Baseball Business - Case Study Example

Running Head: [short [institute of affiliation] I. Introduction Since the professionalization of baseball, the sportshad been considered more of a business because of the money that it brings from the high demand of the public who want to watch grown-up men playing the game. The high demand for it has posed opportunities for investors over more than a century. However, being a business it has faced issues such as labor relations problems. This paper aims to explore the collective bargaining practices that are employed in the baseball business, as well as their impact on the sports itself and ticket consumption on the part of the consumers. II. Body A. Baseball and union Baseball has long originated in the early 19th century. According to historians, the origin of baseball has been considered the formation of a formal organization back in 1842 by a sports club. In his article, Haupert stated: “The origin of modern baseball is usually considered the formal organization of the New York Knickerbocker Base Ball Club in 1842. The rules they played by evolved into the rules of the organized leagues surviving today. In 1845 they organized into a dues paying club in order to rent the Elysian Fields in Hoboken, New Jersey to play their games on a regular basis. Typically these were amateur teams in name, but almost always featured a few players who were covertly paid (Haupert, 2007).” As the games became more popular, these early club has seen some profit potential in producing games of this sport. Due to this, a more formal organization has been set up in order to cater to the business side of the sports’ operations. “Association of Base Ball Players was organized in 1858 in recognition of the profit potential of baseball. The first admission fee (50 cents) was charged that year for an All Star game between the Brooklyn and New York clubs. The association formalized playing rules and created an administrative structure (Haupert, 2007).” However, according to the article, although baseball has promised a lot of profit potential, the players have been banned from “granting direct financial compensation for players” due to their being amateurs, in theory. Even at its origin, baseball as a business has posed some serious conflicts between the players and the owners of the teams. As the sports business evolves during the past century, there are many changes and challenges that the industry has faced. One of these is the growing concern of players as regards financial schemes and compensation for them. Players have been dissatisfied with the amount of compensation that they get, and in response to it, they have formed leagues by themselves (Berry, Gould & Staudohar, 1986, 47). However, these leagues have proven to be unsuccessful without the backup of the owners. This major conflict between the interests of the owners and the players has led to many changes in the baseball business. As collusion between the owners have worked to limit the choices for players of either accepting the compensation schemes offered to them or being blacklisted, a major force in the baseball industry has emerged in the form of a union. In the form of the Major League Baseball Players’ Association, the players have found a voice which will enable them to deal with the owners without having to face quandaries that are imposed by them. According to its MLBPA website: “The MLBPA is the collective bargaining representative for all current Major League Baseball players. The Association also assists players with grievances and salary arbitration. The Association works closely with MLB in ensuring that the playing conditions for all games involving Major League players, whether the games are played in MLB stadiums or elsewhere, including internationally, meet proper safety guidelines. The Association also serves as the group licensing agent on behalf of the players (MLBPlayers.mlb.com).” When the players have chosen Marvin Miller, an economist from the United Steel Workers of America, the union has withstood the failures that its predecessors have encountered in addressing the concerns of players as regards their compensation. According to Berry, Gould & Staudohar: “With Miller as executive director the Major League Baseball Players’ Association made gains for its members that remained unmatched by any other union in a similar timespan. [...] For baseball players the key year was 1968, when their organization closely followed on the heels of the basketball players in coming to terms with the owners in reaching the first collective bargaining agreements in professional sports (1986, 47).” B. Collective bargaining practice in the baseball as a sports business The formation of rival leagues has resulted in players’ roster jumping in order to get a better compensation scheme through the rivals. In order to solve this issue, the team owners have sort of formed a cartel, hence the name “reserve clause” where they have agreed not to hire a player that another team owner plans to keep in his team for the next season. For some time, this kept many players to sticking with their teams and to accept certain terms as regards their compensation. Over the last century, many leagues that are formed by players themselves have emerged but have not been successful. This formation has been a response to owners’ unfair treatment to the players as regards compensation. According to Haupert: Simon Rottenberg was the first economist to seriously look into professional baseball with the publication of his classic 1956 article "The Baseball Players Labor Market." His conclusion, not surprisingly, was that the reserve clause transferred wealth from the players to owners […] (Haupert 2007).” Aside from low pay schemes, and the putting of cap to pay schemes in order for owners to minimize their labor costs, there have been exploitation issues as owners fail to honor their agreements with the players. This exploitation comes in the form of either not paying the player the promised amount, or delaying the payment as requested by the