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Monday, September 5, 2011

A Matter Of Persective, And The Economic Hyping Of Professional Sports

  
As a young child I have vague memories of an Ebony magazine cover circa 1970 or 1971.  The subject of that issue’s front cover was the $100,000 club for major league baseball players.

As best as I can recall, the faces on the cover were Willie Mays, Hank Aaron, Pete Rose, Frank Robinson, and others. If you know baseball history I don’t have to tell you that these names were the absolute cream of the crop.

                      Salary in 1970                    Inflation adjusted salary
Hank Aaron            $125,000                                             $696,939
Harmon Killebrew     $95,000                                             $529,673
Frank Howard         $125,000                                             $696,939
Roberto Clemente   $100,000                                             $557,551
Carl Yastremski       $125,000                                             $696,939
Bob Gibson             $125,000                                             $696,939
Frank Robinson       $125,000                                             $696,939
Pete Rose               $105,000                                             $585,429

The average baseball salary back then (1970) was $29,303.  The minimum salary was $12,000.

As best as I can determine from research the average person’s salary back in 1970 was $6,186. The average median household income at the time was $8,730.

According to the U.S. Census Bureau the median household income for 2010 was about $51,425, and median income per person for 2010 was $27,041.

By contrast the average salary in the NBA is at $4.9 million; the average salary in the NFL is $1.3 million.  The NHL average is slightly higher at $1.8 million.  The average in the MLB is at about $2.5 million per player.

Today of course, almost no one even bats an eyelash with regards to pro athletes and their salaries. We’ve become accustomed to it.  Some would argue that we have also become accustomed to the average working person’s salary stagnating.

The Rise To Mega Bucks
So exactly what drove the salary explosion in pro sports?  Back in 1975, the "reserve clause" was eliminated.  Under the reserve clause, when a player’s contract expired, his team retained the rights to that same So, even though both the player's obligation to play for the team as well as the team's obligation to pay the player were terminated, the player wasn’t free to enter into another contract with another team. The player had two options: (A) negotiate a new contract to continue playing for the same team or (B) ask to be released or traded.

The reserve clause system has, for the most part, been replaced by free agency.

From this point forward the players were allowed to collectively bargain for higher salaries. In 1920, the average baseball salary was $5,000 a year. It took 50 years for salaries to reach $30,000, but with the reserve clause removed the average salary soared to $143,000 by 1980.

Elimination of the reserve clause, coupled with the rise of televised sports and the advertising revenues that began to flow, has led to the meteoric rise in players’ incomes.

The business of professional sports has also changed a lot over the years, allowing teams to spend big bucks on their players. Games have been televised as far back as the late 1930s, and by 1966 games were being sold as a national television package.  Businesses used commercial time during sports games to advertise their products and sports teams have become ever more valuable. Professional athletes went from heroes to super-heroes with Hollywood style production commercials featuring their exploits.

I remember watching sports(including championship boxing matches) for free. Now, much of what you’d like to view is offered via pay per view or a premium entertainment channel such as HBO. Many of today’s fans have been “trained” to accept high-ticket prices and millionaire athletes. They haven’t known anything else. Especially the fans younger than 45. 

Along with the escalating salaries, the cost of heading out to see a professional sporting event live has climbed as well:

New York Yankees
Average Ticket Price $72.97
Parking: $23
Beer: $6

Tampa Bay Buccaneers
Average Ticket Price: $74.25 
Parking: $25
Beer: $5.75

Los Angeles Lakers
Average Ticket Price: $93.25 
Parking: $15
Beer: $7.75

Boy, this is a far cry from my days as a kid paying a $1.00 for bleacher tickets at the Oakland Coliseum and munching on hot dogs for $1.00 each!

For the most part I won’t pay for televised sporting events. It’s nothing against sports. I love sports and the athletes are amazing. I just have a hard time wrapping my head around spending what little money I have to watch athletes whose salaries dwarf mine. I mean it’s not like these guys are curing cancer.

And that, my friends is the magic of hype. Consider the Super Bowl. When the first Super Bowl was played, almost no one paid attention. Now, it’s practically a national holiday. What happened? Hype. I mean it’s still just a football game, right?

My question is, how can professional sports continue to enjoy such a huge growth in income during a time when much of their target market can barely afford to purchase what they are selling? Once again, the answer is hype.

I realize that many of the tickets are being purchased by corporations as no ordinary family could afford to attend very many games at these prices. But that only underscores the disconnect between the fan base and the sporting events that they love.

Do you agree that the professional sports machine has used “hype” to get millions of dollars from today’s fan?


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