According to Forbes (and who knows how reliable a source it is) capital appreciation has grown in-line with wages). MLBAM also has a considerable effect of the value of the clubs as it is owner my the clubs. Add in non MLBAM appreciation too and you can start to see where a lot of the new money is coming from.

Your numbers shows a 4% year over year, just based on MLBAM itself. If you can believe they would have done 6% growth, excluding MLBAM, there’s your 10% growth. Certainly teams have been spending this year like they expect 10% growth.

So, from 1985-2005, they actually have seen 10% growth. Inflation is what, 3%? MLBAM you say is 4%. If all they get is a modest 3% over and above all this on their regular product, we continue with 10%. At a pure minimum, using your numbers, it’s 7%.

I probably just made some horrible math error: my chicken skewers are ready to come out of the oven, so I’m rushing.

Doesn’t matter. I’m skeptical of MLBAM’s ability so sustain that kind of growth that long, and baseball’s ability to sustain revenue growth over the next decade. I don’t know, certainly.

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Why is 10% not sustainable? Payroll has grown at a 10% clip from 1985 to 2005. Also 10% from 1990 to 2005. As high as 9% from 1996 to 2005. While 6% may seem more appropriate, I’d counter that MLBAM money will be enormous. MLBAM is already worth more than the Yankees I’d guess. And one day, possibly within the next few years, MLBAM will be worth 50% of the entire league.

Teams will have lots of money floating around, and, while spending it won’t give them a bigger share of MLBAM, they won’t be able to resist not spending it. They are going to budget spending 55% – 60% of their revenue on payroll, even if 45% makes more sense because of MLBAM-revenue sharing.

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As for the non-linearity, if you play in single-year fantasy baseball, you will find that the valuations of players do follow the linear rule. I would say that if you were to construct a realistic baseball model (30 teams, average team payroll of 80 million$, with 1 SD = 15 million$), that the valuations of players would also follow a linear line.

I understand the “50 x 1/50th Pujols”, but the reality is that once a team pays for Pujols and Carpenter and Rolen, it’s tough for them to keep paying for other stars.

It’s like… say I can pick three car leases.

There’s the BMW for $1,000 a month for ten years.
Or a nice VW for $500 on a five-year deal.
Or a Civic for $300 on a three-year deal.

Further, assume that cars all degrade in value continually, quickly, and equally. And there’s no inflation. Also, no friction or gravity. At the end of the Beemer lease, you’re paying $1,000 for a crappy car that spends all its time at the dealer and they won’t give you a loaner.

You’re not better off having signed that lease because the initial quality was better. At that point, in that last year of the deal, you’re thinking “Crap, I could go rent two VWs for this money. Or three Civics. Then I could have one for me, one for the extra $100 I’m saving, and one for all the women who will want to date me for my amazing financial skills.”

Okay, so that’s not the best analogy, but I typed it out and everything so I’m not going back.

How much would you pay to each player if they were one/50th as talented as Albert Pujols? You can’t put a team together with 50 fractional Pujolses. And so on and so forth. Value can’t be linear. Teams may pay on the line, but that doesn’t mean it’s rational or a good idea.

And the economics thing – predicting even the near-term future of much larger economies is a crapshoot. I don’t know if they can sustain 10%, but I’m extremely skeptical.

The value in the commodity is in sustaining that ability. A 2-win player will say be 1.5 wins next year, then 1.0 wins, then 0.5 wins, then out of the league, so that over a 5-yr period, he’d be 5 wins total. A 4-win single-year player will be a 15 win player over 5 years, so he’d producing 3 times more value, rather than the initial year double the value.

I believe it is on that basis that the perceived “non-linearity” comes in.

I think if all players signed for exactly one year, the linear relationship would hold (like in fantasy baseball). In any case, I think my model as I’ve presented it would probably hold if we look at it long-term.

As for 10%, this has been the case if you look at most 10-yr periods. I wouldn’t be surprised if in the future it’ll be more than 10%.

But then, I also don’t believe a 10% annual inflation in payroll is sustainable.

through the life of any contract.