Eric Gartman / Salaries & Business

ADDRESSING BASEBALL'S ECONOMIC IMBALANCE

by Eric Gartman

The gross economic imbalance that has plagued baseball in the past decade has accelerated in the past few years, and is currently Commissioner Bud Selig's top priority. I would like to examine three ways baseball can deal with this inequality. The first involves individual teams, the second involves the office of major league baseball and the third involves both the teams and commissioner.

Building New Stadiums

Baseball is currently undergoing the largest wave of new stadium construction in its history. The movement was started by the neo-traditional Oriole Park at Camden Yards, built in 1992 as a small, fan-friendly, baseball only environment. Since then the following teams (not including expansion teams) have built new stadiums, all of them along the Camden Yards model:

1. Camden Yards in Baltimore- 1992

2. Jacobs Field in Cleveland- 1994

3. The Ballpark in Arlington- 1994

4. Coors Field in Denver- 1995

5. Remodeled Edison Field in Anaheim- 1997

6. Turner Field in Atlanta- 1997

7. Safeco Field in Seattle- 1999

8. PacBell Park in San Francisco- 2000

9. Comerica Park in Detroit- 2000

10. Enron/Astros Field in Houston- 2000

11. PNC Park in Pittsburgh- 2001

12. Miller Park in Milwaukee- 2001

13. Cincinnati- scheduled to open in 2003

14. San Diego- scheduled to open in 2004

15. Philadelphia- scheduled to open in 2004

New parks have been proposed for St. Louis and the New York Mets. Two parks were also built just prior to Camden Yards, Skydome in Toronto and Comisky in Chicago. Thus of baseball's 26 pre-expansion teams, 16 have or are building new stadiums, with more likely build new ones in the next few years. The only teams that did not (yet) were the Cubs, Yankees, A's, Red Sox, Dodgers, Royals, Expos and Twins. The reason behind this building craze? Quite simply, more money. Fans love the new parks, and rightly so. The dismal cookie-cutter stadiums of the 70's are gone forever, replaced by beautiful parks loaded with charm and appeal.

So how has this affected baseball's economic situation? Every team that has built a new park has seen immediate and impressive box-office results. The first team, the Orioles, went from averaging 30,000 fans per game at Memorial Stadium in 1992 to selling out every game for the first years of Camden Yard's existence (capacity 48,000). Despite the team's abysmal performance since 1998, the lack of star players, and the retirement of Cal Ripken, the O's still outdraw their old stadium, and still remain in the top half of revenue.

An even more dramatic turnaround occurred in Cleveland, where the Indians opened Jacobs Field in 1994. Fans flocked to the new stadium, in stark contrast to the ghostly silence at Cleveland's old Municipal Stadium. The Jake was sold out for every game until 2000, for a major league record of 455 straight sell-outs. Furthermore, the Indians were transformed from a perennial loser into a perennial winner, dominating the AL Central Division and reaching two World Series. Part of this was due to smart ownership, particularly that of GM John Hart, but it would not have been possible to maintain an expensive team without the added revenue from the new stadium.

A similar change occurred in Arlington, Texas, where the Rangers opened The Ballpark in Arlington in 1994. The Rangers had been a losing franchise since their inception in 1972, playing to empty crowds at a second-rate facility. But since opening the new stadium, Texans have jammed the turnstiles, creating additional revenue. The Rangers have won three division titles since then, and in 2001 signed Alex Rodriguez to the largest contract ever.

A less dramatic but still important change occurred in Seattle in with the opening of Safeco Field in 1999. The Mariners had been drawing large crowds since fielding a winning team in 1995, but the new stadium increased attendance. It is also unlikely that fans would have kept on coming to the dreary Kingdome. Since 1999 Seattle's revenue has risen, and in 2001 the Mariners fielded a team that won a record 116 games.

The last major turnaround occurred with the opening of San Francisco's striking Pac Bell Park in 2000. The Giants had been struggling for years, and had threatened to leave town several times. But fans packed into Pac Bell, securing the Giants future in San Francisco, and as a competitive team.

