Thesis!

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Bury: MLB Economics
Economics of Major League Baseball
Gregory Bury
Curry College

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Bury: MLB Economics
Acknowledgements
I would like to thank Dr. Warners and Mr. Tallent for their dedication and support to this thesis.
They put hours of work to enhance and guide me in a positive direction and without them this
would be impossible.
I would also like to thank Chris Cameron for the time he devoted for an interview making this
thesis more credible.
I would like to thank Curry College institute for this opportunity.
Finally I would like to thank my friends, family and classmates for their support and effort along
the journey.
Greg

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Abstract
This research discusses the economics of Major League Baseball. Evaluations on polices
in the Collective Bargaining Agreement that effect the economics of the game are defined. The
pulse of the industry is measured in terms of revenue, media contracts, and gate attendance.
Gerald Scully’s model on valuing player’s performance is discussed and explained. The strength
of the fan base is also measured in a form of a survey that present statistics on demographics,
age range, men and women. The relationship between the minor league and their parent club
is discussed in the form of an interview with assistant general manager of the Portland Sea
Dogs, Chris Cameron. Finally, an observation is made on what most influences the economic
success of Major League Baseball.

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Table of Contents
Introduction .................................................................................................................................... 6
The Pulse of the Industry ................................................................................................................ 8
Minor Leagues................................................................................................................................. 9
Value of the Minor Leagues........................................................................................................ 9
The Five Tool Formula............................................................................................................... 10
The Relationship of Minors and Majors.................................................................................... 11
The Drafts.................................................................................................................................. 12
Valuing Players Performance ........................................................................................................ 14
Scully’s Method of Value .......................................................................................................... 16
Pros and Cons of Long Term Contracts..................................................................................... 19
Free Agency/ Competitive Balance............................................................................................... 22
The birth of Free Agency and its Complications ....................................................................... 22
Innovation of Compensation .................................................................................................... 24
Competitive Balance Implications ............................................................................................ 25
Competitive Balance Improvements ........................................................................................ 27
Salary Arbitration .......................................................................................................................... 28
The “Super Two” ....................................................................................................................... 29
Process of Arbitration ............................................................................................................... 29
Waivers and Designated for Assignment...................................................................................... 32
Types of Waivers....................................................................................................................... 33
Designated for Assignment....................................................................................................... 34
Rising Revenue with Television Contracts, Sponsorships, and Branding ..................................... 35
Method.......................................................................................................................................... 37
Primary Data on Spending ........................................................................................................ 37
Figure One. Spending among age on regular season tickets. (Survey Item 2 and 11) ......... 37
Figure Two. Spending among men and women on regular season tickets. (1,2, and 11) ... 38
Figure Two. Spending among men and women on regular season tickets. (1,2, and 11) ... 39
Figure Three. Spending among demographics for a season ticket. (Survey Item 3 and 11) 40

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Figure Four. Spending among age on a playoff ticket. (Survey item 2 and 22).................... 40
Figure Five. From where do you buy tickets. (Survey Item 14) ............................................ 41
Figure Six. Spending for food and drink among men, women, and age range. (Survey Item
1,2, and 17) ........................................................................................................................... 42
Primary Data on Frequency and Travel Alternatives ................................................................ 43
Figure Seven. Frequency of visits to ball game. (Survey Item 12) ........................................ 43
Figure Eight. Company to a game among men, women, and age. (Survey Item 1, 2, and 13)
............................................................................................................................................... 44
Figure Nine. Average distance traveled among men and women. (Survey Item 1 and 27). 44
Figure Ten. Reasons for attendance among age. (Survey Item 2 and 11)............................ 45
Figure Eleven. Under what conditions would a fan go to a ball game.(Survey Item 18) ..... 46
Figure Twelve. Willingness to buy program. (Survey Item 22) ............................................. 47
Figure Thirteen. Averages of games watched on television among men, women and age
range (Survey Item 1, 2, and 28)........................................................................................... 47
Figure Fourteen. Outside of stadium activities among men, women, and age. (Survey Item
1, 2, and 24) .......................................................................................................................... 48
Figure Fifteen. Overall experience with MLB. (Survey Item 26) .......................................... 49
Primary Data on Interview........................................................................................................ 49
Limitations................................................................................................................................. 50
Analysis...................................................................................................................................... 50
Correlation ................................................................................................................................ 53
Discussion.................................................................................................................................. 53
Addendum 1.................................................................................................................................. 54
Addendum 2.................................................................................................................................. 61
References..................................................................................................................................... 64

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Introduction
Is Major League Baseball (MLB) a monopoly? A monopoly is a market that sells a
product with no competition, and this causes the monopolist to behave in a fashion that is
predictable. Some believe Major League Baseball is a monopoly because baseball is the only
sport that is exempt from antitrust law’s thus protecting the league from outside competition.
This relationship is characteristic of a monopoly. Some economists, nevertheless, believe MLB is
not a monopoly because the MLB is affected by external markets such as income. A monopolist
typically can increase revenues with no effects on the demand of the product but if this were to
occur, MLB fans would venture away from the game (Bradbury, 2007).
The business of Major League Baseball has additional unique facets to the business.
MLB was a pioneer of a variety of policies and agreements that led to the success of the other
major sports. MLB was the first to adapt the Collective Bargaining Agreement or CBA in 1968. It
was the first to have a player’s union known as the Major League Baseball Players Association in
1966 (MLBPA) (Fetter, 2015). This led to dynamic changes not only throughout baseball, but
throughout the other professional sports. Within this Collective Bargaining Agreement, which is
updated every four years, came much debate between players and owners. This created a tug
and pull, negotiations, or in other words, economics. Where there are economics, there are
debates. Some argue that the players are paid too much and some say the greedy owners have
the majority of the stake. The Collective Bargaining Agreement, with a big part in free agency
adapted in 1975, essentially shaped the majority of economics in the game of baseball (Fetter,
2015).

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The game of baseball influences the economics beyond the ballpark into the local
economy. Hotels, restaurants, tourist attractions, and real estate all experience these
influences. The city in which games are held generates revenue that is essential to their
businesses. Hotels raise their prices, real estate is more expensive near a stadium, and tourist
attractions and restaurants are flocked with customers.
While the fans of baseball are the driving force behind the macroeconomics in baseball,
macroeconomics is not the only economics in baseball. Ticket revenue, concessions stands,
merchandise revenue, player’s salaries, and sponsorship’s create the microeconomic aspects of
baseball. For example, the negotiation of player salaries creates a competitive team, thus
compelling a loyal fan base willing to invest money in purchasing tickets; creating a simple
supply and demand structure. This study will examine the policies behind the economics that
must be followed to attract the fan base. It will examine the how the fans impact the game
from a viewpoint of how macroeconomics of the city and its businesses that are affected. This
study will also touch on the modernization or MLB effect to speed up the game of America’s
past time and how it may or may not affect the revenue of the business.

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The Pulse of the Industry
Currently, baseball is in the best shape it has ever been in. According to Forbes, the
average team was worth $1.2 billion in 2014, an increase of forty-eight percent from
2013.According to Forbes in 2009, the average team was worth $492 million. The increase is
largely due to TV contracts. In 2011, there was only one team worth more than a $1 billion
(New York Yankees); now, as of 2014, there are fifteen teams that exceed that $1 billion mark.
Back in the 1990s and early 2000s, values of clubs increased due to new venues or a large
renovation. During that time, almost all teams enhanced their venue or entirely acquired a new
venue. MLB began new TV contracts in 2014 with Fox, TBS, and ESPN, now averaging an annual
$1.55 billion. Media revenue accounts for twenty-one percent of MLB revenue. With these
large contracts, free agents’ prices rose to an average of $4.25 million annually. This is up
sixteen percent from 2013. The average salary for a player was $50,000 when free agency was
first adapted in 1976 compared to $3.69 million in 2014, showing immense growth in the
industry as a whole (Smith, 2015). With the cost of free agents and TV contracts on the rise,
other facets had to develop to compensate this behaver.
Major League Baseball is also improving at the gate. In 2012, the league drew over
seventy-six million fans for the entire season, which is 1.2 million more than the 2011 season.
All of these data averages 30,800 fans a game across the entire league for the 2012 season.
With the opening of a new park, the Miami Marlins drew the fewest fans per game at 27,300
fans, since the Metrodrome opened in 1982. However, this is still an increase for the Marlins of
8,000 fans per game. The Texas Rangers averaged 6,000 more to 42,000 fans a game after
appearing in two World Series. The Washington Nationals, after introducing their top tier

