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Baseball limping, not dead |

Baseball limping, not dead

Bill Steigerwald
| Saturday, March 15, 2003 12:00 a.m

Overpaid players. Greedy owners. Poverty stricken teams without hope. Dumb marketing. Aging fans. Publically subsidized stadiums. Shrinking Little League participation.

Baseball is not the national pastime it used to be. But Andrew Zimbalist, the noted sports economist and author of “May the Best Team Win,” says America’s signature game is not dead yet.

His new book about baseball’s economics and the public policy that has created it says the source of baseball’s problems is its monopoly status and its presumed (government-given) antitrust exemption. Lack of competition, he says, has bred arrogance, laxity and inefficiency among baseball’s leaders and has put baseball on the disabled list of major league sports.

I recently talked by telephone with the Smith College economics professor, whose book goes on sale Opening Day, March 31:

Q: If you were a doctor, how would describe the health of Major League Baseball.

A: Oh, that’s a tough question. I think baseball has a number of things that are right with it and a number of things that are wrong with it. I think because of its central position in our culture and in our history, it’s cut a lot of slack to make mistakes.

The fans have been very resilient and willing to forgive, not perhaps as much as they were before the ’94-’95 strike, but nonetheless, still very forgiving. So baseball gets away with all sorts of inefficiencies and abuses that other industries can’t get away with.

Of course, one of the other things that makes that possible is that baseball is a monopoly. It doesn’t have competition from another top-level baseball league, so fans have no other place to go.

So I’m not sure I’d say baseball has a 101-degree fever. It certainly does not have a terminal illness. Baseball is limping along and will continue to limp along until it gets its ducks lined up properly.

Q: What specifically happens because baseball is a monopoly•

A: Baseball has not had any competition since 1914 and 1915, with the Federal League, and 1922, when it got an antitrust exemption. They don’t have economic competition from a rival league, Number 1. Number 2, they are not regulated and Number 3, unlike the other professional sports leagues, they have a presumed antitrust exemption, which means they’re not even subject to judicial review, to checks and balances, if you will.

Q: In what ways does that shape baseball?

A: You see all sorts of direct manifestations of the problem. One of them is the whole stadium game that gets played out. A few hours ago I was talking to a reporter in Washington, D.C. Here you have the eighth-largest media market in the country and the nation’s capital without a baseball team for 30 years. That would be absolutely inconceivable if you had competition in the industry.

If Burger King and McDonald’s see a viable street corner, they both rush to get there before the other one. You end up with two hamburger joints. If you had a competitive league against Major League Baseball, Major League Baseball would rush to take advantage of the wonderful market that Washington offers.

Instead, you get the opposite phenomenon, where — because there is an artificial restriction on the number of franchises — you get cities competing against each other to get a baseball team. You get these massive public subsidies in order to lure baseball to the city, and what they end up in essence doing is subsidizing extraordinarily wealthy individuals, be they owners or executives or baseball players, who get the lion’s share of revenue that’s generated at a ballpark that’s usually financed out of sales taxes, which fall disproportionately on lower income groups.

All that flows from the economic power and monopoly status that baseball has.

Q: The NFL has figured out how to make sure Green Bay wins a Super Bowl every once in a while. All baseball has to do is look at football. What’s wrong with baseball’s leadership?

A: Basically, it’s had that simplistic approach. They look at football and say there’s revenue sharing in football, let’s do revenue sharing. They think it’s magically going to convert themselves into the NFL.

But the problem is that they did revenue sharing the wrong way. They didn’t design it properly. And they really don’t have as much revenue sharing as the NFL. But look, the NFL has had revenue sharing since its inception in 1920. It’s been built into the system, so whenever any owner bought an NFL team, they were buying into a structure that had revenue sharing, and their expectations were never anything different.

But if John Henry pays $720 million for the Red Sox and its assets in 2002, and all of a sudden you say, “OK boys, we’re going to have an NFL here, and everybody gets roughly the same,” then Henry gets expropriated. And he’s not going to put up with that.

Q: It sounds like you’re saying baseball is unfixable.

A: No, I’m not saying that. I think what you have to do is set your sights to gradually improve it over time. The first step here is that you’ve got to move each time in the right direction … . If you don’t have the discipline of the marketplace, it’s going to be more difficult. If you’re not subject to judicial review, then you get away with more stuff, and that becomes part of the culture of how the industry conducts itself.

Let me add one other thing: The obvious way you solve the problem of the New York Yankees, or however you want to characterize competitive imbalance, is by putting another team or two in New York. That would happen if you had competition.

Q: Is this lack of competition the cause — or the explanation, at least — of how all these cities have been basically extorted into building new ballparks for teams?

A: Yes, it is.

Q: So what has to be done from a public policy point-of-view to bring about this competition?

A: There are three options. Option No. 1 is to have a law that forces divestiture in the industry. Now you don’t want to create 11 baseball leagues, but you might want to create two.

Option 2 is regulation. I’m not saying it should happen in any particular way, but the federal government might say 50 percent of all games have to be shown on over-the-air television, for example.

And the third option, and this is a much milder, less heavy-handed thing, is you say that baseball, like the other sports and the rest of the U.S. economy, is subject to the country’s antitrust laws.

Q: Is Pittsburgh in better or worse shape than the average small-market team?

A: Oh, I don’t know. I’d have to study it. Certainly, Pittsburgh is not in good shape. Part of that equation has to do not with just the size and the income of the city and the conditions of the new stadium and the lease and so forth. It also has to do with the management of the team.

Clearly there are other small-market teams, such as the Oakland A’s or the Minnesota Twins — which, by the way, aren’t really small markets — that have had low revenues in the past and don’t have new stadiums, but they’ve been well-managed. So there’s a big, subjective element here. A well-managed team in Pittsburgh under the current system ought to be able to generate a profit.

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