MLB's Growing Wealth Gap; Bloomberg's Brackets for a Cause Winners

0:00This is the business of sports. The business of sports can be intimidating or hard for a startup to break into. We really appreciate when our owners are actually there, you know, with us through the journey. Teams, ours especially, have been very intentional to diversify at all levels of the company. I think we're in the golden years for the NFL and college football. Our demographic reach has continued to expand. This is going to be really unlocking the streaming platform for sports fans. Sports valuations are rising. We'll see when they peak. You don't have to be the best in your sport to make a whole ton of money.

0:35Bloomberg Business of Sports from Bloomberg Radio. This is the Bloomberg Business of Sports. We explore the big money issues in the world of sports. I'm Michael Barr, along with my colleagues Damian Sassauer and Vanessa Bernomo. Coming up on the show, we talk a little baseball. Now that the season's well underway, we take a look at the growing divide between MLB's haves and have-nots with Bloomberg News global business reporter Ira Budwe. Plus, we talked with the founder and CEO of Vow, an innovative event management company. We'll learn about what they're doing to enhance the fan experience. Vow hosts up to 10 ,000 guests and seats, so we have a proprietary seating software that integrates with all the tools in our platform.

1:18We have a proprietary ticketing software, so everything is all in one. But what's very cool is not only do we host up to 10 ,000 guests in seats, you can have up to 400 people working in the platform in real time. All that is straight ahead on the Bloomberg Business of Sports, but first we've got winners in the NCAA basketball tournaments. It's an even dozen for Gino Auriemma and Connecticut. A lot of guys back on top of the college basketball world championship madness. Paige Beckers and the UConn Huskies won on the women's side while the Florida Gators won in a thriller for the men. Sounds like a great time for Vanessa Bernomo.

2:01She recently did a write-up on Bloomberg's Bracket for Cause and can take us through her final thoughts on this year's March Madness. So it's the 10-year anniversary of Brackets for Cause that we do here at Bloomberg. And it's just a mix of, you know, lots of people who have big money and they want to, you know, put it in. and they actually raise money for charity. So it's a$20 ,000 buy-in. They each have a different charity that they vie for. And it's CEOs, it's hedge fund managers, VCs, everything like that. And this year actually saw the first ever back-to-back winner for the men's bracket, the Bumble founder, Whitney Wolf Hurd.

2:39She said before that she can't give away her secrets, doesn't like to give away her secrets in filling out her bracket. But a couple of other people I talked to, the women's bracket winner, Jeffrey Taupins and George Walker, they tied. They both had 211 points. This was a different year for the brackets, and a lot of people had the higher seeds going further. But they both likened filling out their brackets to business and risk-taking and calculated risks. By the way, back-to-back is the first time that has ever happened doing this, like you're saying. But it's hard. It's hard to pick a winner out of this.

3:16I mean, because like you said, it's like if you go off the board and you try to like, OK, maybe I can zoom in and this and that, whatever, and win it that way. But no, this was one of those where, you know, you had the number ones pretty much going. Yeah, this was the first time since 2008 that all number one seeds made the final four for the men's side. And, you know, I think one of the reasons we've seen that, a lot of people are likening it to NIL and the transfer portal. And, you know, now mid-majors are losing their players after a year or so. So we're seeing a lot of that. But obviously the top seeds were just really good this year.

3:53But I think one of the interesting things for Whitney winning again was she didn't get swept up in the Duke, you know, bandwagon. That I got swept up in Cooper Flagg and that. So that was another reason why I didn't do too great on the men's side. And we should add, too, that Whitney Wolf heard she was playing for Baby to Baby, correct? Yes, she was playing for Baby to Baby. Jeffrey Taupins was playing for American Prairie, which is doing a really interesting thing with, you know, they're trying to make the largest reserve in the U.S. George Walker was playing for the MSK Cancer Center, which is a research institute here in New York City.

4:27So obviously a lot of these people were just playing for really, really big charities that they have a lot to do with overall year round. So it was good for them. And because of Jeffrey and George both tied, they got first place and second prize split between their two journeys. When you fill out a bracket, folks, and I've always said this, we have to wait till next year to do it again. I like to fill it out in reverse. I like to fill out who I think is going to win. That's how I filled out the women's bracket. Because I thought, OK, UConn's going to win it. And then I went in reverse the other way.