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prospects in Bryce Harper and Stephen Strasburg, averaged 4,900 more fans per game, up to
29,800 (Van Riper, 2012). Gate receipts according to Forbes in 2014 climbed to $2.4 billion
dollars as the average ticket was just below $28.Overall the industry of baseball is in a large
profitable stage.
Major League Baseball gate Receipts (Ticket Revenue) from 2009 to 2014 (in billion
U.S. dollars)
Year 2009 2010 2011 2012 2013 2014
Revenue 2.25 2.28 2.33 2.37 2.33 2.4
Source: Statista, Forbes
Major League Baseball Average Ticket Price from 2007 to 2015 (in U.S. dollars)
Year 2007 2008 2009 2010 2011 2012 2013 2014 2015
Revenue 22.77 25.43 26.64 26.74 26.91 26.98 27.48 27.93 29.94
Source: Statista, TMR
Minor Leagues
Value of the Minor Leagues
The minor leagues are essentially a feeding ground for talent that is developing that will
become the future of Major League Baseball. According to Vince Gennaro, “blending winning
and financial returns begins with a strong scouting and player development system” (36) an
organization will have sustainable success (Gennaro, 2007). Talent at the minor league level
leads to depth and low priced high quality players. It creates a strong foundation that will give a
club strong standing in the free agent market with larger revenues and ultimately a better

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brand. The risks to this are that the prospects don’t always live up to their expectations. Also
fans could still fail to show up and players always run the risk of getting injured. The market size
also needs to be taken into account as the New York Yankees have more spending power than
the Atlanta Braves (2007).
The Five Tool Formula
In Gennaro’s book, Diamond Dollars, he explains a “five tool formula” that can increase
value and performance in the organization. The first tool is to understand the relationship
between revenue and winning. Fans spend more toward a winning team than a losing team by
spending more in tickets, telecasts, merchandise and would be more tolerable if there was a
ticket increase. Market size also plays a role because the larger the population, the more
potential revenue. Second is to understand the value as calculated by means of the formulas
that determine at what level to value the player. The third factor is to have a strong scouting
and player development system. Vince says, “this is the lifeblood of an organization” (36).
Good scouting lowers financial costs because a organization does not need to spend as much in
free agency because the has the player under financial control for up to six years. Prospects can
also serve as trading pieces as it did with the Boston Red Sox when they traded Hanley Ramirez
for all-stars Josh Beckett and Mike Lowell. Building up the brand for a organization will also help
build a loyal fan base and increase revenue. This will get clubs larger sponsorship and television
contracts and is a heavy source of income. The final tool in the five-tool formula is a new
management model. This is essentially a template that are grounds for decisions on free agents,
drafts picks and ticket prices (Gennaro, 2007).

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The Relationship of Minors and Majors
The minors and the parent club of an affiliate are not as close a relationship as most
may think (personal communication, September 10, 2015). The Portland Sea Dogs have no
control from a baseball viewpoint, according to Chris Cameron on promoting, demoting, signing
or trading players. In fact, the Boston Red Sox, the parent club of this Double-A affiliate, doesn’t
even want their opinion. The minor league is in charge of the business side such as sales,
promotions and entertainment. All the minor league players are paid by the parent club. The
only expense account the minor league affiliate has is the travel expenses. The minor league
affiliate does stay in communication with player development and media relations of the
parent club for roster moves. This is also communicated with the field manager. In Chris’s
experience, the hardest jump for a player is from a single-A to double-A club because
essentially there are three teams feeding into one (high single-A, single-A, and low single-A).
Later in the interview he observed roughly thirty-five percent of Double-A players will go on to
play in the majors.
Chris was also asked to speak on the modernization policies the minor league is
implementing. He observed that minor league baseball has been experimenting with rules that
would speed up the pace of play to America’s pastime. These rules consist of the batter keeping
one foot in the batter’s box and a pitch clock for the pitchers. The penalty would be a strike if
the batter violates; if the pitcher violates the pitch clock, then the result would be a ball.
However, Chris thinks the proposedtime of two minutes and twenty-five seconds between
innings will have the largest affect. He said the games got “crisper” and the average of a game
went down by about five to ten minutes. The Portland Sea Dogs, along with other teams need

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to be careful of their on field promotions between innings lasting longer than this allotted
timeframe (personal communication, September 10, 2015).
The Drafts
How important is the importance and policies of the drafts and the relationship
between Major League clubs and their affiliates? Professional baseball has various drafts that
propose change in the minor leagues and ultimately the future of the Major League. The most
common draft in the industry is the Rule 4 Draft, which takes place in June on an annual base.
This draft is also referred to the “Amateur Draft” or the “First Year Draft.” The Rule 4 Draft is a
mechanism to recruit high school and collegiate players from the United States and Puerto Rico
from Baseball America’s top prospect list. The Rule 4 Draft is unique in comparison to the other
drafts that take place across professional sports because it is the only draft that is held during
the season, unlike the NFL, NBA and NHL who hold their drafts at the end of their season. It is
also one of three sports (NBA, and NHL) to not have draftees immediately enter the top tier
level. In fact, this almost never happens in baseball. In baseball, the recent draftees are likely to
spend four to five years before reaching the Majors. For the NFL and NBA, it is common for a
team to change dramatically in just one year because the draftees make an immediate impact.
An example is when the St .Louis Rams had a horrible season in 1998 and went on to win the
Super Bowl in 1999. In the NBA, the San Antonino Spurs went from mediocre to greatness twice
with the draft picks of David Robinson and Tim Duncan in the 1980s (Barzilla, 2002). In baseball,
typically, only one in every six draftees will ever see the Majors and one and fifty of them will
spend more than six years in Major League Baseball. What does this mean? Baseball is a sport
that takes more conditioning of the body than any other sport (Zimbalist, 1992).

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The Rule 4 Draft consists of forty rounds and two competitive balance rounds. When a
player is drafted, the player has an exclusive right to sign with that club. If the player chooses
not to sign with that club, he must stay out of baseball until next year’s draft in hopes to sign
with another club. When the player is signed with a club, he is bonded to that club for three
years unless part of the “Super Two” (discussed later). Beyond the first three years a club can
control a player for another three years if placed on the forty-man roster. The forty-man roster
consists of the twenty-five man Major League Active Roster, and fifteen additional players that
can be optioned to and from a minor league affiliate (Zimbalist, 1992).
Though the Amateur Draft has the largest impact on the league, it is not the only draft.
Another draft, not commonly known to the public, is the Rule 5 Draft that is conducted in
December. The purpose of this draft is to limit clubs from stockpiling young players in the minor
league, and thus preventing them for ascending to the majors where other clubs would use
them at the Major League level. The Rule 5 Draft works in three different phases; the MLB
phase where players not already on the 25-man roster can be selected and put on the new
teams 25-man roster for $50,000, triple-A phase, and double-A phase. In an interview with
Portland Sea Dogs assistant general manager, Chris Cameron said the Rule 5 draft does not
affect the minor league level a great deal. He went on to explain that if a minor league
organization has a player for more than five years that is not on the forty man roster, and was
drafted in the amateur draft at age18, he becomes Rule 5 eligible. If the player is 19 when
drafted, the player needs 4 years of professional baseball and not on the 40-man roster. Then,
in December a team can add this player to their roster for the next season but he must be
played at a level higher than what the player has been playing before. If the new club does not

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keep him at a higher level, he can be returned to the previous club for half the cost. Chris said,
“it is always interesting to watch the Rule 5 Draft, at the baseball winter meetings and to see if
a organization is going to lose or pick up anyone (C. Cameron, 2015).”
Valuing Players Performance
Free Agency is when a player’s contract expires and teams can compete with other
teams on negotiating a new contract. Owners know that producing a winning baseball club
would lead to more revenue than a losing team, and players know that they were the essential
piece to achieving that goal. At the beginning of the free agent era in 1976, advanced scouting
reports were developed to estimate the player’s worthiness. Before the free agency era, there
was the reserved clause. The reserved clause was a rule that the rights of the player belonged
to the team upon being drafted. Organizations could trade players, but players had no say
where they would end up. Players were upset by this as they were not receiving the revenue
they were contributing.
When Gerald Scully realized that owners were not paying the players close to the
revenue the players were generating, he wrote a highly esteemed paper in 1974 called
“American Economic Review (178).” This paper explained Scully’s way of determining what a
player is worth. He broke it into a three step process:
First, estimate the value of wins
Second, determine how much an individual player’s performance contributed to
winning

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Third use information to compute the values of a player.
This paper was critical for owners to grant players free agency. In modern day baseball, the
previous team has an allotted time period once a contract is expired to agree to a new contract
or that player has the right to search for other offers from other teams (Bradbury,2007). This is
discussed in detail below. However in the free agency era, how can scouts compute the
worthiness of a player?
Gerald Scully used marginal revenue product (MRP) to determine how much a player is
worth. J.C. Bradbury (2011) describes marginal revenue product by “adding dollar value of the
output provided by an additional unit input” (71). It is the output generated from the input
multiplied by the revenue that the unit produces. Players often want to get paid close to or at
their marginal revenue. If a player such as Dustin Pedroia generates $10 million for the team,
he might be willing to accept a salary of $8 million. However, every player is different, and
some may want closer to their marginal revenue. Often times this method is also used in
arbitration hearings. The only problem to Scully’s method is it requires revenue streams of the
teams that are not released to the public (Bradbury, 2011).
A new model emerged well after Scully’s that was called the “free market returns.” This
was Anthony Krautmann’s model which evaluated a player’s worth by the market prices of the
free agents. Krautmann used market prices to impute the assets on players based on
components, this is also known as “hedonic prices.” This method is also used for loans for
houses. How this works is a player with similar statistics would get paid approximately the
same, such as a price of a house in a neighborhood would have a similar price. However, this

