A hundred years ago, the gross income for all of Major League Baseball was no more than $3-4 million, or a maximum of $250,000 a team. It was a tiny fraction of the roughly $167 million apiece grossed by rival entertainment industries such as the movies, live theater…and the sale of musical instruments. By the time of Harry Frazee's sale of Babe Ruth to the New York Yankees in the 1920s, the average major-league team made a profit of $130,000 – while Frazee's Broadway theaters could make up to $10,000 a week with a hit such as No, No Nanette.
Andrew Zimbalist discusses baseball salaries
Bud Selig discusses the resistance to change in the sport of baseball
Tom Verducci talks about parity in baseball
Andrew Zimbalist discusses the economics of new ballparks
Even as late as 1964, when the Yankees were sold to CBS, the $11.2 million purchase price was less than two percent of the media giant's annual revenues – or less than two weeks of the money it took to produce its nighttime shows.
By the time of owner George Steinbrenner's death in the summer of 2010, Forbes magazine put the estimated total worth of the Yankees at $1.6 billion. This made the team the third wealthiest sports franchise in the world, close on the heels of the Manchester United soccer club, and the Dallas Cowboys. The turnaround speaks not only to the business acumen of Mr. Steinbrenner, but to a period of unprecedented prosperity for Major League Baseball (MLB) as a whole.
Contrary to many predictions, the fans did eventually come back to the park after the debacle of the 1994–95 strike, with major league attendance reaching a new record of nearly 33,000 fans a game by 2007. In the two years that followed, during the worst recession since the 1930s, turnout fell by almost eight percent, but total revenues still reached a record $6.6 billion in 2009 – over five times what they had been in 1992. In 2009 some 115 million fans came out to watch either major or minor league ball, in 200 North American cities. The Boston Red Sox, the New York Mets, the Los Angeles Dodgers, and the Chicago Cubs all joined the Yankees in the ranks of the fifty wealthiest sports franchises in the world.
Andrew Zimbalist discusses revenue growth vs. salary growth
Donald Fehr talks about the expansion of baseball
Bud Selig talks about the golden era of baseball
Baseball's prosperity was due to a variety of factors. One was all the new major league ballparks, 21 in the past 20 seasons, thanks to a considerable helping hand from state and local governments, and an emphasis on luxury boxes. On the field, the World Baseball Classic, interleague play, an extra round of playoffs, and the increased competition for six division titles and two wild-card spots spurred interest everywhere.
Major League Baseball at last became the media-savvy, global brand it had long aspired to be, signing enormous new television contracts and starting its own national cable TV network. Increasingly, individual teams cut out the middle man, boosting their net worth exponentially by buying or starting their own local cable networks.
The key to the game's renewed success, though, was keeping the labor peace. From 1995 to 2010, baseball went 16 seasons without a work stoppage, a record for the modern era. Alone among American sports leagues, MLB and the Players Association seemed to have discovered a way to maximize profits and increase wages without resorting to salary caps.
Center fielder Torii Hunter tries to score, Game 3, 2006 American League Division Series Brad Mangin
By 2010, the minimum major-league salary was $400,000 a year, and the average player salary was a record $3.34 million. At the same time, a de facto, "soft cap" of revenue sharing and a luxury tax on payrolls reduced the percentage of moneys going to the players from a high of 63 percent in 2003 to 51 percent in 2010, as opposed to 57 percent for the National Basketball Association and the National Hockey League, and 59 percent for the National Football League.
The hundreds of millions of dollars in shared revenues funneled annually to small-market teams helped make the game more competitive than ever, with 23 of the 30 MLB teams making the playoffs, 15 reaching the World Series, and eight different clubs winning the championship in the first decade of the twenty-first century. The 2000 season marked the first time in major-league history, dating back to 1871, that no team won or lost as much as 60 percent of its games.
Problems remained, including lagging television ratings for the All-Star Game and some playoff rounds, the pricing of many tickets beyond the reach of the average fan, a reduced interest in the game among African-Americans, and the seeming inability of small-market teams such as Kansas City or Pittsburgh to compete even with considerable subsidies from their competitors. But by 2010, baseball as a business was more prosperous than it had ever been, with players and owners alike working to common purpose for the first time in the history of the sport.
By Kevin Baker