Revenue-Split System Would be a 'Win-Win-Win' for MLB Owners, Players, and Fans

Revenue-Split System Would be a ‘Win-Win-Win’ for MLB Owners, Players, and Fans

Major League Baseball club valuations now trail their NHL counterparts in several markets (see: Tampa Bay, Colorado, Toronto, Detroit, Pittsburgh and Vegas Golden Knights/Athletics).

The revenue disparity between MLB’s haves and have nots, and the resulting competitive imbalance is to blame. For context, the 2015 Kansas City Royals were the league’s last championship team to hail from the bottom half by market size. The NFL and NHL each had five ‘bottom half champions’ over that same period (the NBA has had 2 in last 3 seasons).

A revenue-split system would level baseball’s playing field and lift club valuations. 

The problem is the union has publicly stated it will never accept the model, calling it a salary cap. That is despite it becoming increasingly obvious most players would benefit from that sort of framework. 

MLB players received 47% of total league revenues in 2024 (figure does not include the estimated ~$800mm in annual expenses that go toward minor league players represented by the MLBPA). By contrast, NFL, NBA, and NHL players all share ~50% of their respective leagues’ pie.

It is estimated that baseball’s players association has left ~$2.5bn on the table over the last three years by failing to tie compensation to revenues (assumes 50/50 split).

One must assume that savvier MLB players know they’re earning less in aggregate relative to revenues than their peers in the other big four leagues. 

But the MLBPA has long hung its hat on being the ‘strongest’ union in sports, in large part because it has refused to accept a salary cap. No one on that side of the table has been willing to give that position up–even if it no longer makes economic sense to maintain it.

MLB players didn’t always split a smaller piece of the pie than players in other leagues. Payroll as a share of total league revenues peaked at 56% in 2002. 

Since then, though, it has dropped off.

Clubs have started to act rationally within the constraints of the existing system. Most have come to realize it is inefficient –and unrealistic– to build through free agency (think: $10-$15mm/incremental win) when free spending teams like the Dodgers and Mets exist. 

For perspective, the Dodgers’ total payroll spend this year is projected to be $70mm more than the combined spend of the five teams with the lowest payrolls in baseball. 

So, many aren’t even trying and instead content to field rosters filled with young players making the minimum. It’s estimated that 70% of production (WAR) league-wide now comes from players under team control (i.e. not yet eligible for free agency). 

And as a result, the veteran middle class is being squeezed out of jobs (see: J.D. Martinez, Whit Merrifield). 

A salary cap system would kill multiple birds with one stone: the players would receive more money in aggregate (assuming a 50/50 revenue split, like the other leagues have), it would fix the wide team payroll disparity issues across the league, and if clubs are forced to spend to a floor, the calculus surrounding veterans and their intangibles will change.

If the players were to accept a cap, they might even be able to reduce the number of years under team control and/or push age-based free agency across aligning production curves with earning potential. Being a late bloomer cost Aaron Judge several hundred million dollars.

It’s hard to comprehend why a union responsible for serving the best interests of its entire constituency continues to embrace a system that serves a select few at the top of the pyramid (even if several of those individuals are represented by the same agent). But this is a group that has historically focused on raising the ceiling for its top players and relied on trickle-down economics, which is what has led to the current disparity in player salaries.

Sure, MLB’s top players would be worse off in a cap system–at least, in the short-term. Juan Soto would not have received a $700mm+ contract. His deal likely would have been more in line with what Anthony Edwards (5 years/$244.6mm), Shai Gilgeous-Alexander (4 years/$285m), or Jayson Tatum (5 years/$314mm) received.

But a rising tide lifts all boats. And a more competitive league will undoubtedly increase the size of the revenue pie over time. It’s easier to sell media rights packages, sponsorships, and tickets when fans nationwide have reason to hope and are engaged with the product.

Parity on the field should also increase the potential buyer pool and boost club valuations.

Billionaires buying in want to know they have a realistic chance to win, and it’s hard for prospective purchasers in many markets today to believe they’re going to be able to compete with the top spending clubs. The Mets and Dodgers’ combined payroll spend this season –$877mm– is projected to be larger than the total payroll spend of three individual divisions (AL Central/$612mm, NL Central/$666mm, AL West/$875mm)!

They also recognize that if the club manages to find a modicum of success, the sport’s economic disparity makes sustaining it nearly impossible (see: speculation the Pirates could trade Paul Skenes in his second season). So, they’re less inclined to bid on those clubs.

It’s hard to peg exactly how much a revenue-split system –and by proxy, competitive balance– would increase team valuations (in part, because it would be dependent on what the rev-share percentage is). However, one source familiar with baseball’s economics suggested the lift could be as much as 50%.

Think about it this way. Forbes values the average NBA franchise at $4.4 billion. It has the average MLB franchise at $2.3 billion; that is despite MLB generating more revenue than the NBA in 2024 ($12.1bn to $11.3bn). 

Of course, the players are going to have to come to their senses and recognize a deal is in the bulk of their best interests too.

The league’s current CBA runs through the end of the 2026 season.

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