Rich Tradition

The New York Yankees might be a .500 team in today’s American League standings. In baseball’s financial standings, however, the Yankees are in a league of their own.

Despite the lack of a new ballpark so critical to treasuries across the major leagues, the Yankees rake in roughly twice as much cash as the average team. With October reinstated on the Yankee calendar every year, record crowds filling a historic stadium and owner George Steinbrenner launching a cable television network for his team, the money rolls in.

And, despite baseball’s attempts to rein in the team’s spending with revenue sharing and a luxury tax, the gap between the Yankees and the rest of baseball shows no sign of narrowing.

Last season, the Yankees generated about $145 million in revenue from ticket sales and cable television -- without selling a single hot dog or beer, without renting a single parking space or luxury suite, without a dollar in advertising sales or radio rights.

The Dodgers, in the largest media market outside New York, generated about $150 million in total revenue. The Angels generated about $120 million, slightly below the major league average. The Yankees topped the list at close to $260 million.

The Yankees make so much money they can spite a system designed to thwart them, writing a $60-million welfare check last year to support their poorer brethren and having more than enough left over to trade for the game’s best player -- and his $252-million contract.

They could, so they did, picking up Alex Rodriguez on the eve of spring training and pushing their player payroll this year toward $200 million. Cries wailed from across the land about a mockery of competitive balance, howls about baseball’s wealthiest team filling a minor hole at third base with baseball’s wealthiest player.

“I don’t know if it’s good for baseball,” Angel pitcher Jarrod Washburn said. “I don’t see how it could be bad. The Yankees did something every other team in baseball wishes they could have done.

“For years, fans have either loved the Yankees or hated the Yankees. Every time they do something like this, it creates an uproar for the fans that hate them.”

Even satirist Bill Maher, who grew up rooting for the Yankees, vowed to disown them after the Rodriguez trade.

“Let’s face it: All the Yankees do is just buy everything,” Maher said on his HBO show. “The Yankees ... try to convince you that everyone has an equal chance. Right -- like the Kansas City Royals really have a chance.”

For every dollar the Royals will spend on players this season, the Yankees will spend four. No other team will spend even three.

No other team will approach the Yankees’ tax bill, either -- about $80 million in revenue sharing and a payroll surcharge.

And will the Yankees turn a profit this year? Bob DuPuy, president and chief operating officer of Major League Baseball, squirmed for a moment in his chair, paused, and said, “Yes.”

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The Yankees might be the No. 1 team in all of American sport, but they were the No. 2 baseball team in New York when they took the first step toward overwhelming their competitors in revenue, even the one with which they shared the largest U.S. media market.

In 1988, at a time the Mets dominated the Yankees on the field and in attendance, Steinbrenner leveraged the threat of finding another cable television home into a landmark 12-year contract with MSG Network, for a rights fee of $486 million.

“The deal he got was probably worth more than the team then,” said Neal Pilson, a television industry consultant and former president of CBS Sports.

From 1985 to ‘92, the Mets outdrew the Yankees every year, winning a World Series championship and twice attracting more than 3 million fans. But Steinbrenner secured a cable contract so lucrative that, for the first few years of the deal, it would pay all his player salaries before he sold one ticket.

“They’ve just separated themselves from the Mets in revenue,” said Andrew Zimbalist, author of “Baseball and Billions” and economics professor at Smith College. “The separation began with the television contract.”

As baseball split its leagues into three divisions and doubled the number of playoff qualifiers to eight, that separation widened into a gulf. The Yankee renaissance was underway, at the most opportune of times.

In 1995, the first year under the new playoff system, the Yankees made their first postseason appearance since 1981. They have advanced to the playoffs every year since then, and to the World Series six times.

Three rounds of playoffs mean three rounds of playoff revenue. In 2001, after losing a seven-game Series to the Arizona Diamondbacks, the Yankees reported $16 million in postseason revenue, according to figures provided to Congress by Major League Baseball.

Over the last three seasons, the Yankees are the only team to participate in the league championship series more than once.

The promise of October baseball lured the fans Steinbrenner had declared would not flock to a creaky old stadium in a decaying neighborhood. The Dodgers first drew 3 million in 1978, and regularly thereafter. The Minnesota Twins drew 3 million in 1988. The Atlanta Braves hit 3 million, and so did the St. Louis Cardinals and the Philadelphia Phillies, and even the expansion Florida Marlins.

The Yankees hit 3 million for the first time in 1999, and they haven’t missed since. They have outdrawn the Mets for 11 consecutive years. They led the major leagues in attendance last season, at 3.47 million.

“And, given the marketplace they perform in, they’re able to charge prices higher than many teams are able to,” DuPuy said.

According to Team Marketing Report, the Yankees charged an average ticket price of $24.86 last season, second only to the Boston Red Sox, occupants of the smallest stadium in the major leagues.

In the revenue standings, from 1996 to 2003, the Yankees widened their lead over the second-place team from $11 million to $40 million, over the average team from $45 million to $140 million and over the last-place team from $68 million to $200 million. (The Times used the 1996 figures provided to Congress and obtained 2003 estimates from an industry source.)

