Editor's note: The above video is from Feb. 11, 2016.
The stadium staredown between the O.Co Coliseum co-tenant Raiders and A’s is being fueled by Major League Baseball’s revenue sharing program.
MLB teams participate in revenue sharing, a system that redistributes income from the richest franchises to their less profitable partners in an attempt to improve competitive balance. Under the 2012–2016 Collective Bargaining Agreement (CBA), each team contributes 34 percent of its net local revenue into a pool that gets divided equally among every team. Higher-earning clubs put in more than they get back while lower-earning clubs receive more than they put in.
A’s ownership has been uncharacteristically quiet on the Raiders' relocation merry-go-round and their specific plans to build a new stadium on Coliseum property. No matter how hard Oakland Mayor Libby Schaaf pushes to gain some traction for an A’s Howard Terminal ballpark, the A’s will bide their time since they have a guaranteed yearly profit whether they win the World Series or finish in last place. Every day that John Fisher wakes up as the majority owner, he is richer than the day prior.
The estimated revenue sharing check that the A’s deposited from their brethren in MLB was somewhere around $34 million last season. Since 2012, according to published reports, the A’s have received $114 million to support a club that was 28th in payroll spending.
Over the past four years the Marlins, Rays, Royals, Padres and A’s among other teams received a combined $642 million dollars. The franchises that keep on giving to them are the New York Yankees, Boston Red Sox, Chicago Cubs, Philadelphia Phillies and San Francisco Giants. The mountain of cash deposited since 2012 is a staggering $1.15 billion.
Revenue sharing was a divisive issue before and during the 1994-95 negotiations that led to a 7 1/2-month strike. Some teams that pay revenue sharing money have expressed anger at receiving clubs they think are not maximizing their local revenue. After a series of eight work stoppages from 1972 to 1995, baseball has had two decades of labor peace -- the longest current stretch among the major US professional leagues.
“I think that every one of the 30 team owners recognize that revenue sharing is part of the legacy of Bud Selig,” MLB Commissioner Rob Manfred said. “It’s helped produce tremendous competitive balance in our sport, and I think as of a result of those two realizations, it’s less controversial among the clubs than it probably was 20 years ago.”
MLB's revenue river flows to its teams through the following major business pipelines...
Major League Baseball agreed to an eight-year contract with ESPN in 2012. Its TV deal with Fox runs from 2014 through 2021. Baseball also generates additional revenue with Turner Sports, ESPN and MLB Network. The Fox and Turner deals add up to $6.8 billion.
Teams with their own regional sports networks generate large piles of cash that also go into the revenue sharing pot.
A major source of team revenue comes from LPCs (Little Pieces of Cardboard) aka tickets accounting for a third of MLB revenue. The average baseball ticket cost about $29 in 2015, but fans can pay as much as $97 for the league-wide average premium ticket, according to the 2015 Team Marketing Report.
Butts in seats mean dollars in the bank when fans shell out for food and drinks during the game. Concessions can bring in millions of dollars annually for popular teams. They brought in $53 million for the Yankees in 2013. Forbes calculates that parking and concessions contributed 7 percent of MLB revenues in 2014.
LICENSING & SPONSORSHIPS
While MLB doesn’t publicize merchandise sales figures, MarketWatch reports record sales of licensed MLB merchandise in recent years. Pay attention to how much Giants gear you see next time you are walking around. Major League Baseball has dozens of big-name sponsors: Bank of America, MasterCard, PepsiCo and Ford among them. Sponsorships contributed close to $700 million to MLB in 2014.
THE BOTTOM LINE
Until Major League Baseball changes its revenue sharing parameters, fans of the Raiders and A’s will be pawns in a game of monetary musical chairs.
Round and round you go. When the music stops where will the teams go?