Meals From The Marketplace

Government regulation of anything continues to be viewed with skepticism by many Americans, even with the nation still suffering from the effects of de-regulation in the financial markets.  Still, few can seriously argue against a need for increased supervision by the SEC and other market/banking regulatory agencies, and rare are the voices clamoring for less efforts by the FDA to perform its function with respect to the foods and drugs we ingest, or for the FAA to do less to safeguard the airline industry.

Government regulation becomes more necessary as private industries become more complex and, thereby, less responsive to the desires and needs of the public at large.  This fact is only in dispute among adherents of the Chicago School of Economics, a largely discredited group of theorists whose heyday most certainly came to an end with the collapse of our financial markets last year.

The need to bring government regulation into the world of professional sports should be apparent to anyone who views the scene objectively.  In the last 40 years, this unregulated industry has managed itself to the point of chaos, with its insatiable greed creating a ripple of detrimental effects for both fans and non-fans alike.

To be specific, player salaries have risen to insultingly astronomical levels and are continuing to rise.  Franchises have moved from one community to another with absolutely no regard for dispossessed fans.  Ticket prices have become all but unaffordable to the average family.  And TV and radio broadcasts have become bloated with commercials and promos that detract from the pleasure of the games, while networks charge advertisers obscene amounts for those same ads, the results of which are increased charges to the public for the goods and services that are advertised. 

Work stoppages have also become commonplace, bringing with them disrupted regular seasons and even (in 1994) the cancellation of the World Series. 

Meanwhile, every time ownership tries to stem the tide of escalating salaries, the players’ unions cry foul and the public is treated to the silly spectacle of millionaires charging billionaires with collusion and calling replacement players scabs.  The whole scene is so offensive to most Americans that many are turned off to the games they used to love.

So what would the establishment of a Federal Sports Agency accomplish?  It would allow for a return of a sense of sanity to the world of professional sports without, and you can underline that word, in any way injuring the games themselves. 

For openers, an FSA could impose a limit on all player salaries of one million dollars a year.  The players would howl, but no prospective player would turn away from a chance to play professionally with the knowledge that his income would be so limited. 

Think about it for a minute.  First of all, a million bucks a year, or even $200,000 for the more ordinary players, would provide more income in the span of a typical career than most of these athletes would see in a lifetime in whatever other trade or occupation they would seek for themselves.   And the best of the players would still derive far in excess of their annual salaries in endorsement deals.  (For example, Michael Jordan’s player salary of some $30 million in his last year with the Bulls was only a small fraction of his overall income.)

So cry not for the players.  They will continue to play with as much fervor as they show now, and they will still be well paid for their efforts.

With payrolls substantially reduced, teams could be required to roll back ticket prices significantly to levels that would once again permit the average fans to take their kids to a game occasionally, without requiring them to dig into junior’s college fund to do so. At the same time, the FSA could limit profits so that no team could enjoy a significant financial advantage over any other, thereby giving teams in smaller markets a greater chance of competing with those in bigger markets or with bigger bankrolls. (Imagine for just a moment the Yankees operating with a comparable budget to the Kansas City Royals’.)

But the biggest benefit to the nation would occur if reducing payrolls and restricting profits removed the principal secondary effect of the madness that now exists.  With profits specifically limited, the professional leagues would no longer be able to engage the broadcast networks in the bidding wars that have resulted in the preposterous amounts those networks are now paying for the rights to televise the games. 

And if the amounts paid by the networks for those broadcast rights are significantly reduced, the likelihood is great that the amounts charged by the networks of advertisers might also be reduced, which, in turn might well cut the costs of the goods and services those advertisers provide.

Admittedly, in an economy as large as the United States has, much of the foregoing may only be conjecture.  But one thing is clear: the explosion in player salaries and owner profits that the professional sports industry has seen in the last 40 years has coincided with increased ticket prices, increased broadcasting fees, increased advertising rates and increased consumer costs.  And, even if nothing else were to result, at the least the games would once again serve the public, instead of the other way around. 

We have long regulated the broadcast industry (via the FCC).  The nation’s professional sports industry is no less worthy of the same treatment.

Regulation of professional sports will impact negatively on only a very few while benefitting a great many, and, most important of all, it will forestall the alternative to which we are otherwise inevitably headed: a sports empire in which the players and owners are the emperors and the rest of us are the slaves.

(First of two parts)

It is time to consider government regulation of professional sports. 