New stadiums have increased revenue in Houston and Atlanta as well. Both were competitive before, but have increased funds since opening new parks. The only park that did not produce a major change was the remodeled Edison Field, but that was only a remodeling, not a new park, and even there, attendance rose from 1.7 million beforehand, to 2.5 million in the first year of its remodeling. Fans have also been somewhat less receptive at Comerica Park in Detroit, but it is too early to judge its long-term impact. Finally, new parks were well-received in Pittsburgh and Milwaukee in 2001.

Parks have also had an effect on the expansion teams. The dreary dome in Tampa Bay has discouraged attendance, leaving the Devil Rays future in jeopardy. Pro Player field in Miami is designed for football, and it can hot and muggy in the summer. Conversely fans in Arizona have taken to the retractable-roofed Bank One Ballpark, which is modern and cozy. And fans in Denver are treated to Coors field, the lovely park which has revitalized downtown Denver.

It is also possible that future stadiums will have major impacts. The most likely city to experience a huge boost is Philadelphia. The Phillies play in a cavernous, colorless, concrete behemoth, The Vet, which is better suited for football. The Phillies are also saddled with an unfavorable contract with the Vet. With its large population, a new stadium may turn Philadelphia into baseball's next success story. New stadiums will also help Cincinnati and San Diego, but neither cities have tremendous populations like Philadelphia does.

We clearly see that new parks have a major effect, turning some cites around, and helping nearly all the others. But in terms of addressing baseball's economic imbalance, new parks can't turn Milwaukee, Pittsburgh, or Cincinnati into New York, or even Cleveland. Cleveland, Texas, and SF were all larger than these cities when they built new parks. The sharp drop off in attendance in 2002 in Milwaukee and Pittsburgh illustrates this point. The only lower-revenue franchise that does not plan to build a new park is Minnesota, which may lose its team. Montreal, which did not build a new park, has already lost its team. New parks will help baseball's have-nots, but only to a degree. Other solutions must be found.

Moving Franchises

One of the other solutions has been to either move or eliminate existing franchises. To answer this question, we must first examine how many franchises are not currently viable, and how many cities that don't have teams would be viable candidates. The criteria for a cities' viability is as follows:

1. Total Population- The first and most obvious factor, a metropolitan areas total population provides the basis for fan support. Minimum population seems to be around 2 million, but this can be deceptive, as in the cases of Miami and Tampa Bay, which leads to the second criteria:

2. Geography- A spread out versus concentrated population hinders fan movement. For example, Tampa Bay-St. Petersburg are really two cities separated by water. Miami is spread out thinly along the Atlantic Ocean in a north-south slice, making trips to Miami very long from the northern suburbs

3. Average Income- A city's wealth affects how many will spend money on baseball games.

4. Demography- Seniors are less likely to go to games, while young people tend to go more. Also, Hispanics seem less likely to go to games than whites.

5. Climate- Extreme climate hinders fans, as few people are willing to endure the heat in Miami during the summer

6. Stadium- As seen above, a good facility is a major factor in drawing fans to games. Poor facilities are a major deterrent to fans.

7. Local Sports Fans- Some areas just seem to love sports and baseball. St. Louis and Colorado draw far more people than their population would predict. Conversely, Montreal, a large city, is more attuned to hockey than baseball, for cultural reasons.

8. Team Performance- Fans naturally want to see a winner

9. Quality of Ownership- Good owners affect whether a team wins or loses

10. Tradition- Teams with long traditions are likely to continue to support a team through tough times. Newer cities may not.

11. Population trends- For the future of a team, population trends must also be taken into account.

Factoring in all these variables, we end up with three teams that are highly questionable in terms of viability for baseball. The first one is of course Montreal, the frequent target of contraction and resettlement schemes. Montreal has a healthy population, and at times has even drawn respectable crowds (2.2 million in the early 80's). But Montreal and Quebec do not have the same baseball tradition and interest in the game that other markets do. Not only does their poor attendance harm the teams ability to field a winning team, but most of all the tiny local TV revenues, only $3 million a year, makes Montreal the worst Major League city.

