Revenue Sharing is the MLB system by which big market teams share a certain percentage of their profits with the smaller market teams to off-set the natural advantage they have of playing in a big market.  The Yankees and Red Sox naturally have more fans than say the Pirates or the Marlin because they just simply play in more densely populated areas.

Since 2002, the rule has been on the books that money a team gets for revenue sharing must be used to improve the team.  The definition of improving the team has long been debated however.  Paying off debt or putting the money towards payments to build a new stadium counted, as long term the new stadium and all of its revenue streams would help the team raise payroll.  The Reds were allowed to use their revenue sharing money to help finance Great American Ballpark, for example, and payroll has increased since its opening. (Though maybe not as quickly as Reds fans would have liked.)

Teams also must stay within a prescribed debt to income ratio, where debt can only be 10 times EBiTDA (earnings before interest, taxes, depreciation and ammortization).  MLB monitors this pretty closely, and is part of the reason Tom Hicks has to sell the Rangers- because his ratio had gotten too high.

So its interesting that MLB and the Player’s union has come out together to basically tell the Marlins they are not using their revenue sharing to improve the on-field product.  Presumably, the money they have received is partly going towards their new stadium, but the joint statement issued yesterday form MLB the MLBPU and the Marlins suggests that on paper it has not appeared that the money is directly affecting on-field product.  This Ken Belson and Richard Sandomir piece has some interesting quotes from Frank Coonelly President of the Pittsburgh Pirates, explaining how his team has poured money into its player development, scouting and foreign born free-agents.   That is something the average fan doesn’t see, yet clearly does affect the on-field performance of the team.  Apparently, the Marlins have not done enough on that front to appease the player’s union.

The Union is involved because the use of revenue sharing affects their members.  If the teams that receive money aren’t willing to spend that money on players, there are fewer teams bidding on the most expensive free agents.  Agents need all 30 teams to be in the mix to be able to guarantee their clients the best possible salary.  If the Marlins aren’t willing to sign any free agents, then that decreases the competition for any single player, and makes the market tighter.

But here is the thing about the Marlins. As Clark Spenser, a reporter for the Miami Herald, points out, the Marlins have won more games since their current ownership group was put in place than the New York Mets- even going to the World Series in 2003, without spending a ton of money.  They finished second in the NL East with 87 wins despite having the lowest payroll in baseball.  Also currently, they play in a stadium where they get little money from tickets sold, from parking, suite rental, and even from sponsorships that include signage in the stadium.  Most of those funds go to the owner of the stadium.

So why should a team that is having success on the field be required to pay players more?  Why should the union tell a team that they simply must bid on free agents?  It doesn’t really seem right.  But here is the thing.  MLB and the Marlins have worked very hard to convince the citizens of Miami and of Florida at large to build help them build a stadium.  The team, and MLB, owes those fans an opportunity to win- or at least the ability to be able to believe that they could very easily be back in the World Series again.  Despite the fact that no one comes to games, there are Marlins fans.  The Marlins have one of the best rated television audiences among Major League Baseball teams.  But those fans don’t believe that their team will do whatever it takes to make the playoffs, and that is the reason why MLB does this.  At least in this way, they are showing fans of MLB that the league takes this part of the covenant they share with the fans very seriously.  When pitchers and catchers report, every fan must feel they are a part of something, and that their team can win.  Good job on this one MLB- even if it took the Player’s Union to make sure it got done.