Quiet Offseason May Be The Result of Economic Recession

[ljshorty89]

Economic Downturn Affecting Free Agency?

It is quite obvious that over the last few years, the nation's economy has experienced what many are calling a recession. The value of the dollar has gone down, and the price of necessities such as gas have increased. While both are rebounding at the moment, the economy is still in relatively poor shape, and many have began to wonder how this economic situation will effect Major League Baseball. Most notable are the effects on Free Agency, as this has been an unsettlingly slow offseason.

Bud Selig has been asked repeatedly about how the economy will affect the league. He remains unsure on what impact the economy will have. Both acknowledge that the nation has not seen a situation like this since the Great Depression, and as such we cannot know how the sport will be changed. However, both remain hopeful that the sport will remain relatively unchanged.

"Yes, I'm concerned," he says. "Gross revenue for the sport is at an all-time high. But, plenty of factors jeopardize that stability."

MLB's gross revenue for 2008 was over $6 billion.

With the economic downturn in full bloom, league attendance dropped towards the end of the season. The total of 78,614,880 fell short of 2007's record of 79,503,175.

Selig had publicly hoped baseball would reach 80 million for the first time, but considers the 78.6 million "a tremendous accomplishment, given the uncertain economy" and weather problems teams had to endure during September.

"We need to protect our ticket prices," Selig adds. "This is family entertainment. I tell the clubs this all the time. I think a lot of clubs have; I think there are some clubs I'm obviously a little concerned about.

"It's something we have to concern ourselves with the future. We should be very careful not to get too cocky and overprice ourselves." (MLB.com)

MLB Players Union chief Donald Fehr had a similar response when asked the same question.

Fehr said "we don't know how the economic problems will affect baseball. Historically, the sports industries have been resistant to most economic downturns, but we're in an atmosphere right now I haven't seen in my lifetime. We have to do our best and the future will take care of itself." (MLB.com)

However, as we have advanced through the offseason, the signs are clear that the weak economy has made some owners more hesitant to spend than others. Yes, the Yankees and Mets will continue to throw money at players like it's going out of style. However, the telling sign was the Winter Meetings. Virtually no major deals got done, save for the contracts signed by the two New York teams. Additionally, teams like the San Diego Padres and Milwaukee Brewers did all they could to dump salary, trying to trade more expensive players including Jake Peavy, Mike Cameron, and Bill Hall.


An article on mlb.com quotes Smith College professor Andrew Zimbalist, an authority on baseball economics who's written several books on the subject, who believes the economic collapse will have broad impacts throughout the economy.

"In Major League Baseball," he says, "the effect will be seen in lower demand for tickets variously resulting in diminished attendance as well as lower price points, a reduction in advertising and sponsorship dollars, including naming rights for stadiums."

Zimbalist adds that financing will be more expensive for facility renovations and construction projects. He also believes "more parsimonious capital markets should dampen franchise prices."(MLB.com)

In recent weeks there have been numerous signs of the economy's struggles stretching into the MLB. First, Citigroup's corporate sponsorship of the New York Mets' new stadium came under fire, due to the bailout Citigroup had required. Many questioned whether the company would be able to afford the naming rights, and whether it was appropriate to bail a company out to pay for rights to a stadium's name.

Additionally, Mets owner Fred Wilpon's Sterling Equities was one of a group of extremely wealthy investors who lost money due to the actions of Wall Street broker Bernard Madoff. Wilpon's group lost an estimated $300 million, a number that scared many Mets fans. Later reports and interviews with Wilpon confirmed that that lost money would not effect the team and its payroll. However, there is doubt among some that Wilpon could possibly be as willing to spend money wildly with $300 million less to his name.

Also in the past few weeks, Mercedes Benz has pulled their sponsorship of the picnic section in Milwaukee's Miller Park. 5 Days later, GM decided not to renew advertising contracts with the New York Yankees and Pittsburgh Pirates. They will negotiate a new contract with the New York Mets, and will consider "resigning" with up to 6 other teams, but will likely cut some of those as well. GM wanted to maintain an advertising market in New York sports, but decided that a deal with the Mets would be more financially reasonable for them than the previous contract with the Yankees.

Finally, the Free Agent market has moved remarkably slow. The two New York teams made their major moves, but many highly paid players like Manny Ramirez, and Derek Lowe remain unsigned. This is often the case this early in the offseason, however, the lack of contact that these players have had with teams is alarming. Many in the know believe that the smaller market teams may be more afraid of the economy's impact and therefore less willing to empty their pockets for free agents.

For now, we cannot possibly know how the economy will impact the future of Major League Baseball. It is quite strange to think of the ways in which the nation's issues have intruded into those of the MLB. However, agents and economists alike believe that the MLB will be okay. Zimbalist stated that because the MLB had previously negotiated long term media contracts, and because of the interest generated by an exciting season, he believes the league will be able to lessen if not mute the effects of the economy's shaky future. Even agent Scott Boras has made clear that he doesn't buy into the economy's affect. It is clear to him, and to many, that the level of income that most MLB owners have will allow them to keep spending at whatever rate they had been, preventing the economy from devastating the league.

While it is unclear what the future may bring, it appears for now that the MLB has avoided the financial struggles that have effected many other areas business. At this point, it is probably in the best interest of any team with the financial capability to make moves that will keep their teams continually popular, exciting, and in playoff contention. Certainly signing big name free agents like Manny Ramirez and Mark Teixeira fit that bill.