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model had a problem too. The market value of players on the market was not always accurate
for MRP. The MRP was often too high, and therefore players were overpaid. For example,
Barry Zito’s contract with the San Francisco Giants was for seven years at $126 million. He
underperformed his first three years, making his contract sixty percent less than what he signed
for (Reuter, 2014). Using Krautmann’s method, teams can easily overpay players, therefore
making Scully’s model more accurate. But what makes Scully’s model more accurate to
determine a player’s worth?
Scully’s Method of Value
Examining in depth Scully’s method, we need to find out what a win is worth to the ball
club. In order to calculate this, the analyzer must know the team’s total revenue, which can be
difficult. Forbes magazine puts out The Business of Baseball every year in which it gives an
accurate number for the revenue of each of the thirty teams. Forbes reported that the Boston
Red Sox had total revenue of $357 million in 2013, the second highest behind the Yankees.
Bradbury explains that an individual in a city is worth about $3.88 to a ball club. If the analyzer
multiplies this with the population of the city, the average total revenue will be found. In The
Baseball Economist he states that a win for a .500 team is worth about $1.34 million (2007).
Applying the second step in Scully’s method is finding how much each player
contributes, Bradbury makes a slight modification. Since pitchers cannot control what the
hitters do on the other side of the ball and vice versa, Bradbury estimates what a win is worth
the difference of runs scored and runs allowed. This eliminates any bias for teams that have
great pitching but not hitting and vice versa. So how do we measure a player’s performance
towards a win? For hitters on-base percentage (OBP) and slugging percentage (SLG) is a useful

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measurement. On-base percentage is calculated by adding hits + walks + hit by pitch/ at-bats +
walks +hit by pitch + sacrifice flies. Slugging percentage is calculated by: (1 x 1B) + (2 x2B) + (3 x
3B) + (4 x HR)/ at-bats. Scully reported from using the data from 2002-2005 that for every
1/1000th of OBP is worth about 3.013 runs and for every 1/1000th of SLG is 1.68 runs scored for
a team a season.
Using these two calculations, a measurement can be made based on on-field
performance based on the playing time. If they multiply the player’s statistic by these weights,
the organization can get a prediction of runs of what the player can produce if the players are
the only player in the lineup for the entire season. To make this number even more accurate,
Scully adjusts the number based on the ballpark they will be playing in since some parks are
more offensive friendly.
On the other side of the ball, for pitchers every strikeout per nine innings lowers runs by
25.8, every walk increases runs by 60.7, and every homerun increases runs by 249.5 according
to Scully. By multiplying the weights by the pitcher’s statistic, a organization can find out the
number of runs the pitcher would allow, if he pitched 100 percent of his team’s innings
(Bradbury 2007). However, the defense could affect a pitcher’s performance. Voros McCracken
of the Boston Red Sox front office developed DIPS, or Defensive Independent Pitching Statistic.
He was the first to perform this analysis. This helped evaluate the pitchers performance
regardless of defensive error.
Scully then makes another adjustment to the number because some ballparks are
better for pitchers due to dimensions of the field. The next step is to find the average number

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of runs for every batter and number of runs allowed for every pitcher. If an individual pitcher or
batter is above that number, he ise above average. Today this is abbreviated by RSAA, runs
scored above average, and RABA, runs allowed below average. There is one more factor we
need to calculate in, playing time. Finally, multiply the percentage of the teams’ plate
appearances or inning’s pitched by the difference in runs scored and allowed. The end result is
the player’s RSAA or RABA. For example, Derrek Lee produced 74.3 runs in 2005, therefore he is
74.30 RSAA (Bradbury 2007). While this tells an organization how to evaluate an individual
performance, how does this transfigure to dollars?
The first step in the final stage of calculating how much a player is worth, is to multiply
the dollar value of runs, calculated in step one, times the RSAA or RABA from step two. That
determines the value of an average player with the same amount of playing time. This is often
abbreviated $ValAA. Next, is to establish a baseline for what an average player is worth. To do
so, take the number of average wins for an average team; in 2005 Scully estimated 81 wins
worth $109 million. Then divide $109 million in half because half is generated through pitching
and the other through hitting. Next, use the percentage of plate appearances or innings pitched
multiplied by $54.5 million. This will find the baseline of an average player. The final step is to
add the $ValAA to the baseline or subtract if it’s below average. This determines the player’s
worth and his marginal revenue product. However, while evaluating players through this
method is useful, it does not factor in a player’s leadership or defensive skills, which are an
important factor, so using Scully’s method is affective, as an organization can increase or
decrease based on these factors.

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Scully’s method of sabermetrics is used in the hit movie and novel by Michael Lewis,
Moneyball: The Art of winning an Unfair Game. This is a story of the general manager, Billy
Beane of the Oakland A’s uses an approach not often used in the mega contract era of baseball.
Billy emphasizes the importance of on-base percent when he loses his top three players to
teams that over paid for their services. Today, we frequently see teams over pay a star athlete
to a long term contract and the small market teams don’t stand a chance winning against these
large market teams. Mr. Billy Beane in the movie “Moneyball” finds undervalued players that as
a team have a great on-base percentage that create more opportunities to score. This method
leads to the Oakland A’s making it to game six of the 2002 American League Championship
against the large market New York Yankees in which they lost too. Oakland A’s payroll in 2002
was $44 million compared to the New York Yankees $124 million. The Yankees have a three
times larger payroll than Oakland only to lose in the World Series there for a single win is
excessively more expensive (Lewis, 2003).
Pros and Cons of Long Term Contracts
Tom Van Riper described the Yankees of having a “Reverse Moneyball” approach. After
the 2013 season, the Yankees outbid the Red Sox for their star Jacoby Ellsbury, signing himto a
seven year contract worth $153 million. The Yankees are already committed to giving big
money to Mark Teixeira, CC Sabathia and Alex Rodriguez over the next several years. They also
signed catcher Brian McCann to a five year contract worth $85 million. The Yankees are paying
Ellsbury, a thirty year old when signed, for his speed on the bases that will likely deteriorate
with age, and subpar defense in center field who committed five errors since his signing
(Baseball Reference, 2014). Essentially, the Yankees are paying for a player he was and not a

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player he is going to be over the course of his contract, as he is passed his prime. This is a great
example of the risk of long term contracts that large market teams commit to. For the Yankees,
according to Van Riper, they win their season in the off season when tickets are sold and TV
ratings during the season is high (2013). The Yankees and other big market teams, are known
for mega contracts for free agents that small markets like the Oakland Athletics, will never be
able to afford.
However, Tim Reuter has his own thoughts on mega contracts and the free agent
market. In the offseason of 2013, the Seattle Mariners signed Yankees star second baseman
Robinson Cano to a ten-year, $240 million contract. Seattle was looking for a superstar and
Cano was looking for job security, so this contractual agreement benefited both parties.
However, Cano was thirty-one at the time of the signing. This meant that Seattle would be
paying their star player nearly $24 million per year in his late thirties, until Cano reached 41
years of age. They essentially would be paying for Cano’s past performance well beyond his
prime years as an athlete. There are two major downsides to a mega contract like Cano’s: first it
clogs the team’s payroll by having salaries extended multiple years, and second, the final years
of the contract are typically sunk cost (not receiving positive investment). However, this is not
always the case. The Detroit Tigers signed Miguel Cabrera to an eight year, $152 million dollar
contract right before the 2008 season and won the MVP award in the 2012 and 2013 season.
The problem is not necessarily mega contracts, but when they are signed (Reuter 2014).
Reuter claims (2014) that production in the late years of a long term contract is a
“inefficiency” to the free agent structure agreed upon by MLB Players Association (MLBPA) and

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the owners. In 1976 when free agency was adapted into MLB, the MLBPA gave up six years of
player service time for unrestricted free agency. This bounded players to their original team for
the first six years of their professional baseball career. However, players were able to go to
arbitration hearing after the first three years. Therefore, owners controlled their players at
their prime years at a discounted price. However, this limits the free agent pool, causing
bidding top dollar for top talent each offseason (Reuter, 2014).
In 2013, Dave Cameron wrote about the top five worst contracts in an article called
2013 Anti Trade Value: The Five Worst Contracts. He claims that Prince Fielder ($24 million per
year), Josh Hamilton ($23 million per year), Ryan Howard ($25 million per year), Alex Rodrigues
($25 million per year), and Albert Pujols ($24 million per year) are the top five anti-trade
contracts that are difficult to move, due to performance, age, and contract status (2013).
Explained in the novel Moneyball by Michael Lewis, Billy Beane and the Oakland Athletics
survived on the cost of controlled assets (players under the reserved clause) from their draft
picks (2011).
Despite this, clubs are buying out their player’s prime years with extensions before their
players hit free agency. MLB made $8 billion in revenue last year because of this. Troy
Tulowitski of the Colorado Rookies, Buster Posey of the San Francisco Giants and Evan Longoria
of the Tampa Bay Rays are examples of players who signed extensions before free agency. The
result of this has benefited both the player and the club. Reuter states referring to this trend of
extensions “there is a greater willingness to gamble on all-star production materializing
eventually, instead of paying for a known quantity and then a certain decline” (5) He also