Past time, actually.  But since no one, to my knowledge, has even so much as raised the point, let’s see if we can at least get a healthy discussion started on what would be a significant step towards a reclamation by the people of their national pastimes.

First of all, let me explain what I mean by government regulation.  I propose that the federal government, acting under the constitutional powers granted by the Commerce Clause, establish regulations regarding the private ownership of all professional sports franchises and that these regulations be enforced by a newly-formed Federal Sports Agency (the FSA, if you will).  The FSA would be empowered to control all aspects of the management of a sports franchise, beginning with the prices charged for tickets and the salaries paid to athletes.

Further, I propose that Congress establish clear direction for the FSA with respect to both ticket prices and salaries.  For openers, no increase in ticket prices should be approved absent compelling evidence that a franchise is in dire financial straits. 

In addition, individual team profits should be capped, and no player salary in excess of one million dollars a year or ten times the average annual income of all Americans, whichever is greater, should be allowed to any athlete.

In the last 40 years, sports in America have become big business, and a relatively small number of individuals, primarily athletes, have become very rich as a result.  It is more difficult to know to what extent the owners of sports franchises have benefitted from the explosion in revenues that has occurred since free agency and salary arbitration became the tools of this revolution, but as the resale value of these franchises has steadily increased to almost astronomical levels, we can assume ownership has benefitted, if not in annual earnings reports, then at least in terms of long term investment valuations.

In any event, the losers in this game have been everyone else, beginning with the fans, but extending very perceptibly to the non-fan as well.  Consider the following description of what has, in fact, happened:

The owners of all 30 of the major league baseball franchises, unable or unwilling to regulate themselves effectively, have allowed their player payrolls to skyrocket.  In the last decade, single team payrolls in excess of $100 million have become unremarkable.  The average player salary now easily tops $3 million!  These same players, only 40 years ago, averaged no more than $50,000 a year in salary.  (That works out to a 60-fold increase, which means these guys are staying ahead of inflation by just a bit.)  In response to this economic upheaval, the owners have grumbled a lot (as if some outside entity had forced them into this predicament), while they have found ways to more than increase their revenues to meet these increased expenses. 

The first and most obvious method is to hike income from the games themselves, i.e. higher ticket prices.  Example: In 1969, the top ticket price for a field level seat at Dodger Stadium was $3.50.  Ten years ago that same seat cost $35.  This year it was only available in a season ticket package for an average of $150 per game. 

These dramatic increases in ticket prices have occurred nationwide.  Tickets for the new Yankee Stadium began at $50 (for the cheap seats) this year.  Even a small-market team like Kansas City charges an average of $25 a ticket for its games. 

But the explosion in ticket prices for the “average” fan is nothing compared to the loot commanded for the new “luxury suites” that are now found in every ballpark and arena.  These suites start at $100,000 per year, with many costing corporations ten times that much.

Not our money, you say?  Keep reading.

A second method of increasing revenues comes from television, where the major networks are engaged in an ever-escalating bidding war to get the big sports.  As an example, the current NFL contracts for TV broadcast rights total over twenty billion dollars a year (ten times greater than it was a decade ago). 

In turn the networks, needing to generate added revenues to pay for the “right” to air these games, have hiked the cost of advertising by a commensurate amount.  The price for a 30-second ad at last year’s Super Bowl was 2.5 million bucks.  Think about that figure for a minute.  Now add in the cost of producing the attention-grabbing spots.  And just where do you suppose the advertisers are getting the revenue to pay for those ads?

And so, in the end, even the guy or gal who couldn’t care less about the fortunes of the Indiana Pacers or the Los Angeles Angels of Anaheim or the Tennessee Titans or the San Jose Sharks ends up paying for the explosion in salaries that our free market system has wrought. We are all paying in one way or another, folks. 

And who are the beneficiaries of our unwitting largesse?  The answer, in case you haven’t been paying attention, is a relative handful of very good athletes and an even smaller handful of already wealthy individuals and corporations who own their contracts.  Is this any way to run a railroad?

Still not convinced?  Then this weekend, as you watch our national pastimes, note how heavily laden they are with commercials and promotional “announcements.”  Is any athlete, let alone his fat-cat employer, worth the X million dollars a year you are helping him earn?

Next: How the world of professional sports represents that rare exception in a capitalist economy, to wit: an industry that will continue to flourish in spite of significant wage, price, and profit controls.