Player Salaries and their Relationship With Ticket Price

baseball_money

In 2005 the Associated Press conducted a study to figure out what Americans thought the biggest flaw was in baseball. Is it the length of the season? The relatively slow pace of the game? Nope. The number one answer, garnering 33% of the vote was player salaries. In 2012 the average salary for a player on the Opening Day roster was $3,440,000. In 1990 the average salary was $578,930. Let’s go back a little further just because we can. In 1976, the first year of free agency, the average MLB player salary skyrocketed to $51,501. I say skyrocketed because prior to the implementation of free agency the average player salary was less than $30,000 a year mainly due to baseball’s reserve clause which forced players to sign for whatever the team would offer.

Player salaries aren’t alone in their quantum leap in price. Ticket salaries, as most fans are acutely aware, have soared since 1976. For the 1976 season the average baseball ticket would run $3.45. In 2012 the average ticket would set you back $26.96. Any armchair economist can tell you the price increase has to do with inflation. Ok well, calculate inflation, $3.45 in 1976 has the purchasing power of $13.73. That leaves 50.92% of the ticket price left unexplained.

Well economists have the answer for that. MLB owners, like any other business owners, set their prices based on what will make them the most money. As player costs go up, the owners costs go up. Owners aren’t likely to eat that salary and have it taken out of their own pocket so it would make sense that they pass the price onto the public through ticket prices. However, until about 1990, ticket prices and salary price showed almost no correlation. Since 1990, ticket prices and player salary show a direct connection. So what happened? June 5th, 1989, the Toronto Blue Jays open the SkyDome, baseball’s first “mallpark”. The begining of the $7 hot dog and luxury suites. The SkyDome was built for one reason: to make money, and boy did it. The Blue Jays needed just two years to crack baseball’s 4-million mark in single season attendance, the first team to do so. Seeing the success of the Blue Jays, every team wanted to jump on the mallpark train. Mariners owner Jeff Smulyan marveled at the SkyDome saying “you take the suites, the signage, throw the media on top, and you have an economic juggernaut. As bigger and better ballparks began popping up all across the country owners quickly realized that fans would pay unprecedented prices for a fancy stadium and over priced concessions.

So new ballparks and fancier stadium amenities contribute to a huge increase in ticket price because fans thought they were getting more out of their ticket. Well not every team moved to a new ballpark or renovated their current ballpark, but their ticket prices still went up. Why? It’s a fairly simple answer really, baseball’s popularity has risen. The popularity of sports in general has risen. With fantasy sports, sports channels on TV, and huge, attractive stadiums, the popularity of sports has never been higher. A simple supply and demand case here, more people want to go to sporting events, which allows owners to raise the price of tickets because people are willing to pay for it.

So next time you find yourself complaining at the bar because you can’t afford to get to the ballpark, don’t blame player salaries. There is way more to ticket price than player salaries. Remember, when it boils down to it, baseball is a business. Owners, like any other good business owner, are just trying to maximize profits, and that is exactly was has happened. Major League Baseball revenue has gone from $1.35 billion in 1990 (the SkyDome’s first full season) to a whopping $7.5 billion in 2012. So if you want to pin the blame on rising tickets prices, it’s better to blame baseball fans’ love affair with eating hot dogs in luxury suites at lavish ballparks than it is to blame the player’s salaries.

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5 comments

  1. baseballtrashtalkin

    Very interesting perspective on salaries guys. Most young fans do not remember the reserve clause and the players fight for free-agency. It is one of those forgotten nuances of big league ball. Gonna share this one! Nice write-up.

      • baseballtrashtalkin

        Nice looking blog Alan. We have followed as well and would like to share your your stuff with our readers as well if you don’t mind. All writing of course is attributed directly to the author. Getting slammed over here and its tough keeping up with 30 teams…

      • Alan Luken

        By all means feel free to share our posts just as long as you give our guys credit. I know exactly what you mean about getting slammed, it’s tough

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