4:59I had Auburn going all the way, which, well, we know how that came out. Yeah. I think, you know, obviously a lot of people were split between UConn and USC. And obviously South Carolina has been at top of the women's bracket for a long time. So I think it was easy there. But I think a lot of people, obviously, including me, had USC going far because of Juju Watkins. But we're happy for Paige Becker. She's going to get drafted into the WNBA. Let's give a little forward look to this for our audience. Yeah, I mean, I think DraftKings and FanDuel are picking who? Duke and Houston to win it next year, right?

5:33So, again, they're looking for some repeat performances here. Houston could do it, I think. I mean, after that way of losing, I think you come back very, very hungry because that was a rough way to lose. Oh, yeah. Duke, I'm sorry. I'm watching that game, and I'm like, no, the refs had nothing to do with this. Unfortunately, things happen. But they're young men, and they're going to bounce back next year, and I always support that. It's all about character building, comeback hungrier than you were before. We forgot to add that everybody who plays on this puts up$20 ,000. They put in$20 ,000 for the overall prize pool.

6:11And because this has been going on for 10 years, over$6 million has been raised by a breakfast fair cause. Wow. Very good. I wish I had that money. Right. You know, actually, Douglas, who was overall globally, said, you know, he reached out to me and said, you know, great story. You know, I was so excited to get the top score overall. But he said, hopefully one day I can be a part of that. I can be a part of the giving up$20 ,000 for charity and really have some skin in the game. And I think that it's a really fun thing for the CEOs, for the managers, for everyone who's involved in Brackets for a Cause.

6:44I think they love to do it. People do it. Clearly, Whitney's done it multiple times, winning back-to-back. So I think people like to come back to it. It's more fun even when you have skin in the game for someone else. You know you're donating money to a good cause. In one thing that we were looking at, Vanessa, and we were talking about how the NCAA, how they're doing well with the ratings and that's going on. But they also had a settlement involving NIL. And hopefully this will bring a path toward at least giving the money to people who said, hey, we couldn't make any money because you guys held us back, college athletes.

7:34And now there's been a ruling in that. Tell us about that. There hasn't been a ruling quite yet. On April 7th, there was another hearing, and the federal judge basically kind of nodded her head and said, this will most likely be approved, but there's another hearing, I believe, in either June or July, where she will make that final decision. But there was a couple of things that she needed them to address. And one of those being, there's this revenue-sharing model that is really what's going to change everything, that players will actually finally get paid, and that's what you're talking about there, Michael.

8:10Schools will be able to opt in for this and share about$20.5 million with their student-athletes in revenue-sharing models that they've never been able to do before. But the problem there is that not everyone makes money, and now they're going to have to give money to the players and know how to sparse it out. So there's threats to Title IX because they're going to give most likely a lot of money to football players. and men's and women's basketball players. And then they want to make sure that addressing Title IX, they give scholarships to every player on a roster, which means any sport. But the problem is colleges can't really afford to do that.

8:51So the threat was players are going to start getting cut. I played college soccer. The way that it works for women's college soccer, we get 12 scholarships or so, and they sparse them out through the team. I mean, you can't really make a soccer team with 12 people. So we had about a roster of like 30 players. A few players were walk-ons. They didn't have scholarships at all. But most of us had partial scholarships and then they're made up by with whatever else they can be made up with. But the problem is they want the whole 20 to 30 people to have full scholarships. And that's where there's a miscommunication.

9:29And they think that that's where a lot of the tension could come from, and the judge wants them to rule that grandfather and the players who are already on rosters and things like that. Can you imagine if you had NIL when you were playing soccer? You know, I think about it a lot. And I think about it, you know, I talk to other, you know, college players. You know, my step-siblings also played in college, and they played revenue-generating players. Yeah, they played, you know, my step-sister played basketball at Georgetown, and my step-brother played football at BC. So, you know, he would have made some money, okay?

