Baseball-Page 2

August 30, 2002

George Will was on a "Blue Ribbon Panel" (I swear to God that's what it was called.  It sounds like something judging the livestock contest at the Iowa State Fair.)  studying baseball's economic situation two years ago.  The panel was headed by former Senate Majority Leader, George Mitchell, (the punch line in my "Six Degrees of Vernon Jordan,") and also included former Federal Reservc Chairman Paul Volcker and Yale President Richard Levin.

Paul Volcker was also on a panel to help fix Arthur Andersen.  Cheese and rice, baseball and Andersen, he's the kiss of death.  As for Richard Levin, you can tell a Yale man, but you can't tell him much.

The Blue Ribbon Panel said the problem with baseball is there are rich teams that win games and poor teams that don't win games.  The rich teams are rich because they are in large population centers with rich TV contracts, like the New York Yankees.  This allows them to buy the best players, and constantly win games.  Therefore, to restore "competitive balance" baseball's owners should share TV revenues. Now let's ignore some things.  Let's ignore the New York Mets, which last time I checked were also in New York but didn't always win.  Let's ignore the Chicago Cubs which is also in a large TV market but has not won the World Series (Ever?  since WWI?), same for the White Sox and the Los Angeles Dodgers which is in a large TV market but doesn't win year-after-year.  Now the response to that might be, those clubs don't spend money to buy the best players.  And that's where I get confused.

Here is why I'm confused.  Presumably baseball is a business.  Presumably there is an income statement with revenues, offset by costs and some bottom line profit and loss.  Presumably there is a balance sheet and cash flow statement kept by the owners.  Presumably, when they buy the team they calculate a return based on expected cash flows and exit value versus purchase price.  (I have serious doubts any bank or investment company would lend or invest without it).  Presumably each owner projects revenues and costs and profits over some time horizon and makes decisions that will maximize his investment. The Tribune Company, which owns the Cubs has decided to spend little on payrolls and never win the championship.  The Yankees have decided to do the opposite.  But both are rational business decisions.  Why should we care about competitive balance?

That's the entrance to the Tribune Building.  It is very pretty.

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