The Pittsburgh Pirates project to have a 2013 Opening Day payroll somewhere around $65 million, according to Pirates Prospects. While that would classify as the richest Opening Day roster in club history, it doesn’t necessarily point to a more spend-happy front office.
It’s a product of the growing MLB revenue sharing pie.
As the phrase goes, a rising tide lifts all boats. Teams like the Angels and Rangers have contributed huge monies into the revenue sharing pot by striking massive deals with regional sports networks (RSNs) in their local markets.
Just wait until the Guggenheim Dodgers hold a network bidding war for their next RSN deal in a metro area of nearly 18 million residents.
Baseball’s revenues have skyrocketed, and hardly because of lines at the turnstiles. Television contracts are becoming the main revenue artery in all sports leagues able to land major network and local deals.
Television providers are increasingly finding that live sports events are the last programming option able to convince viewers to purchase cable and satellite packages at a time when shows and events are increasingly viewed online and on-demand.
That means those RSN deals—which can be worth about 150 games that provide around three hours of programming—are growing increasingly richer. Baseball’s revenue sharing fund has grown as a result.
Teams now begin each offseason working with a great deal of house money with which to land star free agents.
Revenue sharing was instituted as a measure of ensuring competitive spending without instituting a salary cap, a hard-fought win for former MLBPA chief and current NHL lockout steward Donald Fehr.
Those clubs with greater revenues and more massive payrolls would help to fund teams in smaller markets through shared earnings and luxury tax payments, and the money paid would be a percentage of league revenues.
It’s a good thing, too, that those local deals go into the revenue sharing pie. The Pirates, for their part, don’t have much of a market from which to draw.
The Bucs have the 9th-highest local viewership of MLB’s 30 teams, but the number is a relative one, as Pittsburgh ranks as MLB’s 23rd-biggest TV market in terms of population.
In fact, for a team viewed as being profit-driven, the Pirates certainly didn’t do a good job of driving profits with their RSN deal.
The club finalized a 10-year contact with DirecTV subsidiary Root Sports in 2010, just before the Rangers started the shift toward megabucks RSN contracts with their $3 billion, 20-year deal.
Though not officially disclosed, it’s estimated that the Pirates make about $18 million per season on their deal with Root Sports.
Comparatively, the Cleveland Indians just completed a deal which pays $40 million per season.
Though the Indians draw fewer viewers than the Pirates and offer a commensurately poor product on the field, they had the good fortune of reaching a deal after the Rangers and Angels set the new paradigm.
Still, league revenue sharing means the Pirates won’t be hobbled by their own unfavorable deal. Baseball’s revenues have soared to record highs over the last decade or so, as have the total revenues of each of the big four North American sports leagues.
Baseball’s central piggy bank has grown, and now clubs are earning more than ever from revenue sharing.
The Pirates infamously profited from the system in the 2007 and 2008 seasons, when the club had payrolls worth about half of the average MLB roster while pocketing nearly $30 million in combined profits in those two seasons.
Bob Nutting has opened his wallet in recent years, at least on the surface. But despite relatively rich payouts like Russell Martin‘s $17 million contract and Andrew McCutchen‘s $51 million contract extension, the team payroll hasn’t exactly ballooned since those years.
Pirates Payrolls by Season
2013 - $66.424 million
2012 – $51.932 million
2011 – $44.485 million
2010 – $40.668 million
2009 – $52.736 million
2008 – $50.205 million
If the Pirates indeed carry a $65 million payroll to open the season, they’ll have finally fallen in line with the average MLB payroll—from 2001.
There are still future payments to consider. McCutchen’s contract will be worth $14.2 million in 2017 (versus $4.7 million in 2013), and players like Pedro Alvarez, Gerrit Cole and Jameson Taillon will be looking for contracts and extensions that won’t be cheap.
However, there is a tremendous amount of money going into revenue sharing, and the Pirates have barely increased their payroll in the years since 2007 and 2008, when they profited handsomely while tanking in the standings.
Even if the Pirates reach the $65-70 million threshold this April, it’s going to take a good deal more spending before their payroll falls in line with MLB averages, and before their actions fall in line with the expectations of a ball club focused on winning.