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Friday, April 17, 2015

A Brief History of Economics of Baseball & Media

For today's posting, we wanted to expand a bit on the cost of baseball today vs yesteryear by providing a brief but informative history of the economics of the National pastime..

The origin of modern baseball is usually considered the formal organization of the New York Knickerbocker Base Ball Club in 1842. A couple years later they organized into a dues paying club in order to rent the Elysian Fields in Hoboken, New Jersey to play their games on a regular basis.

The first ever admission fee for a baseball game -- 50 cents was charged

Now when it comes to baseball and the media they have enjoyed a symbiotic relationship since newspapers began regularly covering games in the 1860s.  Games in progress were broadcast by telegraph to saloons as early as the 1890s and in 1897 the first sale of broadcast rights took place.
Each team received $300 in free telegrams as part of a league-wide contract to transmit game play-by-play over the telegraph wire. In 1913 Western Union paid each team $17,000 per year over five years for the rights to broadcast the games.

The movie industry purchased the rights to film and show the highlights of the 1910 World Series for $500 and by the next year, baseball owners managed to increase that rights fee to $3500

Now concerning radio, it is hard to imagine that MLB teams once saw that media as a threat to the value of their franchises, but originally they resisted putting their games on the radio for fear that customers would stay home and listen to the game for free rather than come to the park.
They soon discovered that radio (and eventually television) was a source of income and free advertising, helping to attract even more fans as well as serving as an additional source of revenue.

By 2002, media revenue exceeded gate revenue for the average MLB team.

In the early days of radio, teams saw the broadcasting of their games as free publicity, and charged little or nothing for the rights. The Chicago Cubs were the first team to regularly broadcast their home games, giving them away to local radio in 1925.

It would be another fourteen years however (1939), before every team began regular radio broadcasts of their games.
1939 was also the year that the first game was televised on an experimental basis. In 1946 the New York Yankees became the first team with a local television contract when they sold the rights to their games for $75,000.

By the end of the century they sold those same rights for $52 million per season.

By 1951 the World Series was a television staple, and by 1955 all teams sold at least some of their games to local television. In 1966 MLB followed the lead of the NFL and sold its first national television package, netting $300,000 per team.

The 2002 national television contract paid $24 million to each team.
As to baseball player salaries, back in 1964, the average salary was $85,909 and by 1974, it jumped to $148,248, and by 1984, it ballooned to $563,404 thanks to TV money and free agency which players had been denied prior to the mid 1970s.

In 1994, the average salary nearly tripled from 1984 at $1,399,474 and by 2004 was up to $2,325,908..

Today, the average player salary is just under $4 million

In future postings, we'll get into more economic issues relating to the game of baseball to show how for many years, players were treated unfairly with wages kept artificially low through deviant backroom deals and owners' oligarchical control