Major League Baseball FAILING ECONOMICS 101

March 12, 1995|By JOHN B HOLWAY

Back when I was a sophomore in college taking Economics 101, I was taught that if a businessman buys a widget-maker for $100, he should expect to make at least $100 worth of additional widgets. If he doesn't, he'll soon be an ex-widget-maker.

I've been thinking about that a lot during the baseball strike.

I keep thinking: The Baltimore Orioles pay Cal Ripken Jr. $7 million a year. How the hell does he earn $7 million in additional income for them?

Assume that the average fan pays $20 for a ticket plus concessions. Then $7,000,000 divided by $20 equals $350,000. To paraphrase George Steinbrenner of the Yankees, that's how many extra fannies Cal would have to put in the seats every year. That's 4,300 extra fans every game.

Does he?

Probably not. The Orioles already fill every seat in the stadium.

Well, he helps them win games, then.

Not really. He's quite average as a clutch hitter. How often does he leave runners in scoring position? How often does his heavy hitting come in losing games or one-sided wins?

I don't mean to pick on Rip particularly. He's no different from Barry Bonds, Ken Griffey Jr., Cecil Fielder, Jose Canseco, or most of the other big-money stars. How many of their home runs come in the eighth inning after the game has long been decided and the pitcher just wants to throw strikes and get it over with?

Mr. Fielder makes $35,000 per game ($9,000 per at-bat) for the Tigers. With the score 18-2, he'll smash a 500-footer over the roof for you. But his bat goes strangely limp when it's 2-2 in the sixth.

Mr. Griffey especially was an all-American out in the clutch, which is why Seattle was the second-worst team in the American League despite his 40 homers and its relatively generous payroll.

But let's assume that Cal starts slashing long line drives into the gap when the game is on the line and leads Baltimore to the pennant. How much extra money will that bring into the Orioles' coffers?

Probably nothing. According to Financial World magazine, in 1993, the last time there was a World Series, the two Series teams, Toronto and Philadelphia, broke even financially. (The Phils dispute that, saying they made a $6 million profit on the year.)

The Giants and Dodgers, the two biggest winners in the game that year, claim they barely stayed above the red ink. Far from making a profit, they spent their profits trying to get into the Series -- and failed to do it.

If we can trust the teams' reports, 10 of them lost money in 1993. (Financial World says it was eight). The biggest profit-maker was Baltimore at $27 million.

However, almost certainly every club did worse in '94, except probably Cleveland and Texas with their new stadiums. That's because each team lost $8 million when the CBS-TV contract ran out.

Subtracting $8 million from each club's '93 bottom line would leave only three in black ink, 23 in the red, and two (Atlanta and St. Louis) that broke even in '94.

The moneymakers:

Orioles $18 million, estimated.

Yankees $11 million.

Rockies $6 million.

Cleveland and Texas probably also finished in the black, for a total of five out of 28.

No wonder Peter Angelos can afford to be a maverick among owners: He's got a kitty stashed away, which Houston, Kansas City or Pittsburgh don't.

H

And the Orioles are going to raise ticket prices in '95.

Popular and stingy

Baltimore is second only to Toronto in total attendance in the American League.

It's also the stingiest team in the league. Last year, 1994, the O's spent only $8.90 per fan on player salaries, even counting Mr. Ripken's. The other $11 went into the owners' bank accounts.

By contrast, Kansas City, with about half the Orioles' attendance, spent $24 per fan to give its customers a good team.

San Diego claims it spent $20.30, or practically every cent it took in at the box office.

Thus, it's no surprise that the Orioles made the biggest profit in the majors in '93 -- $27 million. San Diego lost an estimated $4 million and the Royals lost $13 million, the most in the American League.

More for the money

Only two National League teams were more tightfisted than Baltimore: Florida and Colorado. The Rockies, with the biggest crowds in baseball history -- averaging 58,000 a game -- spent only $2.80 per fan to pay good players for their customers to watch. Florida spent $7 per fan.

That explains why Colorado made the biggest profit in the National League in '93, an estimated $14 million. Florida was fourth with $6 million.

The three most generous teams in the American League that year in terms of payroll dollars per fan were Kansas City, Detroit and Oakland. All three lost money. The four most generous in the National League were the Mets, Pittsburgh, Cincinnati and Houston; they all also lost money.

Cheapness pays

The two most niggardly in the AL, Baltimore and Cleveland, showed a profit. The five stingiest in the NL -- Colorado, Florida, St. Louis, Philadelphia and Los Angeles -- all reported turning a nice profit.

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