male) aren’t just profit-driven robber barons: they’re sports fans just like you and me. They want to win.

And how do they win? They follow the formulas of recent success stories. They try to be the next Cubs, the next Astros, the next Red Sox. Teams that built their way to championships through amassing prospects and draft picks, teams loaded with young talent on affordable, long-term contracts. Teams that carefully pick and choose when to spend on a veteran free agent.

They’re not being miserly. They’re being competitive in the long term. Or, to use the more appropriate word for it: tanking.

Teams that have won championships in recent years have done so with a home-grown core of prospects. Teams that invested hundreds of millions of dollars in veteran free agents have been burned. The Orioles are stuck with five more years of Chris Davis at first base; the Tigers will suffer through to the end of Miguel Cabrera’s contract; the Angels will hope that Albert Pujols can produce any value for the $28-million they’ll pay him next season.

The Hot Stove has been cold not because team owners are loath to spend money; it’s because team owners don’t see big money free agents as the path to a future championship.

Though MLB’s record revenues cannot be used to explain the slow pace of the free agent market, they do present challenging questions to the future of baseball. The disparity between rising revenues and declining payrolls won’t please the MLBPA, and could lead to fierce disagreements during the next collective bargaining session. Short of a complete overhaul of the free agent system, it remains to be seen what sort of compromise could appease both the MLB and the MLBPA.

The increase in revenues should also prevent team owners from using lack of funds as an excuse not to pursue players. Executives like to speak of the luxury tax as a bogeyman in the night, but last season the Red Sox owed only $12-million for exceeding the luxury tax threshold of $206-million. Small market teams may have a tough time attracting free agents–Bryce Harper probably doesn’t want to spend his career in Kansas City or Pittsburgh–but every team in the league can afford to shell out for quality players, luxury tax be damned.

More embarrassing for MLB is the continued chorus that they cannot afford to pay minor league players. While major leaguers complain about their own depressed salaries, minor leaguers are barely paid a living wage. Many take jobs in the offseason to make ends meet, limiting the time they could spend training and improving. The fact that MLB continues to post record revenues while painting minor league players as greedy and uncompromising fuels the image of the miserly baseball owner.

Finally, baseball’s revenues shouldn’t be used as a way to ignore the very real problems facing the future of the game. The high revenues are inflated by bloated TV contracts and corporate sponsors. The money from those sources will only continue as long as baseball is seen as a worthwhile investment. The way to ensure that is to grow baseball’s popularity, particularly among younger fans. Owners need to find ways to grow the game. Offer cheaper tickets and concessions, especially to families. Invest more in youth baseball leagues. Promote international efforts to grow the game overseas in South America, Europe, and Asia. While the revenues may be great now, MLB needs to reinvest their profits wisely to ensure the future of the sport and, in turn, their own continued financial benefits.