Revenue Sharing Not Working Properly?

[Dutch Alexander]

So if I understand correctly you would like the max cash to be applied to the previous years final balance and the revenue sharing added to the next seasons starting balance? In that case your starting balance for 2031 would be $500,000 + $2,985,517 = $3,485,517. I see your point, but this is not how the game calculates the starting balance. Max cash of $500,000 means max starting balance of $500,000.

[Dutch Alexander]

Originally Posted by coljesep

I removed the cash max/min, and two things I notice:

#1 - Despite the balance + rev share creating what should be a budget of 13,973,777 or 13.9 to use rounded numbers, the budget remains at 13m.

#2 the projected budget for the following year is based solely on revenue again, as if revenue sharing is not a thing.

I get what you're saying re cash max. But in a league where it's solely about the revenue, and controlling the amount of $ in the game - I don't agree that this format is producing results that players have likely been utilizing for several years.

If OOTP22 and OOTP23 can project a budget based on revenue sharing so that teams do not have to operate on year to year spending then I am failing to see how this can be viewed as 24 doing things right.

Attached is how the team's financial situation is different between 22 and 24 with the same setting, no cash max.

The financial situation in both versions is basically the same. Both show a starting balance of $4.036,054 and starting balance is all that matters. The budget estimates for the upcoming seasons (2032, 2033) is based on this years (2031) projected revenue. The difference is that in OOTP24 revenue sharing is added to the previous year, so the projected budgets for 2032 and 2033 also show no revenue sharing. This is what causes the difference in projected budgets between 22 and 24.

[coljesep]

Originally Posted by Dutch Alexander

The financial situation in both versions is basically the same. Both show a starting balance of $4.036,054 and starting balance is all that matters. The budget estimates for the upcoming seasons (2032, 2033) is based on this years (2031) projected revenue. The difference is that in OOTP24 revenue sharing is added to the previous year, so the projected budgets for 2032 and 2033 also show no revenue sharing. This is what causes the difference in projected budgets between 22 and 24.

So lets just put aside all the questions for now. I get what you're saying. I get the function of the game and accounting has changed. But I still think something is wrong in a revenue share model where revenue dictates your budget.

OOTP24 calculates $ for free agents as Starting Balance + Revenue Subtotal - Expenses

So in the attached example it's
$3,776,184 + 6,568,819 - 7,595,000 = $2,750,003. Spot on.

Then shouldn't Money for Extensions be the same calculation?

OOTP24 calculates extension $ as Projected Budget - Expenses. But that projected budget is based entirely off of the assumption that there is no rev share.

If Revenue Sharing does not enter the budget process until the year is done, then every year a team like this who is receiving revenue share funds will have to operate on a year to year basis.

If this team's projected starting balance is $4,426,184 then shouldn't that be added to the revenue line of 6,568,819 to make a total of 10,995,003. And then subtract expenses $9,927,800 and you get $1,067,203 for extensions - instead of $0

I can't wrap my head around why Year 1 money uses balance + revenue minus expenses. A perfectly reasonable formula. But year 2 would use Budget - Expenses when that budget is based on revenue before revenue sharing.

[Matt Arnold]

The revenue sharing portion of the finances happens at the end of the year, and is applied to that year. We can look to see if we can project it through the budget and future budgets, and see if that helps at all. We'll have to be a little careful what weird cases you might run into, though.

[Dutch Alexander]

Originally Posted by coljesep

If this team's projected starting balance is $4,426,184 then shouldn't that be added to the revenue line of 6,568,819 to make a total of 10,995,003. And then subtract expenses $9,927,800 and you get $1,067,203 for extensions - instead of $0

I can't wrap my head around why Year 1 money uses balance + revenue minus expenses. A perfectly reasonable formula. But year 2 would use Budget - Expenses when that budget is based on revenue before revenue sharing.

I agree $1,067,203 for extensions makes more sense. Not sure why the game uses Budget - Expenses to calculate money for extenions. (It is not exactly Budget - Expenses, the numbers don't add up exactly. Not sure what the actual calculation is but it's close to Budget - Expenses). It does seem to make more sense to use projected final balance to calculate money for extensions rather than season profit/loss.

