thoughts on the Mariners, MLB draft, and more homelinksdraftabout me

Salary Cap Is Not the Best Answer

In the wake of the most extravagant spending spree in Major League Baseball history (courtesy the Yankees), there have been many arguing that a salary cap is needed to keep such a spree from happening again. The most popular arguments are for the sake of being fair, and/or to stimulate parody within the league. Often, the NFL is cited as the golden example. However, the value of a salary cap is grossly overblown; it is not a panacea for any professional sports league. There are better ways for Major League Baseball to level the playing field some.

Three other major American professional sports leagues - the NFL, NBA, and NHL - have salary caps. The NHL only implemented theirs a few years ago with their most recent collective bargaining agreement, so it is too early to make any firm conclusions about how it has impacted their league. However, it is fair to study the NBA and NFL, and both should be studied.

It is true that the NFL enjoys parody. The Patriots have emerged as a dominant team in recent years, but there are plenty of challengers within striking distance. A total of 8 teams have won the Super Bowl in the last 10 years, with the Patriots being the only team to capture multiple titles in that span. Additionally, massive turn-arounds are possible, such as those by the Dolphins and Falcons this year.

However, it is hard to attribute parody to the NFL's salary cap when looking at the NBA. The Association also uses a salary cap, but does not enjoy the same level of parody. Only 5 teams have captured titles in the past 10 years, with both the Lakers and Spurs capturing multiple championships in that span. Additionally, the past decade does not include any of the Bulls' six championships in the 1990s, the Rockets' back-to-back championships in the early '90s, the Pistons' back-to-back championships at the turn of last decade, or the Lakers-Celtics rivalry that dominated the 1980s. In fact, the NBA has only had 8 different champions in the last 29 years! Furthermore, glancing at the NBA standings this year, there is clearly an elite tier and then everyone else, which is hardly a sign of parody.

While on the subject of parody, let's take a look at World Series champions. Remarkably, MLB matches the NFL with 8 different champions in the last 10 years. In that span, two teams won multiple titles, the Yankees and Red Sox. Considering fewer teams qualify for the MLB playoffs than in the NFL or NBA, the multitude of World Series champions is perhaps even more remarkable.

Of course, the way all three leagues operate has remained far from stagnant the past decade, so on some level this brief comparision is unfair to all of them. However, if a salary cap is as significant as many think it is, shouldn't the the NBA and NFL have significantly more parody than Major League Baseball right now? According to team payroll gaps they do, but when it comes to actual competition, they do not.

So, it seems plausible that other factors impact competitive balance besides a salary cap. A logical place to look is revenue sharing. Here, the NFL has a unique model thanks to all telecasts being packaged in national contracts. Consequently, the NFL can disperse all televesion revenues (conveniently their largest source of revenue) evenly to teams. So, while some teams make way more than others through other sources, every team is capable of spending the maximum money allowed on payroll by the salary cap. Meanwhile, both NBA and MLB franchises rely much more on local revenues, thanks to local television contracts and the structure of their seasons (since both the NBA and MLB have significantly longer regular seasons than the NFL, ticket sales are more significant and television contracts are not quite as lucrative). As a result, the operating budgets for teams in both leagues vary more than they do in the NFL. While the NBA keeps their elite teams in check with a salary cap, there have been teams that were not capable of spending all the way up to the salary cap. In baseball, the heavy reliance on local revenue is the source of the large payroll gaps.

Spreading money around in professional sports leagues is at least as important as a salary cap, because the cap will not equalize payrolls if only a handful of teams can reach the ceiling. Major League Baseball has taken significant steps to increase revenue sharing, and the payrolls for teams in smaller markets have increased more than big market ones. Those efforts need to be continued whether a cap is implemented or not, because it is every bit as important to making a salary cap truly work.

Another significant difference in baseball needs to be considered, namely an MLB team's ability to control players they drafted for a remarkably long time. An amateur player signed by a baseball team can theoretically stay under team control for around a decade before even being able to file for free agency. In the NBA, a rookie may have to wait up to three years, and in the NFL it is entirely dependent on the first contract they sign (for first-round picks those are often in the range of five to six years). Baseball players stay under team control for much longer, and more importantly, stay under team control below market value for several years, even in their primes. Teams that understand this system and exploit it through shrewd drafting and trades are the ones that compete with remarkably low payrolls. Neither the NFL nor the NBA has a model even remotely similar to this.

Hapharzadly adding a salary cap in Major League Baseball, just because the NFL has one and has parody, is a bad idea. They are very different leagues. If MLB added a salary cap right now, it may have an adverse impact on competitive balance. For argument's sake, let's set baseball's salary cap at $150 million. Basically only the Yankees would be impacted, with their payroll of around $200 million. Clearly, they can support that kind of monstrous payroll, so while they would have to shed lots of contracts (and talent), they also would end up with $50 million more to spend elsewhere.

Suppose the Yankees spent all that $50 million in amateur scouting. Already, many amateur players (especially Scott Boras clients) slip in the draft because teams are not willing to meet their high salary demands. That would not be much of a concern to rich teams that all of a sudden cannot spend their money on free agents. However, more importantly, international players are not even subject to a draft! They simply become free agents when they turn 16. Teams with lots to spend would likely build up their international scouting. If a salary cap were added right now, affluent teams may end up with a major advantage in amateur scouting, meaning they may end up sucking the life out of the system that allows teams with less money to compete right now. The advantage could very well end up neutralizing any advantages of leveling out team payrolls.

A salary cap is not the answer in Major League Baseball. The league already has more parody than it gets credit for. Giving small market teams more money to use, and regulating amateur scouting much more would be more productive steps to take. Those need to be taken anyway for a salary cap to work, and those alone may eliminate any need for a cap at all.