10:03So we talk about it a lot. I mean, I personally, as a women's soccer player, I think I would have had a hustle really hard to, you know, make money because we don't really see a lot of women's soccer players getting those sorts of deals. But hey, if it was a possibility, I would have made that hustle. You know what I'm saying? Like, I would have made it happen. And it all depends on the market you're in. I played in Pittsburgh, and I could imagine a lot of Pittsburgh companies are really focused on having Duquesne players out at things and meet and greets and things like that. And I would have done anything I could have just to get a little bit more money, because we couldn't really work.

10:37We can't have jobs. No, I mean, but you could have, and that's what a lot of NIL people are doing now. It's like, but that's a Perdomo for the Ford Mustang. Yeah, and you could have done that, and now you're driving around in a Mustang. Yeah, 100%. I mean, that's what we see. Like, Livvy Dunn, who's a gymnast at LSU, you know, she's one of the only gymnastics, you know, athletes who's that high up. I think she's third overall in NIL,$3 million or something, her net worth. You know, she just made it her own and really, really went for it. And that's what you got to do. You know, we see some players who are walk-ons, you know, getting deals.

11:14And it's all about the hustle. It's all about the hustle. unless you're a basketball player or football player at a power conference and you don't really have to do anything to make that money. But good on you because you deserve it, actually. And it's about name, image, and likeness. But don't quit because you've got to build the name first to make name, image, and likeness. Yeah, I think that's the hard thing that we're seeing, again, with this March Madness in particular that was a little bit affected by that. that seven out of the 15 players that were all on the All-American Associated Press were players that went to mid-majors and then went on to bigger schools after that.

11:55And I think that those mid-majors were just struggling to pay them what they could. But with revenue sharing, we're going to see that maybe those mid-majors that are basketball-centric, like a Big East, like an Atlantic 10, that don't have to play football players, they're going to be able to compete with those. So maybe we'll be able to see that eventually get back up into, you know, they'll start happening again. But this year was a rough year for the mid-majors. Check out Vanessa Perdomo's latest reporting on the tournament and brackets for cause now on the terminal and at Bloomberg.com. Up next, we turn to the baseball diamond and the growing divide between the league's wealthy and the teams trying to get by.

12:36For Vanessa and Damian Sassauer, I'm Michael Barr. You're listening to the Bloomberg Business of Sports from Bloomberg Radio around the world.

12:48This is Bloomberg Business of Sports from Bloomberg Radio. This is the Bloomberg Business of Sports where we explore the big money issues in the world of sports. I'm Michael Barr along with Damian Sassauer and Vanessa Berdomo. The MLB season is well underway following an offseason that saw some of the league's top teams last year. The New York Yankees, Mets, and the Los Angeles Dodgers adding big-name stars to their rosters and spending a lot to do so. It's adding to a growing divide between the haves and the have-nots of baseball. Bloomberg News global business reporter Ira Budwe did some reporting on that lately, and he's here now to take us through it.

13:30Ira, welcome back to the Bloomberg Business of Sports. Always a pleasure. Hey, you wrote a great article. You talked about no easy way to fix Major League Baseball's wealth gap. Obviously, the big teams, you've got the Yankees, you've got the Mets, you've got the Dodgers. And then on the lowly end of the scale are teams like the Pittsburgh Pirates. Talk to us why we have such a gap. I mean, I guess I look at it like, okay, you have people in the world that are rich that can afford a Porsche. Then you got people in the world that are doing okay and maybe can afford a Lincoln. And then you got people like me that can just afford a Chevrolet Vega.

14:16So, I mean, it seems like that's the same setup for baseball teams. Yeah, in a way, you're right. It's like somebody went in and bought a Volkswagen and is trying to race the people who bought a Ferrari in the same field of teams. The revenue for the Dodgers or the Yankees just far outpaces what teams in – what the Pittsburgh Pirates can bring in or even the Milwaukee Brewers or the Tampa Bay Rays, Baltimore, you name it. There's a lot of teams that just don't have the revenue because baseball is a sport that depends on local revenues in large part. You've got ticket sales and you've got your regional TV deals, and those are local.

