Blue Ribbon Silliness, Part 1
For a columnist like me, the report by Major League
Baseball's "Blue Ribbon Panel on Baseball
Economics" is too juicy a target for just one column. This
month, I'll dissect the data; next issue, I'll critique
The very first sentence of the report should set off BS detectors
across America: the panel modestly describes itself as
"representing the interests of baseball fans." Who are
our self-appointed protectors? Twelve of the 16 panelists
(including the ubiquitous John Harrington) own or operate major
league baseball teams. The four "independent" members
are Yale president Richard C. Levin, who drafted the owners'
1989 salary cap proposal; former Federal Reserve Board chairman
Paul Volcker, who represented the owners on the last blue-ribbon
economic panel, in 1992; former Senator George Mitchell, often
mentioned as a possible Commissioner; and columnist George Will,
who in a remarkable conflict of interest serves on the boards of
both the Orioles and the Padres.
Yes sir, a regular cross-section of American fandom.
The report, which covers the 1995-99 seasons, presents three main
categories of data: revenues, player payrolls, and
"competitiveness," measured by comparing payrolls to
on-field performance. All of this data is flawed to the point of
The team revenue and profit data is especially suspect. The panel
merely accepted the numbers provided by the clubs, conducting no
independent investigation of its own. Comparing these
"official" figures to the informed estimates published
by Financial World and Forbes strongly suggests
that the owners have underreported their income and overstated
their expenses MLB claims that only three clubs made money from
1995-99, while the industry as a whole lost over $1 billion -- an
average of $35 million per team! By contrast, the independent
estimates suggest that MLB has earned more $400 million over that
period. (See accompanying table.)
Who's right? Look at the objective evidence. Franchise values
keep rising. No team has moved, let alone filed for bankruptcy.
Indeed, look at the panel's own figures. According to MLB
itself, from 1996 to 1999 gross revenues grew by more than $1
billion, while player salaries rose by only $550 million -- yet
MLB's losses increased over this period! Where did the other
$450 million go?
The official figures look even sillier when broken down by team.
According to MLB, only the Yankees, Indians and Rockies turned a
profit. The Braves lost $7 million? The Cubs lost $30 million?
The Dodgers lost $77 million? I don't think so. And if
Cleveland and Colorado made money, what happens to the argument
that "small markets can't compete"? The Indians
dominated their division while playing in a market the same size
as Minneapolis-St. Paul, while the Rockies' home market is
the size of metropolitan Pittsburgh.
Dutifully ignoring the implications of this data, the blue ribbon
panel presents payroll and "competitiveness" charts to
illustrate its concerns about "chronic competitive
imbalance." The charts show that as a group, teams with
higher payrolls have better records than teams with lower
This is news? Unless the owners are totally irrational in handing
out contracts (take a bow, Peter Angelos), high-payroll teams
will collectively have better players than low-payroll teams.
MLB's charts beg the real question, which is how easily a
team can move from one category to the other.
Let's look back to 1991. That year, the Minnesota Twins upset
the league's highest-paid team, the Oakland Athletics, to win
their second World Series in five years. In the National League,
Pittsburgh won its second of three consecutive divisional titles,
only to lose in the LCS to the Braves, who in each of the past
three seasons had posted the league's worst record.
Meanwhile, the majors' three lowest-payroll teams finished
with the three worst records, a combined 189-297. Those hapless
losers, the Orioles, Indians and Astros, seem to have recovered
And by focusing only on the seasons between 1995 and 1999, the
panel has made the link between payroll and performance look
stronger than it actually is. In 1994, the Montreal Expos had the
majors' best record and second-lowest payroll. This season,
at press time the Chicago White Sox are 26th in salaries but
first in winning percentage, while Toronto, Oakland and San
Francisco are contending with their divisions' lowest
In fact, the eight postseasons since 1991 have featured 24 of the
30 major league teams. A 25th, Montreal, would have made it in
1994. The other stragglers include Tampa Bay, a third-year
expansion team; Anaheim and Detroit, mismanaged large-market
clubs; Kansas City, which had earlier won seven division titles
in 11 years -- and Commissioner Selig's Milwaukee
Would this "blue ribbon panel" have been convened if
Selig or his daughter knew how to build a winning team?
TABLE: MLB and Red Sox Profits, 1995-99 ($
| MLB profits (official figures)
| MLB profits (informed estimates)
| Red Sox profits (official figures)
| Red Sox profits (informed estimates)
Copyright © 2000 Doug Pappas. All rights
Originally published in the August 2000 issue of Boston
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