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SBJ/September 2 - 8, 2002/Opinion
Baseball loses sight of profit motive
Published September 2, 2002
It seems a bit absurd to be writing about Economics 101 and trying to apply it to Major League Baseball at this time. This is an organization that needed months of study by the best economic brains in the land to declare, in a Blue Ribbon Report, that baseball was in trouble. Well, hell, any idiot who understands the primal survival principle that you have to take in more money than you spend knew the game was in trouble.
But through the months of debate on big-revenue markets versus small-revenue markets, local media dollars and contraction, we came to believe that baseball's economy was out of control and the very existence of the national pastime was in jeopardy. By the time the barons of the game engaged labor at the bargaining table, the arguments over revenue sharing and a payroll tax became so overriding that they took our eyes off the ball. We lost sight of a simple free-market standard: profit motive.
Oh, they know it's about the money. That's what all the arguing is about. But they haven't quite got the hang of the fact that it's about making money, not arguing about money.
I know you're saying that this is just too simplistic a concept, unworthy of the space. And it probably is. But just prior to the last work stoppage in 1994, Dick Ravitch, who at the time was at the top of baseball's leadership, told me that he was continually befuddled that he couldn't find the common ground for baseball owners. "They can't even agree to make money," said Ravitch. The only common denominator he could find was that none of them was terribly excited about losing money. But, he lamented, it's tough to build a coalition around that.
Yes, a decade ago baseball was a different animal. A look at players' salaries, sponsorship dollars and income from new facilities will tell you that. But the lack of a common motive still plagues the owners. It's why the union, until this point, has won every bone of contention since it was established in 1966. Baseball seems always to be up against the Murderer's Row of labor, Marvin Miller and Don Fehr, but essentially it has never been about management versus labor but rather management versus management.
A few years ago, the top guy at the Dodgers, Bob Graziano, was complaining that owners showed no fiscal restraint when signing players. He said it was ruining the game. But this was just months after the Dodgers had made Kevin Brown the highest-paid pitcher in the history of the game. "Hey Bob, what about the $15 million a year the Dodgers are paying Brown?" Graziano cocked his head and said with a sardonic smile, "Yeah, I guess that means us, too."
All that is history, but we know it has gotten worse. I believe the barons of baseball when they say that all but a few teams are losing money. It's because the principles of Adam Smith don't apply here. Making money, in our grand old game, is not the accepted business goal; it is a distant second to winning. And as long as there are deep-pocketed owners who would rather win games than make money, the game will never be healthy.
Larry Lucchino, part owner of the Boston Red Sox, told me when he was part owner of the San Diego Padres that he had an easy fix for the game: "Make every team show an annual profit once every three years or take their franchise away."
Lucchino conceded, that, too, is overly simplistic, but it illustrates the point. It's a game, some of us say it is our American game ... so let's agree, or better yet, let owners agree, to adhere to the American principle that profit is not bad. Winning on the field is great, but maintaining the game by winning in the front office is even better.
John Genzale is editor-in-chief of SportsBusiness Journal.