Sports Econ 101

Team owners don't want you to know it, but player salaries and ticket prices have nothing to do with each other.

Topics: Basketball, Baseball, U.S. Economy, Economics,

“Reds listen to fans and pay the price,” announced Mike Lopresti in the “Commentary” section of USA Today when Cincinnati gave future Hall of Fame shortstop Barry Larkin his due the other day with a three-year, $27 million contract. “Larkin stays in Cincinnati,” read the subhead, “but ticket prices might be going up.” The article went on to suggest that the only way the Cincinnati Reds might be able to pay for Larkin’s new contract would be by raising the price of tickets and peanuts. It could, he hinted, actually happen this year. I’d like to suggest to Mr. Lopresti that he go back to school and take a course in Economics 101.

I’m not picking on USA Today. Last Friday, the Wall Street Journal’s ace staff writer Sam Walker made an equally serious economic blunder in a report about teams paying the salaries of discarded players. Walker suggested that such payments were being passed on to the fans in the form of higher prices for “tickets, beer and hot dogs.”

If Americans are really the most economically uneducated people in the Western world, our sports journalists must be on an even lower level. Simply put, and contrary to what you read and hear virtually every day on the radio call-in shows, there is no necessary connection at all between an athlete’s salary and the prices you pay at the ballpark, arena or stadium. Let me repeat that: none, as in no, zero, zip, nada. One is not dependent on the other at all, to the slightest degree. This is a simple fact that all economists and all baseball executives know, but that the latter take great pains to obscure when they talk to the fans through the press.

I know this might be difficult to grasp if you’ve never studied economics, but start out thinking about it this way: The price of tickets, hot dogs, beer, etc. at games is dictated by what the market will bear. It’s that simple. If you, the fan, buy that ticket and pay for that beer, then the team assumes, reasonably enough, that you are willing (if not altogether happy) to pay it. What you pay, then, becomes the price. After a certain time, they might try, say, a 50-cent hike; if you pay it, that’s the new market level. If you don’t, they bring it back down. That’s the way it works. It has nothing to do with what the team pays the athlete.



Or, stated a different way, if they’re hitting you up for $6 a pop on beer, and suddenly they were to drop the average ballplayer’s salary from, say, $2 million a year to, say, $100,000, the price of tickets, beer and dogs wouldn’t drop by so much as a nickel.

Another way of understanding the concept is this: NHL hockey games, by some estimate, yield about 13 percent of the revenue of Major League Baseball games, yet NHL teams pay their players about 40 percent of what baseball players get. As you can see, the salaries aren’t at all proportionate to the revenue differential, and neither are ticket prices, which are, in most cities, higher than the average baseball ticket.

And here’s another way of thinking about it. “M:i-2″ cost, what, maybe $150 million, with Tom Cruise getting, what, maybe $25 mil? But your average multiplex charges you $8.50 per ticket, the same price it charges for a ticket to see “Being John Malkovich,” which cost about 9,000 bucks and for which John Cusack was paid in food stamps. (The price of popcorn at both movies is the same.)

And here’s still another: The cost of tickets, beer and hot dogs at college games is through the roof, and the players don’t get paid at all.

Yes, the Los Angeles Lakers are going to raise prices when they sign Shaquille O’Neal, because they feel they have a more attractive product to sell. Yes, the Reds might raise ticket prices now that fans have given their public approval for signing Larkin. But the only connection between the salary and the price increase is that the Reds assume you, the fan, will pay for it. If enough don’t, they’ll bring the price down. They’ll have to. They don’t dictate the price to you, you dictate it to them. The price isn’t determined by factors you can’t control; on the contrary, it’s determined by the only factor you do control. As Satchel Paige might have phrased it, you pays your money and takes your choice. Or you don’ts.

If Elmore Leonard wrote about hoops

In 1995 Jim Patton followed Michael Jordan around Birmingham, Ala., as Jordan played at being a minor league baseball player. Denied access to the World’s Most Boring (Off the Court or Field) Athlete, Patton watched as Jordan was welcomed by Birmingham’s white upper class onto otherwise segregated golf courses, allowed the press and public to think he paid for the Birmingham Barons’ team bus and generally provided material enough for half a dozen good books — if five other journalists had had guts enough, like Patton, to buck the coalition of butt-kissing agents, media and press that surrounded His Airheadedness.

“Rookie: When Michael Jordan Came to Birmingham,” published in 1995, is the “Roger and Me” of sports books. Though it was largely ignored by the mainstream press, it can still be found and is well worth seeking out. Patton’s new novel, “The Shake” (Carroll & Graf), is also worthy of your attention. The novel is about the underside of pro basketball — coke-drenched power-forwards, 16-year-old nymphomaniac daughters of team owners and extorting sports agents. Trust me, ’cause I’ve been there — you won’t find a sleazier cast of characters short of the editorial staff of a big-time Internet magazine.

This is the way Elmore Leonard would write about pro basketball if he were as knowledgeable and cynical on the subject as Patton. Grab this book before it becomes a cult item, like Patton’s previous books, and maybe it won’t have to remain a cult item.

Enforce the rules fairly

This is not written in defense of Boston Red Sox outfielder Carl Everett, who’s serving a 10-game suspension for bumping an umpire. As far as I’m concerned they can suspend him for a month, and since I’m a Yankees fan you can tack another month onto that. What disturbs me is why the umpire in the dispute, Ron Kulpa, was allowed to arbitrarily enforce the rule about crossing the batter’s box line and standing too close to home plate. It’s the kind of thing ballplayers do every day, and no one can recall Kulpa ever enforcing it before. Do you remember an umpire ever enforcing it before?

There is ample reason for believing that Kulpa (whom Everett had clashed with before) was baiting him, and it certainly wouldn’t be the first time over the last couple of years we have seen umpires do that. If Major League Baseball vice president Frank Robinson wants to retain respect for baseball’s decision-making process, he should call a press conference now and announce that from here on the rule will be strictly enforced — that, or drop it altogether. To allow an umpire to randomly enforce a little-known rule is asking for trouble. If you don’t believe me, walk up to George Brett and ask him if the words “pine tar” ring a bell.

Allen Barra cowrote Marvin Miller's memoirs, A Whole Different Ballgame. His latest book is Mickey and Willie: The Parallel Lives of Baseball's Golden Age.

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