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Capitalism is ruining baseball

Note: This is not a hit job on owners.

A gold piggy bank QuinceCreative - Pixabay

In this week’s Hok Talk, we discuss the different, conflicting goals making baseball less enjoyable than it could be.

Baseball is a sport.

1. an activity involving physical exertion and skill in which an individual or team competes against another or others for entertainment.

If it were up to me, I’d probably remove the “for entertainment” clause out of that definition. Regardless, it is plainly obvious that baseball meets the criteria. Players compete as a team against others using physical exertion and skill. They even do it for entertainment.

Major League Baseball is a business.

Again, this is plainly obvious. Every player acquisition, trade, or release is accompanied not just by an analysis of how it impacts the on-field product but also how it impacts the team monetarily. Teams regularly use business lingo or cite business reasons for decisions around the team; no one finds this to be particularly noteworthy or odd.

The goal of a sport is to compete. The goal of a business is to profit. When it comes to Major League Baseball, these goals are not well-aligned.

It is unclear for how long this has been true - perhaps since the very beginning - but it has become starkly self-evident in recent years. “Tanking” only appears to be a viable competitive strategy when two things are true. First, the team leadership must believe that the team, as currently constructed, has so little chance of competing. Second, the team leadership must believe that there is no possible avenue for improving the immediate roster. When both of those criteria are met, it might make sense to trade pieces that might help some other team now for pieces that could help your team in the future.

In other words, competitively, it almost never makes sense to commit to a tank during the off-season. There are always dozens of available free agents and trade opportunities. A team that wanted to could put a completely different roster on the field the following season. The problem is that Major League Baseball teams are businesses. Earning profit is their primary goal. More than that, the logical outcome of a business in a capitalist system is not just making a profit but earning the most profits possible. Completely replacing the existing roster might make sense competitively, but it will never make sense for the business’s bottom line.

Additionally, sometime in recent years, MLB teams have realized that they can often be more profitable by intentionally losing than by making a failed attempt to win. This doesn’t make them evil or bad. It makes them good businesses - at least in the short term, but more on that later. The problem, in this case, is that following good (or at least reasonable) business practices conflicts with the goals of fans and players - both of which prefer a more competitive environment.

In the near term, fans are still willing to root for their teams because of a feeling of civic pride or other sense of identity. Tanking efforts can also occasionally lead to competitive stretches, which can be sufficient to keep fans interested. Live sports, even less competitive live sports, also serve as one of the few remaining vehicles to guarantee live viewers for cable and satellite companies, allowing MLB to take in a large amount of money via television contracts. Still, MLB has realized in recent years that their fanbase is skewing older. Not only is this a less-profitable demographic, but it’s indicative of a failure to keep the sport growing into new audiences.

A graphic posted on the Gallup website shows that while football, basketball, and soccer have been climbing in popularity among US citizens for decades, baseball has been trending down since sometime in the 60s. Baseball isn’t going to go extinct tomorrow, but as of 2017, it was the favorite sport of only 9% of respondents. Soccer is at 7%. Basketball is at 11%. It is decidedly trending in the wrong direction.

Fixing the conflict

So if baseball teams aren’t doing anything wrong, but the league as a whole is suffering because of their actions, what can be done? Recall when baseballs were juiced for a few years, and the home runs were getting out of hand. MLB could have tried to ban some of the behavioral changes that accompanied the juiced balls. Instead, they changed the circumstances that led to those behavioral changes to incentivize different behavior. In the same way, circumstances around profits in MLB must be changed to incentivize different behavior.

MLB must become less capitalist.

I’m talking about revenue sharing among the teams - a socialist concept where no matter each team must recognize that they are all ultimately working together to bring in all of the profits and that they should be shared equally. Revenue sharing does exist in baseball, but it’s not as complete as it needs to be. Right now, the Yankees have to give some of their profits to the Reds. But because it isn’t total revenue sharing, it leads to inequalities that hurt the sport. The way the system is structured, the Reds still can’t directly compete with the Yankees for free agents. The lack of rules around revenue sharing means that the Reds aren’t even required to try to compete with the Yankees for free agents, either. Since they can’t go toe to toe and without a mandate to spend that money, the Reds have determined that it is more profitable to simply keep losing without trying to improve. The Yankees don’t mind this too much because, with less competition for free agents, they still save money, too.

Look at the other major sports leagues in North America. You’ll find that they all use extensive revenue sharing, salary caps, and salary floors to increase the competitiveness of the teams within the league. This is the reason for the growing popularity of these leagues; the fan, player, and owner interests are all aligned toward frequent competition because of the rules. It may not be immediately evident to the various groups in baseball why this is in their best interest, but it is.

Players have long resisted a salary cap because it puts a direct and literal cap on their earning potential. However, they need to realize that the Luxury Tax is doing that quite effectively on its own. Additionally, there may not be a hard and fast rule limiting their earning potential, but fewer teams bidding for their services de facto accomplishes the same. Meanwhile, teams have resisted salary floors and full revenue sharing because the current system is more immediately profitable, but the Gallup poll shows that it’s damaging the business in the long term. This may not disturb the current group of owners overmuch, but if things continue, someone will eventually be left holding the bag; the league should seek to avoid such a scenario.

The good news is that MLB has proposed a salary floor as part of their negotiations for the next CBA. The bad news is that MLB’s proposed floor would only be $100M. For one thing, this is too low. It would barely represent an increase for a handful of teams. For another, this is a flat amount with no relation to the profits of the sport. Finally, MLB accompanied this proposal with a reduction in the luxury tax, too. This is also a non-starter. The floor and luxury tax should be tied to public income numbers, the same way they are in other leagues and relatively close together. That’s how you encourage the competition that could help baseball begin to grow again.

The owners aren’t intentionally killing baseball, but the current capitalist structure encourages each team to care only about its short-term profits. MLB has allowed this to continue because of the short-term nature of most playing careers and ownership stints. If they don’t make adjustments soon, though, the whole thing could collapse like a house of cards and rob Americans of their national pastime.