Friday, February 4, 2011
by Mike Jaggers-Radolf
Maher's obvious political metaphor aside, he was referring to the NFL's salary cap, its revenue sharing agreement and the perceived parity they contribute to the game. Was Maher's assertion correct? Does baseball need additional revenue sharing and a salary cap to reap the benefits of parity?
There are two components to this analysis. The first is the distribution of payrolls from the NFL. We can't project the impact of the successful NFL payroll policies onto baseball if those policies have been ineffective. The second component is the distribution of payrolls from MLB, to see if baseball lacks parity when compared to the NFL.
The graph below shows NFL payrolls by team, for 2008 and 2009, the most recent reliable data I could find. The data are sorted from largest payroll to lowest payroll for 2009, with the 2008 data presented for comparison. USA Today is the data source.
There is a strong suggestion of parity there, but the graph alone won't tell the whole story. To make some sense of it, see the chart below, which contains some basic measures of comparing the maximum and minimum payrolls in the NFL.
At first glance there isn't all that much parity there. In either season there is an obvious high team and the difference between the highest and lowest paid teams is a wealthy NHL team. If there is an accurate measure of parity, it would be the proportion of the median NFL salary to the maximum NFL salary, because this is a scaled measure of the difference between the middle payroll level and the team with the highest payroll in either season. That number is just a hair above 80%, which suggests some degree of parity. The real question is whether or not these ranges differ significantly from the payrolls in MLB.
The graph below is identical to the one provided for the NFL, except it has data for MLB teams for 2011, 2010 and 2009. The graph is ordered by the 2011 salary data, which are estimated and come from Baseball Reference. The 2010 and 2009 data came from Ask.com.
As before, the graph is important, but the real story will come from the measures that compare maximum, average and minimum salaries, which are posted below.
Comparing the two tables tells a lot. Obviously baseball has some outliers at the high end of its payroll scale, but the difference isn't all that extreme between the 2008 NFL high salary and any of the Yankee payrolls (come on, we all know who the prime offenders are here) from the past three seasons. The real story comes at the bottom end of the data, not the top. Despite having several teams each season with a higher payroll than the highest in the NFL, MLB has a lower median and average salary than the NFL each season. That outcome is surprising. If baseball's problem is its heavy spenders (the Yankees, Red Sox and Phillies, etc.) then its average salaries should skew upward when compared to the NFL. Instead, they skew downward, suggesting the lack of parity isn't due to the big spenders. It's due to the cheapskates.
The minimum salary in the NFL in 2009 was $81.8 million. That was higher than the median salary in baseball the same season. Fifteen teams in baseball had payrolls below the lowest NFL payroll that year. That same season 10 teams had payrolls below $70 million, almost the equal to the nine teams that had payrolls above $100 million in 2009. Can we still be so certain that baseball's problem is the high end of the payroll distribution? It looks as if it has at least as much of a problem at the bottom. Salary cap defenders will be quick to argue that the NFL has revenue-sharing, which helps its poorer teams compete with the wealthier ones, but that's a cop-out. MLB has revenue-sharing as well.
Maher was no different in his analysis than virtually all of the other sports' prognosticators who criticize baseball's lack of a salary cap. He left out a component of the sport's parity that is just as important, if not more important than its salary cap and revenue sharing program. The NFL has a salary floor as well, set to 75% of its salary cap in any given season. This aspect of the NFL's pay structure is almost never mentioned when baseball is criticized for lacking a salary cap. The Pirates and the Royals can't exist in the NFL because instead of pocketing their revenue-sharing dollars those teams would be forced to reinvest a large chunk of that money into their on-field products. Did I mention those two teams are profitable? Yet there are still those that think the Yankees are what's wrong with baseball.
These data suggest that a salary cap may be a useful tool to introduce more payroll parity in baseball (which I have not argued the sport needs -- that's another post) but it wouldn't be just to start there. Unlike football, baseball revenues are heavily localized. The Yankees' main revenue generator is the YES Network, not the money it gets from a TV deal with Fox. The network is a Yankee asset that the team built up to meet demand in its market, not a potentially shared resource the way a national TV network would be.
Why punish an organization that chooses to use its resources to put a better product on the field, especially when the on-the-field product helps every team in baseball? If baseball wants more payroll parity, the way the NFL has, the teams at the bottom of the payroll distribution are more obvious targets. If baseball had a salary floor, just like the NFL has, then teams like the Pirates and Royals would have to invest in their product, which in turn would attract more fans. If, after that, baseball fans not in the New York and Boston areas still scream for a salary cap, then maybe they have an argument, but they don't right now, not when the league has revenue-sharing and allows its cheapest spenders to pocket that money.