player. As the labor market has become fiercer over the years as the conflicts between owners and players intensify, there has been a significant collective bargaining practice that Miller, then the executive director of the MLBPA. This extreme practice of has been strikes and lockouts. “Miller organized the players and unified them as no one had done before. The first test of their resolve came in 1972, when the owners refused to bargain on pension and salary issues. The players responded by going out on the first league-wide strike in American professional sports history. The strike began during spring training, and carried on into the season. The owners finally conceded in early April after nearly 100 games were lost to the strike. The labor stoppage became the favorite weapon of the players, who would employ it again in 1981, 1985, and 1994. The latter strike cancelled the World Series for the first time since 1904, and carried on into the 1995 season. The owners preempted strikes in two other labor disputes, locking out the players in 1976 and 1989. After each work stoppage, the players won the concessions they demanded and fended off attempts by owners to reverse previous player gains, particularly in the areas of free agency and arbitration. From the first strike in 1972 through 1994, every time the labor agreement between the two sides expired, a work stoppage ensued. In August of 2002 that pattern was broken when the two sides agreed to a new labor contract for the first time without a work stoppage (Haupert 2007).” Through strikes, lockouts, and later on some arbitration and some litigation cases that are brought by Miller through the union, the players have been able to get better deals as regards financial compensation from the owners. C. Relevance of unions to the sports business The union, or in the case of baseball players the MLBPA, has enabled the shift from player exploitation to players getting a fair share of compensation from the earnings of their games. After Miller has been employed as the executive director, and the MLBPA has formally acted for collective bargaining on behalf of the members of the Major League, the players have significantly gained power. The unions have played a significant part in attracting future talents into the sports business, especially baseball by granting them enough reward for their efforts in playing good games. For over a century, baseball has been plagued by conflicts between owners and players. As the games have enormous earning potential, the players are treated unjustly by restricting pay that they should get from the customers’ willingness to witness them play. Thus, this has been addressed by unions by granting a voice and power to a player, by making him part of a larger group that will push for the interest of the members of the unions. Collective bargaining has proven to be a significant thing for the baseball players. As the years pass, baseball teams have been able to recognize more earning potential from their playing games. These include franchise rights that are sold to media in order to cover their games. The thought of consumers paying for this increase in financial renumeration to players through the increase in ticket prices must not hold true, as the ticket prices since the origin of baseball have benefited the owners through profits. By granting the players some power, or through free agency and increasing their earning potential, this is reflected in the owners’ payrolls. Thus, the shift is from the owners’ to the players, and does not really involve consumers as regards the efforts of unions to improve the compensation scheme. III. Conclusion In baseball, unions have proven to be a significant thing for the sport. The conflict between the owners and the players has caused a lot of distress in baseball which have caused some missed games due to players’ dissatisfaction with the compensation schemes that are offered to them by the owners. When unions have gained a stronger foothold during the past decades, the incentive for good talents to remain playing in the baseball field has made the sports more stable in terms of game schedules, etc which are relevant to fans and consumers. Therefore, these incentives being brought by the power of collective bargaining also serve as motivation for players to give their best and provide great games to viewers. This increase in financial compensation that has been granted to players is not incorporated in the ticket prices that consumers pay in the process. As the revenue of baseball teams becomes less concentrated on ticket sales, but is derived more from franchises that are sold to media, this increase in financial compensation only shifts the weight in terms of earning from the owners to the players. Thus, collective bargaining has served the players well in the baseball sport in order to keep owners from employing unfair practices to players. Reference List Berry, Robert C, Gould, William B., & Staudohar, Paul D. (1986). Labor Relations in Professional Sports. California: Greenwood Publishing Group, pp.47-73. Haupert, Michael J. & Whaples, Robert (ed.) (2007). “The Economic History Of Major League Baseball.” EH.net. University of Wisconsin—La Crosse. Retrieved February 13, 2009, from http://eh.net/encyclopedia/article/haupert.mlb Miller, Philip A. (2006). Do Team-Specific Revenues Matter in Baseball’s Arbitration System? Krypton.MNSU.edu. Minnesota State University. Retrieved February 13, 2009, from http://krypton.mnsu.edu/~millep1/papers/arbitration%20and%20team%20revenues.pdf MLBPA. (2007). “2007-2011 Basic Agreement.” MLBPlayers.mlb.com. Retrieved February 13, 2009, from http://mlbplayers.mlb.com/pa/pdf/cba_english.pdf MLBPA. (2007). “MLBPA Info.” MLBPlayers.mlb.com. Retrieved February 13, 2009, from http://mlbplayers.mlb.com/pa/info/faq.jsp#created Robbins, S. (2005). Organizational Behavior. New York: McGraw-Hill Rovell, Darren. (2000 November 21). “The Early Days of Free Agency.” ESPN.com. Retrieved February 13, 2009, from http://assets.espn.go.com/mlb/s/2000/1121/893718.html Read More