The Future of Baseball:
What Needs to be Done and Why
New Yankee Stadium Construction as seen from the top of Yankee Stadium, 4/2/08
Artemus Ward
Department of Political
Science
Northern Illinois University
aeward@niu.edu
Introduction
• Major League Baseball is a monopoly: it is the only
provider of top-level professional baseball in the country.
Economists believe that this condition leads to a number
of undesirable outcomes: lower output, higher prices,
indifferent service to the consumer, and inefficiency.
• The general remedy that economists propose for such a
condition is either divestiture (breaking up the monopoly
into more than one firm) or regulation.
• In this lecture we will discuss possible changes to
baseball and whether or not these changes are likely to
come about.
• We first begin with a discussion of the puzzle of “talent
compression” and how it relates to the popularity of the
game with casual fans.
Talent Compression I
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What accounts for record-breaking
performances over time? Why, until 1998,
were almost all of baseball’s personal
achievement records set between 1910 and
1930?
The reason has to do with relative degrees
of talent compression. The distribution of
baseball skills in the population follows a
normal distribution (like a bell-shaped curve).
For any given curve, the larger the number of
people selected to play MLB, the greater will
be the difference between the best and the
worst players in the league.
If the population grows and the number of
baseball teams does not, then the proportion
of the population playing will fall and the
distribution of talent will become more
compressed toward the mean. This is what
happened in MLB between 1903 and 1960,
when the population grew from 80 million to
181 million and the number of teams
remained constant at sixteen.
With talent increasingly compressed, the
difference in skills between the best and
worst players grew more narrow, and it
became more difficult for the best players to
stand out. Hence, records ceased being
broken, or even approached.
The blue curve represents talent decompression
which occurs when more of the population is
able to play Major League Baseball – a more
normal distribution.
The black curve represents talent compression
which occurs when less of the population is able
to play Major League Baseball.
Talent Compression II
• So it is difficult to compare Babe
Ruth (714 career HRs, 60 in a single
season) to players from the 1960s. It
makes more sense to conclude that
Ruth played during a time when
talent was more dispersed, so he
faced many superb pitchers but also
a much larger share of weak pitchers
than did 1960s hitters.
• Similarly, Dutch Leonard (0.96 ERA
in 1914) and Walter Johnson (1.09
ERA in 1913) faced some
spectacular hitters, but they also
faced a much higher percentage of
weak hitters than did the greatest
pitchers from later, more compressed
years such as Sandy Koufax, Nolan
Ryan, Roger Clemens, or Curt
Schilling.
•
The dramatic rise in foreign-born players in recent years—as well as the turn of American youth
away from baseball toward basketball and football—further exacerbates the problem of
compression as the most talented young athletes spurn baseball and the weakest U.S. baseball
players are replaced by better non-U.S. players.
Talent Compression Data
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Ratio of U.S. Eligible Baseball Population to U.S. Roster Spots
100000
90000
80000
70000
60000
50000
40000
30000
20000
10000
0
19
00
19
10
19
20
19
30
19
40
19
50
19
60
19
70
19
80
19
90
20
00
•
Taking into account the
exclusion of African-Americans
prior to the 1940s, the ratio of
the U.S. male, playing-age (2044) population to the number of
U.S. major league players
gradually rose from 36,500 to 1
in 1901, to 71,500 to 1 by 1960;
Over this time span, talent was
gradually compressed making
individual excellence harder and
harder to achieve.
But by 1970, MLB had
expanded from 16 teams to 24
and decompression to 1930
levels returned.
But it was short-lived as
compression hit record highs in
the 1980s, 90s, and into the 21st
Century – despite expansion to
26 and then 30 teams by 2000.
Thus, talent compression
appears to be a permanent
fixture of today’s game.
Population
•
Year
The Compression Conundrum
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So in today’s compression era, players like Mark McGwire, Sammy Sosa, Barry
Bonds, Roger Clemens, and Alex Rodriguez can only excel if they take dramatic
steps to counteract the lack of mediocre and weak competitors. Their answer
was performance-enhancing drugs. Without them, there is virtually no way that
records from decompressed eras would have fallen so quickly and so
dramatically. Consider Roger Maris’ 1960 record of 61 HR in a season being
easily eclipsed by Sosa’s 66 and McGwire’s 70 HRs in 1998 and Barry Bonds’ 73
in 2001.
Why does this matter? Because if baseball is successful at eradicating steroids
yet continues to recruit players from outside the U.S., talent compression will only
grow and we would expect fewer, if any, record-breaking performances. This
would make the game less exciting to the casual fan and, with lower demand,
more economically challenged.
The only answer is ongoing expansion and probably on an international scale.
Indeed, scheduling games outside the U.S. and creating the international World
Baseball Classic are examples of MLB moving in this direction.
Economic Discrimination: Hulbert’s Law
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When William Hulbert founded the National
League in 1876 the owners were able to collude to
set ticket prices at a half-day’s wage for a
workingman—much more than even today’s ticket
prices. The early pricing structure limited potential
spectators to the upper classes who could afford
to attend. Games were also played during the day
making it virtually impossible for workingmen to
attend as where professional workers could
regularly attend by taking a few hours off work,
taking long lunches, and attending games with
colleagues.