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Bury: MLB Economics
believes “athletics is a young man’s endeavor” (5); MLB should acknowledge that fact, by
starting free agency earlier, with the first six years of a players playing career restricted to a
single club, players really only have a single chance at a mega contract. If players were to hit
free agency earlier there would be less sunk cost at the end of the contract because the deal
would consist of more years in the player’s prime. Albert Pujols had all-star statistics and two
World Series titles when he was with St. Louis Cardinals from 2004 to 2011. However, he
declined in 2012 when the Angels signed him to a $240 million deal that will last through the
2021 season and will prove to be a burden on the payroll of the Angels. With a limited free
agent pool belonging to players in their late twenties and early thirties, teams are spending all
their money on contracts that will have sunk costs (Reuter, 2014). The result of this could be
higher risk of financial losses as the player ages.
Free Agency/ Competitive Balance
The birth of Free Agency and its Complications
Before the Free Agency Era, there was the reserved clause. The reserved clause was a
ruling that the clubs still had possession of a player even after the players contract expired. This
began to change when Curt Flood was traded from the Cardinals to the Phillies in 1969. He
chose to challenge the reserve clause all the way up to Supreme Court, where he lost the ruling.
Marvin Miller, the Players Association executive director, was convinced the ruling would
change if he had a test case to take to arbitration. However, Miller needed a player to play a full
season without a contract. Miller finally found two players who went an entire season without
a contract in Andy Messersmith and Dave McNally. These two players’ grievances granted them
free agency to an arbitration panel of three on December 23rd, 1975 (Morris, 2006). The free

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Bury: MLB Economics
agency era was born. Major League Baseball wanted to implement a salary cap, such as other
leagues have, but the MLBPA was opposed (Cox, 2006).
Free agency was granted in the 1976 Collective Bargaining agreement, but free agency
had complications. Even though free agency was the essential piece of the players getting their
Marginal Revenue Product (revenue produced for team due to performance), it hurt the
smaller market teams that could not afford steep salaries. Larger markets bought players for
top dollar with no discipline as small market teams crumbled. That was until 1980 when the
basic agreement expired and the owners knew the rapidly growing salaries had to be tamed.
During the negotiations of the new CBA, the players union wanted to reduce the six year free
agent eligibility, to only four years giving the players an extra two years to receive a salary to
their satisfaction. Essentially, the owners wanted to be compensated for a loss of a player due
to free agency. They wanted a compensation package that would consist of major league talent
and a draft pick. The players union disagreed and authorized a strike that began on May 29th.
However, the strike was quickly over when the owners agreed on a deal with the players for
everything but the compensation package for free agency (Zimbalist, 1992).
Marvin Miller made a suggestion to players and owners to set up a study committee to
look into the issue of the compensation package. He also suggested that if the report could not
lead to an agreement by January 1st, 1981, then the owners would apply their compensation
scheme. However, the players would be allowed to strike and they did. The 1981 season was
known as the split season, as the strike began June 12th and went to August 1st costing the
owners an estimated $72 million and the players $34 million. Marvin Miller claims that the final

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Bury: MLB Economics
compromise was the one that he composed before spring training where, “each team signing a
Type A free agent (a player ranked in the top twenty percent at his position) would have to put
all but twenty-four protected players into this pool.” A team that lost a type A free agent, could
select any player in this pool, but not limited to the team that signed the free agent. “Clubs that
did not sign a Type A free agent could protect twenty-six players and up to five clubs could
become exempt from the compensation pool by agreeing not to sign Type A free agents for
three years” (Zimbalist , 1992).
Innovation of Compensation
In the 1987 agreement, the free agency changed again. The owners now agreed to open
up free agency by eliminating the major league player for compensation of type A free agents.
Now the rule would be the signing club of a type A free agent would compensate their first
round amateur draft pick. Type B free agents, or free agents ranked between twenty and thirty
percent of a given position, would compensate a “sandwich pick.” A sandwich pick would be a
pick between the first and second round of the amateur draft.
Times have changed and so have the rules for free agency and competitive balance
picks. According to the current Collective Bargaining Agreement (CBA), which expires after the
2016 season, any player with six years of Major League service is eligible for free agency unless
the player has executed a contract for the next season. The player officially becomes a free
agent at 9:00AM eastern standard time the morning after the final game of the World Series.
However, there is a five day “quiet period” where the player or, agents of the player, can
discuss only certain criteria. This period ends on the fifth day at 11:59pm eastern standard time
after the final game of the World Series. Some of the criteria a player can discuss is the

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Bury: MLB Economics
advantages or disadvantages of playing with the club, the length of the contract, the players
interest in playing with that club, the club’s plans on the players services, and no-trade
provisions (CBA 2012-2016).
During the five day quiet period, the previous team of the free agent has the
opportunity to make a “qualifying offer.” A qualifying offer is a one year contract for the next
season that is equal to the average salary of the top 125 highest paid players. This amount is
determined by the Labor Relations Department (LRD) ten days before the championship series
and clubs are notified of this amount. A free agent has seven days after the five day “quiet
period” to accept the qualifying offer. If rejected, the former club is subject to compensation.
The former club of the qualified free agent receives a “Special Draft Choice” in the Rule
4 Amateur Draft in June the following year. Clubs receive this “Special Draft Choice” in reverse
order of the previous season’s win-loss percentage. The selections begin right after the first
round of the Rule 4 Draft. If a club has more than one “Special Draft Choice” they are received
in succession. If clubs have identical winning percentages, they will choose in reverse order of
the prior seasons winning percentage. The club that signs a qualified free agent must forfeit
their highest selection in the Rule 4 Draft with exception to the top ten picks under the 2012-
2016 Collective Bargaining Agreement. Therefore, the signing club gives up their highest
selection following the tenth selection of the draft (CBA 2012-2016).
Competitive Balance Implications
Major League Baseball also implements a Competitive Balance Tax to limit the big
market teams spending. This tax is more commonly known as the luxury tax. Luxury Tax does

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not stop clubs from spending excessive amounts; however, penalties those clubs that spend
over the allotted amount determined by the Collective Bargaining Agreement. The current CBA
states the Luxury Tax threshold in 2012 and 2013 shall be $178 million. From 2014 through
2016 season, the luxury tax increases to $189 million. A club that exceeds these amounts in the
given season, needs to pay a percentage of the exceeding amount. For the first time offense,
clubs need to pay seventeen point five percent of the exceeding amount. For teams that exceed
the threshold second consecutive seasons must pay thirty percent, for three seasons must pay
forty percent and four seasons must pay fifty percent. For a club that exceeded the threshold
by $12 million in 2013 must pay $2.1 million in luxury tax. If this was their second consecutive
season, the club would have to pay $11.7 million. The graph below demonstrates the amounts
all teams had to pay since 2003. This money is then used by MLB for industry growth (25%),
baseball development in countries that don’t have high school baseball (twenty five percent)
and player benefits (fifty percent). Only a handful of teams surpassed the luxury tax threshold
since 2012 consisting of the New York Yankees, Detroit Tigers, Anaheim Angels, Boston Red Sox
and Los Angeles Dodgers. In 2013, the Dodgers rate was seventeen and a half percent meaning
they exceeded the amount for two consecutive seasons and the Yankees rate was fifty
exceeding the amount four times (Delgado, 2013). In 2014, according to ESPN.com, the luxury
tax payment was at its highest. Teams paid MLB $44.92 million compared to only $17.3 million
in 2011.

