In modern professional sports, athletes are paid a wage that is determined by their potential economic impact on a team. For instance, a team will sign a player to a $10 million contract only if they believe that the player will have an economic impact of at least $10 million (Landsburg). Most professional sports leagues employ a system of free agency in which players are essentially auctioned off to the highest bidder. Usually, the team that is willing to pay the highest salary will be the team that acquires the player. There are some other variables involved in the signing process, which include contract length, clauses, incentives, and signing bonuses. The fact that athletes will play where they are offered the most money remains the underlying principle nonetheless.
Most sports operate under some form of what is known as a salary cap, which sets a limit on the total amount of money that a team can spend on all of its combined player’s salaries. Essentially, it is not so much a cap on salary as much as it is a cap on payroll. Payroll is the total amount of money spent on salary (Keri). Of the four major sports league in America, three of them use a salary cap: the NFL, NBA, and NHL. The MLB currently employs a luxury tax system which taxes any team who spends over a set amount. However most teams never even come close to paying this tax, and since its inception in 2003 the New York Yankees have accounted for 92% of such tax payments (Brown). Lacking a true salary cap, baseball will cease to be America’s favorite pastime.
Competitive imbalance leads to an imbalance in interest. Since 1995, 22 of the 30 teams in the MLB have reached the postseason five times or less. Eight of these 22 teams either reached the playoffs once or...
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Do Major League Baseball teams with higher salaries win more frequently than other teams? Although many people believe that the larger payroll budgets win games, which point does vary, depending on the situation. "performances by individual players vary quite a bit from year to year, preventing owners from guaranteeing success on the field. Team spending is certainly a component in winning, but no team can buy a championship." (Bradbury). For some, it’s hard not to root for the lower paid teams. If the big money teams, like Goliath, are always supposed to win, it’s hard not cheer for David. This paper will discuss the effects of payroll budgets on the percentage of wins for the 30 Major League Baseball teams of 2007.
Anyone who has been involved in an organized sport, whether it is backyard football or a high school sports team, knows that these sports all have organizations that are responsible for setting rules, determining conditions of play, and penalizing individuals who infringe the rules. Some of the organizations like the National Football league and the MLB are familiar to most people, the rules they follow are not generally understood by anyone who is not closely associated with the sport. Most fans and sport critics assume that what is happening inside these organizations are of little concern to them. However, this is not the case. In the MLB, the New York Yankees spend an excessive amount of money every year to obtain big name players. A luxury tax was put into effect for teams that go over the spending limit. However, the Yankees are the only team that pays the tax because they are the only team that exceeds the spending limit. The players, coaches, fans, and I have argued that a salary cap would be the best possible way to allow teams in the Major Leagues an equal opportunity getting to the World Series.
However, if the current rules remain in place and baseball continues without a salary cap, the only hope a small market team may have is to fend for themselves on the big market with financially superior teams. This becomes an exceedingly harder task when one team can afford the salary of two top players while those contracts are equal to the entire payroll of another team’s entire roster. Therefore, the question remains should baseball implement a salary cap, and if they do, how would it come into play. When asking the question regarding the salary cap, four supporting ideas arise for either the implementation of a salary cap or keeping it nonexistent.
Under the protection of Major League Baseball’s (“MLB”) longtime antitrust exemption, Minor League Baseball (“MiLB”) has continuously redefined and reshaped itself according to Baseball’s overall needs. But while MLB salaries have increased dramatically since the MLB reserve clause was broken in 1975, the salaries of minor league players have not followed suit.
A salary cap in pro sports is the amount of money every team in a league can spend on all of the players on its roster in one year. Major League Baseball does not have a salary cap. The reason for a salary cap is to keep teams competitive and not have just two or three outstanding teams that dominate everyone. Another reason leagues like the National Football League and the National Basketball Association have a salary cap is it is fair and gives teams an equal chance to get players which can make a large impact on their team by using their skill and experience. Salary caps also keep players from receiving contracts which give them an extremely large undeserved salary. This is why I am for a salary cap in Major League Baseball.
Labor market theory is one of the most integral economic theories needed to dissect the inefficiencies in professional sports. Looking first at the type of market these leagues function in, one can see that they do not necessarily meet all the criteria that a competitive market requires. The big four sports leagues in the US have a set number of teams which creates barriers for entry. Only when an expansion is agreed upon by the league, such as NHL has done for the upcoming season, are teams allowed to enter, and even then, it is limited to a maximum of a few teams in recent history. Additionally, the league makes it virtually impossible to exit, as selling of a team is the closest they come to exiting the market. Through
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Baseball remains today one of America’s most popular sports, and furthermore, baseball is one of America’s most successful forms of entertainment. As a result, Baseball is an economic being of its own. However, the sustainability of any professional sport organization depends directly on its economic capabilities. For example, in Baseball, all revenue is a product of the fans reaction to ticket prices, advertisements, television contracts, etc. During the devastating Great Depression in 1929, the fans of baseball experienced fiscal suffering. The appeal of baseball declined as more and more people were trying to make enough money to live. There was a significant drop in attention, attendance, and enjoyment. Although baseball’s vitality might have seemed threatened by the overwhelming Great Depression, the baseball community modernized their sport by implementing new changes that resulted in the game’s survival.
Even though the NBA is a multi-billion dollar industry, it does not mean that the owners should have to pay over 50% of their revenues in player salaries. Something needs to be done to stop the enormous growth of player salaries that has been taking place the last couple of years. The NBA players union seems to believe that they should have salaries as high as the market can bear. The NBA was started by the owners and others as a business. Therefore, all of the players are employees of the owners and the league. The league and owners are the ones who do all of the advertising, make deals with television stations, sign contracts for licensing and make it all happen. They are the ones who should be reaping the most financial rewards. In his magazine article, "Held Ball", Phil Taylor, a writer for Sports Illustrated lets us know that with the signing of a new four year, 2.6 billion dollar contract with NBC and Turner Sports, the league seems to have plenty of money. But with figures of about a billion dollars being paid out in player salaries, there is not enough money to pay for all the employees, ...
MINTZ, A. (2011). How expanding instant replay can boost mlb’s bottom line . 22. Retrieved from http://www.sportsbusinessdaily.com/Journal/Issues/2011/02/21/Opinion/Mintz-column.aspx?hl=instant replay in baseball&sc=0
Ever watched ESPN and seen a report about a baseball player signing a five year contract worth 150 million dollars? Now, with a little math, one would come to realize that that contract means that baseball player will make a bit less than 30 million dollars in that five year period. That is ridiculous. Why do professional baseball players as well as professional athletes in general make so much money just to play a game that little kids play to stay out of trouble? It is because people pay them to play, athletes unions that, for a large part, are used to force team owners to pay them such a high salary, and businesses pay them to advertise their products.
Players get paid too much. Rodriguez's made a deal for 275,000,000 to be on the new York Yankees team. The highest team player made 13 million in 2011. Low set paid bears player made 330,000 in 2011. Yes players do get payed too much.
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