I had a feeling a report like this would surface eventually, but I thought it would take until next offseason. Ken Rosenthal says the Yankees’ plan to get under the $189M luxury tax threshold might not be as lucrative as the team originally anticipated due to various goings-on around the league. I’ll let him explain…
Under the labor agreement, the 15 clubs in the largest markets will forfeit an increasing percentage of their revenue-sharing proceeds starting in 2013, and become ineligible for any such money by ’16.
The revenue-sharing funds that would have gone to those clubs then would be redistributed to payors such as the Yankees. The idea is to motivate certain big-market clubs — the Toronto Blue Jays, for example — to increase their revenues, knowing that they no longer would qualify for revenue-sharing money.
From that perspective, the plan appears to be working — the Blue Jays, Washington Nationals and Atlanta Braves are among the big-market clubs that anticipate higher revenues next season, according to major league sources.
Such developments would reduce the size of the market-disqualification pot — and in turn reduce the percentage of that pot the Yankees would receive.
In English, that means there were top 15 market size teams that were not among the top 15 revenue generators, like the Nationals and Blue Jays. Those teams received revenue sharing payments but are now disqualified under the new Collective Bargaining Agreement, and the money they would have been received goes back to the clubs that paid out. Since they’re generating more revenue though, they would have received a smaller piece of a revenue sharing pie and thus the Yankees won’t get back as much. Got it?
Rosenthal cites a Joel Sherman report I don’t remember seeing that says the Yankees anticipated $10M in revenue sharing savings by getting under the luxury tax threshold in 2014. That then jumps up to $40M (annually, I assume) if they continue to stay under in subsequent years, something Hal Steinbrenner has confirmed they will do. All of that is on top of the money saved by not paying the luxury tax, which is a decent chunk of change. Just based on the team’s revenue sharing number ($10M) plus the luxury tax (~$12M) plus the general payroll reduction (~$20M), the Yankees are looking at something like $42M in savings in 2014.
None of this is a guarantee, of course. If teams like the Blue Jays and Nationals don’t generate as much revenue as expected — or if (when, really) a revenue sharing payor like the Astros turns into a payee due to a revenue drop — the Yankees will get a larger rebate on their revenue sharing payment. We also have no idea how exactly they calculated their potential savings either, but I’m guessing the club evaluated several scenarios before deciding to scale back payroll. And yeah, I’m willing to bet at least one of those scenarios involves missing the postseason and losing out on millions in playoff revenue.