Making Change

There was once a time when fans could go to a professional baseball game and on average pay just over $10 for a ticket, but what would occur if average ticket prices jumped to $40? The reality is that this “time” was only twenty years ago, and latter scenario is exactly what is occurring today. The answer to the question is tricky, and brings about several other questions. Will the players experience a change? Will the experience improve or decline for fans? Will small-market teams be unable to compete with the financial elite? The current scenarios of the four major American sport leagues (NFL, MLB, NBA, and NHL) give an answer to these questions.
For the most part, professional athletes in the four major sports have not experienced any major change in the game play of their sport over the past years, just a few rule changes and precautionary safety measures. However, in economic terms the recent surge in player salaries comes as a shock to many. Notable recent contracts include those of Alex Ovechkin of the Washington Capitols, Calvin Johnson of the Detroit Lions, and Robinson Cano of the Seattle Mariners (featured above). According to data provided by Baseball Prospectus, Cano’s salary of $30 million per year exceeds that of the entire payroll of the 2000 Florida Marlins.
The dramatic rise in players’ salaries may seem a burden to the ownership groups, but the new salaries do not cost the teams as much as one may think. As players’ salaries rise, so does the profit of professional sports teams and leagues. The hype that comes with a huge contract signing transformed the business of sports, and a major area is in television coverage. Earlier this year, Time Warner Cable gave the Los Angeles Dodgers over $7 billion for the rights to broadcast the Dodgers on their network, SportsNet LA. Several other large television deals have also been completed and many others seem to be coming in the near future. The profit granted by large television companies outweighs the increase in team payroll, so the team along with the individual players benefit from the recent economic boom in sports.
As for the fans, multiple stances exist when weighing in on the topic. Some argue that ticket prices are too high and are limiting the opportunity to experience professional sporting events to a smaller audience. While attendance has dropped slightly in some sports, it has remained fairly constant over the past few years. Most sports fans attend professional sporting events to watch some of the best athletes in the world compete, and the high player salaries in American sports helps ensure that many of the world’s best athletes will play in front of these paying costumers. Even though it may be a bit more expensive nowadays to spend a day at the ballpark, all in all the fans benefit from the teams’ willingness to spend.
As team payrolls began to shoot up, many fans of small-market teams feared that their team would no longer be able to compete with teams located in larger cites and that received more revenue. However, professional sport leagues have worked to avoid this issue and have done so in several ways. The simplest way to resolve this issue is simply to limit teams’ spending, and this is done be enforcing a salary cap, luxury tax, or both. A salary cap sets a specific salary limit that no team can exceed while a luxury tax is a tax enforced on any excess money spent on players over the salary cap. The money paid out due to the luxury tax is given to the league to expand league funding. Having these rules in place prevents one single team or a small group of teams from creating a monopoly of athletes within their sport. These rules do not resolve every issue, as some teams still pay far less than the salary cap while others push the limit. The NFL, or National Football League, made strides towards leveling the playing field by introducing the franchise tag, which allows a team to hold onto a player for one year and prevents the player from leaving due to free agency. Other leagues, such as Major League Baseball, offer compensation draft picks for every elite player lost due to free agency. The draft is a key equalizer in all sports as the teams that finish towards the bottom of the playing field receive higher draft picks, allowing them to add greater talent to their teams.
The increase of funds being poured into professional sports comes as a benefit to all parties. The business of professional sports seems to be rising unchecked, ascending the sports we all love to a peak never seen before.