Rob Manfred, Put on Your Thinking Cap
Every year, baseball fans preemptively get psyched for the upcoming MLB season. From the second that the World Series concludes until Opening Day, a majority of baseball fans have hope, both for a surplus of riveting offseason acquisitions and for a successful season. But there are also fans that are dreading their team’s future. These fans root for teams that seemingly have no shot at any sort of postseason contention, as well as teams that have no intention of spending any money or making any significant trades in the offseason. Why are some teams afraid to make moves while other organizations spend money big?
Major League Baseball actively enforces a luxury tax, rather than a salary cap, making it the only league of the four major American professional sports: National Basketball Association (NBA), National Football League (NFL), and the National Hockey League (NFL), to not have a salary cap on spending. Major League Baseball’s salary tax, also known as the Competitive Balance Tax, is an outdated model from 2002 that sets a limit of spending for teams before a tax penalty is distributed. The maximum spending number is declared in the Collective Bargaining Agreement each year, which is constituted by the Major League Baseball Players Association and Major League Baseball’s commissioner. As Jerry Trotta notes in his 12up article “MLB Luxury Tax Explained,” the luxury tax is a boundary that causes teams to pay a tax if they exceed the payroll threshold, and the tax will increase in cases where a team repeatedly exceeds the predetermined boundary. In essence, staying below the luxury tax is only a recommendation, and it is a recommendation that is often disregarded by richer teams.
Meanwhile, the NFL has a “hard cap.” These hard caps, similar to MLB’s salary tax, are enforced by their respective leagues in order to maintain balance between all teams and to ensure that no team has a spending advantage. Preventing big market teams from “buying championships” by signing all the best available players is the primary reason why the caps and taxes are created. However, hard caps allow no leniency, because according to the NHL and NFL collective bargaining agreements, any team that surpasses the hard cap is subject to any of the following: fines up to $5 million, loss of future draft picks, suspension or dismissal of team staff (typically the general manager or owner), voiding of player extension contracts, and forfeiture of games for the duration of a team circumventing the cap. In addition, any attempt to sign or extend a player’s contract, subsequently putting them over the salary cap, automatically issues the team a $25,000 fine.
The primary dilemma with the luxury tax, versus the hard cap, is that the luxury tax does not have a finite limit for spending, inviting big market teams to exceed it and gain an advantage. Teams such as the Yankees, Red Sox, and Dodgers are classified as “big market teams” due to their worldwide popularity, media market size/outreach, and city-based population. They are also some of the most valuable organizations in all of baseball. Nothing is stopping them from pursuing the premier and most expensive players every offseason, leaving the smaller markets to pick up the leftover scraps.
This cyclical process develops into an ugly mixture of tanking and dynasties, two concepts that many baseball fans are haunted by. Tanking teams discuss losing intentionally, behind closed doors of course, in order to receive better draft picks in the following year’s draft. Tanking severely impacts the quality of games and competition in those team’s respective leagues. Big market teams rarely tank because they have the financial means to add plenty of talent with the aid of their immense amount of revenue/income. Those big market teams quickly develop into dominating dynasties due to a lack of competition, often winning multiple championships within a decade or even just a few years.
Dynasties coexist with tanking teams, and as a result, attendance and tv ratings in the regular season and postseason decrease. Tanking teams eliminate the enjoyment and anticipation behind baseball games for fans of the tanking team and fans of the opposing team. Meanwhile, the same can be said for a dominant dynasty, especially when a World Series appearance is nearly bound to happen. The San Francisco Giants were in the midst of a legendary run that started in 2010 with a World Series title. They’d go on to win the 2012 World Series and the 2014 World Series, making them baseball’s latest dynasty. At the start of 2012 they were riddled with injuries, just as they were all of 2011, but everyone knew that they were going to be lethal after those players recovered. They ended up SWEEPING the Detroit Tigers, and according to the Baseball Almanac, that series had the lowest ratings (the percentage of households watching a program, game, etc.) of any World Series ever, even to this day. Of course, the Giants achieved this while the luxury tax system was already in full effect.
League parity, fan involvement, and team-construction are directly correlated. One of the main indicators of a sport’s popularity is team attendance numbers. According to the article “From Terrible Teams To Rising Costs: Why MLB Attendance Is Down Over 7% Since 2015,” written by Maury Brown of Forbes, “Since 2015, the last year that MLB saw a slight uptick, attendance has dropped 7.14%, or a loss of 5,265,268 fans purchasing tickets and attending games. For 2019, the league saw 14 clubs out of 30 with attendance declines from last season.” This drop in fan engagement is in large part due to widespread belief among general managers that their purchase(s) of players will not be enough to contend with the stacked big market teams in the playoffs. Revenues may be soaring, as his title reads, but the fans and popularity of the sport are more essential to the future of the game than revenue. And fans do not want to watch a league that lacks competitive balance, one where the current luxury tax rules benefit only a small percentage of teams while scaring the others away from improving the quality of players that they put on the field.
The NFL’s tv ratings and attendance is thriving due to their consistently entertaining and drama-filled regular seasons, postseasons, and off-seasons. These attributes are achieved via the hard cap because it encourages smaller market teams to spend money, thereby opening the door for them to compete on AND off the field with the bigger markets. Only 3 teams: the Cleveland Browns, Tampa Bay Buccaneers, and the New York Jets, have not made a postseason appearance since 2014. On the other hand, a whopping 8 teams in Major League Baseball, which is more than ¼ of the league’s teams, have experienced postseason droughts since 2014! Why is there such a difference? The hard salary cap. Less incentive to tank and more (but limited) spending due to the regulations of a hard cap creates parity in the NFL. As a result, they are the king of American professional sports while MLB continues to spiral downward in tv ratings and attendance.
Brown, M. (2019, October 4). From Terrible Teams To Rising Costs: Why MLB Attendance Is Down Over 7% Since 2015.
Trotta, J. (2019, December 13). MLB Luxury Tax Explained.