Baseball and Recession

by: Jimmy Scott | Special to NY Sports Day | Friday, October 24, 2008



I was thinking about how to compare the baseball industry to other big, blue chip industries during bad economic times. You can't. For example, if GM or Ford has a bad year or string of bad years/quarters, they can cut thousands of jobs and close plants and put together long-term turnaround plans. A baseball team is like a GM or Ford. If the team has a bad year, and this happens to a handful every year, there are no jobs to be cut.

You think the 25-man roster shrinks the following season to 19? You think they fire the shortstop and have the 2nd baseman absorb his duties? That would be a whole lot of ground to cover. You'd see a bunch of balls finding holes. No, the union is too strong for there ever to be a cut in player positions. Meanwhile, we all know what happened when MLB tried to cut plants, or in our scenario, contract teams earlier this decade. Montreal is now in D.C. and Minnesota wins every year, their new stadium being constructed as we speak. Baseball is blue chip. If you're suffering through bad economic times, it's a good time to be a baseball player.

Teams can put together long-term turnaround plans, which they usually refuse to term as "rebuilding" plans. These usually involve a new stadium and expected revenue increases for at least 2-3 years once it opens (except in Pittsburgh). If a team rebuilds, it can cut salaries. But unlike other industries, cutting salaries means passing them off onto other teams in exchange for players who earn less. Yes, sometimes a team will buy out a guy's big contract, but that doesn't mean they're not on the hook anymore to pay him the full amount. Big companies can have loads of people take early-retirement payoffs, but they save money over time in doing so. If I'm in the 3rd year of a 5-year, $65 million deal and you cut me after year 3, you still owe me the full amount for years 4 and 5. You didn't save any money. Just the headache of me stinking up the joint every night.

Baseball will feel the pinch from the fans. Maybe a corporation decides not to spend $100,000 for the luxury box renewal this year. Or maybe Joe Fan decides not to go to 10 games next year, only 2 or 3. Suddenly, revenues drop precipitously. So what happens then? Teams contract spending - not every team, but some - and pass on free agents or certain trade proposals. They may stop getting better, which further hurts fan interest and desire to attend games and purchase merchandise, restricting revenues even further. The spiral continues until the front office calls up a wunderkind from A-ball who suddenly slams 20 home runs in a month and is the next Albert Pujols. Or until the recession ends. Or until... Well, if you're Pittsburgh, you continue the downward spiral that started in 1993.

But eventually, a team like Pittsburgh or Kansas City will be good again. Eventually, fans will care again. Maybe management gets good (see Oakland, Minnesota and Tampa Bay). Or the team gets lucky (see St. Louis circa 2006). The recession eventually ends and all becomes happy again. It's cyclical. Except in Pittsburgh.

For players, a recession like this one particularly hurts. First, salaries might get compressed. If you've only got a small window of opportunity (meaning years) to play and those years are bad ones for the vault of money your team controls, you never get the full benefits financially you could have received during better times. Second, the players who have made money and are still making money can get hurt just like you. Retirement plans lose value. Investments lose value. We need to pull back on spending, maybe even fire a few maids or gardeners and sell off a couple of vacation condos in St. Croix and Miami. So while the union protects players from teams that would like nothing more than to cut jobs and close facilities, the players end up doing it on their own anyway. Hmm. Interesting irony.

Now, if only maids and gardeners had a union of their own.

To read more from Jimmy Scott, the greatest future Hall of Fame pitcher you’ve never heard of, and listen to interviews with MLB players and wives, just click away to his website, Jimmy Scott’s High & Tight, which you can find at www.jimmyscottshighandtight.com.