AUDIE CORNISH, host:
The Pittsburgh Pirates are terrible. They've got the worst record in baseball this year. They haven't had a winning season since 1992. And while they're setting a new standard for losing, the team's making money, lots of it. That was revealed in financial documents that leaked out this week.
David Berri, a sports economist at Southern Utah University, says it's all because of baseball's revenue sharing program. That's a kind of sports welfare that's designed to even the playing field.
Mr. DAVID BERRI (Economist, Southern Utah University): The idea was that the rich teams, like the New York Yankees, were winning because they had money, and teams like the Pirates were losing because they didn't have money. And so what they did is they said, okay, we're going to take some of the money from the Yankees, we're going to give it to the Pirates and the Pirates are then going to have more money to be more competitive.
And what these documents show is that the Pirates looked at the baseball landscape and essentially said, well, you're giving us about $39, 40 million a year. And so what we're going to do is rather than spend the money on players, we're just going to keep it.
So, the one avenue is Pirates spend money they might win or they can simply say, look, we're not going to spend the money. We're just going to have a payroll - this year their payroll's around 30 million - they're going to have a low payroll and we probably won't win, but that's okay because we get the revenue sharing money and we'll make a profit.
CORNISH: So give us an example...
Mr. BERRI: If they spend the money...
CORNISH: ...then of a team that does this well, you know, that gets the revenue sharing money and maybe does well without having to spend a whole lot more.
Mr. BERRI: Well, the Tampa Bay Rays have done pretty well, so they've gotten money and they've done very well. It is the case that in order to win in baseball, it really is ultimately a function of what players you acquire. And you can acquire players a number of different ways; one is you can acquire them on a free agent market; two, you can trade for players; and three, you can develop them through your farm system.
If you're a team like the Yankees, you get to use all three avenues. If you're a team at the lower end of the revenue streams, doesn't make as much money, you're going to rely more on player development. And what the revenue sharing program was designed to do is to give those teams a little more ability to go after trades or go after free agents. It's not going to make them the Yankees.
CORNISH: How does it affect the other teams, if a team like the Pirates actually gets better?
Mr. BERRI: This is another reason why from the perspective of richer teams why they're giving the money to the Pirates. The other teams are saying essentially, we would like you to be better; we'd like you to have a better product on the field so that when you come to our park, you're more competitive and we have a better ticket to sell. This is one of the peculiar things about sports.
When you think about Target and Wal-Mart, if Target goes out of business, Wal-Mart is really, really happy about that. But in sports, the Yankees have to have the Red Sox, okay? The Yankee fans may hate the Red Sox and the Red Sox fans may hate the Yankees, but if you went to those teams and said, if you had the power to exile that team from Major League Baseball so that you never had to see them again, would you do that? The fans might say, you bet I would...
(Soundbite of laughter)
Mr. BERRI: ...but the owners would say, that would be stupid. I sell a lot of tickets when that team shows up. I need that rivalry. The rivalry is very important.
CORNISH: Has this release of documents and this whole conversation prompt any rethinking of baseball's revenue sharing program?
Mr. BERRI: You know, there clearly is an incentive problem here. The Pirates simply don't have much of an incentive to spend the money. And if that's the case, then I think the Yankees and Red Sox are asking, then why are we giving it to you in the first place? Now, it's too early to say what kind of conversation they've had about this. But you would think that going forward, baseball owners are going to be saying, hey, you know, we need to be thinking about how this money is being distributed.
CORNISH: That's David Berri. He's an economist and co-author of the book, "Stumbling on Wins." He joined us from the studios of KOMY in St. George, Utah.
David Berri, thank you.
Mr. BERRI: Certainly.