If anything, the ballplayers are underpaid

Chew on this the next time your local columnist spouts off about how baseball salaries are out of step with reality or out of touch or insensitive or whatever the hell else mere economic transactions are incapable of being:

Major League Baseball players received about 52 percent of leaguewide revenue last season, said MLB’s Rob Manfred, which would appear to leave baseball players with the lowest percentage of revenue among the Big Four team sports.

Under their respective collective-bargaining agreements, NHL players received 56.7 percent last season, NBA players about 57 percent and NFL players about 59 percent.

It is impossible to make an apples-to-apples comparison among the sports. Manfred, MLB executive vice president in charge of labor, and other industry experts have said one reason it is not fair to compare the percentage of MLB revenue paid to players to other leagues is that MLB clubs collectively spend hundreds of millions of dollars on player development for players in the minor leagues.

Still, MLB players in the early part of this decade received a much higher percentage of league revenue, in the high 50s to low 60s. In recent history, the number peaked in 2003 at 63 percent.

Still, Manfred’s point is a good one: how much less would football players make as a percentage of the whole if the NFL had to underwrite college football or its equivalent? Of course, if the NFL did control college football it, being a rational economic actor desirous of making its fans happy, would have instituted a college football playoff system that would go a long way towards recouping the enterprise’s expenses. That, however, is a topic for another blog.

(thanks to Pete Toms for the heads up)

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  1. Jason @ IIATMS said...

    But baseball fans remain curiously pro-Management versus pre-Labor, which flies in the face of everything else we seem to believe it.  Doesn’t it?

    Who roots for GM’s management versus their now-displaced labor?

  2. Melody said...

    I agree, Jason, it’s odd that fans seem to be hostile to players in any financial conflict with owners.  I’m sure there’s lots of psychological grist for the mill, there… I’d also argue that the players’ union does a great job of fighting for what they want, but not such a great job of appealing for fan support.  If they made that a priority, there’s a lot they could say that would put them in a better light.
    So far as player salaries as a percentage of revenue, I also believe that MLB players have far better pensions and health benefits after they stop playing.  In addition, their contracts are guaranteed (unlike NFL players).  How does this impact the percentage-of-revenue measurements?

  3. Jeff said...

    Is it just jealousy that these athletes get paid more money than we’ll ever see in our lives to play a game for entertainment?  But people don’t get angry with how much Tom Cruise gets paid to be in a movie.  Most people don’t have experience failing as actors, while most of us have experience failing in athletics.  Is the jealousy somewhere in there? 

    Or is it in guaranteed contracts?  Most of us don’t get a guaranteed contract for anything, so if we do our job poorly, we get fired.  If Carl Pavano can’t perform for 3 out of the 4 years of his contract, he can’t get fired, as the Yankees are paying him too much to release him.

  4. Pete Toms said...

    Craig, Manfred’s point that you refer to is high on the agenda ( from what I can construe from my basement ) @ MLB. There have been past pieces in SBJ – including an opinion piece by Zimbalist – on this subject and you’re right, if you factor in player development costs that 52% figure climbs considerably.

    Tom Werner has commented publicly on the high costs of player development.  Both he and Zimbilast have it pegged at an avg of $20 million per team per year.  That is obviously a lot of dough industry wide.

    I think this is part of the larger issue of why Selig has intervened ( unsuccessfully ) in the Rule IV and is lobbying for an expansion of it.

    I also think it is part of the reason that big league clubs are becoming more active in the owning and operating of their minor league affiliates.  I also think it is part of the reason that you heard Shapiro & Veeck @ SABR musing about a change in the structure of AAA.  (  I wasn’t there, is that what they were talking about? )

    PS.  If anybody has a transcript of the discussion between Shapiro and Veeck, I’m interested in this subject.

  5. Kelly said...

    That’s nice, but mostly irrelevant. Comparisons to other sports are useless. Let’s see a comparison to “everyday” jobs. What percentage does your local hamburger-flipper get? Or office manager? Or construction worker?

  6. Craig Calcaterra said...

    Kelly—the comparison wouldn’t be with your average hamburger flipper or your average office manager.  The comparison would be with the overall labor costs for McDonalds or Dunder Mifflin, Inc. or whatever.

    I don’t have the time to quickly find that out, but my guess is that salaries as a percentage of revenue for these companies is lower.  Thing is, those sorts of companies have all kinds of materials expenses that baseball doesn’t have.  Once you have acquired players, most of the expenses have been paid.

    Ultimately, though, you have to figure it this way:  Baseball made $6B on the work of roughly 1000 Major League ballplayers last year.  GM, for example, has lost billions on the labor of hundreds of times more employees. In light of that, why is it that baseball players have to be ashamed of what they make?

  7. Kelly said...

    Craig—overall labor costs is what I meant. Sorry I didn’t make that clear.

    I’m not sure that “materials expenses” is relevant, either. GM probably spends millions on materials such as office supplies, etc., while baseball will spend only thousands on, say, uniforms. But there’s home and road unis, batting practice unis, new balls for every game. And would you count plane travel expenses as a “material expense” or a labor cost? I’m no economist or accountant. But it doesn’t matter because none of that is the point.

    The point is salaries. And the questions is, are baseball player’s salaries “out of step with reality.” I assume that means everyday reality, not just the reality of sports. All I’m saying is the comparison to other sports is a bad one, if I understand the question being asked. The comparison needs to be made to all jobs in order to answer the question accurately.

  8. Craig Calcaterra said...

    I’ll grant you that there needs to be a broader comparison, Kelly.  My only point (not made well with the GM stuff) is that some industries are far more labor intensive than others.  It follows then, that industies in which labor is a bigger piece of the production pie should pay their workers a greater percentage of profits than industries in which the labor has to combine with things like sheet metal, rubber, electronics and other things in order to realize the profits.  Maybe services firms like accounting and the law are better comps.  Maybe it’s something else.

    It’s also worth thinking about the specialization of the workforce.  Baseball players have highly specialized skills that are harder to find in the labor pool (to put it mildly).  Because a manufacturing business is more easily able to replace its workers than a professional sports league is, it follows that their salaries should be less.

  9. Kelly said...

    Craig—I understand your point about labor intensity and agree. And, for the record, I don’t think baseball players are overpaid.

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