Joon Lee reports Dodgers favorable revenue share agreement lasts through 2039

Revenue sharing in Major League Baseball is nothing new. It’s one longstanding measure the league has relied on to maintain some semblance of competitive balance without a salary cap.

In short, large-market teams like the Los Angeles Dodgers and New York Yankees are required to share portions of their annual revenue with small-market teams like the Tampa Bay Rays or Kansas City Royals. The revenue-sharing system aims to level the playing field so that teams can compete for championships no matter which market they reside in.

Now, the formulas used to determine these payouts are complex and often convoluted. Just like a billionaire will employ an army of accountants to find loopholes in the tax code to save as much money as possible, large-market teams will try to minimize the revenue counted towards the league’s revenue-sharing protocols.

The system has again been called into question, most recently by a report from former ESPN writer and current independent journalist Joon Lee. In a recent report, Lee outlined how the Dodgers have historically benefited from the revenue-sharing system as a result of the club’s bankruptcy and subsequent sale in 2012. Lee reports that teams typically share about one-third of their local television revenue, but the Dodgers, in the midst of their bankruptcy proceedings in federal court, secured a much more favorable rate of about 10%.

Given the Dodgers have by far the most lucrative local broadcast deal in MLB (a ludicrous $334 million per year), Lee estimates the team could avoid contributing about $66 million per year to the league’s revenue-sharing pool under its special arrangement. That, of course, doesn’t sit well with fans of other clubs, who in recent years have seen the Dodgers buy their way to one of the most stacked rosters in the history of the game.

Previously, it was unknown exactly how long the Dodgers would retain these favorable terms. But Lee revealed in his report, citing a league source, that the agreement goes through 2039, when the Dodgers’ current local broadcast deal expires. In other words, the team’s built-in advantages could benefit them for another 13 years.

And ironically, as other teams struggle to retain as much of the once-lucrative local broadcast revenue stream as possible when regional sports networks are on the verge of collapse, the Dodgers’ absurd local broadcast deal is rather safe.

Charter Communications, the telecom giant that owns Spectrum SportsNet LA, the television home of the Dodgers, would reportedly have to declare bankruptcy to wiggle its way out of the $334 million-per-year deal. That’s not something Charter, whose main business is providing broadband service to tens of millions of customers nationwide, necessarily wants to do.

So while other clubs are accepting cuts to local broadcast revenue as cord-cutting threatens regional sports networks, the Dodgers are sitting pretty. And it makes the team’s favorable arrangement look even more absurd to the average fan.

Whether the Dodgers will be able to maintain this arrangement with Charter until 2039 remains to be seen. The league may have an opportunity to rewrite some of its revenue-sharing procedures once the current collective bargaining agreement expires after this season.

But for now, the optics do not look great. The Dodgers aren’t paying their fair share and are able to buy whatever players they want. Other teams are fighting to maintain local broadcast revenue that are already many multiples below what the Dodgers make. If this continues, it will put the league’s competitive balance issues in even clearer view over the next decade.