All fans deserve to have a chance to cheer for a winning team. A fan’s ability to cheer for a team that wins should not be hindered by what market size the team comes from. One major difference between a small and large market team is the amount of television revenue a team accrues yearly (Cushman 3). Norm O’Reilly, a professor of sports business at the University of Ohio with a Ph.D. in sports marketing from Carleton University, believes small market teams stand no chance of competing because fans will lose interest in even watching the teams play if the fans do not believe that all teams have an equal chance to win. O’Reilly proves that point when he states:
The success of a professional sports franchise is rooted in its relationship
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Those rules need to be strengthened so that teams are not able to easily find ways around the rules. Three of the four sports have an actual salary cap; the fourth, however, only has a restriction called a luxury tax (Cushman 1). Major League Baseball is the one professional sports league that uses a luxury tax. A luxury tax is defined as a tax that a team has to pay if the team spends over a pre-determined amount. The tax is a 22.5% tax on every dollar spent over the luxury tax threshold. If a team was to break the luxury tax threshold in a following year the team would have to pay 30% for the second time, 40% for the third, and so on (Walter 4). The money that is accumulated from the taxation of the teams that exceeded the luxury tax is then divided up evenly to the teams in smaller markets to try to create more parity. The money handed out to the smaller market teams, however, never amounts to much once it is split among all the small market teams, so it has very little effect on the parity of the MLB (DiLascio 1). A luxury tax does very little to prevent the spending of teams and has only even been imposed upon a team eleven times since its inception (Walter 5). Andrew Walter studied the spending of professional sports teams and said, “For example, Alex Rodriguez, the Yankees third baseman, is the highest paid player in the history of baseball, earning thirty-three million for the 2009 season… In contrast, the payroll for the entire Florida Marlins team for 2009 is about thirty-seven million. Only four million less than Alex Rodriguez’ salary alone” (2). If a team is already spending hundreds of millions of dollars, why would the threat of penalty for few million more make the team stop spending? The other three major professional sports have an actual salary cap in place, but each one is
Do Major League Baseball teams with higher salaries win more frequently than other teams? Although many people believe that the larger payroll budgets win games, which point does vary, depending on the situation. "performances by individual players vary quite a bit from year to year, preventing owners from guaranteeing success on the field. Team spending is certainly a component in winning, but no team can buy a championship." (Bradbury). For some, it’s hard not to root for the lower paid teams. If the big money teams, like Goliath, are always supposed to win, it’s hard not cheer for David. This paper will discuss the effects of payroll budgets on the percentage of wins for the 30 Major League Baseball teams of 2007.
Anyone who has been involved in an organized sport, whether it is backyard football or a high school sports team, knows that these sports all have organizations that are responsible for setting rules, determining conditions of play, and penalizing individuals who infringe the rules. Some of the organizations like the National Football league and the MLB are familiar to most people, the rules they follow are not generally understood by anyone who is not closely associated with the sport. Most fans and sport critics assume that what is happening inside these organizations are of little concern to them. However, this is not the case. In the MLB, the New York Yankees spend an excessive amount of money every year to obtain big name players. A luxury tax was put into effect for teams that go over the spending limit. However, the Yankees are the only team that pays the tax because they are the only team that exceeds the spending limit. The players, coaches, fans, and I have argued that a salary cap would be the best possible way to allow teams in the Major Leagues an equal opportunity getting to the World Series.
Overall, compelling points exist supporting or not supporting a salary cap in baseball. Teams have the benefit of a salary cap existing, and out of that, a balance in free agency forms and a sense of championship parity develops too. On the other side of the spectrum, teams can use the Moneyball method of recruiting and signing players, along with tax implications and revenue sharing to balance out payrolls. The main factor in deciding if a salary cap is appropriate is the factor of fairness among the teams. Therefore, based off the support the research provides, the implementation of a salary cap is necessary.
Economic Theory Labor market theory is one of the most integral economic theories needed to dissect the inefficiencies in professional sports. Looking first at the type of market these leagues function in, one can see that they do not necessarily meet all the criteria that a competitive market requires. The big four sports leagues in the US have a set number of teams, which creates barriers to entry. Only when an expansion is agreed upon by the league, such as NHL has done for the upcoming season, are teams allowed to enter, and even then, it is limited to a maximum of a few teams in recent history. Additionally, the league makes it virtually impossible to exit, as selling a team is the closest they come to exiting the market.
A salary cap gives all the teams an equal chance to sign players. It also keeps teams with a lot of money not able to acquire every all-star they want , or any player who is a free agent. Some Major League Baseball teams like the Anahiem Angels and the Atlanta Braves are owned by very wealthy people and companies. The Anaheim Angels are owned by Disney.(Worisnop, 128) So with no surprise the Angels can produce a team which can be very competitive, and have several all-star players. Just recently they exercised this advantage by signing Mo Vaughn for ninety million dollars over seven years.(Antonen, 2) There were at least four other teams that wanted to sign this all-star, but the Angels easily had the money, and outbid everyone who wanted to sign him. If there was a salary cap in Major League Baseball then the Angels would have thought twice about giving that much money to one player. With the its roster for one year. So giving one player 12.8 million dollars for one year does not really make sense if the salary cap is fifty million dollars a year. That would leave only 37.2 million dollars for the twenty-four other players, which equals each player getting on average a little less than one and a half million dollars a year.
