Revenue Sharing

In order to combat the growing revenue disparity among major league teams, MLB first instituted a revenue sharing program back in 1996. The plan was slowly phased in over a couple of years, and then was simplified and improved during the 2002 CBA negotiations. The current revenue sharing program has not changed much since then, with minor tweaks along the way. Although the plan is far from perfect, it has managed to give small market teams a much needed boost in order to keep them on somewhat-competitive footing with large market teams.

Under its current iteration, MLB’s revenue sharing program looks something like this:

● Every team in the majors pays in 31% of their net local revenue, and then that money is divided up and equally distributed to every team. Since large-market teams will have much greater local revenues than small market teams, this already puts small market teams in the black.

● On top of this, a large chunk of MLB’s central fund (which are acquired through things like national broadcasts) is set aside to be allocated to teams based on their revenues.

● By 2016, the fifteen teams in the largest markets in baseball will be disqualified from receiving revenue sharing. This feature is being phased in over the coming years. The disqualified clubs will receive a refund for the amount that they would have received in revenue sharing, although teams that have exceeded the Luxury Tax threshold in recent years will not receive a full refund. (MLB.com)

Links for Further Reading

Revenue Sharing, Luxury Tax Are Not The Same – Biz of Baseball

MLB’s Revenue Sharing Formula – CBS