Hence, William Hulbert started the move, still
practiced today, to gentrify the business of
baseball.
Today, stadium gentrification is rampant. Baseball
ticket prices are too high—pricing out lowerincome families and children who might otherwise
attend games and play the sport.
Seat licensing for the right to purchase season
tickets, is an example of stadium gentrification and
economic discrimination.
Furthermore, televised baseball games have
increasingly migrated from free, broadcast TV to
pay-cable outlets and satellite—making it
increasingly costly for would-be fans to even see a
game on TV.
Breaking the Amateur Draft
and Minor League Monopoly
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Baseball’s presumed antitrust exemption allows it to follow restrictive labor market
practices relating to its minor leagues.
Each June, MLB holds a draft of amateur players from U.S., Canadian, and Puerto Rican
high schools and colleges. Teams choose players according to their finish in the previous
year’s standings: teams with the worst records pick first. Once chosen, players can either
sign with the selecting team for a fixed salary plus a signing bonus or they can stay out of
professional baseball until next year’s draft.
Chosen players who sign with a major league team then spend up to four years in that
club’s minor league system before another team has an opportunity to sign them and
move them up to a higher minor league or to the major league level. If, however, the
drafting club puts a minor leaguer on its forty-man major league roster, then that player
cannot be signed by another team until he has completed seven years in the team’s
system.
These restrictions on minor leaguers are all restraints of trade. The amateur cannot
receive competitive bids for his services at the time of the draft nor can he receive bids
from other teams (for up to seven years) after he is drafted. While in the minors, salaries
are determined according to an owner-set scale. With few exceptions amateurs do not go
directly into the unionized major leagues and there is no labor union of minor league
players.
Without the exemption, it is possible that minor league players would sue and the farm
system as we know it could collapse. But if minor leaguers did not “belong” to a particular
major league club, then it is likely that competitive balance among major league teams
would improve. Major league clubs would draft players out of the minors, not out of college
and high school. These players would be more developed and their potential talent level
more knowable. The reverse-order draft would confer a larger advantage on the lowfinishing teams than does the present amateur draft.
Boycott?
• Why do fans continue to patronize the sport instead
of boycotting it?
• Fans are a geographically dispersed, amorphous
group for whom effective collective action is highly
unlikely.
• Furthermore, baseball has cultivated an
increasingly gentrified fan base which is unlikely to
rock the boat.
Congressional Inaction
• The only way congress will ever act is if a “policy
window” opens where MLB is largely unpopular
with the public and there are calls for change.
Scandal or work-stoppages would be the two
most likely events to prompt such an opportunity.
• Meanwhile members of congress have little
incentive to act. MLB has a powerful full-time
lobbying organization, contributes money to
congressional campaigns through a political
action committee, and the wealthy owners are
politically and economically connected to
members of congress through their other
business ventures.
• Absent a policy window opening, attacking MLB’s
presumed exemption is a no-win situation for
members of Congress. There is little to gain from
constituency support, there is the risk that an
alienated MLB establishment would be less
willing to retain a team in or introduce a team to a
member’s district or to provide a member with
box seats for a high-profile game.
Promoting the
Game
• MLB could do more to attract young fans:
– Start World Series games earlier;
– Open ballparks earlier so that fans can watch the home
team take batting practice;
– Increase the number of discounted family games;
– Build parks and open spaces for urban youth to play the
game;
– Schedule games with top stars in cities without MLB
teams such as Portland, Charlotte, Sacramento, etc;
– Expansion: more teams in more cities and players on
team rosters.
A New
Players League?
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Though Monte Ward’s Players League (1890) failed, could their model—or a form of it—be revived
today?
Then, as now, the public cares little for the pleas of highly paid athletes. As in the 19th century, claims to
moral authority or appeals to rationality will have little effect.
The Players League failed because the effort lacked a source of reliable capital to create and maintain a
major business enterprise. Because the players needed to build stadiums and meet payrolls, they turned
to financial backers who were motivated primarily by profit and not by ideological zeal or a passion for
the game.
Hence the only way to make a new Players League work is for MLB players themselves—and most
importantly the biggest stars—to abandon MLB forever. Indeed, since the advent of free agency in 1977,
the reserve clause for major leaguers no longer protects MLB from encroachments by a potential rival
league.
Furthermore the barrier of access to minor leaguers is less problematic today due to the success of
several independent minor leagues around the U.S.
Also, the college game is better developed and producing better players than in the past.
Finally, non-U.S. players have proved to be excellent ballplayers and present a wealth of opportunity for
a competing league. Indeed MLB knows this and has made moves in recent years to further
“internationalize” the game in a long-term plan to stave off potential competition. They have not only
increasingly signed players from outside the U.S., they have played exhibition and regular season games
in places like Japan, Mexico, and China and started the World Baseball Classic featuring teams from
Australia, Canada, China, Chinese Taipei (Taiwan), Cuba, Dominican Republic, Italy, Japan, Korea,
Mexico, Netherlands, Panama, Puerto Rico, South Africa, and Venezuela.