To explain the importance a sports team has on a city, a new avenue for future
In 1970, a hotdog costs fifty cents, a pop costs one dollar, a ticket to a NFL game costs fifteen dollars and the average football player made between nine and ten thousand dollars. Jump ahead almost 40 years and a hotdog that cost 25 cents now costs on average five dollars and fifty cents, a pop costs six dollars, a ticket to an NFL game costs 100 dollars and the average player gets paid over two million dollars! Times have changed. Because of all of those price changes, and insignificantly the salary of players, in 1994 the National Football League introduced the first salary cap that allowed owners to spend a certain amount of money on players. The Players Union and the National Football League did this because for one, they were tired of players getting thrown from club to club just being a price and two to make things more equal between the teams. Today, money and fame have made players and owners very greedy and cocky people. Players ask for negotiations when they are making well over a million dollars a year and there are people in the United States that are homeless? That it the biggest reason that the salary cap needs to stay in effect. If the salary cap goes out the window, just like it did this past season, a sports fan can kiss NFL goodbye in ten years from now because there will not be enough money to pay all of the players. There should be a salary cap in the National Football League because it allows organizations to be equal and have a better chance of competing with each other and it may put players in their shoes so they know they can’t have everything they want.
Baade, R. A., Baumann, R., & Matheson, V. A. (2008). Selling the game: Estimating the economic impact of professional sports through taxable sales. Southern Economic Journal, , 794-810.
The focus of professional sports has evolved from one of teamwork and camaraderie to one of avarice and greed. The specific problems in recent years that have stemmed off this overwhelming greed include exorbitant salaries, lockouts (or work stoppages) in professional sports, and the growing disparity among team payrolls. Most recognize these issues as major problems; however, others overlook the greed and see validity in the financial aspect of today's sports world. They argue that professional sports are thriving and should not be modified.
How many of you sports fans out there are sick of paying twenty-five dollars for a lousy seat at an NBA game? How many of you are sick of seeing the same teams in the finals every year? I'm sure there are thousands of you out there that feel this way, as do I. The way we can fix these problems is to demand that the NBA enforce a hard salary cap. A hard salary cap would lower ticket prices, allow for more teams to be more competitive and eliminate the possibility of any future lockouts. If the three things listed above aren't met, it's hard to say if the NBA will survive at all. I want to see the NBA survive, but not in the way things are being run now. A hard salary cap is the only way the fans and the players can coexist.
In 2004, over 40 schools brought in more than $10 million, with 10 of them bringing in over $30 million. Several athletes around the nation are worth more than $1 million to their school (Brown). Both of these statistics are proof that while these athletes are essential to their schools, they are still kept out of the revenue. Even though these universities won’t pay their players, the schools still have no problem giving their coaches some money. In 40 U.S. states, the head coach of the basketball or football program is the highest-paid public official (Edelman).
The problem with this is the inflation of players' salaries. When players are drafted young, they demand to be paid what they want; teams pay them millions right out of college.
The controversy of athletes being overpaid dates back to 1922, when well-known baseball player George “Babe” Ruth received $50,000 within the first year of his career. Ruth’s extensive wealth was bolstered by dozens of endorsements (Saperecom). As it is shown in figure 1, in the Fortunate 50 Tiger Woods takes the number one spot for highest paid athlete. Tiger’s salary for 2011 is $2,294,116 and like Babe Ruth, his endorsements exceed his salary earning $60,000,000 making his total $62,294,116 (Freedman). It’s crazy to think that 89 years ago professional athletes scarcely made more than the average person today. This is of course not counting the inflation that has occurred since the years which Babe Ruth played baseball.
Sports are one of the most profitable industries in the world. Everyone wants to get their hands on a piece of the action. Those individuals and industries that spend hundreds of millions of dollars on these sports teams are hoping to make a profit, but it may be an indirect profit. It could be a profit for the sports club, or it could be a promotion for another organization (i.e. Rupert Murdoch, FOX). The economics involved with sports have drastically changed over the last ten years.
In today’s society many will argue whether or not professional athletes are overpaid. In the present time athletes are being paid phenomenally large amounts of money for their entertainment. It is my claim that all professional athletes are overpaid because they do not offer society an essential function that improves or enhances our world in comparison to other professionals such as medical doctors, lawyers, and teachers. Society does not value entertainment enough to warrant such high salaries such as those of many professional athletes. There is no reason that these athletes should demand these tremendous amounts of money. This is why you have to put into question their reasoning for demanding such high salaries.