EXECUTIVE SUMMARY
The focus of this study is on Major League Baseball. It examines the problems that are present in the operating business aspect throughout the entire league. Of the four major sports leagues in the United States, baseball has the most questions surrounding its league. Major League Baseball is a very troubled industry that faces numerous chronic problems that threatens the future of the league. Some of these major problems include: effects of the antitrust exemption, competitive balance issues, profitability of franchises including Forbes magazine’s take on the issue, the Collective Bargaining Agreement, new stadium financing issues, and Commissioner Bud Selig. These problems all can be traced back to a single common reason: monopoly. Since 1922, Major League Baseball has benefited due to an assumed exclusion from our nation’s antitrust laws. MLB is the only top-tier professional baseball league throughout the United States.
A practice called “sabermetrics” exists for franchises that are in rough shape financially to compete with teams like the Red Sox and Yankees. First used by the Oakland Athletics, sabermetrics is a statistical theory that is used to evaluate baseball players. Oakland has been one of the most successful franchises on the field over the past five years because of this approach despite having a miniscule payroll.
Emphasis is put on the Milwaukee Brewers organization. An in-depth look at the entire organization is done with sabermetric principles. Also, statistical projections for the upcoming 2004 season are made for players competing for the Milwaukee Brewers roster as well as for the top 25 prospects in the Milwaukee Brewers farm system.
INTRODUCTION OF MAJOR LEAGUE BASEBALL
In the baseball movie “Field of Dreams” the voice says ‘If you build it, he will come.’ Early in the film this refers to constructing a baseball diamond in the middle of acres of valuable cornfields in order to allow players in the after-life to return to earth and (re)play the good old game of baseball. By the end of the film, hundreds of fans are seen heading in droves to the cornfield diamond to watch these players play ball. “If you build it, they will come.”
“Field of Dreams” is a portrayal of the powerful hold that baseball has on the United States of America – an activity said to be the national pastime. While there is obviously more to the film than this particular “field of dreams,” it is based on the preposition that if you put on a game of baseball, Americans will part with their own, hard earned cash to watch it. To further illustrate this point, no matter what happens in regard to the game’s organizational structure and production, there will always be Americans that will watch and follow baseball. Americans love baseball. “If you build it, they will come.”
Over the past decades of baseball in America, Major League Baseball (MLB) in particular, has been involved in controversy after controversy. Today, baseball faces perhaps what is its most important problem – the growing divide between the game itself and its fans. According to a USA Today / CNN / Gallup poll conducted during June 2003, the results were not promising for America’s pastime. The poll results stated that 33% of sports fans say they are following baseball less closely than they did three years ago, and 39% believe the game is in a state of crisis or has major problems.
It can be very easy to be lulled into the thinking that everything is fine with baseball. The numerous experiences that everyone seems to remember are still accumulating in everyone’s mind, more vivid than ever. With Mark McGwire and Sammy Sosa relentlessly chasing the homerun record in 1998, Barry Bonds breaking numerous batting records in 2001, the Cubs and Red Sox just five outs from facing off against each other in the 2003 World Series; it is moments like these that can still seize the serious as well as the casual fans alike. But the more important issue behind those highlights - the foundation of the game - is falling apart faster than ever before.
The actual business of baseball stands in stark comparison to the game’s nostalgic appearance as America’s national pastime. Major League Baseball is a very troubled industry that faces numerous chronic problems that threaten the future of the league. Some of these major problems include: ongoing labor tension, competitive balance issues, transfer of game telecasts to cable, rising ticket prices, and MLB Commissioner Bud Selig’s leadership. While all of these issues are taking place, there is the threat of contraction, current franchises are requesting public funding for new stadiums all while more than capable host cities are practically begging for teams. The heart of baseball’s fan-base is also aging while MLB is doing very little to make the game more attractive to a much younger fan base.
The Source of the Problem in Major League Baseball
These problems all can be traced back, in some part, to a single common reason: monopoly. Since 1922, Major League Baseball has benefited due to an assumed exclusion from our nation’s antitrust laws. MLB is the only top-tier professional baseball league throughout the United States. As a result, each franchise is assigned to an exclusive market territory. In general, monopolies have market power which is in turn used to achieve higher returns, abuse resources, and above all take advantage of consumers. Major League Baseball is not exempt from these accusations (http://slate.msn.com/, Greenberg).
The antitrust exemption is actually an irony. Owners and players prove day after day that they consider baseball, above all, a business instead of just a game. But the exemption arrives from our own national government's naive insistence that baseball is just a game. Alone among all other professional sports in America, baseball enjoys its immunity from antitrust prosecution because neither Congress nor the Supreme Court has been willing to overturn an ancient decision that baseball is merely an amusement, not a commercial enterprise.
The controversial antitrust exemption dates to the early years of organized ball. In January 1903, the rival American and National Leagues joined to form the beginning of Major League Baseball. The two leagues included a "reserve clause" in their contracts. The National League had been using this technique for the past 25 years. The “reserve clause” in essence tied the athletes to the teams that had first signed them to a contract. The players were able to be sold or traded by team management; however, they couldn't simply sign with new teams on their own after their contracts expired (http://www.zmag.org/zmag/articles/barzimb.htm).
