One Thing Leads to Another
It’s been sixteen years since the last major league baseball expansion, which equals the longest period between expansions since 1961 when the first MLB expansion happened. The record will be broken next season since expansion isn’t currently being discussed by the team owners (at least as far as the public knows).
Why haven’t major league teams given more thought to expansion, given that the Great Recession is more or less over and that two new expansion teams would bring fees of as much of $1 billion to be split between the existing team owners given the current value of even the poorest MLB teams. The main reason is that major league owners are incredibly short-sighted and greedy.
Two new teams mean two more teams who get an even cut of national television revenue, the new teams might cut ever so slightly into existing teams’ fan bases, and they would reduce the number of credible relocation sites that teams can threaten their current cities with if the cities won’t give them various benefits from tax breaks to publicly financed stadiums. More teams also mean more supply when it comes time to put a team up for auction to the highest bidder.
In the long term, of course, expansion for an industry as financially healthy as major league baseball means expanded markets, bigger TV and radio contracts and greater overall national interest. In other words, more money for everyone. Even so, the current teams want every last dollar for themselves now, rather than getting even more ten or twenty years down the road.
In fact, former baseball Commissioner Fay Vincent is on record stating that the only reason MLB expanded in 1993 and 1998 is because the existing teams needed the huge expansion fees in order to pay off the $280 million the teams owed to the players’ association in settlement after having been found to have colluded against free agents in the 1985, 1986 and 1987 off-seasons by two different arbitrators (the first arbitrator was fired by the owners after the first collusion decision).
The fact that the owners had to pay the players’ association for colluding in the first place goes back to 1966 and beyond. Before 1966, major league baseball was a complete monopoly and recognized as such by two United States Supreme Court decisions. Major league players had no choice, no matter how good they were, but to play for the team’s salary offer. Their only other option was to find a job in some other industry.
Individual players tried hold-outs, and these sometimes got them a few more dollars, but in the end they always had to accept a price very close to the owner’s previous final offer, or be barred from the game at all professional levels.
In the early spring of 1966, shortly before the players elected former United Steel Workers’ economist Marvin Miller to represent them and create a truly independent labor organization, star pitchers of the World Champion Los Angeles Dodgers, Sandy Koufax and Don Drysdale, got the bright idea to stage a double-holdout. They hired a lawyer to represent them (up until this point, teams had steadfastly refused to negotiate with anyone but the individual player) and demanded a cool $1 million to be split evenly between them over three seasons (so, $167,000 per year each).
The Dodgers refused to meet with the lawyer and refused to acknowledge the duel holdout. However, with the team’s two great aces both holding out, they had at least twice the leverage they’d have had holding out alone and ultimately signed contracts for $130,000 (Koufax) and $110,000 (Drysdale), which were almost certainly the largest single-season major league contracts up to that date.
[It’s worth noting that recent research by SABR’s Michael Haupert strongly suggests that before the formation of a real players’ union in 1966, teams routinely fed the media exaggerated figures instead of the real the amounts they signed their biggest stars for. For example, contemporary news reports (and legend — more than the President) indicated that Babe Ruth made $90,000 in the early 1930’s; Haupert says he never made more than $80,000, although that was still more than twice what any other player in baseball was making at the time. Similarly, contemporary reports said that Ted Williams made as much as $125,000 and Stan Musial made $100,000 in a season; neither ever made six figures in a season, at least in terms of base salary excluding performance bonuses. Teams obviously did this for two reasons: (1) it was good press and promoted a recognition of just how good the best players were; and (2) it disguised just how little players were paid in comparison to their true value in terms of putting fans in the seats at market prices.]
Well, the team owners just hated what Koufax and Drysdale had done. When the players’ union came in later that year and began forcing the teams to negotiate collective bargaining agreements, one of the things the teams asked for fairly early on was agreement that players wouldn’t be able to negotiate their salaries collectively in the future in the manner that Koufax and Drysdale had done. The union said O.K. but only if the owners agree not to act collectively in negotiating with the players (i.e., no collusion). The owners couldn’t agree fast enough at the time, but it came back to bite them years later when they collectively agreed not to sign free agents.
If Fay Vincent is right, then it might be quite some time before we see major league expansion again. Without an immediate need for large amounts of capital, don’t bet on the owners to look any further than maximizing their immediate profits and team values.