Revenue sharing differs across the major sports leagues in the United States. Depending on the Players Association and the terms negotiated in the Collective Bargaining Agreement, a league divides a specific percentage of national television, radio, cable, and broadcast revenues with teams and owners. The greater the share is going to the owners limits the amount that can be issued out to the players. With massive media deals being signed over recent years, professional leagues are generating huge revenues, but these profits don’t always result in improved products on the field or court.
MLB Collective Bargaining Agreement
Major League Baseball and the Players Association reached new labor terms for 2017 through 2021. Included in the Collective Bargaining Agreement is a policy regarding revenue sharing to combat the growing disparity in income among teams. Teams pay a percentage of their local revenue into the league’s ‘shared fund’, which is then allocated evenly amongst all of the teams. This is considered the Blended Net Local Revenue Pool.
The Revenue Sharing Formula, set forth in the Collective Bargaining Agreement, states that each club will contribute a percentage of the net local revenue from the three previous revenue sharing years in a blended average, including 50% of revenue from the previous year and 25% of revenue from two and three years prior. Depending on a team’s market, not all organizations qualify for a piece of the shared revenue. This provision assures that the playing field is closer to being leveled for small market teams that compete against teams based in markets such as New York, Boston, and Los Angeles.
The MLB’s Collective Bargaining Agreement states that “a principal objective of the Revenue Sharing Plan is to promote the growth of the Game and the industry on an individual Club and on an aggregate basis. Accordingly, each Club shall use its revenue sharing receipts … in an effort to improve its performance on the field.”  The revenue sharing provision promotes a greater sense of equity across the league, giving small-market teams more resources and making the league more competitive from the top to the bottom. Other than considering the market size, the Commissioner and League office review the attendance, revenues, payroll, player development investments, and capital spending plans of teams receiving shared revenue in an effort to maintain a high level of competitive effort. These teams have the burden of demonstrating this effort towards improving their competitiveness and overall financial position. Organizations that employ the strategy of ‘tanking’ and underperform to deliberately cut payroll, collect draft picks, or restock their farm system are damaging the brand of Major League Baseball. To protect against this practice, the MLB Players Association is permitted to file grievances with the league to ensure that revenue-sharing funds are being utilized to build rosters and compete, rather than being pocketed to mitigate losses.
NBA Collective Bargaining Agreement
One league where tanking is rampant is the National Basketball Association and the league office hasn’t seemed to take any action using shared revenues to combat this practice. An ESPN report showed that fourteen teams in the league, nearly half, lost money in the 2016 season when net income was considered. After including shared revenue, nine teams lost money, but surprisingly, the league produced $530 million in net profit. There is a great disparity between the highest and lowest revenue generating teams. As the League’s national revenues continue to grow, team salary caps also grow accordingly. However, it is the local revenues that a team generates to fund those higher player salaries. Revenue sharing in the NBA shifts money from the top-tier franchises in big markets to small-market teams that couldn’t possibly drive revenues of a similar magnitude.
The salary cap in the NBA is directly affected by league revenue, which continues to trend upward. Large market teams make the most money and cause the cap to increase, but can afford to build rosters with all-star talent while shelling out millions to small-market teams through revenue sharing. This creates a tension for small-market teams between spending and profit; they cannot afford to keep up with the growing salary cap. If a team isn’t interested in operating under the full capacity of the salary cap, they could shed salaries and tank in order to secure a high draft pick the following year. With poor on-court performance, the organization would not generate any significant income and would the receive a large revenue share to help offset the losses. Therefore, this organization could have a promising draft pick and a handout from the league at the conclusion of a losing season. The current terms of the League’s bargaining agreement do not include stipulations to prevent a team from collecting a similar size payment for consecutive years, meaning there is no incentive for a small-market team to pull themselves above the revenue-sharing threshold if they are not performing at a competitive level.
USWNT Collective Bargaining Agreement
One recent bargaining agreement in sports rectified a labor impasse, ensuring that the best product and team continued performing on the field. The U.S. Women’s National Soccer Team had been fighting for better pay after years of consistent success and reached a deal with U.S. Soccer in the spring of 2017. These negotiations initially gained steam as the women’s team was experiencing much more success than the men’s team, bringing home the World Cup in 2015. The wage dispute began with filed grievances over the women’s pay compared to the men’s, supported by financial data that reflected the millions of dollars more the women generated from their success on the field. The new collective bargaining agreement used that increase in generated revenue to fuel the raise in base salaries for national team players, with additional terms that gave players more control over licensing and marketing rights
The Players Association ratified a collective bargaining agreement that will last through 2021, inclusive of the 2019 World Cup and 2020 Summer Olympics. The agreement included a 30 percent increase in players’ base salary with the opportunity to match bonuses and grow a player’s income up to $200,000 or even $300,000 in a year. In addition to salary provisions, the terms included improved conditions both on and off the field, while the players secured more equitable pay. The national team’s collective bargaining agreement ensured that the League maintained a commitment to on-field performance and treating the national team equitably for their work. Without these improved terms, players could have refused to compete in the near future, damaging the brand of U.S. women’s soccer. This labor structure makes an immediate impact for the nation’s top players, while also ensuring the long-term development of the team.
Revenue sharing through collective bargaining agreements has been most impactful on player salaries. Higher revenues increase the amount of money that is being funneled into player salaries. However, unless organizations are committed to building competitive rosters, some leagues allow underperforming teams out on the field or court while the owners of those franchises continue to collect shared revenue checks. There is a careful balance to strike between revenue sharing, rebuilding a franchise, and competing hard in any professional sports league.