Baseball: The Components of Profit

However much baseball promoters may indulge in political maneuvering and factional rivalries, they have no choice in the final analysis but to cooperate. They are in the business of selling baseball games and, unlike operators of more conventional enterprises, they cannot create and market their product independently because a ball game can be staged only in conjunction with another team. In effect, a baseball game is, as the economist Simon Rottenberg has suggested, two companies producing one commodity. This situation makes the baseball owners at once competitors and partners.
It is also necessary that opposing teams match each other in skill as closely as possible if they are to arouse maximum consumer interest in their product--a fact that baseball promoters learned early. They also found that when teams from different cities were pitted against each other, the illusion could be created that each team symbolized the city in which it was located, and the local residents, identifying with "their team," would channel their civic pride and personal sentiment into the game. Carried away by fervid partisanship and imaginary ownership, the baseball fan would forget he paid money to watch professionals play for money in the interests of promoters.
Baseball operators soon discovered that these emotional drives and urban rivalries could be quickened and sustained, in season and out, with regularly scheduled games among a group of teams in the context of a pennant race for a league championship. Such a continuing series of games put on day after day fed and preserved interest by dangling the fans between hope and despair as their adopted heroes (few, if any, were of local origin) battled the hated rivals.
Otherwise, games would be one-sided, the pennant race would become lopsided, and interest would fade, to the detriment of attendance.
How did the owners work out their dual problem? A tempting method of guaranteeing close competition is establishment of the "syndicate ball" already mentioned: the clubs would be lumped together under common ownership; then all the players would be pooled and divided evenly among the clubs. The difficulty with such a system is that it casts doubt upon the genuineness of competition. Another extreme solution is to establish each club under completely independent ownership and permit no exchange of players among clubs. The disadvantage of this arrangement is that the wealthier and more skillfully managed clubs might outstrip the others, again to the detriment of real competition.
To avoid the drawbacks of both systems, pioneer baseball promoters gradually patched together a serviceable, albeit imperfect, solution. Declaring for honest competition, they rejected syndicate ball by confirming separate ownership of clubs, and in time specifically prohibited anyone from holding stock in more than one club in a league. On the other hand, to counteract the disadvantages of unbridled competition, they agreed to cooperate in a number of restrictive practices. Of these, the reserve rule, territorial rights, and the division of gate receipts have already been described. Others were the waiver and draft rules, designed to give all clubs an opportunity to acquire at least some players at non-competitive prices; ceilings on player salaries, particularly in the minor leagues; and a limit on the number of players each club could control.
These restraints on free competition, aimed at braking the financial power of the wealthier clubs, have fallen far short of their avowed objectives because owners either violated or circumvented some of them and clung to others too rigidly, with the result that most of the pennants and wealth have gone to a few clubs.
The partner-competitor relationship among baseball entrepreneurs is often cited to justify exemption of the industry and its restrictive practices, which the owners claim are essential to it, from the application of the anti-trust laws. However, the difference between conventional industry and baseball is not as great as might be supposed. Modern American corporations also work together closely. The various specialists employed by them meet in their own associations and exchange information on an extensive scale. Sometimes this cooperation becomes so cozy and collusive that the Federal Trade Commission finds it necessary to step in with penalties for restraint of trade. The difference between cooperation in American industry and in baseball is that in the former it is merely advantageous, while in the latter it is essential--which is still not to say that the anti-trust exemption is necessary, let alone desirable.
The chief income of the baseball industry derives from ticket sales. Practically all other sources of income are offshoots of attendance: the peddling of refreshments through direct or indirect operation of concessions, the sale of advertising on scorecards and ball-park fences, and, more recently, the income from radio, television, and parking lots. Rental of the park for other functions is another source of remuneration. Although gate receipts are still the life blood of the industry TV receipts have swelled steadily in recent years to the point of rivalling gate receipts in importance. There are even those who go so far as to predict that eventually television income will supplant gate receipts, and the teams will perform quietly among themselves in deserted stadiums for TV audiences.
Attendance in turn is determined by a host of variables. For purposes of simplicity, they may be separated into two broad groups: those extraneous to the business, which stem from the general economic, social, or cultural climate prevailing; and those inherent in the business, over which the owners, working individually and collectively, can exert a direct measure of control or influence. These two sets of factors are not sharply distinct; in fact, there is considerable interaction between them. For instance, the community determines whether Sunday ball is permissible, sometimes with an assist from baseball men; but the baseball operators decide upon the number of Sunday games and which clubs are to get how many. The same is true of night baseball. Technological advance makes it possible, but it is for the owners to say how many night games will be sold.
The outside forces that impinge on baseball attendance are more delayed in their effect and apply more to Organized Baseball as a whole than to clubs individually. Population growth belongs in this category, particularly if the increase is reflected in cities, since it is only there that a mass audience can be recruited for commercialized spectator amusements. The general level of prosperity, another factor, will sway the response of potential customers, for it involves wages, hours, disposable income, and the amount of leisure available. And war, of course, is bound to make itself felt in every corner of society.
