For many years Major League Baseball had a stunning disparity of revenue between “big market” and “small market teams. In the NFL the major revenue source is network television and it is split into 32 equal shares. Each NFL team is receiving $170 million dollars this year. Although there are differentials in seat and sponsorship revenues, a salary cap insures that each team has enough payroll parity to remain competitive. In baseball, with 162 regular-season games and a spring training schedule, it has been local television and radio in addition to gate, which defines the capacity of teams to spend.
It is not only the size of a city but the size of a regional market that makes a difference in baseball. The enormous region surrounding New York, the No. 1 market in the nation, allowed the Yankees to own part of their own television network -- YES. They receive $90 million per season from their television contract and millions more from radio. Several years ago, the contrast between their local revenue from television and radio compared to Seattle was about 8 to 1. Baseball does not have an actual salary cap. The Yankees payroll is $197 million while San Diego and the Oakland A's are at $55 million.
Payroll does not necessarily equate to on-field dominance. Arizona has won a World Series and Tampa Bay has gone deep in the post-season. The A's are the surprise team this year even with a relatively skimpy payroll. Good scouting, maintenance of a superior farm system, excellence in administration, terrific field managers, team chemistry and motivation all play a role.
The ability of the Yankees or the Dodgers and Angels to sign high priced free agents does give them an advantage. The Dodgers make $100 million from their local television deal with Prime Ticket, of which they own 30 percent. The Angels receive $95 million and a 25 percent equity stake from Fox Sports West.
The revenue influx in Major League Baseball has been turned upside down with the recent signing of lucrative network television deals with Fox, ESPN and TBS.
Fox, which broadcasts a Saturday regular-season game each week under its current deal will double regular season game rights from 26 to 52 games under the new contract. Twelve of those will be telecast exclusively on Fox, but they have the right to telecast another 40 games, which will probably end up on their new national sports network. It is an eight-year deal for $4 billion dollars that gives teams $500 million dollars to share. It doubles the old deal, which was $257 million a year.
ESPN recently did their own eight-year deal for $5.6 billion dollars. This gives teams another $700 million to share. The old deal, in total, was for $700 million.
TBS did a recent eight-year deal for $2.4 billion. This doubles the previous contract. Altogether these television contracts total $12 billion or $1.5 billion a year for teams to split -- this doubles the $711 million they received previously. Each team will receive as much as $50 million per team.
Major League Baseball has enjoyed an extraordinary resurgence since the crippling strike of 1994 resulting in the cancelling of the entire playoffs and World Series. The following season saw a precipitous drop in attendance as angry fans boycotted. The record-breaking home run competition between Mark McGwire and Sammy Sosa saved the game. The labor peace that followed allowed the League to focus on new revenue sources. Naming rights, sponsorship, premiere seating, marketing and memorabilia and Fantasy Baseball all have flourished. The gross receipts quadrupled. Owners stopped complaining about their finances. The game had a resurgence in popularity.
The 2012 season and the new playoff format which adds a new wild card team has been remarkably exciting and popular. The Yankees and Orioles went to the end of the season virtually tied. The White Sox and Tigers fought right up to the end. The Washington Nationals emerged as a new powerhouse. Miguel Cabrera won the first Triple Crown in 45 years. Mike Trout set a new standard for electrifying rookie play. Add the doubling of national television revenue to local radio, gate and merchandising, and Major League Baseball is entering a Golden Age.
Is the National Hockey League paying attention?
-- Leigh Steinberg has represented many of the most successful athletes and coaches in football, basketball, baseball, hockey, boxing and golf, including the first overall pick in the NFL draft an unprecedented eight times, among more than 60 first-round selections. His clients have included Hall of Fame quarterbacks Steve Young, Troy Aikman and Warren Moon, and he served as the inspiration for the movie "Jerry Maguire." Follow him on Twitter @SteinbergSports.
