Big Money in Flushing

The dissertation is eating up my time. I haven’t blogged in a month, and I’ve really had a lot to say.

Everybody should be reading Frank Rich’s column right now. He can be found at http://www.nytimes.com/top/features/arts/columns/frankrich/ (unfortunately, you have to pay at the Times for back articles). He is writing much more eloquently then I can about this family values nonsense. Also check out this great article in the UK Guardian, and wonder why main stream American supposedly “liberal” press hasn’t been covering this story. I checked it out: it’ real. It’s also real scary. http://www.guardian.co.uk/arts/features/story/0,11710,1369643,00.html

But I am getting so tired of politics right now! The best comment I’ve seen on the last election came from Michael Moore, who was asked on Leno (I never watch Leno, but I was flipping past and I saw a well groomed Michael Moore in a suit, so I had to stop) “What do you think happened in the election?” Moore replied “I think George Bush got more votes.” You can’t really sum it up any better then that. Move on, moveon.org.

So if we are going to skip politics and the media for awhile, what is left? Well, we can’t avoid the whole Red State/Blue State thing completely. It is too dominant a theme. But today and today we’ll take a break. Let’s talk about sports.

Particularly lets talk about sports, media and money, and let’s pose a simple question: Are athletes overpaid?

Pedro Martinez, a man with a questionable brain but a killer fastball, just signed a four year, $53M deal to pitch for the New York Mets. To put that in perspective, that is almost twice the growth domestic product of the island of Montserrat ($29M). It is only one-one hundredth of the GDP of Martinez’ native Dominican Repbulic, but in a nation of 8,833,634 that’s a lot. The per capita GDP is only $6,000.

And Martinez isn’t the highest paid athlete at all. Not even close. Alex Rodriguez’s ten year contract, signed in 2000, is worth $252M. Mind you, that’s only about $21M a year. A pittance among high priced athletes. But still, $252M is a chunk of change and gives A Rod a lot of purchasing power. He an Manny Ramirez each made $22M in 2004. http://www.insidevcnewhomes.com/sports/354263.shtml breaks it down for you, as does this article from sports illustrated: http://sportsillustrated.cnn.com/thenetwork/news/2000/12/11/rodriguez_contract/. Michael Shoemacher, the Formula One driver, is paid $40M a year by Ferrari. Add in his $40M in endorsements and he makes a cool $80M, putting him almost up there with Tiger Woods, who totals $80.3M.

What could you do with $80 million dollars? What could your school do? Your fire department? Your library? I’ll bet the Library could buy a whole bunch of new books that the kids from the school can check out, which can then be burned by their outraged parents in a bonfire that the fire department will have to put out. But I digress.

Of course in the case of American athletes it is not a moot question, because We the People end up with about half the money they are supposedly paid once their tax bills come round.

$80 million dollars. Wow.

The average baseball salary is $2,555,476. According to Congressman John J. Duncan, of Tennessee, “while the average salary in the United States is around $37,000 a year, that figure is very much skewed by the top one-tenth of one percent. The true average salary is closer to $25,000 a year.” In other words the average big league ball player makes a little over 100 times what the average American makes. However, there are only 1200 players in Major League Baseball out of a total US labor force of 140.3 million workers, so slightly fewer then one out of every 100,000 people in the US plays major league baseball. That doesn’t seem unreasonable, does it?

But are they worth it? Let’s go back to Pedro. The money he gets comes out of the very deep pockets of team owner Fred Wilpon. Wilpon, like all other baseball owners, gets his money primarily from television, secondarily from licensing team jerseys, caps, little pencils and coffee mugs with the Met’s logo, that sort of thing. The national television contract for Major League Baseball, which is entirely controlled by FOX, is $416.7 million over six years, or roughly $13.8M per team per year. Under baseball’s complicated revenue sharing formula, in which teams with the highest revenue share the spoils with the teams with the lowest revenue, over $200M was redistributed in 2003, and the Mets, predictably, were on the giving end, to the tune of $21M.

In other words, they can afford it. The Mets total payroll was about $96M in 2004, down more then $20M from 2003, when it was $117M. I guess that’s what happens when you clean house. Their payroll is obviously going up this year. I was unable to find their revenue for some reason (though obviously that $21M payment was calculated somehow), but lets say it’s around $190M (the Yankees revenue is $217M, so that’s probably not far off). That’s almost double their payroll. How many businesses keep their labor costs to around 50% of their revenues? Think about it. Of course the players union fights to prevent a salary cap, because that’s what they are supposed to do, look out for the interests of their members. Of course the owners (other then King George) want a salary cap, because they want to be able to compete for players on a more or less even footing. And of course they fight it out. That is what collective bargaining is all about.

I’ll give you a hint: it’s not the players’ fault that they are so highly paid. It’s not the owners’ fault either. It’s yours.

Baseball has all this money because people watch baseball on TV, go to ball parks and buy licensed merchandise, and they shell out all this cash on the Boys of Summer willingly. Nobody puts a gun to their heads. Ticket prices are high because that’s what the market will bear. FOX pays $416.7M for the baseball contract because Murdoch figures he can make more then that selling advertising during games and—baring a strike or a lot bigger fallout from the steroid controversy then is brewing now—he’ll get it. It’s a big pie and everybody wants a piece of it. The players’ agents negotiate the best deals possible for their clients because that’s how they make their own money, and the owners dole out the cash because they know a player like Pedro Martinez means higher ticket sales right off the bat and, hopefully, success in the post season which translates to more ticket sales and more TV revenue. It is simple economics. Ray Ratto, commenting on the record breaking salary of Glen Robinson in his rookie year, said (using Robinson’s famous nickname) “Big Dog is worth whatever Big Owner is willing to shell out of Big Wallet.” As far as I’m concerned, that closes the book on the subject.

I get most of these stats by going to Doug’s Business of Baseball weblog, http://roadsidephotos.sabr.org/baseball/index.htm and then following the links. It’s a great site.