Thursday, July 21, 2011

Cap or no cap?

With the NFL on the verge of labor peace and baseball working toward a new labor pact, it's a good time to look at our old pal, the salary cap.

A big piece in the NFL's economic puzzle, the cap is also good fodder for sports debate, more so in San Diego, where some fans and folks in the press see it as a tool to help the Padres. "Look at football and basketball," they say. "Baseball needs a cap, too, so teams like the Padres can have a chance. Without a cap on spending, the rich teams will rule the sport."

Maybe the cap crowd has a good point, but it seems one should look first at how each sport shares its revenues, and once one does that, the cap talk seems beside the point.

In the NFL, all the TV deals are national in scope, with TV money going into the NFL pot and then out to each club in equal shares. TV rights fees being the No. 1 source of cash by far in both sports, football clubs thus have similar revenues across the board relative to baseball clubs.

Bear in mind that the NFL has a spending floor, which goes with having a salary cap. Based on the new deal, each NFL team must spend at least 90 percent of the $120 million cap.

Now, let's look closer at how baseball shares its revenues.

Baseball lets its teams do their own TV deals and keep most of the money from those deals. The spread in those sums is vast -- the Yankees, Red Sox and Phillies, for example, generate (and keep) far more local TV money than do the Padres, Royals and Pirates.

Baseball does redistribute some of its revenues, but without a TV structure similar to football's to further level revenues, teams like the Padres may not want a cap-and-floor. (Without a floor, there can be no cap, as the union and the big market clubs would never OK a deal without it.)

A quick look at the new NFL deal: The salary cap drops to $120 million per team, while players salaries  fall to about 47 percent of gross revenues.

 Baseball doesn't have a cap, yet its players salaries over the last few decades has been somewhere in the 50-52 percent range. The Padres have revenues of about $150 million, including the help they get from major league baseball. Assuming, then, a cap at 50 percent of revenues and a floor of 90 percent of cap, the Padres would have a payroll of $68 million to $75 million. The Yankees, with revenues of $500 million, would have a franchise-record payroll of $250 million, assuming they spent to the cap.

Exactly how are the Padres coming out ahead if there's a cap? Under Jeff Moorad, the three player payrolls have averaged about $43 million. With a cap (and the floor that comes with it), the Padres would have to spend another $30 million on major league players. Just a guess here, but Moorad would agree to shave his beard and also club president Tom Garfinkel's head sooner than he'd agree to a new labor pact that makes him add some $30 million in player payroll. The Yankees, meantime, would be allowed to spend as much or more as they spend now.

The point seems to be that baseball can't have a cap formula that works unless it also changes how it generates and shares TV money, given that its clubs' revenues are so disparate. The genius of former NFL commissioner Pete Rozelle was that he got owners from New York and Chicago and Los Angeles to give up the chance to do local TV deals and also got them to let the NFL dole out the TV money equally among all the clubs. The notion that baseball will do the same, leaving, say, Kansas City with  the same amount of TV money as the Yankees, seems beyond farfetched. More likely, even if baseball finds other ways to distribute its revenues, its only caps will be those worn by players, coaches, managers and fans.

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