The fact that season profit/loss is used to calculate money for extensions is indeed a problem in your example. Since revenue sharing is added to the starting balance and since the starting balance is ignored in calculating money for extensions a team like in your example will always have zero money for extensions.

[Dutch Alexander]

The other issue remaining is that the combination of revenue sharing and a cash maximum simply does not work. A team receiving money will immediately lose all money above $500,000 since that is the cash maximum. For it to work the revenue sharing would have to be added to next years revenue line rather than the starting balance. But only for teams receiving money, team paying money would be hit double if this is added to next years revenue. First they would lose all profit above $500,000 and then they would still have to pay revenue sharing.

For this to work revenue sharing would need to be added to the previous years expenses for teams paying and to the next years revenue for teams receiving.

[Matt Arnold]

Originally Posted by Dutch Alexander

The other issue remaining is that the combination of revenue sharing and a cash maximum simply does not work. A team receiving money will immediately lose all money above $500,000 since that is the cash maximum. For it to work the revenue sharing would have to be added to next years revenue line rather than the starting balance. But only for teams receiving money, team paying money would be hit double if this is added to next years revenue. First they would lose all profit above $500,000 and then they would still have to pay revenue sharing.

For this to work revenue sharing would need to be added to the previous years expenses for teams paying and to the next years revenue for teams receiving.

With a low cash maximum revenue sharing is more about stopping any losses, rather than being able to use the revenue sharing money for future planning. ie. if you happen to run into the red, the revenue sharing money at least means the Owner doesn't have to inject as much cash in and be upset, but you can't really use excess revenue sharing money to bootstrap yourself for the next year.

But I think I see where we can project out the revenue sharing/luxury tax values into the future budgets, which should help especially in leagues with bigger gaps in income, or to be able to use it for future planning when the owner doesn't control the budget.

[coljesep]

Originally Posted by Matt Arnold

The revenue sharing portion of the finances happens at the end of the year, and is applied to that year. We can look to see if we can project it through the budget and future budgets, and see if that helps at all. We'll have to be a little careful what weird cases you might run into, though.

Thanks Matt, appreciate it. The change in where rev sharing $ is applied changes a lot. I understand it's purpose though, and I also understand thanks to Dutch Alexander that turning off a cash cap will positively impact te end result.

This seems to be the only way to make revenue sharing work in a league where revenue determines budget now since the revenue sharing money is no longer "added revenue" for the current year.

I think ultimately, the only way revenue sharing can actually work (specifically in a revenue determines budget) is if somehow that revenue brought in can be attributed to future year spending.

In the attached example, this team got just over 2.9m in revenue sharing, plus a season profit of 550,337 and on top of a starting balance last year of 500,000. That gave them just over 4m as their starting balance. Taking away expenses, they have 3.6m to spend.

But there's no reason to assume they will only have 9.9m to spend next year on players right? It's almost like next year's budget is assuming there is no revenue sharing, despite this year's budget correctly doing so. The fact next year's budget removes the revenue sharing $ presents a problem.

If revenue shared money has to go into the previous year's books... then a team in this situation will always be forced to operate on 1 year deals if the projection isn't changed.

The projection can't be perfect. Teams will have to be mindful that if they don't bring in the revenue they are projected to bring in, they may spend too much.

But taking the revenue sharing $ out of the next year budget like it does now at the bottom, to me is a problem that forces a team to operate in 2 inconsistent methods.

Next Year Spending should either be:
Projected Revenue Sub: +9,937,723
Projected Expenses Sub: -12,491,150
Projected Revenue Sharing (matches previous year): +2,985,517
= $432,090

or

Current Year Budget: $13,000,000
Projected Expenses Next Year: -$12,491,150
=508,850

Right?

This Year $ = $3,632,277 (Start Balance + Rev Budget - Expenses)
Next Year $ (option A) = $$432,090 (Proj Rev + Proj Rev Share - Expenses)
Next Year $ (option B) = $508,850 (Current Budget - Proj Expenses)

I feel like both, probably give the person controlling the team at least some runway to operate in a multi-year mindset. Option A assumes the revenue will come in either thru their own methods or via revenue share. Whereas option B has the team operate within the same budget they have this year and then if they happen to get more revenue via share or their own subtotal - they will have more $ to spend in that offseason.

