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The Money Pitch

The Widening gap between rich and poor teams means only a handful will have a shot at the World Series
Ken Shouler, Austin Merrill
From the Print Edition:
Cuban Spy Scandal, May/Jun 02

(continued from page 2)

So the phrase "economy is destiny" overstates the case. But is there any chance for a team in the lower half of the payroll rankings to win the World Series in 2002? Economist Charles R. Link is unequivocal in his answer. "No; it's purely accidental if it happens." A professor at the University of Delaware, Link thinks that payrolls are highly predictive of outcomes. "I feel that I can predict the five or six teams that are going to be in the World Series next year. And I'll be shocked if one of those five or six is not there." Who are the contenders? "Well, the Yankees are one of them. Could be Boston because Boston just got bought by an owner who has the resources and they paid a humongous amount of money for the franchise. I see Atlanta. I see Arizona. I see Seattle. The Mets are going to be there; they just invested a lot in beefing up the team. Cleveland will be there. And I think eventually Texas will get back into it, because they've got the money to start buying. One thing they didn't buy was pitching." But if predictive power is so assured, should Minnesota, Tampa Bay, Montreal, Kansas City and a few other low payroll clubs just pack it in? "No," says Roger I. Abrams, the dean of Northeastern University School of Law and author of The Money Pitch: Baseball Free Agency and Salary Arbitration. "It just means that someone who is rich has to buy those teams. But if you're not ready to put money into the team, don't play the game. You don't go out on the field without a glove. Don't go out and own a club unless you're willing to put in the money it's going to take. If you're almost rich, I think that's nice, but go play another game." What makes this money talk more urgent from the money talk of decades before? It all changed in the 1990s.

At the outset of the '90s, hopes for competitive balance in baseball were high. A new national television contract with CBS and ESPN for 1990 through 1993—together with growing central licensing, superstation and Copyright Royalty Tribunal revenues—funneled some $19 million a year to each team. In 1990, $19 million was nearly 40 percent of average team revenues.

A significant change occurred in 1994, when baseball's new national television contract fell by more than 60 percent. Compounding the bad news for the small-market teams was that big-market teams were earning more than $40 million a year in unshared local media revenues. The gap between rich and poor was widening. Then, too, this was the era of new, big-revenue-generating stadiums, ushered in by Camden Yards (Baltimore) in 1992. Camden was followed by Jacobs Field (Cleveland) and The Ballpark in Arlington, Texas, both in 1994, and Turner Field (Atlanta) in 1997. "With centrally distributed monies below $10 million per club," Zimbalist says, "teams with a big market or new stadium found themselves with a rapidly growing revenue advantage. The ratio of richest to poorest in payroll has thus grown to unprecedented proportions."

Baseball's caste system was set. But to some this talk of money elicits a shrug. Rich owners and poor owners—so what? That's nothing new. Teams have always won because of some monetary advantage.

The owners ruled the roost from baseball's beginning. A reserve clause was instituted by owners in 1879, eight years after the beginning of the National Association, baseball's first major league. The reserve system chained players to their teams in perpetuity. Salaries were capped at $2,500 for the vast majority of players in the 1880s. Poor teams sold players to rich teams just to survive. While player sales were becoming commonplace, the players didn't profit from them: the productive values of players were not marketed but traded between owners. Albert Spalding, who pitched for Boston and the Chicago White Stockings of the National League before becoming the owner of the latter, admitted later that he earned $750,000 from his Chicago club in the late 1880s.

The reserve system held salaries in check, even as attendance boomed. Baseball attendance in 1910 reached an unprecedented 7.25 million, and future Hall of Fame players like Ty Cobb and Christy Mathewson earned $9,000. The average salary, however, was a paltry $1,200. Competition from a new circuit in 1915, the Federal League, spiked the average to $2,800. Cobb's salary jumped to $20,000. During this time, players might earn as much as $3,000 extra if their team won the World Series (sometimes more).

The wealth of owners at the time didn't show up in team payroll but took a different form. The Yankees of the 1920s bought the Red Sox's best players when Boston owner Harry Frazee needed financing for his Broadway show No, No, Nanette. Salary dumping was nothing new. Connie Mack, whose Philadelphia A's had won three World Series from 1910 to 1913, began selling off his stars after losing to Boston's "Miracle" Braves in the 1914 Series. He even unloaded his so-called "$100,000 infield" of Stuffy McInnis, Eddie Collins, Jack Barry and Frank "Home Run" Baker. (After building the team up again and winning three straight pennants and two World Series with the A's of 1929—31, Mack again sold stars because the Great Depression caused attendance to fall off sharply after the 1931 season.)

Both leagues made a profit every year from 1920 to 1930, with the Yankees leading the way with a reported profit of $3.5 million. Babe Ruth was a symbol of their outsized wealth, though his salary was singular. The median salary on the historic 1927 Yankees was $7,000; Ruth earned $70,000 that year. Ruth's salary hit $80,000 in 1930, higher than President Herbert Hoover's $75,000. When someone mentioned the discrepancy, Ruth replied, "What the hell does Hoover have to do with it? Besides, I had a better year than he had."

An owner's right to hold players forever, or trade them at whim, ended nearly 100 years after it began. In 1969, Curt Flood challenged baseball's reserve clause. The St. Louis Cardinals had a poor season in 1969 and decided to trade Flood and others for Philadelphia slugger Richie Allen. Flood was making $90,000 with St. Louis; Philadelphia offered $100,000 and then increased it to $110,000. "There ain't no way I'm going to pack up and move 12 years of my life away from here," Flood insisted to reporters. He sued, challenging baseball's reserve clause. Flood lost the case before the U.S. Supreme Court in a 5 to 3 decision. Justice Harry Blackmun said the proper way to revise baseball was in Congress, by legislative action, not by judicial action. But Flood's challenge emboldened other players and they slowly chipped away at the reserve clause.

By 1973, players had won the right to salary arbitration, thanks to a concession negotiated by Players Association head Marvin Miller in his first Basic Agreement with the owners. As the World Series was about to begin in 1974, Jim "Catfish" Hunter, that year's American League Cy Young award winner with 25 wins, decided to terminate his contract with the Oakland Athletics after the season. Oakland owner Charlie Finley had failed to make an agreed-upon $50,000 payment (half of Hunter's salary) into a life insurance fund. Hunter cited Section 7A of the Standard Player Contract, which stated "…the player may terminate his contract upon written notice to the Club, if the Club shall default in the payments the player provided for…." Arbitrator Peter Seitz voided the contract.

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