The Yankees generate money for every other team, directly and indirectly. They lead the majors in road attendance, yet visiting teams do not retain a designated share of ticket revenue. No matter how many Rodriguez jerseys they sell, merchandising revenue is pooled and split equally among teams.

And, under a collective bargaining agreement approved by every team except the Yankees and targeted at them, they chose to pay a luxury tax rather than limit spending on players. No other team paid the luxury tax last season, and the Yankees’ luxury-tax-plus-revenue-sharing check totaled about $60 million, virtually the same amount the Angels paid to their World Series championship roster in 2002.

“There is a price to generating that much revenue,” DuPuy said.

“You never hear any complaints when we write the check,” Yankee President Randy Levine is fond of saying.

The most curious of complaints echoed not from one of the pauper teams in the Midwest but from the Red Sox. Two teams will pay salaries high enough to trigger a luxury-tax payment this year: the Yankees and the Red Sox.

The Sox tried to acquire Rodriguez last winter, but negotiations collapsed after they demanded he take a pay cut and the Texas Rangers accept Manny Ramirez and his $160-million contract in return. The Yankees did not ask the Rangers to take an enormous contract, and so the Rangers agreed to pay off part of the money owed Rodriguez.

And, because of the stadium Steinbrenner considered all but obsolete, the Yankees might make money off Rodriguez that the Red Sox could not. The Red Sox already charge NBA-level prices and fill virtually every seat at Fenway Park, capacity 34,000. Yankee Stadium holds 57,000, so a hike in ticket prices and a few thousand additional fans per night lured by Rodriguez could translate to an additional $10 million.

“Baseball doesn’t have an answer for the Yankees,” Boston owner John Henry wrote in an e-mail to the Boston media. “There is really no fair way to deal with a team that has gone so insanely far beyond the resources of all the other teams.”

Baseball splits its national broadcast revenue equally among its teams, as does the NFL, but all NFL games are covered under network contracts. Most baseball games are not, enabling teams to sell rights to local stations.

The larger the market and the more popular the team, the greater the revenue -- and the greater the franchise value. It would not be feasible, and perhaps not legal, to confiscate all that revenue and redistribute it equally.

The players’ union adamantly opposes a salary cap, which would restrain spending if not revenue. In accordance with its advocacy of the free market, the union also opposes a salary floor, which would minimize the difference between what the Yankees and their cheapest rivals spend.

An increasingly popular theory holds that major league owners could best control the Yankees’ revenue by cutting into it, by moving the Montreal Expos to New Jersey and putting a third team in the New York metropolitan area.

Although baseball officials refuse to rule out virtually any potential homes for the vagabond Expos -- including Las Vegas, San Antonio, Portland, Ore., Washington, two sites in Virginia, San Juan, Puerto Rico, and Monterrey, Mexico -- DuPuy politely dismissed the New Jersey idea.

“That does not appear to be a feasible alternative at this juncture,” he said.

The Yankees would not be hurt by a team in New Jersey any more than the Lakers would by an NBA team in Anaheim, according to a prominent sports investment banker who declined to be identified. A New Jersey team would instead cause unintended damage, in attendance and revenue.

“It would kill the Mets,” the banker said.

The debate over the Rodriguez deal and the revenue that made it possible, DuPuy said, obscures the incremental steps baseball has taken. The revenue-sharing program that redistributed $20 million in 1992, he said, is projected to redistribute $300 million in 2006.

“I think we’re on the right track,” he said. “It took us 30 years to dig the hole we found ourselves in.”

Of course, the Yankees could head onto another track entirely. They stopped selling cable rights to MSG two years ago and established their own network -- YES, for Yankee Entertainment and Sports -- but protracted negotiations with local cable companies kept the Yankees off the air in large parts of New York. The Yankees allocated a reported $58 million to the team treasury as an annual rights fee last year.

As YES spreads through cable and satellite systems starting this season, one TV executive said the Yankees could earn another $10 million to $20 million a year.

And Steinbrenner still wants a new stadium. Yankee Stadium has 18 luxury suites. Suppose a new stadium had 150, the investment banker said, and Steinbrenner rented them for $300,000 a season. That’s $45 million. One can only imagine the e-mail from Henry.

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Monied Class

The New York Yankees pull in about twice as much cash as the average team, despite baseball’s attempts to rein in their spending with revenue sharing and a luxury tax.

Their resources gave them a competitive edge in picking up Alex Rodriguez and his $252-million contract:

BASEBALL

Franchises worth the most money:

*--* 1. New York Yankees $849 million 2. New York Mets $498 million 3. Boston Red Sox $488 million 4. Dodgers $449 million 5. Atlanta Braves $423 million 6. Seattle Mariners $385 million 7. San Francisco Giants $382 million 8. Chicago Cubs $335 million 9. Texas Rangers $332 million 10. Cleveland Indians $331 million

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*--* NFL Washington Redskins $952 million

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*--* NBA Lakers $447 million

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*--* NHL Detroit Red Wings $226 million

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*--* Source: Forbes

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