In 1914, the new Federal League made an attempt to lure ballplayers away from Major League Baseball with the attraction of higher salaries and no reserve clauses. Only a few athletes made the jump to the new league, however, and in 1915 the Federal League sued MLB for cornering the players' market—a violation, it seemed, of the Sherman Antitrust Act. The two parties soon reached a settlement that terminated the upstart league while compensating its owners. Each owner accepted the buyout except the owners of the Baltimore Terrapins, who were offered only a sliver of the settlement money. They rejected the $50,000 settlement offer and further pursued their antitrust claims at the Supreme Court. In the 1922 decision in Federal Baseball Club of Baltimore v. National League, the court ruled against the Terrapin owners. Justice Oliver Wendell Holmes wrote that "personal effort, not related to production, is not a subject of commerce" and that baseball therefore wasn't subject to federal regulation (Federal Baseball Club v. National League, 292 U.S. 200 (1922)).
In the Federal Baseball decision, it pointed out that baseball exhibitions are “purely state affairs” and as a result did not constitute interstate commerce. The fact that teams had to travel across state boundaries to play the games was a “mere incident, not the essential thing.” (Federal Baseball Club v. National League, 292 U.S. 200 (1922)). It should also be pointed out that the idea of what interstate commerce meant at the time and what it is understood to stand for now are very different, with it being much narrower today. The idea back then was that if a good was produced within a state, it was intrastate commerce and the production activities of the company weren’t subject to the Sherman and Clayton Acts.
Judge Holmes' ruling was keeping in line with other lower-court rulings from the era that stressed baseball's status as just a game. Over time, however, the ruling came to be widely regarded as flawed, as the Constitution's "commerce clause" was increasingly used as grounds for the government to regulate a range of dealings that had once been deemed off-limits to the feds. The court itself decreed, in other contexts, that exhibitions which crossed state lines were subject to federal control. Yet it had in effect rendered Major League Baseball exempt from antitrust law (http://slate.msn.com/, Greenberg).
The Federal Baseball ruling went unchallenged for 25 years until the Supreme Court had a chance to revisit its decision in 1953, when it heard arguments in Toolson v. New York Yankees. The case concerned George Toolson, a ballplayer whom the Yankees had reassigned from their minor-league Newark franchise to another team. Toolson sued, claiming that the reserve clause in his contract violated antitrust laws. But the high court stood by its 1922 decision. It stated that if Congress had disagreed with the earlier ruling, it would, or should have introduced new laws in the interim. "We think," the court wrote in an unsigned 7-2 opinion, "that if there are evils in this field which now warrant application of it to the antitrust laws, it should be by legislation" (Lowenfish and Lupien, p. 106).
Congress, however, again failed to act on behalf of the matter, and as a result ballplayers remained shackled to the franchise they belonged to in which they had no say. Then, in 1969, the St. Louis Cardinals traded their star outfielder Curt Flood to the Philadelphia Phillies, again without his consent. Flood did not want to move his family or walk out on his business interests in St. Louis. He appealed the trade to Commissioner Bowie Kuhn stating, "After twelve years in the Major Leagues, I do not feel I am a piece of property to be bought and sold irrespective of my wishes." Kuhn sided with the Cardinals ownership and upheld the trade. Flood retired rather than play for the Phillies.
Flood's case reached the Supreme Court in 1972. Harry Blackmun, a newcomer to the Court, wrote the opinion in Flood v. Kuhn, in which the court upheld Flood's trade by a vote of 5-3. Blackmun’s decision will be scrutinized for many years to come. Blackmun acknowledged that ever since the Federal Baseball decision, the court had routinely interpreted the commerce clause to expand the government's sphere of influence. Blackmun also pointed out that no other major sport was protected from antitrust laws. And yet, in spite of his own accumulated evidence, he maintained that the Federal Baseball precedent should stand because of the judicial custom of ‘stare decisis’, or a respect for precedent (Flood vs. Kuhn et al., 407 U.S. 258 (1972)).
Surprisingly, shortly after Flood, baseball players were awarded the right to free agency and ended the 100-year tyranny of the reserve clause. The avenue of redress wasn't litigation but collective bargaining, through which the players' union had recently secured the right to arbitration. In 1975, pitcher Andy Messersmith's contract with the Los Angeles Dodgers expired, and although the Dodgers and Major League Baseball insisted the Dodgers alone had the option to re-sign him, Messersmith claimed otherwise. The parties took the case before an arbitrator hired by the owners, Peter Seitz, who ruled for Messersmith. Seitz was immediately fired. The owners lost an appeal in federal court, and thereafter players enjoyed a limited right to free agency (http://slate.msn.com/, Greenberg).
In October 1998, in a long overdue effort to finally fix the labor problem, President Clinton signed into law the so-called Curt Flood Act, which stated that baseball's antitrust exemption didn't apply to player employment issues after all. But with the players faring well through collective bargaining, and with free agency embedded in baseball's practices, the point was now moot. On the other hand, however, the 1998 act explicitly left untouched such issues as team relocation, minor-league play, the employment of umpires, broadcasting agreements, and league expansion—suggesting that the exemption did in fact apply in these areas.
As a result of these controversial rulings in the higher courts, it is obvious that others differ in the law’s interpretation, resulting in uncertainty about whether the country’s antitrust laws apply to MLB. If they do consider MLB to be exempt, it is also unclear just how far the exempt status extends into the league.
- posted by Hot Rod @ 9:53 PM
