Econ-O-Ball: How America's Money Crisis May Affect Major League Baseball

Will NortonCorrespondent INovember 26, 2008

We’re talking about money, here. Dollars and cents.

With America's economy floundering and many cornerstones of our capitalist foundation in flux, this offseason should be an interesting one for baseball's free agent crop.

The operative word here is "should"—but will it be?

The Yankees are, well, the Yankees, and despite all that is wrong in the American auto industry and corporate sector, it appears as though the iconic franchise of America's pastime will do little to alter it's free spending philosophy.  

Hank Steinbrenner isn't going to let a global economic meltdown get in the way of CC Sabathia, AJ Burnett, and Derek Lowe, god dang it! Besides, we all saw how well developing from within and trusting young arms worked out for the Bronx Bombers last season.

As the boisterous and oftentimes insufferable mini-Stein said recently, "We're going to do what we do every year, and that's try to field a championship team. That's not going to change. We know that we've got some weaknesses, and we're going to fix the problems as best we can. If that means spending money, obviously that means spending money. The philosophy has not changed."

For many other baseball franchises, those with shallow pockets, wary fanbases, and limited marketing resources, the philosophy simply has to change. The dollars just aren't there to invest in over-valued free agents with the current backdrop of our economic downturn and the somewhat precarious future of baseball's biggest trust fund—the fans.

Even John Henry and the Red Sox brass, who spent the fifth most money in baseball last year, have talked about making solid investments with long-term sustainability during such hard times. As a sign of the current financial crisis, the price of admission to the historic Fenway Park for the first time since 1995, will not rise in 2009.

Red Sox CEO Larry Lucchino said, "The team could have raised ticket prices this season...but its analysis of focus group research, fan feedback, and the economy led to the freeze."

Baseball teams, just like any other entertainment outlet, should continue to follow what they feel to be the most effective long-term model for success. To the Yankees of the league, spending money, even in perilous economic times, does not alter the greater, overarching model in place.

However to other teams, like San Diego for example, the model for sustainable development and competitiveness has been shaken.

The Padres, coming off a 99-loss season, will likely be losing arguably the two most marketable names on their roster. Franchise legend Trevor Hoffman and Cy Young ace Jake Peavy will inevitably change teams. As a result, the Padres should expect attendance figures to drop for the second straight season.

Kevin Towers, unlike Hank almighty, can't simply spend, spend, and spend some more to remedy the situation. The hardship is real, the challenges great, and the future prospectus muddled.

The reality of the situation is that more teams are like the Padres than the Yankees; more teams are going to have to scale back instead of surge forward with the checkbook, especially now. This could create a bigger divide than ever amongst the league’s haves and have-nots.

This brings me to my bigger point. As the country's deficit soars over $420 billion, our auto sector crumbles to pieces with no help in sight, and our debt to foreign nations becomes a major deterrent to the future of American choice making, at what point do you have to look at baseball, as an industry, and shake your head at the overall lack of equity within the business?

I mean, if an economic earthquake like this one can’t shake the top heavy structure of baseball’s financial Jenga board, what can? Will this crisis merely be a backdrop for the next decade of baseball, an umbrella under which the rich can ignore the rain while the poor get drenched?

The lack of equity in MLB is a large-scale problem that has been exacerbated by the current economic crisis. These problems have been around for over a decade. They have, however, been allowed to manifest themselves by the ludicrous financial landscape of the most out-of-touch business in the entire entertainment industry.

As our country struggles with a new financial reality, a handful of major league teams will continue to throw $15 million per year at a pitcher who had an ERA over 4.00 last year and has experienced several major elbow problems throughout his career. A.J. Burnett, step on down.

But will other teams simply refuse to offer fat multi-year contracts to marginal players? Will they be forced to sit out the majority of negotiations altogether? As I said at the beginning of this piece, the economic crisis should alter the philosophy and inherent risk-reward model caught up in the free-agent process. But will it actually do so?

I foresee a dark immediate future in baseball. The teams at the top, the Yanks, both sets of Sox, Dodgers, Angels, and Mets, among others, will continue to have annual payrolls of over $100 million, while scaling back the risk in some of their investments.

What about the other 20-some teams like the Padres, Pirates, Royals, and Nationals? Well, they are operating on a different playing field altogether. They have a different set of rules governing their resources and limitations, rules that have become all the more strict and imposing, given the economic upheaval of the nation.

This issue of equity and league balance has always been a prevalent one in Major League Baseball, and one can only hope that the current financial sag will shed some light on just how bumpy a road the majority of the league is heading down, and just how absurd the entire industry is.

After all, we’re talking about money here...