Sunday, May 4, 2008

Rebuffing a Baseball Salary Cap

Last week, the New York Times Freakonomic Blog wrote about changes that Major League Baseball could enact that would help the game. In my opinion, any changes have to benefit competition, profitability, or viewing experience. These are the three pillars of the professional sports business.

According to Freakonomics, a majority of readers advocated a salary cap as salve for Major League Baseball’s problems. A salary cap will do nothing to improve any of the aforementioned components. It will not help competition, increase profitability, nor enhance the viewing experience.

Competition – There are several reasons why a salary cap will not help competition in Major League Baseball. First, as Freakonomics points out, there is a link between higher pay and sluggish performance. The idea that players perform at higher levels when financially motivated is a fact, and that after rewarded, performance generally decreases. Hence the phenomenon of “contract year” increased performances. A massive increase by current smaller market teams to their players should only result in decrease performance as players become less “hungry”.

A salary cap will also hinder competition as the reward for franchises to maximize their dollar decreases. Without the current system, numerous teams would not have been motivated to develop alternate views of player development and utilization. Without the current system, the Billy Bean philosophy exemplified in the book “MoneyBall” would not have taken hold and teams might still be wedded to the olden ways of player analysis.

Profitability – A salary cap in Major League Baseball would do little, if anything, to increase profitability across the league. History has proven that high payroll and a high winning percentage are not correlated. By forcing teams to pay more for players, the league would actually be holding cities and franchises hostage to attendance. If a team is prone to struggling and continues to produce poor performance on the field, the price paid for players will not force fans to attend the games. In most cases, only tradition or continuous positive performance can guarantee high attendance.

Viewing experience – According to SI.com, the White Sox, Cubs, Mets, Yankees, and Red Sox are the only teams with an average ticket cost over 30 dollars. Not surprisingly, these teams are also ranked 18th, 27th, 28th, 29th, and 30th respectively in affordability. As these teams pay more to their players the cost of player salaries is passed down the fan. Conversely, the Royals, Pirates, and Rays are among the top five in affordability. These teams also have among the lowest payrolls in Major League Baseball. Forcing teams to pay players will only increase the cost of tickets and turn off fans in cities without an established tradition.

While it is important to insure that no team has a monopoly on all available talent, supply, demand, and player preference must mandate salaries, not an imposed salary cap. If a franchise opts to be competitive, it must commit itself to fielding a competitive team through the methods it has on hand, whether that means scouting and development, shrewd market deals that exploit underappreciated talents, or opening their coffers to buy the services of the best talent.

1 comment:

Anonymous said...

The New York Yankees currently treat all the other major league teams like their personal farm league. Because of their deep pockets and large market share, they wave the big bucks and possibility of a WS ring in front of every great emerging player in the league. It has to be discouraging for owners of teams in smaller markets, and it certainly is discouraging for fans to see their favorite players be bought by the Yankees. This allows the Yankees to not perform the due diligence of building excellence into their own farm league, they just buy off other the developed talent of other teams. The lack of salary caps, uneven markets in the US, and predatory teams like the Yankees may well soon kill the goose that laid the golden egg.