Thursday, February 16, 2006
Red Sox owner Henry critical of revenue sharing
BOSTON -- Major League Baseball's current revenue-sharing
system, even while bettering the game, is too burdensome on the
wealthiest clubs which are substantially subsidizing some of their
opponents, according to Boston Red Sox principal owner John Henry.
Team ownership must bring in roughly $2 on every $1 invested in
order to break even, Henry was quoted as saying in Thursday's
editions of the Boston Herald. The Herald said his comments came in
an exchange of e-mails with the newspaper over the past week.
"Baseball has to address the disincentives created by
large-scale transfers of revenue from successful clubs to less
successful clubs," Henry said. "At high enough tax levels, the
incentive is to invest somewhere other than in baseball."
He said the disincentives are just as powerful for lower-revenue
clubs as for the higher-revenue clubs.
"The Red Sox have taken an aggressive stance in investing in
all aspects of the franchise," he said. "But one has to wonder
how many teams will do so when the financial risks often outweigh
the potential financial benefits."
About $50 million to $60 million of the Red Sox money is flowing
per year to less successful clubs, Henry said.
"The commissioner and the union have radically altered the game
of baseball for the better over the last few years by transferring
enormous amounts of dollars," he said. "But as with all taxes,
there is a point at which taxation discourages effort and
investment to the point that baseball clubs one by one come to the
same, unfortunate conclusion."
Boston sells out every game and has been aggressively expanding
Fenway Park. Henry leads the investment group that bought the Red
Sox and the New England Sports Network cable television station
from the Yawkey Trust four years ago for $660 million.
"The Red Sox have lost money and NESN has made money," Henry
said. "The continuing investments in Fenway Park help revenues but
are not cheap. It is not a coincidence that the teams paying a lot
of money in revenue sharing are investing substantial sums in
ballparks because that is the only deduction available."
Henry said commissioner Bud Selig has done a good job in
reducing the debt ratio allowed by individual clubs.
"[Selig] may have, in fact, saved the industry from itself by
acting to limit debt," Henry said.
Most teams have large and growing debts, Henry said. He said he
knew some owners who have lost more than $100 million over the last
10 years. In his three years as owner of the Florida Marlins, he
said he lost about $50 million.