Regardless, I'm pretty confident that in order for revenue sharing to work in a league where revenue determines budget - something has to change for Year 2+

You said you had an idea on how that # can be projected for future years. Can you share what that looks like? And a ballpark timeline?

[coljesep]

Originally Posted by Matt Arnold

With a low cash maximum revenue sharing is more about stopping any losses, rather than being able to use the revenue sharing money for future planning. ie. if you happen to run into the red, the revenue sharing money at least means the Owner doesn't have to inject as much cash in and be upset, but you can't really use excess revenue sharing money to bootstrap yourself for the next year.

But I think I see where we can project out the revenue sharing/luxury tax values into the future budgets, which should help especially in leagues with bigger gaps in income, or to be able to use it for future planning when the owner doesn't control the budget.

This would be a huge help.

We had the cash cap to keep spending under control before we had revenue sharing. But I can see how in this new model of revenue sharing that a cash cap/floor isn't as needed, or at least doesn't provide the same result it was originally intended to do (control losses or high gains). We are more concerned with teams ability to spend to compete. So it would seem that removing the cap with revenue sharing would do that.

[Dutch Alexander]

Another option to share revenue is gate share. In my league I do not use revenue sharing but instead I use a 50% gate share. This prevents the most succesful teams from stockpiling money and the poorest teams from an ever increasing negative balance. In my league this is quite effective since the bigger teams have bigger stadiums as well as bigger market size. And gate share is copied to next year(s) projected revenue and thereby also next year(s) budget.

[Matt Arnold]

I think the plan for calculating future revenue sharing is basically assuming that league revenues are constant, then each projected year knows what its projected revenue should be, so you can effectively calculate the projected revenue sharing.
Projected luxury tax is a little more complicated, since the amount paid into the luxury tax will vary depending on how many teams put in vs how many teams receive. For that basically it's a simple calculation to figure out a projected amount you pay into the luxury tax, and if you're below the threshold (at least, assuming average payroll is constant), then we'll assume that the average team receives the same luxury tax returns as the previous year average.

I think the way that works, you should have an idea on how the revenue sharing will impact you each year. We won't simply copy last year's total, which should also adjust in case if the team revenue is expected to change, but it generally should come in close if revenues aren't changing much.

That should make it into the next patch, which we don't have a direct ETA on yet.

[coljesep]

Originally Posted by Dutch Alexander

Another option to share revenue is gate share. In my league I do not use revenue sharing but instead I use a 50% gate share. This prevents the most succesful teams from stockpiling money and the poorest teams from an ever increasing negative balance. In my league this is quite effective since the bigger teams have bigger stadiums as well as bigger market size. And gate share is copied to next year(s) projected revenue and thereby also next year(s) budget.

I think this would be a good suggestion for a startup. But not for a league that has been in existence and is just about to process new budgets.

In the most perfect world, revenue from rev sharing for leagues set to "entire revenue available" would apply revenue gained to the revenue line for the upcoming year.

I understand that in MLB revenue sharing is more about offsetting expenses and that is why it makes sense for the game to now apply rev share to the bottom line of the most recent season.

But in a setting where its built to avoid owner meddling, offsetting expenses with revenue share doesn't achieve the goal of "entire revenue available" in my opinion.

However, I'm not a coder and I don't know how big of a change that is to make a different financial calculation for each setting for budgets.

Assuming its a bigger lift than a hotfix can provide, I'd be perfectly content with a more accurate "projected" budget for the extension money and just call it a day. I do think though that may not work for all leagues.

[coljesep]

Originally Posted by Matt Arnold

I think the plan for calculating future revenue sharing is basically assuming that league revenues are constant, then each projected year knows what its projected revenue should be, so you can effectively calculate the projected revenue sharing.
Projected luxury tax is a little more complicated, since the amount paid into the luxury tax will vary depending on how many teams put in vs how many teams receive. For that basically it's a simple calculation to figure out a projected amount you pay into the luxury tax, and if you're below the threshold (at least, assuming average payroll is constant), then we'll assume that the average team receives the same luxury tax returns as the previous year average.

