It's not. It's dictated by what a few owners are willing to overpay, which artificially drives up the market for everyone. The end result is less money for everyone, as attendance rockets down for the bottom tier teams.
You are describing market Economics 101 drivers stating 'It's dictated by what a few owners are willing to overpay, which artificially drives up the market for everyone.'
Every professional team sports league is bloated by the number of franchises that they are comprised of. The market corrects a company that expands too large after creating too many locations, etc. Retail store closures are one example.
Professional team sport leagues on the other hand? They do not dissolve member franchises. Attendance
should decrease if fans of a particular franchise do not support the quality of the product that the franchise fields.
What
could happen is the elimination of underperforming franchise markets. Overall player talent would consolidate with average-to-over performing franchise markets. Product quality would increase for the lessor quantity of franchises, which, in turn, would increase overall attendance for fewer franchises.
And the bottom tier teams don't even try to get better, as they are lowballing their players and making a fortune from the revenue sharing of teams over the cap. It's a complete mess.
Repeat that again bold part again. That is a very relevant problem with who gets paid what in professional team sports.