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Competitive Balance Improvements
Competitive balance has greatly improved. For the first fifteen years of free agency,
from 1976 to 1991, twelve different teams won the World Series while sixteen different teams
appeared in the fall classic. The only teams that failed to win division titles were the Indians,
Mariners and Rangers during that time period. Prior to free agency from 1903 to 1970, the four
largest cities won forty-nine of sixty-eight pennants. Prior to the implementation of the
amateur draft in 1965 in reverse order, a New York team (large market) won thirty-nine of
sixty-one World Series. Fifteen years before the draft, the New York Yankees won nine World
Series and appeared in twelve of them (Zimbalist, 1992). In the past fourteen years dating back

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to 2000, nine different times won the World Series and three of those teams won multiple
World Series, not once consecutive seasons (ESPN). Andrew Zimbalist also explains it’s not
possible to buy a winning club anymore, since from 1984 to 1989 “average team salary
explained less than ten percent of the variance in team winning percentage (r = .303) and less
than twelve percentage of the variance in team standing (r = .334).” In earlier years economist
Zimbalist claims it was possible to “buy” a winning team (1992).
Salary Arbitration
This section will discuss the salary arbitration process in Major League Baseball (MLB).
First the three different types of markets players could fall under will be distinguish and it will
explain what markets are players eligible for salary arbitration. Next, we will discuss the process
of how salary arbitration works in which when it takes place, the criteria on decision making,
and who are the arbitrators. Finally, we will examine the effects of salary arbitration with player
performance pre and post arbitration.
Salary arbitration is a critical aspect of MLB because it affects team finances which are
essential to plan for the future of a ball club. Baseball implemented salary arbitration beginning
with the 1974 season of specific players, not all players were eligible. This determined a raise or
sometimes a decrease in player’s salaries (Faurot, 1992). According to Zimbalist (1993), there
are three labor markets for MLB players. The MLB has a reserve clause which allows the team
control over a player for the first six years of MLB service. First there are the players that are
under three years of MLB experience and not eligible for salary arbitration, except in the “Super
Two” which we will discuss shortly. Second are players under the reserve clause that have a

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little more negotiating power with three or more years of service that are eligible to go to
salary arbitration. This gives the player a case for a raise in salary. The final market is players no
longer under the reserve clause. They are considered “free agents” and have the ultimate
negotiating power.
The “Super Two”
Before 1985 Collective Bargaining Agreement, a player needed only two years of service
to be eligible for arbitration; that, however, changed, when MLB introduced what some call the
“Super Two” (Zimbalist, 1992). The MLBPA (Major League Baseball Players Association) were
not happy to give up a year of arbitration, so MLB created the “Super Two.” This allowed
players with two years of service on the active roster for a minimum of eighty-six days in the
previous season and in the top seventeen percent of all players of two years of service to enter
salary arbitration. It is important to note that eighty-six games on the active roster does not
mean eighty-six games played. Front office personnel manage this carefully by preventing use
of the player as they get closer to the 86 day limit. This prevents the player from salary
arbitration early (Gorman, 2012).
Process of Arbitration
According to Hot Stove Economics by J.C. Bradbury (2011), the arbitration process
begins with a player and team proposing salaries for the next season. If the team and player
cannot agree on a salary, they each argue their side in front of three arbitrators. The arbitrators
are part of the American Arbitration Association (AAA). The MLBPA and the Labor Relations
Department agree upon a group of sixteen arbitrators. Each side strikes names off the list of 16
arbitrators until three remain. Arbitrators are lawyers or judges with arbitration experience and

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certification (Gorman, 2012). Each side submits their final offer and passes it on to an
arbitrator, and then a hearing is scheduled for the first three weeks in February. Each side
continues to negotiate until the hearing. In most of the cases, players and teams reach a
settlement before the hearing and the hearing gets canceled. In 1991, out of 157 players who
filed for arbitration, only seventeen players had hearings. In a case that it does not get settled,
the arbitrator conducts a hearing and chooses one of the final arbitration offers with no
possibility of compromise (Faurot, 1992).
Typically, the scheduling of the hearing is carefully thought out. If a player scheduled for
early February wins their case and receives a large award, it could impact similar players
scheduled thereafter. For this reason similar caliber players go on the same day. If cases do go
to the hearing process, the hearings typically take place in hotel conference rooms in Los
Angeles, Phoenix, and Tampa Bay/ Orlando due to CBA policies that is a neutral city for both
parties (Gorman, 2012). Each side has one hour to explain their case and a half hour to offer
rebuttal the other side including closing statements. The arbitrator makes the decision on six
criteria: (1)the quality of the player’s contribution in the previous season, (2) the consistently
of the contribution, (3) player’s previous compensation, (4) comparable salaries of other
players, (5) physical and/or mental defects of performance, and (6) the clubs recent
performance. They cannot make their decision based on press comments, financial position of
club or player, testimonials, previous offers made by club and player, and expenditures on
player or club on agents, attorneys or representatives (Faurot, 1992). Players cannot be
compared to other players with more than one additional year of service under the reserve
clause because of depressed salaries. The only exemption to this is a “special circumstance,” as

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whenRyan Howard won the All-Star selection, MVP, and Silver Slugger award and won a $10
million arbitration case (Bradbury, 2011).
The panel of three makes their decision within twenty-four hours of the hearing by
summiting the results to the Labor Relations Department and the chief of the Players
Association. Under no circumstances will the party know the vote of the arbitrator’s decision
and the results do not explain why they made that decision. The arbitrators only pick one side
or salary and do not compromise, which results in a clear winner and loser in the settlement
(Gorman, 2012). Andrew Zimbalist states there is “little downside risk for the players” (83) in
salary arbitration. There were ten players who lost their cases in 1990 and their salaries still
increased an average of 100 percent from their previous salary. If a organization loses a player
to salary arbitration who is not under the reserve clause and is a free agent that is ranked in the
top fifty percent of his position, the team that signs that player needs to give up a first or
second round draft pick to the previous team (Zimbalist, 1992).
Does salary arbitration affect player’s performance on the field the next season?
According to a study by Paul Sommers (1993) of Middlebury College, it does. Baseball is a sport
that can measure performance easily with all the statistical data available. He analyzed 234
players by dividing these players in age groups of under 27, at 27 or 28, and over 28. He then
categorized further on whether the team or the player won the case. He then examined the
batters by batting average (BA) and on-base plus slugging percentage (OPS). For pitchers he
examined their earned run average (ERA) and strikeout to walk ratio (K/BB). The results, he
found out for batters’ averages were poorer eight out of twelve occasions and for pitchers they

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were poorer eleven out of twelve occasions. The ERA for pitchers in the older group is higher no
matter whether they won or lost their case. Win or lose, the player always seems to win with a
salary increase significantly greater than their previous rate (Sommers, 1993).
Waivers and Designated for Assignment
Waivers in Major League Baseball can be complex. A waiver is a disclaimer of a
contractual right. According to Roger Abrams, section 7(b) of the Uniform Player Contract,
which is negotiated by the MLB owners and MLBPA, a club shall terminate a player’s contract if
players “fail, in the opinion of management, to exhibit sufficient skill or competitive ability to
qualify or continue as a member of the team.” Teams must pay the regulated amount according
to the Collective Bargaining Agreement (2000). Waivers are a part of baseball that is beneficial
and at times risky. However, waivers are essential to the business of baseball and almost every
player will be put on waivers at one point in the season. Waivers can cost teams large amounts
if clubs are not careful. In 2012, the Cincinnati Reds claimed Alfredo Simon, which proved to
benefit the club as they finished first in the National League Central (Salfino, 2014). Essentially,
there are three different types of waivers; unconditional release waivers, irrevocable outright
waivers, and revocable Major League waivers (Euston, 2007).
This section will also discuss the different types of waivers and the criteria to be put on
them. Also this section will discuss the effects of players being designated for assignment. In
order for a player to be put on waivers, the player must possess a Major League contract, on
the forty man roster. If a player were to run out of minor league options and were brought up
to the major leagues, then a major league contract was previously agreed upon. According to

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Bury: MLB Economics
Jeff Aberle, a player is likely to be placed on waivers because the player ran out of minor league
options. Teams can also place players with options on waivers if the club wanted to release him
or upon player request. For the Colorado Rockies in 2008, Cory Sullivan was sent down to the
minors as an option in his contract. However, he requested to be brought up and put on
waivers to test the market. With his large salary no team claimed him, cleared waivers, and
then the Rockies put him back in the minor leagues (Aberle, 2009).
Types of Waivers
The simplest type of waiver is the unconditional release waiver. Players on this type of
waiver can be claimed for one dollar but the player can refuse this claimand become a free
agent (Law, 2006). This is the type of waiver the club uses if they intend to release the player
from the organization. An example of this was when the Astros released Shawn Chacon after he
shoved the General Manager, Ed Wade. The organization just wanted him out of their
organization (Aberle, 2009).
The second type of waiver in MLB is the irrevocable outright waivers (sometimes called
special waivers). This type of waiver is mostly used to move a player out of minor league
options, off the forty-man roster, back down to the minor leagues. However, the risk in this is if
the player is claimed with the consequence that the club cannot pull the player off the waiver
(Law, 2006). The club claiming the rights to the player must pay the previous club a waiver fee
of $20,000. Also the club that is now responsible for the player must pay the player the rest of
the money under the player’s current contract. However, if a player with five years or more of
MLB service time or a trade clause can overrule this waiver (Euston, 2007).