I think the way that works, you should have an idea on how the revenue sharing will impact you each year. We won't simply copy last year's total, which should also adjust in case if the team revenue is expected to change, but it generally should come in close if revenues aren't changing much.

That should make it into the next patch, which we don't have a direct ETA on yet.

Thanks Matt. Think we are talking days, weeks or months?

I am trying to figure out how to move forward with my league as we approach the offseason. Ideally would like to begin with 24, but without this - that would be tough.

[Matt Arnold]

Originally Posted by coljesep

Thanks Matt. Think we are talking days, weeks or months?

I am trying to figure out how to move forward with my league as we approach the offseason. Ideally would like to begin with 24, but without this - that would be tough.

We'll likely have a public beta out this week or next. Hopefully not too too long

[coljesep]

Originally Posted by Matt Arnold

We'll likely have a public beta out this week or next. Hopefully not too too long

Appreciate ya!

[Le Grande Orange]

Originally Posted by Matt Arnold

The revenue sharing portion of the finances happens at the end of the year, and is applied to that year.

For what it's worth, in real life revenue sharing is lagged a year.

That is, for the 2024 MLB season, the revenue sharing a club would pay or receive is based on a weighted average of the local media the club earned in the 2021, 2022, and 2023 seasons. Clubs which are payors would make payments on May 15, July 15, Sept. 15, and Nov, 15 of 2024, while clubs which are payees would receive the funds on May 25, July 25, Sept. 25, and Nov. 25 of 2024.

There would also be a final tune-up adjustment on May 15/25 in 2025 based on the final audited financial results. The delay is the result of the time it takes for clubs to fully process and analyze its finances, and have the figures independently audited by the accounting firm.

In OOTP, of course, such a delayed tune-up wouldn't be needed since as soon as the 2023 season was concluded, the financial results are in and complete, and the revenue sharing payments for 2024 calculated.

[coljesep]

Originally Posted by Le Grande Orange

For what it's worth, in real life revenue sharing is lagged a year.

That is, for the 2024 MLB season, the revenue sharing a club would pay or receive is based on a weighted average of the local media the club earned in the 2021, 2022, and 2023 seasons. Clubs which are payors would make payments on May 15, July 15, Sept. 15, and Nov, 15 of 2024, while clubs which are payees would receive the funds on May 25, July 25, Sept. 25, and Nov. 25 of 2024.

There would also be a final tune-up adjustment on May 15/25 in 2025 based on the final audited financial results. The delay is the result of the time it takes for clubs to fully process and analyze its finances, and have the figures independently audited by the accounting firm.

In OOTP, of course, such a delayed tune-up wouldn't be needed since as soon as the 2023 season was concluded, the financial results are in and complete, and the revenue sharing payments for 2024 calculated.

Right, but MLB doesn't have a play option as "entire revenue available" as a way to invest in players. The change in process makes total sense when comparing it to MLB. An MLB owner is taking rev share to offset the previous year expenses.

But in entire revenue available, you can't spend over your revenue total (budget) unless it's via trade and the Commish forces it.

Ultimately, the change is what it is. Ideally revenue from rev sharing would just get applied to the current year in games being played with the revenue setting.

But, having extensions and next year accounting assuming that rev share will take place is probably a greater need right now.

[Le Grande Orange]

Originally Posted by coljesep

Ideally revenue from rev sharing would just get applied to the current year in games being played with the revenue setting.

I agree, but the amount of the revenue sharing paid or received should be based on the previous season's finances. That eliminates any need for estimates during the ongoing season — the amount a club gets or pays is known exactly going into the season.

[snepp]

Originally Posted by Matt Arnold

I think the way that works, you should have an idea on how the revenue sharing will impact you each year. We won't simply copy last year's total, which should also adjust in case if the team revenue is expected to change, but it generally should come in close if revenues aren't changing much.

That should make it into the next patch, which we don't have a direct ETA on yet.

Excellent.