Still, it is obvious that to compete with MLB, a rival league would need substantial capital to sign players,
secure public financing to build new stadiums, and secure television contracts to generate revenue and
publicize the games. Is this possible?
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United Baseball League (1994)
After the cancellation of the 1994 World Series and in the midst of a three-month long MLB
work stoppage, the UL saw its chance and announced its formation.
Each team would sign a top-tier player, several midlevel players, and a majority of low-salary
players at its outset. As its following grew, the league would upgrade the talent level over
time.
Among its management group, the UL included Curt Flood, Al Harazin (former general
manager of the New York Mets), Dick Moss (former general counsel for the Players
Association and a player agent), and Mike Stone (former general manager of the Texas
Rangers). Moss said, “We’re not here to prod the old establishment and it’s not our intention
to replace it. We’re here to coexist with it. We will compete just as Ford competes with
General Motors. By starting fresh and not being bound to antiquated practices, we will be
able to have a much healthier atmosphere.”
Initially the UL had 8 cities with modest ballparks (Los Angeles in the Coliseum, Washington
DC in RFK Stadium, New Orleans in the Superdome, Long Island, Central Florida, Puerto
Rico, Portland Ore., and Vancouver British Columbia), a good share of its needed capital, a
154-game schedule from March-Sept. to begin in 1996, and a 20-year television contract
with Liberty Media on a revenue sharing basis. The league planned to share profits with host
cities and players. Cities that agreed to build or adapt existing stadiums would get a 15%
share of pretax profits and a 15% equity share. Players would get a 35% share of pretax
profits and 10% equity.
The UL planned to offer fans cheaper tickets and involve members of minority groups in
significant numbers and significant positions. “Minorities in the United Baseball League will
be able to step from the batter's box to the owner’s box,” said Eric Vinson, vice president of
the United States Trust Company and one of several black members of the league’s
management company. Flood said, “I need an alternative league. Baseball’s owners have
shut me out for 25 years.”
Yet a few weeks after the UL’s deal with Liberty Media, Fox Sports merged with Liberty and
a few weeks after that Fox secured the long-term broadcasting rights to MLB. Liberty
reneged on its contract with UL and the new league was dead before it even started.
Antitrust, Regulation, and Divestiture
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Lifting MLB’s presumed antitrust exemption would permit judicial review
of baseball’s policies and actions. When MLB claims that the minors as
currently structured are necessary or that contraction by two teams is
imperative, as long as there is a blanket antitrust exemption there is no
judicial review. Without judicial review there is no discovery of facts and
there is no analytical challenge to MLB’s claims by and independent
judge or jury. Given that MLB is not regulated and faces no competition,
the opportunity for judicial review would provide the only chance to limit
the potential abuse of its monopoly powers.
An alternative is to regulate the baseball industry by creating a federal
sports commission with regulatory authority or a national sports council
with subpoena power which could recommend policy to congress. Such a
body could regulate or make proposals on the schedule, the number and
movement of franchises, broadcasting, labor relations, etc.
Forced divestiture—breaking MLB up into two competing business
entities—is another solution. The entities could collaborate on playing
rules and engage in interleague and postseason play but they would not
be able to divvy up metropolitan areas, establish common drafts of
players’ markets, or collude on broadcasting policy, among other things.
Competition would be consumer (fan) friendly with lower government
subsidies, team revenues, owner profits, player salaries, and ultimately
fan cost to see and attend games. Existing markets currently without
teams would gain teams under competition and some markets that could
support multiple teams would see growth. For example, Charlotte,
Portland, Las Vegas, New Orleans, Sacramento, and other cities could
gain teams with existing MLB cities such as New York which once
supported 3 teams could see expansion.
Conclusion
• MLB’s monopoly, coupled with the recent
success of the MLBPA, have made the game
extremely profitable for owners and majorleague players.
• Stadium gentrification further satisfies the
economic elite who might otherwise bring
pressure to bear on the problems of the game.
• A new, competing league—such as the
proposed United Baseball League, revoking the
antitrust exemption, regulating the game
through a federal agency, or breaking up MLB
into two leagues through divestiture are
potential dramatic solutions to baseball’s
problems.
• Still, while numerous remedies could be tried to
make the game more accessible to young
people, the lower classes, and wider geographic
areas, congress has little incentive to act to lift
baseball’s antitrust exemption or otherwise act
in the best interests of the game.
Bibliography
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Chass, Murray. 1994. “Baseball; New Baseball League Offers Profit Sharing for Cities and
Players.” New York Times, November 2.
Diamos, Jason. 1995. “Baseball; New League Gets TV Deal and Schedule.” New York Times,
August 18, 1995.
Zimbalist, Andrew. 2003. May the Best Team Win: Baseball Economics and Public Policy.
Washington, DC: Brookings Institution Press.