The Economic Woes of Pro Sports; R. Keating

THEFREEMAN IDEAS ON LIBERTY The EconomicWoes of Pro Sports: Greed or Government? by Raymond J. Keating B eyond labor strife, two issues particularly annoy pro sports fans today-exorbitant player salaries and city-hopping by teams. Player salaries that seem wildlyout of kilter have been bothersome for some time. For example, the average Major League Baseball player reportedly earned $1.2 million dol lars last year. Payrolls averaged about $32 million per team. The Montreal Expos were considered cheap-their payroll was only a bit more than $15 million, compared with the New York Yankees' top payroll, reportedly exceeding $60 million by year's end. Almost as irksome are team owners who move, or threaten to move, their teams from city to city. Art Modell's recent uprooting of the NFL's Browns from Cleveland to be come the Ravens of Baltimore is the most publicized example-though actual and threatened moves have spread into a mini plague in pro sports.

Fans regularly identify private greed as the source of these annoyances. However, the true genesis of these problems is government action. In this instance, federal, state, and local governments contribute to the mess. At the federal level, antitrust legislation serves as one culprit in the city-switching games played by teams. Pro sports leagues Mr. Keating is chief economist with the Washington, D. C.-based Small Business Survival Foundation. 27 have been classified by government officials as monopolies, and are therefore subject to antitrust regulation. This makes it all but impossible for leagues to exert any control over team movements. If a league wishes to stop a team from picking up and moving to another city, it faces an expensive and prob ably losing litigation battle. The exception to this has been Major League Baseball, which operates under an antitrust exemption, and indeed, baseball teams remain far less mobile than, for example, NFL teams.

In reality, pro sports leagues can in no serious economic way be considered monop olies. Leagues are nothing more than part nerships competing for consumers' entertain ment dollars. Members of Congress often remind Major League Baseball how lucky it is to be granted an antitrust exemption. And baseball is indeed lucky to be granted a reprieve from congressional economic igno rance. Antitrust regulation stands on highly precarious ground even in more seemingly simple cases. On the field of pro sports, it lands clearly out of bounds. All pro sports leagues should be exempt from antitrust regulation. The effect of this action would allow leagues to be run as the partners see fit, including the power to stop team movements that hurt the sport. At the state and local levels, government subsidies boost player salaries and also en28 THE FREEMAN • JANUARY 1997 courage team mobility. These subsidies take the form of taxpayer-financed stadiums and arenas.