Attendance is also affected by technological changes and improvements. As Professor John R. Betts has pointed out, those who have sought to explain the evolution of sports have usually emphasized the role of individuals while largely overlooking the influence of technology. The very concept of establishing professional baseball leagues among distant cities and playing a regular schedule of games would have been at best a dream were it not for the railroad networks of the nineteenth century and the airplane of the twentieth. A mere mention of the telegraph, electric light, airplane, automobile, and television is a reminder of the profound impact of technology on the business of selling baseball games. Or take rain, cold, or extreme heat, once fickle but unmistakable influences upon attendance; technology has increasingly reduced or eliminated their influence over the gate with such developments as improved methods of draining the playing fields, electric blankets and jackets for the players, artificial turf, and the domed stadium, making play possible in all weather, day or night. Now the computer is being introduced for such jobs as arranging league schedules and for handling ticket sales.
During the era of the National Commission, most of these attendance factors favored Organized Baseball. Generally good business conditions provided a sure foundation for the industry. Those were spacious, buoyant, and, on the whole, prosperous years for America. A prodigious $100 billion increase in national wealth brightened the first two decades of the twentieth century. Most classes shared in these gains, for although the cost of living rose, real wages edged slightly higher and the work week in non-agricultural industries declined sharply; most important, full and steady employment generally prevailed. Still, many workers, especially those unorganized, toiled under harsh conditions. In steel, for instance, about 30 per cent of them continued to work a seven-day week, and uncounted families still living in poverty further detracted from the overall economic advance. Then, too, short though severe depressions in 1907 and 1914 marred the era. But unless protracted, depressions do not seriously affect attendance at ball games. In fact, the unemployed may spend some of their enforced leisure watching this relatively inexpensive form of entertainment. World War One set attendance back temporarily, as did baseball's own economic war with the independent Federal League.
Other things being equal, the greater the population the larger the attendance at ball games. Moreover, population growth coincided with economic expansion in those years. By 1920 the total population in round numbers reached 105 million, as against 76 million in 1900. About 70 per cent of the people lived east of the Mississippi, a fact that gave some justification to the existing geographic location of major-league clubs. But would it always make sense? We can now see that the Pacific Coast's 73 per cent gain in those decades already promised a negative answer.
More significant for Organized Baseball was the unceasing movement of people from the country to the city. In 1900 approximately 40 per cent of Americans were city dwellers; by 1910 the proportion was nearly 46 per cent; and by 1920 America's urban and rural population were about equally divided. A craving for amusement and excitement accounted in part for the steady shift, and the baseball promoters, among others, capitalized on it.
Within the growing cities the elevated railway, the electric trolley car, and the subway transported the multitudes to the ball parks. The subway was just beginning to share the load. New York broke ground for one in 1900, and Boston, first to go underground, had already completed a short line. As the subway lines were steadily extended, they naturally carried more fans and got them there faster. They were to be of prime strategic importance to the less accessible parks, as they were to the Yankees when the subway opened a station at 168th Street, nearly at the doorstep of their old Hilltop grounds.
The trolley companies, too, reached farther and farther out, making suburban living feasible and extending the ball clubs' metropolitan markets along with the car tracks. In some areas, like Western Pennsylvania, Indiana, and Michigan, trolley lines hooked together strings of towns often as much as twenty-five miles apart. Such cheap and rapid transportation prompted the formation of trolley baseball leagues, with players and fans alike using the car lines to get from town to town. These leagues also provided a haven of sorts for professionals on the downgrade and a stimulus to youngsters to play ball.
In the large cities, the long-standing affinity between streetcar lines and professional ball clubs continued. Traction companies sometimes arranged for excursions to the games at special rates. Owners were aware of their dependence on the trolleys for bringing the fans to their gates. When Ban Johnson was trying to expand his new American League into New York, he sought backing from influential New Yorkers by presenting them with the financial statements of streetcar lines, showing their volume of business in taking fans to and from games. Barney Dreyfuss congratulated himself on locating his new park adjacent to sixteen car lines, which could add large cars and trailers on big days, although in a few years he complained that inadequate service was costing him money.
The customary cooperation between the railroads and professional ball increased. The roads were always eager for the major leagues' business, and in that era they realized an estimated $60,000 a year transporting teams. The railroads, like the trolley companies, offered cut-rate excursions to the ball games for fans from more distant areas. They advertised these package deals in newspapers that circulated in territories traversed by their lines or by means of fliers sent directly to the postmasters for display in towns lacking newspapers. The baseball clubs obliged by supplying advance information about special attractions, such as a Sunday doubleheader with, say, the New York Giants, always a good crowd-puller. A sample ad in the Lexington ( Kentucky) Leader in 1908 offered a round trip to Cincinnati for $1.50 on a special train leaving Lexington at 7:30 a.m. for a game between the Reds and Pittsburgh. Another railroad executive expected to bring from 1500 to 2000 people to Cincinnati on July 29, 1903, many of them making the trip just to see the ball game. That section of the country "is base ball crazy," he said, and he chose the July date knowing that the farmers would be through with their most urgent work at that time. The bumpkin character of the rural population in those days is attested to by the fact that the railroad prepared guides to help those bewildered by city noises and streetcars" to find their way around the city.


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