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Baseball Economics

With the final out of the 2009 World Series recorded this November, analysts and experts can now step back and review the business of America’s Pastime in the first year since the financial collapse drastically altered the country’s economic realities. Beginning as it did in the midst of the worst economic situation since the Great Depression, early predictions for the 2009 season forecasted a decline in attendance, decreased advertising revenues, and diminished national interest. This gloomy outlook was not unwarranted; the bad economy already manifested itself in the 2008 offseason, in which premier free-agent players such as Bobby Abreu, Orlando Hudson, and Pat Burrel all took substantial pay-cuts as teams declined to add to their payrolls in expectation of declining revenues. These fears were confirmed at the outset of the season as ticket sales declined, and even the vaunted New York Yankees were forced to advertise tickets to their brand-new stadium.

Overall, the sport proved to be resilient, however. Teams adapted to the difficult economy by increasing promotional days, trimming their front-office staffs, and slashing ticket prices. On a whole, attendance declined by six percent between 2008 and 2009, but the 73 million fans who attended games in 2009 was still the fifth highest total in history. No team was faced with bankruptcy, and baseball continued to grow in popularity overseas. Most importantly, the revenue-sharing agreement put in place by the last collective-bargaining agreement ensured that small-market teams remained competitive; the low-budget Minnesota Twins made the playoffs, while the Florida Marlins challenged for a wild-card berth. Most importantly, no teams were forced to trade large contracts mid-season due to an inability to pay the player, as was the case when the Pirates traded slugger Aramis Ramirez to the Chicago Cubs to avoid paying him for the final two months of the season.

As baseball moves into the second off-season of the recession, several questions remain. First, will attendance figures continue the decline of 2009 into 2010, stabilize, or rebound? Second, will free-agents, and by extension the player’s union, continue to settle for inexpensive contracts? Finally, will small-market teams remain competitive? As for the last question, there are already rumors that the Detroit Tigers and Cincinnati Reds are seeking to shed large contracts they can no-longer afford. Meanwhile, large-market teams will look to compete with the perennially big-spending world champions, the New York Yankees. While the economy remains lukewarm, the 2009 hot stove should prove to be as warm as ever.