The Dodgers aren’t the villains here

The Mets aren’t either

Much ado has been made so far this offseason about the spending of the Los Angeles Dodgers. Of course, they aren’t the biggest spenders this off-season, those would be the New York Mets. Together, those teams have spent nearly as much ($1.3 billion) on free agents as the other 28 teams combined ($1.5 billion). The Mets alone have spent as much as the bottom 25 spenders. The payroll discrepancies in baseball are inarguably out of control, which has caused many to renew their cries for a salary cap.

However, a salary cap wouldn’t solve these issues.

I mentioned the bottom 25 spenders a moment ago. One of the reasons this is true is because the Mets spent a lot of money on a single free agent, Juan Soto. However, an arguably bigger reason this is true is because, according to Spotrac, five teams still haven’t spent a single, solitary penny on free agent contracts this offseason. A salary cap won’t fix that!

MLB doesn’t have a revenue problem, they have a Nutting problem. There are too many teams out there willing to just completely forgo spending cash. When confronted about it, they will complain that they simply can’t afford those contracts the Dodgers and Mets make. That isn’t true.

Baseball, as we are so often reminded these days, is a business. Teams are not chasing pennants, they are chasing profits. None of them would say no to a pennant, of course, those come with additional revenues after all! But given the choice between profits and pennants, every team except one seems willing to forgo the pennants every time.

That is, of course, their prerogative. It is still, as of now, at least, a free country. But that doesn’t mean we have to like it. And it especially doesn’t mean we have to accept their false explanations or parrot them to all our friends and random fans we meet on the internet.

JP Morgan put out an investment guide for pro sports franchises in June of 2024 that further highlights these issues. If you scroll down to page 34, almost every team is highlighted as having positive income, often in the tens of millions. You can see almost every team has seen income growth over the past five years, too. This despite the downturn that every business suffered during the pandemic, but which we can see MLB has bounced back from nicely according to these numbers. But they don’t even include what these teams can expect to collect in revenue sharing. Per the linked article about the Nutting problem:

Under the new collective bargaining agreement (CBA) negotiated in 2022, each MLB team pools 48 per cent of local revenues with the total amount split equally between all 30 teams. This results in each team taking in 3.3 per cent of the total—an estimated $110 million USD, if not more.

And, of course, anyone that complains about the Dodgers’ and Mets’ spending has to contend with the fact that the commissioner redirects some of the Luxury Tax proceeds to revenue sharing teams. And, well, if you buy that the TV deal issues are causing cash flow issues for teams, never fear. The league and MLBPA agreed to allow even more Luxury Tax money to be distributed to the affected teams.

Per Wikipedia, national TV deals alone account for at least $90 million distributed to every team. That information is outdated, but the numbers could have gone up since then – as they often do – and even if they went down, it’s unlikely to have been by much. There are seven teams below that threshold. The Nutting problem article indicates that the Pirates (whose owner, Bob Nutting, gives the problem its name) have regularly been able to cover their entire roster spending with just their gate revenue since 2007. Their payrolls have fluctuated between $38 million and just under $100 million in that span. They could be spending twice as much just with the national TV revenue and still bring in a profit thanks to revenue sharing and local TV.

We know from an Athletic article by Evan Drellich that the Athletics receive among the most revenue sharing in the sport at $70 million in addition to their national TV money and local TV money. But their payroll is still under $100 million.

MLB’s problem isn’t teams that are spending too much money. It continues to be that teams make the smart business choice to pocket the profits without needlessly spending to acquire championships that won’t earn them as much money as it would cost to acquire them. The most obvious solution would be a salary floor, but even if that somehow fixed everything, it seems impossible to ever implement.

Under the current circumstances, owners have no incentive to commit to such a thing. Certainly not one that would increase team spending in any meaningful way. However, players have too little incentive as well. The fight to get such a concession from the owners would be long and financially bloody for current major league players. Their careers are already short, sacrificing significant time to achieve such a thing would drastically hurt their own earning potential and likely help future players far more than they. And even that assumes they could get it without a salary cap – not particularly likely – which would also hurt earnings for future players.

