According to Forbes, if you combined the value of each team, the league as a whole would be worth $36 billion. All in all, 15 organizations are now worth at least $1 billion each. The Chicago Cubs rank number 5. In 2014, the Chicago Cubs had an operating income of $73.3 million dollars and generated a revenue of $302 million. Then in February 2015, the Ricketts family solid minority interest of the team to six different investors in order to raise $150 million to help renovate Wrigley Field. It was during this deal that the Cubs were given a valuation of $1.8 billion dollars. This organization has come a long way since 2009, when the Ricketts bought the team, Wrigley Field, 25% of Comcast SportsNet Chicago, and some close real estate for $845 million.
But wait, how did the game of baseball become a billion dollar baby? Well that answer includes terms like revenue sharing, collective bargaining, free agency, and a little thing called competitive balance tax. So let’s go back and look at some of the key business agreements made by players and owners throughout the history of the game.
During the winter of 1878-79, team owners gathered to discuss the problem of player roster jumping. They made a secret agreement among themselves not to raid one another’s rosters during the season. Furthermore, they agreed to restrain themselves during the off-season as well. Each owner would circulate to the other owners a list of five players he intended to keep on his roster the following season. By agreement, none of the owners would offer a contract to any of these “reserved” players. Hence, the reserve clause was born. It would take nearly a century before this was struck down.
The current players organization, the Major League Baseball Players Association, was formed in 1954. It remained in the background, however, until the players hired Marvin Miller in 1966 to head the organization. Hiring Miller, a former negotiator for the US. steel workers, would turn out to be a stroke of genius. Miller began with a series of small gains for players, including increases in the minimum salary, pension contributions by owners and limits to the maximum salary reduction owners could impose. The first test of the big item – the reserve clause – reached the Supreme Court in 1972.
Enter Curt Flood.
Flood was traded from the Cardinals to the Phillies in 1970. Flood however, did not want to move and informed both teams and the commissioner he had no intention of leaving. Then Commissioner Bowie Kuhn ordered Flood to play for the Phillies or don’t play at all. Flood chose the latter. He then sued MLB, the case eventually ending up in the hands of the Supreme Court in 1972, for violation of antitrust laws. The court sided with Major League Baseball. The court acknowledged that the 1922 ruling that MLB was exempt from antitrust law was an anomaly and should be overturned, but it refused to overturn the decision itself, arguing instead that if Congress wanted to rectify this anomaly, they should do so. Therefore the court stood pat, and the owners felt the case was settled permanently: the reserve clause had once again withstood legal challenge. They could not, however, have been more badly mistaken. While the reserve clause never has been overturned in a court of law, it would soon be drastically altered at the bargaining table, and ultimately lead to a revolution in the way baseball talent is dispersed and revenues are shared in the professional sports industry. While Flood lost his legal battle the players ultimately won the war, and are no longer restrained by the reserve clause beyond the first two years of their major league contract. In a series of labor market victories beginning in the wake of the Flood decision in 1972 and continuing through the rest of the century, the players won the right to free agency after six years of service, escalating pension contributions, salary arbitration (after two to three seasons, depending on their service time), individual contract negotiations with agent representatives, and more.
Free Agency changed the landscape of the industry dramatically. No longer were players shackled to one team forever. Now they were free to bargain with any and all teams. The impact on salaries was incredible and the impact on fans? Well that is still debatable. Many fans long for the old days when a man played baseball for love of the game but again, baseball is a business not a game.
1981 was the first time in history professional sports saw a strike in mid-season. The strike was called by the players association with owners being on the receiving end of much of the blame. Only one issue needed settling to avoid a work stoppage, but it was a heavyweight: Free agent compensation. The owners demanded compensation for losing a free agent player to another team. The players maintained that any form of compensation would undermine the value of free agency. Clarence Raymond Grebey Jr., negotiated for the owner and Miller again for the players. Mr. Grebey succeeded in averting a strike in 1980 by postponing the issue of free-agent compensation for a year. But the players did strike on June 12, 1981 with play resuming August 10th. Players lost $28 million in salaries. Owners lost $72 million, even after collecting $44 million in strike insurance. Fans were deprived of real and true pennant races due to the arrangement of the “split season.” The Reds and the Cardinals, despite having the best records in the NL, were not in the playoffs and teams like the Royals with a below 500 record were. The resulting compromise was the free agent compensation draft, which functioned for the next four years .
To be continued…..