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League Revenue Sharing: A Playoff Primer

Credit: Jeff Hanisch-USA TODAY Sports

(Jeff Hanisch/USA TODAY Sports)

As tens of thousands of fans stream into NBA and NHL arenas for playoff action, anticipation and excitement reaches a fever pitch. For fans, the goal is simple: their team advancing all the way to a league championship. Years from now these fans still treasure the $30 championship T-shirt, purchased just minutes after their beloved squad wins it all. You know, the one you can still spot in the stands a decade later, frayed stitching and pronounced yellow sweat stains be damned.

But for the franchises involved, postseason success or failure results in immediate financial consequences. Deep playoff runs are great for civic pride, but lucrative revenue splits and performance incentives ensure that the winners aren’t crowned solely on the playing field. Here we’ll examine the distribution of playoff attendance revenues in the four major sports, and how the pie is divided as per each sport’s Collective Bargaining Agreement (CBA).

Major League Baseball

Baseball’s CBA is very specific when it comes to playoff ticket revenue sharing. MLB Rule 45 stipulates that 15 percent of paid attendance receipts go directly to the Commissioner’s Office. The remaining 85 percent is distributed between the participating teams and the Players Pool, which is used to pay out contractual bonuses and incentives, as well as to cover additional salary and expense considerations. The current agreement calls for the Players Pool to receive 50 percent of the paid attendance receipts from wild card games, 60 percent from the first three divisional series games, and 60 percent from the first four championship series and World Series games. Under this format, participating playoff teams lay claim to any ticket revenue not paid to the Commissioner’s Office or the Players Pool – while the home team takes home the millions of dollars in ancillary revenues from concession, merchandise and parking that a playoff run generates. An MLB franchise can maximize the amount of revenue from a title run if both the league championship and World Series are won in seven games.

National Basketball Association

The current NBA setup features a league-distributed playoff pool, of which a team’s share escalates as it advances in the playoffs. The league’s $14 million playoff pool (up from $13 million in 2013) is funded by playoff gate receipts. According to a breakdown of last season’s playoff pool revenue distribution, the Miami Heat brought in just over $3.8 million in playoff bonus money from winning the NBA championship. Playoff revenues are otherwise subject to the league’s revenue sharing program.

National Hockey League

Similar to the NBA, the NHL has a predetermined playoff pool — $13 million for the 2014 playoffs — paid out by the league to playoff participants based on performance. The new NHL CBA dictates that teams participating in the Stanley Cup playoffs contribute a flat 35 percent of gate receipts from home playoff games into the league’s revenue sharing program.

National Football League

The NFL is unique in that seemingly all playoff attendance revenue goes directly back to the league. The league provides playoff teams with a stipend to cover playoff expenses, including player salaries, and net of those expenses the remaining profits are distributed to the league office, with teams keeping only revenues earned from concessions and parking. And while the current revenue sharing system could be considered unfavorable for the teams at play, the overwhelming popularity of the NFL all but guarantees financial dividends as a byproduct of sustained playoff success. Nevertheless, a Super Bowl push does not reap immediate financial dividends for franchises, according to Forbes:

“A long playoff run in baseball, hockey or basketball can generate $20-$30 million in revenue and 50 percent profit margins. NFL teams generate a fraction of those revenues and sometimes even lose money during the playoffs as expenses and incentive payouts pile up”

From an owners’ standpoint, more is better– more games, more revenue, even more generous splits. But when it comes to pocketing additional revenue from the playoffs, the bosses of football’s best teams are often the biggest losers short term.

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