Finances: A Proposal

OK, I've given this a bit of thought and came up with the following idea.

I believe that success should be rewarded and failure should have its consequences.  On the other hand, we don't want to see one team get so far ahead that it's impossible to catch them ever again, nor do we want to see a team fall so far behind that they become the St. Louis Browns of the league.

I decided to focus on the media revenue in my proposal for two reasons:  (a)  It's the bulk of the money a team has in its budget and (b) its not under a team's control (unlike gate revenue which, to a degree, is under a team's control).

My thought was that teams should be rewarded for winning.  As such, I figured we could set the media revenue to a base number for the league (I used the current league median in the example below) and then increase or decrease that amount based on the team's performance the previous year, with the proviso that no team (no matter how well you do) can go above 20% over that base figure and no team (no matter how poorly they do) can go below 20% under the base figure.

The current league median for media revenue is 95,833,332, so the highest anyone's media revenue could reach (with that figure) would be about $115m and the lowest it could get to would be $76m.  The figure for each team would be adjusted based on the number of wins the team has.  So, the more games you win, the higher your media revenue will be the next year and the fewer games you win, the less your revenue will be (subject to the +/- 20% league median maximum and minimum).

Another thing I wanted to make sure of was that a team's previous successes weren't wiped out because of one bad year (or that a team is unduly rewarded for one good year).  So, if a team won 98 games one year and then, due to injuries or other bad luck dropped to 60 the next year, I didn't want to see their revenue simply plummet to the floor.  To counter this, I calculated a team's performance as a weighted average of the previous three seasons (weighted 50/33.33/16.66).

I also figured that if a team has a .600 winning percentage, that would be considered a "fully successful season" and a .400 winning percentage would be a "fully unsuccessful season."  A .600 winning percentage is about 97 wins and a .400 winning percentage is about 65 wins.  So, no team would receive extra revenue for anything over 97 wins, nor would a team be penalized for anything under 65 wins.  This would also put a brake on runaway success or failure affecting the revenues.  A team with 81 wins (a .500 record) should, by definition, be neither rewarded nor penalized - their revenue should stay the same.

By dividing the revenue range by the range of wins where performance matters, we come to a total of about $580k per win.  So, for every win between 81 and 97 in the weighted average, the team would gain an additional $580k in revenue.  For each loss between 65 and 81, they would lose the same amount (again, subject to the minimum and maximum).

Have I completely confused you yet?  I thought so.  Let me give you an example.

Take a look at the spreadsheet linked here and go to the 2028 tab.

The median revenue for last year was about $95.8m (cell E2).  The amount per win is about $580k (cell C10).

Brooklyn, for example, had 69 wins last year, 85 the year before and 82 the year before that.  When weighted, that gives an average of 77 wins.  Since that's four games below .500, their revenue would decrease by 4*$580k, giving them a revenue for the next year of about $93.5.

Highland's average is only 57 wins, but since we're not penalizing below 65, they are treated as if they had 65 wins, which is 16 games below .500.  Likewise, Seattle is at 115 victories, which is 34 games over .500.  However, they are treated as if they had 97, which is the maximum amount, so they gain 16*$580k (about $13m).

The new revenue totals are carried forward to the next year and recalculated based on the median value for that year.  And so on.  I created tabs with made up win totals for the next few years, just to illustrate how this works.

Also, take a look at the 2031 tab.  For that season, I created a collapse for Seattle, where they only won 67 games.  Because we're using a weighted average, Seattle's revenue is not going to suddenly plummet.  They still have the strength of the previous two seasons to keep them at the maximum revenue.  However, if they were to have another bad season (see 2032), then they would start to see their revenue drop.

Likewise, I created a spike for Highland in 2032, going from 60 wins to 99.  This brought their weighted average up to 79 (from only 57 the year before).  As a result, their situation improves, but they don't end up suddenly end up flush with cash, because they still need another good season to bring their average up over the .500 mark.

To summarize:

• At the beginning of each year, the median media revenue is calculated and, based on that, a ceiling and floor of 20% in each direction are created.
• Team records for the three previous seasons are weighted to get a win total and revenue is added or subtracted based on that win total (with a floor of 65 wins and a ceiling of 97 wins).
• If a team's revenue would fall below the floor or above the ceiling, then the totals are adjusted for those teams.

Any questions?  I don't want to make this a formal vote, just a session for getting input.  I'll also make my Excel spreadsheet available to anyone who wants it (just email me) so that you can play with the numbers yourself.

Zev