A New New York Baseball Team?


Baseball owners and players have been negotiating how to make it easier for poorer teams to compete with richer teams, especially the New York Yankees. Proposals include revenue sharing between the clubs and a luxury tax that would penalize teams that spend above a certain limit.

But there's a far simpler solution to the problem of competitive balance: Put a third Major League Baseball team into the New York area. New York teams possess an enormous advantage because of the outsized economic clout of the region, which accounts for fully 10% of the country's personal income all by itself. A richer and broader fan base means more TV money and more cash to spend on players, leading to competitive advantage.

Adding a third team -- either by expansion or by moving a team from a smaller region -- would provide more competition for TV and fan dollars for the Yankees as well as for the Mets. This would substantially reduce the Yankees' economic edge without creating complicated tax or revenue-transfer mechanisms.

WAY AHEAD. One way to see this is to look at the economic base for each team in baseball, which BusinessWeek defines as the total personal income for its region divided by the number of teams. The New York metropolitan region -- including Long Island, Westchester, and parts of New Jersey -- generated $836 billion in personal income in 2000, according to the most recent data from the Commerce Dept. So the two New York teams have an economic base of $418 billion each.

That's far ahead of any other team in baseball. Next on the list are the Baltimore Orioles, which has an economic base of $284 billion, including the Washington (D.C.) area. Close behind are the two Los Angeles teams and the Boston Red Sox.

Another team in the New York area -- perhaps located at the Meadowlands in New Jersey -- would reduce the economic base of the existing New York teams down to $279 billion. While still high, it would no longer be out of line with the rest of the league.

FIELDER'S CHOICE? Moreover, such a move would go a long way toward restoring competitive balance across the entire league, because it turns out that the two New York teams account for the entire advantage of rich teams in recent years. The Yankees and Mets have turned in a winning percentage of .561 from 1995 to 2001. The next 10 teams with the biggest economic bases have a winning percentage of only .497 over the same stretch.

This solution isn't on the table now. But the Yankees and Mets might well prefer having another team enter the market than face an onerous luxury tax on their payrolls -- especially if they got a big expansion fee up front. By Michael J. Mandel in New York


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