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The final type of waiver is the revocable Major League waiver, the most risky of the
waivers. This type of waiver only takes place during the period of August 1st to August 31st.
During this period, virtually every player will be placed on waivers, whether the club intends to
trade the player or not. These waivers are utilized to “gauge trade interest.” With the non-
waiver trade deadline at the end of July, this is a way for clubs to trade players, making
adjustments before going into the playoffs (Euston, 2007). During the month of August, if a
player is not claimed by any team within forty-eight business hours, the player is eligible to be
traded to any team by the end of the month. However, if the player is claimed by a team, that
player can only be traded to that team. If the player is claimed by two teams, the rights go to
the team that has the worst record in the same league, but if no one claims him from the
league in which the organization resides, the rights go to the team with the worst record in the
other league. During this period, the team that is currently responsible for the player’s rights
can pull back the waiver or work out a trade with the claiming club within 48 business hours. If
the team does revoke the waiver and puts the player back on waivers in August and another
team claims him, it is irrevocable (Stark, 2004). This can be risky because the tendency lately
has been to claima player just to stop a competitor from the rights, with no intention of
receiving him. This could cost the team to pay a large salary if the team that put him on waivers
intends to trade him.
Designated for Assignment
“Designated for assignment” or DFA, works closely with waivers. If a club designates a
player for assignment, the club has ten days to trade, release, or put on waivers. By designating
a player for assignment, it removes the player from the forty-man roster but the club cannot

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make a corresponding transaction to recall a player on an optional assignment. When and if a
team becomes interested in the player and would like to work out a trade they have ten days to
do so before the player is put on waivers. If there are no claims on waivers, the player is then
released and becomes a free agent (Euston, 2007).
When there are multiple teams making a claimon a certain player, there is a set of
priorities that must be followed to follow Major League Baseball office policies. The waiver
order from the period of November 11th to April 30th, the club with the worst win-loss record
has priority. From May 1st to July 31st, the club with the worst win-loss record of the current
season has first rights to claimthe waiver. From August 1st to November 10th, the club that has
the worst win-loss record in a specific league has priority, meaning AL teams have first priority
over NL for AL players and vice a versa (Euston, 2007).
Rising Revenue with Television Contracts, Sponsorships, and Branding
Some may wonder how teams can build up revenue for players and Mike Ozanian
explains it through the theory of branding. In the article Chicago Cubs: Baseballs Next
Powerhouse (2014), he discusses television contracts and renovations to the stadium can make
a club worth more in a short amount of time, therefore having more to spend on players. Ever
since the Ricketts family purchased the Chicago Cubs, they have been following the Texas
Rangers blueprint. The Ricketts bought ninety-five percent of the team, Wrigley Field and
twenty-five percent of Comcast SportsNet Chicago. The Rangers were subpar from 2005 to
2008; however, by selling their top players in Mark Teixeira, Chris Young, and Adrian Gonzalez
led them to success. They freed up money to go after pitcher Yu Darvish and make renovations

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to Globe Life Park. The Rangers appeared in the 2010 and 2011 World Series and the team as of
2014 worth $825 million, $232 million more than Ryan Baseball Express paid for the team in
2010. (Ozanian, 2014)
The Chicago Cubs are now in the process of renovating Wrigley Field which will cost
$300 million. They also plan on selling some shares to investors and would use these proceeds
for the renovation. However, all of this is estimated to bring the ball club $30 million more in
revenue per year. Currently the Cubs are under a contract with CSN Chicago until the 2019
season. They expect a television contract similar to the Dodgers 25-year $8.35 billion with Time
Warner Cable. This would boost the Chicago Cubs market revenue and they already have two
of the top eight prospects (Kris Byant and Javier Baez) in baseball according to Baseball America
(Ozanian, 2014).
Vince Gennaro explains the broadcasting and sponsorship side of the revenue.
Television companies often pay fees for the rights to broadcast a team’s game. This fee is
usually a flat rate that last the whole term of the contract. The team receives bonuses from the
television company based on making the playoffs or other on-field performance
measurements. The television company such as Fox will then sell advertising slots. Another
method that is becoming more popular recently is when the team owns the whole or a large
potation of the company. These are called RSN’s or regional sports network. RSN are a more
direct way for teams to “monetize fan demand.” When a team’s performance varies the RSN
gets subscription fees from cable distributors to buy their services and carry their channel
(Gennaro, 2007).

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Method
A survey that consisted of 240 participants was distributed to the fan base of the Cape
Cod Baseball League. The purpose of this research was to determine the strength of the fan
base and the macro economics of the game. It categorized participants into categories such as
age range, demographics, and male, female or other. From this it could determine such factors
as who may spend the most on tickets, food and beverage, who is willing to travel to see a
game, what conditions they would be willing to endure a ball game.
Primary Data on Spending
Figure One. Spending among age on regular season tickets. (Survey Item 2 and 11)
Age Range Price Range Ratio of all in age
range
Percentage
18-20 $91+ 4:27 15%
21-25 $91+ 5:40 13%
26-35 $91+ 3:25 12%
36-50 $91+ 3:48 6%
50+ $91+ 16:72 22%
Research determined that the age group to spend the most on a single ticket is the 50-
plus participants. Of the 50-plus age span, 22% of them would be willing to pay $91 or more on
a regular season game. The most popular prices range of these participants selected the $26 to
$40 range. This could be the result of young adults that are in the early stage of their career
paying back loans on a college education. Other factors of this group being the least likely to

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spend money on a ticket could be the participants beginning to start a family, paying mortgages
or rent, car payments and loans.
Figure Two. Spending among men and women on regular season tickets. (1,2, and
11)
Men $10-25 $26-40 $41-55 $56-70 $71-90 $91+
18-20 13% 27% 27% 7% 13% 13%
21-25 4% 12% 19% 38% 19% 8%
26-35 0% 24% 18% 29% 18% 12%
36-50 0% 8% 20% 48% 16% 8%
50+ 16% 9% 13% 16% 27% 20%
Women $10-25 $26-40 $41-55 $56-70 $71-90 $91+
18-20 17% 8% 25% 25% 8% 17%
21-25 0% 21% 14% 21% 21% 21%
26-35 0% 38% 13% 13% 25% 13%
36-50 4% 17% 26% 30% 17% 4%
50+ 7% 11% 26% 15% 15% 26%

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Figure Two. Spending among men and women on regular season tickets. (1,2, and
11)
For men and women in this category, women in the age groups of 18 to 20 and 21 to 25
out spend the men. The more popular answers for women in the age span of 18 to 20 are $41
to $70 whereas the men more popularly answered $26-$55. It is not till the age group of 26-35
when men spend more than women. Overall out of the all the 224 participants that answered
this category, it can be determined that the $56-$70 range is the most selected.

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Figure Three. Spending among demographics for a season ticket. (Survey Item 3 and
11)
Region Most selected
answer in region
Ratio Percentage
Northeast $56-70 43:175 25%
Midwest $26-40 6:15 40%
West $56-70 3:6 50%
Southeast $56-70 5:11 45%
Southwest $91+ 1:1 100%
The amount of spending per ticket was also broken into demographics. The region that
would spend the most is the west region as the $26 to $40 for a season ticket is favored 40% of
the time. The northeast favors this price range at 25% and southeast favors this price range at
45%. A possible factor could be there are large market teams in all these regions with the
exception of the southeast. The participants were also asked if prices went up 30% would they
still go. The men were at 50/50 and the women were at 53% no.
Figure Four. Spending among age on a playoff ticket. (Survey item 2 and 22)
Age Range Majority Selected Ratio of all in price
range
Percentage
18-20 $141-$160 6:28 21%
21-25 $141-$160 13:39 33%
26-35 $141-$160 9:26 35%
36-50 $141-$160 11:43 26%
50+ $141-$160 13:67 19%

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Bury: MLB Economics
Of the 203 participants in the age span of 18 to 50-plus, 52 were willing to spend $141
to $160 on a playoff game; 21% were 18 to 20 year olds, 33% were 21 to 25 year olds, 35%
were 26 to 35 year olds, 26% were 36 to 50 year olds and 19% were over 50. Every age range
with the exception of the 50 plus range selected the highest price range available as the
popular range selected. Participants in the age span of 21 to 35 years old spend the most on a
playoff ticket. This could be due to young adults having full time positions out of college and
not many commitments to children yet.
Figure Five. From where do you buy tickets. (Survey Item 14)
# of responses Percentage
Team website 71 33%
Team box office 35 16%
Third party (Stubhub, Ace
Ticket)
104 48%
A friend or family member 52 24%
From the results of the participants, 48% (or 104 participants) purchase their tickets
through a third party service such as Stubhub, Ace Ticket, or Ticket Master. Another 33%
reported that they buy of the team website. Box office sales tends to be the least popular
method of receiving tickets for this population.

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Figure Six. Spending for food and drink among men, women, and age range. (Survey
Item 1,2, and 17)
Overall Men Women 18-20
years
old
21-25
years
old
26-35
years
old
36-50
years
old
50+
years
old
$5-$10 11% 7% 13% 14% 8% 4% 6% 12%
$11-$15 24% 24% 26% 29% 20% 8% 33% 25%
$16-$20 22% 25% 19% 32% 30% 12% 23% 19%
$21-$25 16% 16% 17% 14% 20% 19% 17% 15%
$26-$35 13% 15% 12% 7% 15% 19% 13% 14%
$36+ 14% 13% 14% 4% 8% 38% 8% 15%
To continue with the microeconomics of a ball game and spending power of the fans,
the survey analyzed spending on food and beverage in a stadium. The most popular selected
range was $11-$15 as it was represented with 24% of the participant, next was the price range
of $16 to $20 represented by 22%. The survey also determined that men typically spend more
on food than women. The most popular price range for men is $16 to $20 in which 25% of them
answered this way, whereas for women it is $11 to $15 and 26% answered. The age group that
spends the most on food and drink are the 26 to35 year old participant’s. Thirty-eight percent
of this age span claims they would spend $26 to $35.

