Major League Baseball continues to see a gap between the haves and have-nots.
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Major League Baseball continues to see a growing disparity between the haves and have-nots of the 30 clubs. Here are some ways to address it.
Let’s start with some general truths: not all sports leagues are created equal. By baseball’s very design, salary caps that are in play in other sports become an apples and orange comparison to the National Pastime. Skill players on offense can play the entire game in basketball and football where game outcomes are more easily controlled. In baseball, star sluggers come to the plate every inning and a half or so. Your pitching ace is up in the rotation every four to five days.
For Major League Baseball, they see some additional issues. Whether it was timing, forward-thinking, or a combination of the two when the late NFL commissioner Pete Rozell got their league to agree to collectively share in television revenue, it created some additional equity between low and large revenue making clubs. While MLB would go on to have their national TV revenues centrally shared, local media rights created significant disparity between the likes of the Yankees, Dodgers, Cubs, and Red Sox, and those in smaller territories such as the Royals, Pirates, and Rays.
At the end of the 2024 season, final Luxury Tax payrolls showed a staggering gap. Of the nearly $6 billion spent on salary, bonus, benefits, and factors such as insurance, Spring Training allowances, etc. payrolls ranged from a high of $353,015,360 for the Dodgers, to $83,912,541 for the A’s. At the top, three clubs exceeded $300 million (Dodgers, Mets, Yankees), while just one (the A’s) was below $100 million. The median final luxury tax payroll was $180,516,750. Using trimean to exclude outliers in the Mets and A’s shows $191,336,786. The average salary for the top third of the league came to $281,340,295 while the bottom third averaged $121,343,069, a difference of $159,997,227 or nearly that of the Royals with 20th highest final Luxury Tax payroll.
Addressing economic disparity to create a more even playing field in terms of player salaries, is no easy solution. What the owners want and what the players want are distinctively different.
To start, a salary cap is a non-starter. Or rather, to get to a salary cap would require the owners locking out the players for a season or more. Such a work stoppage would harken to the ’94-’95 strike that wiped out the ’94 World Series and remains a stain on MLB. Given the inroads in creating increased engagement through rule changes, that has led to consecutive years of attendance increases, and high interest in the most recent World Series, such a nuclear option would erode these gains (and let’s be honest, the comeback after 1995 involved things that would now not take place such as the steroid era home run chase, and the iron man streak by Cal Ripken).
So, for the owners, it really is going to boil down to trying to further squeeze within the framework now in place. That would likely take the form of increasing the penalties around the Luxury Tax system, and things such as an international draft which would put club controls around foreign players that are now signed as free agents. As an example, over the course of the current labor deal, Luxury Tax penalties have risen nearly 300% from $78,489,606 in 2022 to $311,305,310 in 2024. Based on provisions within the CBA, Commissioner Rob Manfred sees $153,902,655 this off-season to allocate as revenue sharing on top of the centralized revenue sharing that comes with national TV rights, league sponsorship deals, etc. So, depending on whether the owners can gain continued changes around the Luxury Tax penalties, the pool could grow.
Something that Rob Manfred is also envisioning, and does not require the MLBPA to sign off on is creating a bundle of local media rights to sell to a streamer, with the revenue shared across the 30 clubs. A battle that will pit small revenue and large revenue clubs, the ability to get all 30 to agree to such a deal seems unlikely. The likes of the Dodgers, Yankees, and Cubs see little upside. Still, if Manfred can get a large percentage of the league into a bundle, it provides additional centralized revenue to try to address some of the disparity.
There are other methods that could come into play. While it has been somewhat overblown, tamping down on the use of deferred compensation could surface. The ability to defer pay to players well into the future relies on the idea that the financial stability of the clubs will be there a decade or more into the future which benefits the larger revenue clubs. Also, the league will assuredly continue to grow sponsorships outside of club sponsorship deals. That revenue is centralized.
More radically, Manfred could place caps on factors internal to the clubs that give advantages. Fans always focus on a salary cap, but investments in international scouting, development academies in places like the Dominican Republic, and being able to pay front-office personnel greatly favor the haves over the have-nots in MLB, and create an advantage across drafting, player development, and analytics.
None of this is easy, or potentially feasible given the dynamics between the league and the players, or within the ownership ranks. But, it’s impossible to ignore that with the implosion of the regional sports network bubble, and the growing wealth of clubs at the top, the tension internal to the club’s owners is growing. When the current labor deal expires on December 1, 2026, it seems near certain that a lockout will take place freezing free agent signings, trades, and the ability of players to report to club facilities. Whether regular season games are lost is the question. That came ever so close at the beginning of the 2022 season. It seems it could well happen in 2027.