Major League Baseball is, for all intents and purposes, the last major sports league without a salary cap.
The NFL, NBA and NHL all have systems which index team spending to revenue and virtually guarantee profits for owners.
Even the English Premier League, whose economics make very little sense, are introducing a set of rules which will limit expenditure transfer and wage market expenditure to a percentage of turnover.
But while the MLB has league-wide revenue sharing and a sophisticated infrastructure which makes it phenomenally lucrative for its investors, wages have exploded in recent years.
Four of the top-10 biggest contracts in the history of sports were signed by Juan Soto, Shohei Otani, Vladimir Guerrero Jr, and Mike Trout.
Granted, hundreds of millions of dollars from those deals are wrapped up in deferred income and spread out over ultra-long terms when compared to, say, soccer of the NFL.
But the dollar amounts committed by the biggest baseball franchises are astonishing all the same. In total, the 30 MLB teams have pledged over $6.5bn in payroll and taxes. The LA Dodgers alone account for about $590m, nearly nine per cent of the total.
Average revenues meanwhile are about $378m across the American and National League, though there is a big variance between the highest earners (Dodgers: $752m) and the lowest (Athletics: $252m).
The wild discrepancy and the knock-on effect on competitive balance is among the reasons that the vast majority of team owners and swathes of fans want a salary cap, with a hard limit of $245.3m proposed.
Support is nowhere near universal, of course. The MLB Player Association, unsurprisingly, is flatly opposed, as are the agents who represent them.
If a lockout is avoided and MLB are successful with their coordinated PR push for a salary cap, it could have a seismic impact on franchise valuations.
Currently, most experts have the average franchise valuation in MLB pegged at about $2.9bn. The most recent transaction, which saw the Seidler family agree to sell control of the Padres to a group led by José E. Feliciano and Kwanza Jones, was worth $3.9bn – a new record, but still well, well short of the valuations ascribed to NFL and NBA teams, where $5-10bn is becoming the norm.
Speaking exclusively to HITC, sports finance expert Professor Kieran Maguire of the University of Liverpool in the UK forecasted that, if a salary cap is introduced in MLB, the league could begin to narrow that gap.
“Investors are always worried about risk,” he said, “and you want a positive cash return.
“How do you de-risk that? You de-risk it through guaranteed revenue increases or guaranteed cost controls. This deal [the salary cap] is the latter. It does mean that part of the budgeting can be done with more confidence. When you’re looking at selling franchises, you can say that this is the system that you’re going to inherit.
“On the back of that, those franchises are more attractive to investors.
“By having a franchise product where the number of franchises is also capped, you’re also creating artificial scarcity. Economics 101 says that has only one impact on prices.”
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