14:55Those are for that team mainly. So it just sets up a huge imbalance that's coming to the fore because now you're seeing that gap open up in what they're spending on payroll. And the fans look at that and they go, well, I start spring knowing I'm not even in this race. We can't keep up. And by the way, Vanessa, I don't want anybody from any of their teams coming at me with a torpedo bat and slapping me upside the head. No, you don't want to get hit with one of those, I don't think. It seems like they can hit pretty good. I'm just stating the obvious here about money. I think they know it too, though.

15:28One of the things that I thought was funny in the piece you wrote, Iroh, is how Steinbrenner had said to you that even they can't compete, even the Yankees can't keep up with the Dodgers spending. I was reading that as a Yankee fan, a little annoyed. Then I could imagine fans of other teams being annoyed. What are you talking about? You could if you wanted to. So how does that even work, him saying that? I mean, they're still the highest valued team in baseball. Yeah, I mean, he said that on his own network, to be clear, on Yes Network. But I think a lot of people heard that and raised an eyebrow.

16:04Certainly Yankees fans. He said that after Soto went to the Mets, right? He lost out on that bidding war. You look at the Yankees and, yeah, any team technically can deficit spend, right? Right. Steve Cohen, I'm not sure, is balancing the books right now on the Mets. So if Hal Steinbrenner wants to lose money or lose more money than he could. Right. And but the question is, like, what is reasonable to expect of of owners? Like, where are their limits? You know, you look at the Pirates, the they their owner is apparently losing money year over year a little bit. They've been taken on debt the last three seasons, according to local reports.

16:44That's right. So that's what the fans would say is either keep taking on more or sell the team because this isn't working. But you could argue that they need some help to restructure this whole thing so that it can work for people like that who are rich but not mega rich, who have good markets but not great markets. Shouldn't it be possible for teams to compete without going deep, deep into debt? What is the model here? I mean, Ira, this article is amazing. There's no easy way to fix Major League Baseball's wealth gap. That's Ira Boudwe. And here's the interesting thing. I can't believe anyone's reading it because all Ira does is beat up on the Pittsburgh Pirates.

17:19And let's be clear. This is nothing new. The Pirates are 1-5 this year, six straight losing seasons. I think they've had a losing season in 28 of the last 32 years. This is nothing new. And by the way, the Players Association isn't going to change. They're not going to put a salary cap in. As you rightly point out, you know, Tony Clark is not amenable to putting a salary cap in to stop the bleeding. So, my question for you is, what, if anything, is left to change the endemic wealth gap in Major League Baseball? I mean, there's a few things you can imagine, right? They've been adding to the luxury tax.

17:50The Cohen tax. The Cohen tax keeps getting steeper. And that basically is a way to say, all right, we don't have a salary cap, but if you spend over a certain threshold, you're going to be taxed. I mean, at this point, the Dodgers, the Mets, when they sign a guy for$13 million, they're basically paying double that. Their marginal tax rate is 110%. It's$26 million, but they don't seem to care for them to get a$13 million player at this point. That's one avenue. You could keep trying to push that lever to see where Steve Cohen's paying threshold is. That creates a war between the big markets and the small markets.

18:26The owners who are receiving that revenue sharing money, that luxury tax money, basically have a different set of interests than the owners who are paying it out. And I think that's why they're looking at the salary cap as a more, from the owner's perspective, a better option. Because then you take the problem and you put it in the players rather than on your fellow owners. And I think that's why we're headed for a lockout at the end of next year. Because I think they're going to try to get a salary cap in baseball. And that's going to be a real fight. Well, and Damien said it. We just have an article that's out there on the terminal.

19:03The average MLB salary tops$5 million for the first time ever, according to AP. And it's like Damian saying, you put a salary cap in, well, the toothpaste out of the tube. I mean, who's going to say, all right, I'll take a pay cut? Yeah, I mean, the way salary caps tend to work in other sports is they benefit the middle class, so to speak, of that league. The players who are not the superstars. And if you look at baseball, it's interesting. You got these massive eye-popping contracts, Juan Soto,$765 million. But the amount of money of revenue going to players in total is less in baseball than it is in the NFL, in the NBA, where they have salary caps and they have negotiated an amount, basically half, that goes to the players.