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Bury: MLB Economics
Primary Data on Frequency and Travel Alternatives
Figure Seven. Frequency of visits to ball game. (Survey Item 12)
The survey asked how many games the participants go to and the results are similar
throughout all age ranges and men and women. Seventy four percent of participants out of
220; go to one to three games a year, 18 percent selected 4 to 5 games, 5% selected 6 to 8
games and 3% selected 9-plus games. The only demographic where the most common answer
is not 1 to 3 games is the west region. The west region tends to go to more games as the
majority (67%, 4:6) selected four to five games.

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Bury: MLB Economics
Figure Eight. Company to a game among men, women, and age. (Survey Item 1, 2, and
13)
# of
people
year
olds
21-25
year
olds
26-35
year
olds
36-50
year
olds
50+
year
olds
1-2 37% 35% 35% 39% 33% 46% 19% 42%
3-5 61% 62% 63% 61% 65% 54% 77% 54%
6-8 2% 2% 2% 0% 0% 0% 4% 4%
9+ 0% 1% 0% 0% 3% 0% 0% 0%
Out of 219 participants that answered, 61% of them said they go with three to five
others to games. This number is similar when filtering through the different age ranges. Out of
these participants fifty-four said they go with both friends and family (15% just friends, 31% just
family).
Figure Nine. Average distance traveled among men and women. (Survey Item 1 and
27)
1 hour 2 hours 3 hours 5 hours 7 hours Any
distance
Men 22% 38% 18% 5% 2% 15%
Women 27% 36% 25% 8% 0% 4%
Overall 245 38% 21% 7% 1% 10%
The participants were also asked how far they would be willing to travel (in standards of
hours) to a ball game. The average mean for men was 2.69 meaning they would travel

45
Bury: MLB Economics
proximity two hours and forty minutes to a game. The women’s average was 2.28 which
convert to proximity two hours and fifteen minutes. Fifteen percent of the men answered they
would travel any distance compared to four percent of women that answered that they would
travel any distance.
Figure Ten. Reasons for attendance among age. (Survey Item 2 and 11)
Age Range Overall 18-20 21-25 26-35 36-50 50+
Competitive
Team
53% 54% 65% 62% 48% 49%
Social
Gathering
42% 39% 55% 69% 35% 35%
Love of
Baseball
71% 71% 78% 65% 73% 68%
Stadium
Experience
53% 50% 73% 73% 50% 43%
Family
Tradition
31% 39% 28% 35% 27% 35%
Peer
Influence
9% 21% 15% 19% 4% 3%
Loyalty for
player/team
41% 54% 55% 38% 33% 36%
Rivalry 27% 29% 53% 42% 13% 16%
Participants may go to games for the love of the game, for a social gathering, maybe to
experience the stadium or even peer influence. The majority of the participants said they went
to a game because of the love of the sport (71%). The second most selected answer is to see a
competitive team (53%) and to experience the stadium (53%). There is a rise for the middle age
ranges (21-25 and 26-35) to go for a social gathering compared to the younger and older age

46
Bury: MLB Economics
ranges as shown below. The younger generations are more attracted to loyalty of a team
and/or player than older generations.
Figure Eleven. Under what conditions would a fan go to a ball game.(Survey Item 18)
From the participants that were able to select all that applied, 97.75% of 222 responses
to this question selected they would go to a game in warm weather. Another 51.8% claimed
they would go in the cold, 48.65% claimthey would go in the rain, and 17.12% would go in the
snow.

47
Bury: MLB Economics
Figure Twelve. Willingness to buy program. (Survey Item 22)
The results said 72% of participants do not buy a program. For the other 28% that buys
programs, it could be assumed they also selected they go to games for the love of the game.
The results are consistent throughout age range, gender and demographics.
Figure Thirteen. Averages of games watched on television among men, women and
age range (Survey Item 1, 2, and 28)
year
olds
21-25
year
olds
26-35
year
olds
36-50
year
olds
50+
year
olds
Average 45.18 48.43 36.97 45.41 43.1 37.56 46.72 44.74
Total 216 129 78 27 39 25 46 69
The results showed that men watch approximately 11 more games than women as men
watch an average of 48 games compared to only 37 games by women. The middle age span of
26 to 35 watches less games on television than the age spans of 18 to 25 and 36 to 50-plus.

48
Bury: MLB Economics
Figure Fourteen. Outside of stadium activities among men, women, and age. (Survey
Item 1, 2, and 24)
year
olds
21-25
year
olds
26-35
year
olds
36-50
year
olds
50+
1year
olds
Going out
to eat
69% 68% 75% 77% 82% 96% 64% 57%
Tourist
Attractions
18% 13% 26% 15% 27% 17% 27% 10%
None 28% 30% 20% 19% 18% 4% 29% 38%
From the results, the majority of participants favor going out to eat in conjunction with
going to a ball game. The minority of 18% (36:199) of the overall participants do not participate
in any activities. Within the age span of 21 to 35, 50 of 57 (or 88%) participants claimthey go
out to eat before or after a ball game. Women are more probable to participate in tourist
attractions than men as 26% of women (20:76) would participate in such activities compared to
13% of men (15:115).

49
Bury: MLB Economics
Figure Fifteen. Overall experience with MLB. (Survey Item 26)
From the 219 responses to this question, 146 report that they received a good deal on
their purchase of their purchase. Only 62 participants claimthat it was a bad deal. The majority
(218) either agrees or strongly agrees that they will go back to the ball park the same amount of
times next season. Only 4 participants did not agree with this. One hundred fifty-three
participants reported that they do not get a good deal on prices for concessions. One hundred
seventy-four participants reported they would go back to the ball park more games next season
compared to only 32 who would not.
Primary Data on Interview
In an interview with Chris Cameron, the assistant general manager of the Portland Sea
Dogs, he reported that all the baseball operation duties such as player contracts, and call ups

50
Bury: MLB Economics
are handled by the major league club without input from the minor leagues. Communication
does take place between the major and minor leagues for press releases and for the field
manager’s sake. Minor league teams focus on sales and promotions in the front office and
during the winter meetings when the major league clubs are focused on the baseball
operations. The major league club covers all costs of their minor league affiliates with the
exception of travel expenses. The rule 5 draft is also administered by major leagues that could
influence players being lost or picked up through this draft. For example, if a player is in the
minors for certain among of time and another organization would use him at a higher level, this
player could be picked up. If the receiving club does not use this player at a higher level a
$50,000 fine is imposed. Chris also observed that the time table for player development may
take 3 to 5 years for prospects to develop.
Limitations
Survey item 5 was not relevant because the results were skewed to the northeast region
and did not have sufficient data to generalize to other regions. Survey items 6, 7, and 8 were
not relevant because the research focused on major league economics and not minor league.
Survey items 15 and 16 were not relevant because only 11% of participants answered they have
season tickets and was not enough to make generalizations. Survey item 24 was not relevant
because prices were the same for programs inside and outside the venue. Survey item 28 was
not relevant because research did not have any data to compare or contrast ticket packages.
Analysis
The data supported that the age group willing to spend the most on a regular season
ticket is the 50-plus range. The least likely to spend the most is the participants in the span of

51
Bury: MLB Economics
36 to 50 years old. Women from the age span of 18 to 25 outspend men and men out spend
women in age span of 26 to 35. The most popular price range selected overall was $56 to $70
as 54 participants claimed this. Therefore, MLB should market tickets to men and women in
these age ranges. The west and northeast demographic would spend the most on a regular
season ticket. Participants in the age span of 26 to 35 are most willing to spend $141 to $160 on
playoff tickets, more than any other age group. Fifty-two of 203 participants, about 25%,
selected the highest price range, $141 to $160, for playoff tickets. Forty-eight percent of
participants purchase tickets on a third party site such as Ace Ticket and Ticket Master, and 33%
reported they purchase tickets through the team website. The most popular price range
selected for food and beverage was the $11 to $15 range. Twenty-four percent of the
participants selected this. Men spend more on food and beverage as 25% selected they would
spend $16 to $20 and 26% of women selected $11 to $15. The age range to spend the most on
food and beverage is participants in the age span of 26 to 35 as 38% of them claimed they
would spend $26 to $35. This data c
Seventy-four percent of the participants reported they go to 1 to 3 games a year. The
majority of the participants claim they go with 3 to 5 others. This is consistent throughout age,
men, and women. For the reasons participants go to the ball game, 71% go for the love of the
game, 53% go for the stadium experience and to see a competitive team. The age span of 21 to
35 is more likely to go for social reasons than 18 to 24 and 36 to 50-plus. The majority of
participants (98%) would go to a game in warm conditions. Fifty-two percent reported they
would go in cold conditions, 49% would go in rainy conditions, and 17% would go in snowy
conditions. The majority (72%) of participants do not buy programs at the ball park. The data