I came into this thinking that a salary floor was not just the most obvious solution, but the only solution. But earlier this week, Meg Rowley joined us on the Royals Rundown Podcast and made several salient points. Michael Baumann posted an article yesterday that said some similar things. And, well, they convinced me. And it’s all thanks to Roki Sasaki.

Here’s the thing, it’s hugely frustrating that Sasaki, perhaps the best free agent available in MLB this season after his Japanese team posted him, signed with the team that consistently is in the top three of MLB in spending and signed two other Japanese superstars to their roster by promising more than one billion dollars to them combined and immediately won the World Series.

But…Sasaki didn’t sign a mega deal. He signed for less than $10 million. Any team could have afforded that. Most teams probably offered it. Some certainly offered more. He chose Los Angeles anyway. We can’t say with any certainty why exactly he chose Los Angeles, but what we can say is that it wasn’t the money. Money, then, is not the only reason free agents don’t sign with other teams.

And, actually, this makes a lot of sense. As Baumann points out, when Shohei Ohtani first arrived in the US, what team did he choose to play for? The Angels. Why? Because they were the ones who promised him an opportunity to both pitch and hit. Baumann further makes the point that LA is simply a nice place to live. I can toss in there that LA is one of the most comfortable places for a Japanese player to end up.

But it doesn’t have to be that way. Seattle was the preferred destination for Japanese players for many years; Mac Suzuki, Kaz Sasaki, and Hall of Famer Ichiro all got their start there. Like the Angels, you can offer players – Japanese or not – opportunities they won’t get with other clubs. Winning cultures don’t hurt, either. We’ve seen it with the Dodgers and Yankees, we’ve also seen it in the NFL with the Patriots dynasty as well as the team across the parking lot.* Chris Jones is one of if not the best defensive tackles in the game right now, and he never seriously considered playing anywhere else.

*Speaking of the NFL, how about the parity happening in that league with revenue sharing? The Chiefs have made seven straight AFC Championship games. Before them, it was pretty much always the Ravens, Patriots, or Steelers for years and years. Salary caps don’t guarantee parity!

As Meg pointed out on the podcast, teams can also improve their odds – and on the cheap, no less! – by spending money on infrastructure. The best scouts can improve the roster by pointing the team to better amateur and under-the-radar talent but cost a fraction of what a superstar player does. The Royals for years were behind in analytics and it prevented them from winning even while teams that spent similarly on the rosters made the playoffs for chunks of time such as the Moneyball Athletics and Tampa Bay Rays. They invested in improving it and suddenly even a moderately-sized free agent spending spree was enough to add 30 wins over the course of a single offseason!

So, no, the Dodgers aren’t the villains. Teams that spend a lot of money aren’t the villains. Because the other teams could make things much more interesting simply by making an effort. There are a variety of paths to that goal – some that cost more than others – but the goal could be achieved. Unfortunately, winning isn’t the goal for team owners. It’s making money. And hey, why spend 50% more on scouts if it isn’t going to increase your revenues because the ad money and revenue sharing come in regardless? Besides, most owners are using their teams as an anchor to their real business aims: real estate development. Whether the team is actually any good has little to no effect on those kinds of profits, and they don’t even have to share them with the rest of the league!

So, stop asking for a salary cap. It wouldn’t and shouldn’t happen. But also stop saying your favorite team can’t afford some coveted free agent or to win consistently. They may choose not to spend that money. The money, in rare cases such as Shohei Ohtani or Juan Soto, might even be enough that if they spent it they’d begin operating at a loss temporarily, but any team can afford any but the most extreme contracts out there. They simply choose not to do so. And they don’t need us to carry their water in addition to fattening their pocketbooks.