The second city that may not be viable for baseball is Tampa, despite a population of 2.2 million, larger than Cincinnati, and just smaller than Denver, both of which support teams. But as noted above, the metropolitan area is divided, hindering fans. Also important is the ugly stadium, which attracts few fans. An outdoor stadium would not be an option in hot Florida, and only an expensive retractable roof could work, but even then, it most likely would not attract enough fans.

The third city is Miami, despite a hefty population of 3.6 million. But geography hinders attendance, as do the many senior citizens who retire to the region, and the heavily Hispanic population. But perhaps the biggest obstacle is the weather, which keeps fans away from Pro Player Stadium. It not only rains too much, but when there are games it its too hot and humid. A retractable roof stadium might save baseball in Miami, but at this point the local leadership has simply not shown enough interest in making the rather expensive investment. The prognosis for Miami is therefore does not seem good.

Another team that has frequently been mentioned as in trouble in Minnesota. But Minnesota has supported its team in the past, and it seems like it may be able to in the future as well. Minnesota has a sizeable population of 2.8 million, growing at 11 percent. Fans have attended in the past when Minnesota fielded winning teams, and they have started to come back in the last year as the Twins start winning again. Perhaps the greatest obstacle to the team's long-term health is the Metrodome, the ugly, old, decrepit facility meant for football. But taxpayers have rejected a new stadium. Minnesota can be successful again, but it may hinge on a new park.

As for cities that might be able to support a team that currently do not have a team, the most obvious candidate is of Washington, DC. The DC-Baltimore region has 7.2 million people, slightly more than SF-San Jose-Oakland with 6.8 million. Orioles owner Peter Angelos has claimed that that area has not been able to support two teams, and hence Angelos sees a team in Washington as having a major negative impact on the O's. But the fact of the matter is the Bay Area is able to support two teams. We all know that the Giants have become one of baseball's top draws since moving from dreary Candlestick Park to Pac-Bell. During that time, the A's have drawn fair numbers: 2.2 million in 2002, about middle of the pack in the AL. Those numbers could even be higher if the A's had a baseball-only facility like the Giants, and a better ownership (one that did not call its own fans disloyal). Washington also has several well-funded potential owners, as well as some of the wealthiest suburbs in the country to draw fans from.

Another city that might be able to support a team is Portland. With a population of 2.1 million, it is actually larger in potential than Tampa, which is split in half. Furthermore, Portland is growing at a rate of 19 percent vs. 9 percent for Tampa. Portland's population is relatively younger and wealthier than Tampa. Moreover, it faces no weather problems, and is an ideal location for an outdoor summer sport. Portland hasn't completely got its act together yet, however. There is not the same strong alliance and support between the local politicians and business leaders. That could be a major detriment to their chances.

Recently there has been talk of another potential candidate: San Antonio, Texas. Baseball insiders report that MLB agrees with Peter Angelos assessment for a team in DC, while Portland still has some ownership issues. Thus some think that San Antonio is the front runner to get the Montreal Expos in 2003. With a population of 1.5 million as of 1998, San Antonio would be the smallest city to host a franchise. However, San Antonio grew at a rate over 16 percent between 1990-1998, and may already be larger than Milwaukee, with a population of 1.6 million in 1998. Milwaukee grew a paltry 2.4 percent between 1990-1998. Still, San Antonio faces other problems. It is one of the poorer metropolitan areas in the country, and has a heavily Hispanic population. San Antonio thus represents a major gamble, but it may be one that Major League Baseball, scared to take on Peter Angelos, may take (although hopefully they will not-yet). There are no other cities in the US that don't have teams that could support one, however. The only other one that has been discussed is North Carolina, but it falls short on every measurement.