52
Bury: MLB Economics
reported that men on television watch on average 11 more games than women as men average
at 48 games a year and women 37 games a year. The age span to watch the least games is the
span of 26 to 35 years old. The age span of 18 to 25 and 36 to 50-plus, all watch around the
same amount of games (44 to 47 games). For activities outside the stadium, 69% reported they
go out to eat and 18% reported they do tourist attractions. Only 28% claimthey do no other
activity. The participants in the age span of 21 to 35 claimthat 88% of them go out to eat. Of
the 219 participant that responded, 146 claims they get a good deal on the ticket, however 154
said they get a bad deal on food and beverage. Two hundred thirteen of the participants said
they would go back the same amount next year, however when asked if they would go back
more next year 174 said they would.
I believe due to the reserve clause controlling the players salary for first 6 years, is the
reason for such high salary’s when the player eventually is eligible for free agency. Players want
these long term contracts with high salaries to almost make up for the money lost in their first 6
years. I also believe a waiver is a way for teams to lighten the risk of such long and expensive
contracts. If MLB wants to lower the cost of these “mega-contracts,” I believe they will have to
part ways, or shorten the reserve clause making players eligible to negotiate their salary earlier
in their prime years.
MLB relies on the devotion of the fan base, and contracts with large television networks.
If MLB wants to remain successful, I believe they should market to the men and the women of
all ages as the women proved they would spend money, in some cases sometimes more than

53
Bury: MLB Economics
men. I also believe they should introduce digital applications to start replacing the games
program.
Correlation
Forbes reported in 2015 the average ticket to a ball game was $29.94. From the data the
survey perceived, most fans said they would pay $26 to $40.
Discussion
The results of the research would suggest to market regular season tickets to men over
50 as they are most willing to spend the most. However, marketing to women in the range of
18 to 25 years old would prove more beneficial than marketing to men in the same age span.
When it comes to a playoff ticket, marketing to the young adult (26 to 35) would be best. It can
also be concluded that the west coast spend most on tickets. The best way to market these
tickets is through online services such as third party sites and team websites. When marketing
food or beverage products in the stadium, target the men from the range of 26 to 35, as they
spend more than anyone else.
The results also concluded that participants typically go to 1 to 3 games a season with 3
to 5 other people. The reasons why people go are more likely to be because of the game of
baseball, the stadium experience and to see a competitive team. However, people in the age
span of 21 to 35 are more likely to go for social reasons than any other age span. The research
concluded the majority of fans do not buy programs. It may benefit to improve digital
applications as the crowd is more than likely to use those. When marketing on television,
market toward men more than women as they watch on average 11 more games. Most fans go
out to eat in the surrounding areas so it would be beneficial for restaurants to market on MLB

54
Bury: MLB Economics
applications. Fans are also dissatisfied with the value of concessions in the stadium as they
believe they are paying too much.
Addendum 1
Date:
Dear Research Participant,

55
Bury: MLB Economics
You are invited to participate in a survey of the fan base in Major League Baseball. Your
participation in this survey is completely voluntary and will take 5 to 10 minutes. All answers
will be confidential and unidentifiable.
If you have any questions about this research you may contact the Principal Investigator,
Gregory Bury at gbury2012@students.curry.edu or the Curry College Institutional Review
Board at IRB@curry.edu.
A copy of this information consent statement may be requested from the Principal Investigator.
Your completion of this survey indicates your willingness to participate.
Thank you for your assistance with this research study.
Signature Gregory Bury
Principle Investigator
1. Identify as one of the following.
Male
Female
Other
2. Choice your age range.

56
Bury: MLB Economics
18-20
21-25
26-35
36-50
50+
3. In which region do you reside?
Northeast
Midwest
West
Southeast
Southwest
Other
4. Have you ever attended a Major League Baseball (MLB) game?
Yes
No
5. Select as many that apply. Have you ever attend 2 or more games in one ofthe following regions?
Northeast
Midwest
West
Southeast
Southwest
Other
6. Do you go to minor league games?
Yes
No
7. What games doyou prefer?
Major League games

57
Bury: MLB Economics
Minor League games
8. Whydo you prefer one over the other?
[ ]
9. How much do you regularlyspend on a single ticketfor a Major League Baseball game?
$10-$25
$26-$40
$41-$55
$56-$70
$70-$90
$91+
10. If ticket prices wentup 30% would you still attend a MLB game?
Yes
No
11. For what reason(s) do you go to a ball game?
To see a competitive team
A social gathering
Love of baseball
To experience the stadium
Family tradition
Peer influences
Team/Player loyalty
Team rivalry
12. On average how many games do you go to a year?
1-3
4-5
6-8
9+

58
Bury: MLB Economics
13. Typically on average, how many people go to the game with you?
1-2
3-5
6-8
9+
14. Do you typically go with...
Friends
Family
Both
15.Selectfrom whom you generallybuy tickets for MLB games
Team website
Team box office
Third party (such as Stubhub,Ace Ticket, Ticket Master, or others)
A friend or familymember
16. Do you have season tickets to a MLB team?
Yes
No
17. Do you receive season tickets as a gift?
Yes
No
18. At a ballpark,how much would you spend on food and drink per person?
$5-$10
$11-$15
$16-$20

59
Bury: MLB Economics
$21-$25
$26-$35
$36+
19. Would you go to a baseball game in the following conditions (Selectall thatapply)
Rain
Cold
Warm
Snow
Bad social terms withyour party
20. Wouldyou make a special effort to go to a playoff MLB game?
Yes
No
21. How much would you payfor a playoffticket?
$40-$60
$61—$80
$81-$100
$101-$120
$121-$140
$141-$160
22. Do you normallybuya programat the game?
Yes
No
23.Where do youbuya program?
Outside the stadium
Inside the stadium
Don’t buyprogram

60
Bury: MLB Economics
24. Dayof the game, do you participate inanyother events? Select all that apply
Going out to eat
Tourist attractions
No other events
25. How wouldyou rate your experience at MLB games?Select one of the followfor eachcomment.
StronglyAgree Agree Disagree StronglyDisagree
-You get a gooddeal ona ticket
-You enjoyedyour time, you would
go back the same amount next year
-You get a gooddeal for a meal at
concessions
-You enjoyedyour time somuch you
wouldgo to more gamesnext year
27. What is the maximumnumber ofhours you would travel for a game?
1 hour
2 hours
3 hours
5 hours
7 hours
Anydistance
28. How manyMLB games doyou watch onTV a year (1-162)?
[ ]
29. Do you buytickets in a ticket package withgames alreadyarranged?
Yes
No

61
Bury: MLB Economics
Addendum 2
Date:
Dear ResearchParticipant,

62
Bury: MLB Economics
Thisinformedconsentispresentedtoyoutodocumentyouragreementtoparticipate inapersonal
interview regardingyourexpertise inthe baseball industry.Nopersonal informationwill be shared.Your
participationinthissurveyisvoluntaryandwill require uptoone hourof your time.Youwill have the
optiontoskipquestionsorterminate the interview atanytime if a questionwere perceivedas intrusive
or uncomfortable.Nocompensationisavailableforparticipatinginthisstudy.There are norisks,
discomfortsorinconveniencesexpectedwithyourparticipation.Yourconfidential answerswillbe
digitallyrecorded,transcribed,andnumericallyencodedsothatnonameswill be associatedwiththe
information.Anypossiblyidentifyinginformationwillbe redactedfromthe transcript.
The informationwill be usedinanHonorsScholarthesis,the intentof whichistobe usedin a research
study of baseball economics. If youhave anyquestionsaboutthisstudy,youmaycontactthe Principal
Investigator,GregoryBury,atgbury2012@students.curry.edu orthe Chairpersonof the CurryCollege
InstitutionalReviewBoard,Dr.Bruce Steinbergat Bsteinbe@curry.edu.
You may requestacopy of thissingedinformedconsentfromthe Principal Investigator.
Your signature onthe line belowindicatesyourwillingnesstoparticipate.
Signature ____________________________________ Date __________________
Thank youfor yourassistance withthisresearchstudy.
Signed,
GregoryBury
Principal Investigator
 What is your day to day relationship with the parent club?
o How often do you communicate with the parent club?

63
Bury: MLB Economics
 What is the relationship between minor league affiliates and their Major League parent
team?
o Are there any penalties against the club for transitions amongst players?
o Are there any fees the minor league must pay the parent club or fees the parent
club pays to their affiliates?
 How does the Rule 5 draft affect the minor league organizations?
o Does it affect the competitive strategy when building a team?
 Typically how long does it take a prospect to develop in the minors before making his
Major League debut?
 Who was one of your favorite players to watch with Portland?
 What is your role in the Professional Baseball agreement and could you explain the
differences between the PBA and CBA?
 How does free agency work in the minors?
 How are the new rules on speeding up the game being implemented at the minor league
level and what is your opinion on them?

64
Bury: MLB Economics
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Bury: MLB Economics
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