Murdoch at the Bat
We're a month into the 1998
baseball season, and Rupert Murdoch has yet to rename his newest acquisition
the Melrose Place Dodgers. Had he done so, it would probably not have surprised
the commentators who saw the $311 million purchase of the franchise by
Murdoch's News Corp. as final evidence of the sacrifice of the national pastime
to the greed and disloyalty of players and owners. One writer went so far as to
suggest that before the Dodgers were sold, "there was hope baseball could pull
itself back from the brink. But now even those hopes are being dashed."
In the
particular case of the Dodgers, of course, these lamentations were particularly
inapposite, since the team is only in Los Angeles because Walter O'Malley made
a coldblooded business decision in 1957 to abandon Brooklyn in favor of the
sunnier clime of Chavez Ravine. But the larger indictment of the changing
nature of team ownership is similarly misdirected. If anything, baseball needs
more corporate owners, particularly those, such as News Corp., that have major
investments in the game as a whole rather than a stake in a single
franchise.
In the long run, the more corporate owners, the less likely
that baseball's current approach of limiting expansion and migration will
endure. Defending either the expansion of the number of baseball teams beyond
the current 30 or the movement of franchises to new cities is, of course,
enough to get you branded as an uncouth money-grubber. Defending both is enough
to get you shot. Expansion, it's argued, debases an already thin talent pool,
lowering the overall quality of play. The migration of franchises, meanwhile,
breaks the hearts of old fans and rips the hearts out of cities--generally
northern industrial cities--that can't afford to compete against the new
metropolises of the Sunbelt.
It's no
coincidence, of course, that the main defenders of the status quo are always in
cities that already have baseball teams. The unstated premise is that people
in, say, Minneapolis deserve the chance to attend a major league game more than
people in Charlotte do. Of course, the Twins are only in Minneapolis because
the Washington Senators moved there decades ago. But you have to draw the line
somewhere.
A less parochial view shows that change would
be good both for the sport and for cherished local teams. Expansion would
obviously expand--duh!--the sport's fan base. And it, like migration, would
help eradicate baseball's most persistent problem--the division between small-
and large-market teams. In essence, baseball teams are able to reap what are
called monopoly rents because they face little or no competition for the local
fan's dollar. Other things being equal (and new stadiums with high-profit
luxury boxes can make a sizable difference), teams in big markets are able to
reap much larger rents because the pool of fans from which they draw attendance
and TV viewership is much larger. Even with two teams in New York, the Yankees
are far more profitable than the Pittsburgh Pirates because there are so many
more buyers for their product--an advantage the Pirates, unlike a regular
corporation, can't overcome by marketing their goods in New York.
The
reason this is a problem, obviously, is that the Yankees are much richer than
the Pirates and can therefore afford to pay more for players, which means
they'll be able to lure the best players to New York. But the revenues of
baseball as a whole will be hurt if just a few teams dominate play, so the
greater wealth of the Yankees leads to the long-term decline of the game.
This dilemma has occasioned anguished breast-beating ever
since the introduction of free agency into the player market 22 years ago. But
even when players could not freely sell their services on the open market, the
richest teams still got the best players. They just did so by buying them from
the poorer teams. The Kansas City Athletics, for example, were essentially a
farm team for the Yankees during the 1950s and early 1960s, and not
coincidentally the Yankees won pennant after pennant. What free agency has done
is transfer those payments that would have gone to small-market teams to the
players themselves.
But the
answer to this dilemma is not a return to the old system nor is it a salary
cap. The real answer would require allowing teams to move where there's
unsatisfied demand for the game, whether that be in New York itself or in some
region that has no team. This might mean, in the short term, that cities such
as Pittsburgh or Montreal would lose franchises. But if there were three or
four teams in New York, the monopoly rents exacted by the Yankees would
decline, which means they wouldn't be able to pay so much for players, which
means it would be easier to run a team successfully in a small market. The
problem, in that sense, is not that there are big and small markets but that
there are too few teams in the big markets. Supply is not being allowed to
match demand.
Of course, existing owners don't want new teams
in their markets. Similarly, they don't want new teams in general ,
because an important chunk of their current revenue comes from national
television and licensing contracts that are divided among the teams. More
teams, fewer dollars per team (though that's actually more complicated than it
may look, since expansion might open up TV markets--like the South--where
ratings have been traditionally low). Until baseball's antitrust exemption is
removed, owners don't have to worry about intruders in their current markets.
But a mechanism already exists for making expansion mutually beneficial:
revenue sharing of all local TV contracts and gate receipts. Revenue sharing
alone would solve many of the competitive-balance problems between small and
large markets. Green Bay has built a Super Bowl team despite playing in the
smallest market in the NFL, in no small part because NFL teams share 70 percent
of their total revenue.
The point is that for all
their rhetoric about looking out for the best interests of the game, baseball
owners have been interested only in looking out for themselves. In an ordinary
business, that's fine. But in a business like baseball, where the long-term
health of any one franchise depends on the long-term popularity of the game,
the pursuit of short-term self-interest--in the form of the protection of the
benefits of local monopolies--brings about collective harm. The exemption of
baseball from antitrust law is predicated on the idea that Major League
Baseball is one company rather than an industry such as semiconductors or
computers. But owners don't act like competing vice presidents. They act like
competing CEOs, each seeking to maximize their local profits.
In that sense, News Corp. or
Disney--which owns the Angels--could hardly be more venal or short-term in
focus than the current crop of owners. In fact, it may well be that News Corp.,
which is building a national competitor to ESPN by stringing together a series
of local sports networks, is more likely to work for the best interests of the
game as a whole. That's precisely because it has a stake, through its TV
channels, in baseball rather than just in the Dodgers. One of the realities of
corporations, after all, is that they're somewhat isolated from local concerns.
Traditionally, that's been seen as a vice. But in the case of baseball, the
addition of a global--or at least national--perspective should be seen as a
virtue.