I suggest the following options: Baseball can move the Expos to DC, and the Marlins or Devil Rays to Portland. As for the new team in DC, there is no doubt that it would be a successful one, able to compete financially, so long as fan-friendly park is built in a good location in DC or Northern Virginia.

So far I have discussed two methods of dealing with financial imbalance: New parks and relocation. But even taking this into account, six teams would still be on the margins of viability, owing mostly to small local populations: Milwaukee, Kansas City, Cincinnati, Pittsburgh, Oakland, and Minnesota. What should be done with them?

Revenue-Sharing

Currently, baseball's economic structure looks like this:

1. NY Yankees

2. NY Mets

3. LA Dodgers

4. Boston Red Sox

5. Atlanta Braves

6. Chicago Cubs

7. St. Louis Cardinals

8. Chicago White Sox

9. Baltimore Orioles

10. Houston Astros

11. Cleveland Indians

12. Texas Rangers

13. Seattle Mariners

14. Colorado Rockies

15. Arizona Diamondbacks

16. SF Giants

17. Detroit Tigers

18. Anaheim Angels

19. Toronto Blue Jays

20. Philadelphia Phillies

21. San Diego Padres

22. Tampa Bay Devil Rays

23. Oakland Athletics

24. Cincinnati Reds

25. Pittsburgh Pirates

26. Milwaukee Brewers

27. KC Royals

28. Florida Marlins

29. Minnesota Twins

30. Montreal Expos

Teams 1-5 are baseball's elite. But teams 6-16 are all competitive and lucrative as well. Teams 17-21 are on the bubble. We shall call them semi-competitive. And finally teams 22-30 are baseball's have nots who struggle each year to field a decent team. The exception is the A's, who have had good teams, but as the Jason Giambi defection shows, won't be able to keep it. Thus we have four tiers in baseball's current system.

Revenue sharing has been unpopular among baseball's wealthier teams since it involves taking money from some teams and giving to others. But baseball owner's have not totally opposed it: Currently the national TV contract and licensing rights are equally distributed. The owners have objected that the poorer teams need to do more, and that some teams should be eliminated. Let us assume that we act as I suggested above, moving two teams. The new economic structure might look like this:

1. NY Yankees

2. NY Mets

3. LA Dodgers

4. Boston Red Sox

5. Atlanta Braves

6. Chicago Cubs

7. St. Louis Cardinals

8. Chicago White Sox

9. Washington, DC (Formerly Montreal Expos, no. 30)

10. Baltimore Orioles

11. Houston Astros

12. Cleveland Indians

13. Texas Rangers

14. Seattle Mariners

15. Colorado Rockies

16. Arizona Diamondbacks

17. SF Giants

18. Portland, OR (Formerly Miami no. 28)

19. Detroit Tigers

20. Anaheim Angels

21. Toronto Blue Jays

22. Philadelphia Phillies

23. San Diego Padres

24. Oakland Athletics

25. Cincinnati Reds

26. Pittsburgh Pirates

27. Milwaukee Brewers

28. KC Royals

29. Tampa Bay

30. Minnesota Twins

Under the new system, we have two less teams in the fourth tier, from nine to seven, and two more teams in the second tier. Instead of money being redistributed from about 16 teams to 14, we now have money going from 18 teams to 12. This means less money going from each rich team and more money going to each poor team. Without some type of revenue sharing, the bottom seven teams will not be able to compete in the long term. Perhaps a rich team can keep half its TV contract and give the other half to the league. They would still remain the wealthiest teams, but the bottom seven teams would be able to compete again. And rich owners could no longer argue that poor teams have not done enough and other teams should be moved. But without some type of revenue sharing the bottom seven teams will either have to fold or remain perennial losers. It is in baseball's interest that neither one of these options occurs. There is actually one more option if the rich teams choose not to share revenue: A team could easily be supported by moving to the New Jersey suburbs of New York. Surely the Yankees and Mets would rather do some limited revenue-sharing with poor teams out West than try and compete with another team in their own backyard!