19:52In Major League Baseball, it's 46%. And it's going down. And so there are a lot of rank-and-file players who actually might stand to benefit from a salary cap. And so that's another sort of tension in this that's going to have to get resolved. The Juan Sotos of the world don't actually necessarily share an interest in how this works with your journeyman player who's trying to – gone into free agency but is not going to set a record on their deal. But is it not – like wouldn't it just change a little bit? Maybe they're shorter deals or something. Because we do see$50 million quarterback deals in the NFL.

20:31It's not like they don't get paid a lot. Right. No, I mean, the NBA and NFL, the stars do great. But relatively, the guys who are like a tier or two down, you see eye-popping deals for those guys in the NFL and in the NBA because of the way the cap is structured, basically. It sort of creates a slightly fatter middle, right? Which I think is what, if you see a salary cap come to baseball, it's going to be at the cost of ownership saying, we promise you, you're going to get 51 % of revenue or something like that. They're not going to be able to get it without shelling out more money than they're doing now.

21:09Is that a compromise they'd be willing to give? I mean, that's what we're going to see. I mean, honestly, from people I talk to, no one knows. Baseball's going to push for a salary cap. The union's going to say no. There's going to be a lockout. Everyone seems to agree on those parts of this. But then what happens next, right? How long does it last? Who blinks? If they do get a salary cap, what does that look like? I don't think anybody knows. Well, here's the thing. There has to be some sort of a blueprint here. I mean, there are teams out there in recent memory, like the Royals, like the Devil Rays, you know, the Tampa Bay Devil Rays, that have won the World Series championship.

21:46And they are small market teams, right? Now, riddle me this, is it just that ownership for those ball clubs are willing to spend on par with the Yankees? Or maybe it's something because the double race play in the AL East, they're getting incremental revenues from playing the Red Sox and the Yankees. I mean, I'm just trying to wrap my brain around why the Pirates are stuck in this 28 of the last 32 years they've had a losing season. And no one seems to be taking notice. I mean, I guess people in Pittsburgh are taking notice of it, but who cares about them? No, I mean, Ira, seriously, is there a recipe?

22:16People care. It's the best stadium in baseball. It is a shame. It's a great franchise with a great history. I think one answer is Moneyball. Be smarter. But obviously, not everyone can be smarter. The definition is you're at a level above in your ability to identify talent and develop it and make smart transactions. I think being smarter can get you the razor proof that you can do it on a consistent basis. but even they haven't won the World Series. And if you look at which teams are last year in the NLCS, right, and the ALCS, who were the teams, right, who was in the World Series, there is an opportunity to sneak in there.

23:01The Orioles had a great season a couple years ago. It's not like it's impossible with a little bit of luck, right, and some smart ownership. You can have moments as a small market team where you get in there, But the imbalance is getting to be, I think, pretty glaring, right? Just in terms of who has the opportunities to win it all compared to, you know, you don't have a Kansas City Chiefs, right? There is no equivalent to that. Ira, can I suggest for your next article you talk about bigger market teams who can't seem to win it all like the Detroit Tigers? Well, I was going to say that the thing is it's really only worked for the Dodgers.

23:37They're really the only team who's spending this kind of money, and it's really worked. I mean, it hasn't worked for the Yankees in, we know, 20 years. The Dodgers are basically have the most money and have smart management. And so if you're playing money ball with a huge bag of money, then you're going to be really, really good. And I think everyone's starting to wake up to the fact that we might be reaching a point where it's like you might as well. Baseball's got a lot of randomness. Injuries are there. Nothing is guaranteed. But you just look at it right now and you go, well, if they're healthy, they're going to be there in October.

24:13You don't really need to play the season. I know we're out of time pretty much, but I got a creative idea on what maybe the smaller markets can do. And that is, I think of Paul Skeens. I mean, you talk about a pitching ace. It's great for the Pirates. Okay, maybe, in fact, his rookie card went for more than his salary did when he hopped in the league. That's incredible. That's crazy. But what if the team said, okay, listen, we can only pay you so much, but we're going to call a place like maybe Ford and say, listen, can you, like, give him a deal or something, man, for endorsement and hook it up?