plavix drugs cheapest nizoral shampoo online buy sildenafil citrate tablets canadian prescriptions mail vermox mg buy how to take combivent proventil prescription assistance program buy digoxin without a script american voveran sr overseas foreign pharmacy legit how much does prandin cost exelon share price history bactrim on line low price estrace uk low dose amitriptyline weight generic liv paypal is there any ayurvedic medicine for abortion online pharmacies south africa phexin pas cher zebeta to buy in australia bromocriptine mesylate tablets stieva-a side effects buy bentyl 20 mg safe place order ophthacare propecia legal us cheap clozaril usa online forum prednisolone cod next day metformin canada product monograph luvox tablets dosage usa pharmacy cialis brand levitra sale cialis pill best site to buy dilantin cheap acticin us order aceon tablets buy cabgolin 0.5 mg dilantin uses and side effects common birth control pills brand names best price for real cymbalta best india online pharmacy dostinex bonus pills cephalexin online store doxycycline tablets and alcohol ciplox generico online mirapex shopping how to take proventil mg flovent coupons gsk menosan online pharmacy uk singulair 10mg wiki fucidin crema 2 i pill allopurinol website allopurinol refill pack percentage serious side effects accutane where do i buy luvox going off strattera side effects valtrex herpes simplex keratitis buy acivir pills us drugs approved avodart vs propecia tesco slimming aid tablets vytorin for men sale in uk zyprexa 5 mg tablet how to buy with paypal with credit card missed sustiva dose noroxin uk buy triamcinolone acetonide cream usp 0.1 ringworm lozol generic wikipedia drugs buy abilify 20 mg prescription viagra cialis levitra from canada cabgolin legal in england minocin ordering no prescription hytrin spain how to by cordarone online fluconazole over the counter us what kind of medicine is zyprexa buy generic claritin d 24 hour side effects of abilify withdrawal albendazole pill shortage no prescription zestril ortho tri cyclen on line in the canada diabecon canada prescription medrol dose nitrofurantoin macro 100mg cialis store will etodolac get you high exelon capsules can you take brand viagra daily buy cleocin gel 40 albuterol sulfate side effects babies atorlip-5 mg tablet where does synthroid come from flagyl to treat diarrhea dogs cheap levitra from canada nizoral shampoo shelf life buy kamagra online india pharmacy buy femcare in singapore buy penicillin online no prescription uk order aristocort 120 mg buy kamagra gold 15mg online better than ashwagandha meclizine pas cher italie ultra low dose viagra plus lexapro 20 mg cost walmart betapace generic 2013 drugs what does too much zyrtec do provera fast usa cheap accutane uk what is cozaar drugs canadian criminal code controlled drugs and substances act can buy accutane online viagra cialis trial packs caverta cost of viagra in indian market viagra tablet price in dubai prescription estrace what kind of medicine is biaxin birth control pills emsam where to buy spacers for inhalers atacand 8 mg prospect buy remeron 100 1 corinthians 13 nrsv metformin rxp do you need rx betapace mas'c' elocom ulotka houses for sale in pinebrook artane buy cymbalta mg online for what is saw palmetto called in hindi can cialis and viagra be taken together buy mentax online from usa lopid order in the us zyrtec from india hydrea usa tenormin pills buy micardis 80 mg cost how much is a prescription of adderall without insurance propecia safe take what is bismuth citrate used for can we trust himcocid online no prescription antibiotics for cats requip drug store online zovirax pump reviews ethionamide generic reviews buy lopid tablets us pharmacy mexico lipothin what is norvasc nizoral 2 no prescription what part of the scalp does propecia work on long term side effects of aciclovir herpes zoster valtrex dosage buy amaryllis plants prescription accutane comprar kamagra gold original en madrid acheter prednisolone ordering grifulvin v here in canada how long does it take for cipro to cure a uti side effects of reglan in babies brafix tablets uses is erythromycin ointment over the counter cost of allegra d at walmart cost of depo provera planned parenthood what are the side effects of pulmicort buy cialis in usa online claritin reditabs c10 generic moduretic safe blue pill red pill tumblr best site for prilosec topamax vs generic for weight loss walmart actos prices cheap aciphex 20 mg diovan on the internet overnight generic buy metoclopramide online atacand plus doses ambien cr side effects fertility pills for women in south africa buy zyban without rx routine use of mebendazole in pregnancy will alcohol affect zithromax zoloft price per pill celexa 10mg for anxiety what is metformin pills high dose lasix in acute renal failure cheapest actoplus met paypal does medrol dose pack help back pain cheap rx glasses nyc are hungry man meals healthy tronchetti provera 1920s 100 mg zyvox where do i buy viagra over the counter best betapace prices buy carafate online usa desyrel recommended dose ordering yasmin seroquel xr drug classification hydrocortisone tablets 10mg side effects buy zestril online india estradiol gel weight gain images remeron pills purchase code supplied by value pharmaceuticals hay viagra natural para mujeres where to buy feldene with mastercard methotrexate 10 mg week rumalaya forte online bestellen lioresal next day delivery allopurinol pills asacol mail order india buying luvox in manchester how much does augmentin cost order lipitor online without rx buy pariet inhaler canada find a vet vipps online pharmacy buy amaryl 20 how much is generic singulair at walmart chloramphenicol australia price canadadian healthcare reviews coumadin pills color necesito comprar cytotec en venezuela ms in pharmacy in canada universities parlodel online usa diprosone lotion for hair growth buy nolvadex 200 angela women;s ginseng usa billig kytril online kaufen order plavix without prescription healthcare alliance prescription card scam can you buy abilify over the counter in germany purchase effexor xr on line in uk best pain meds for shingles clomid without prescription serevent pills sweat diclofenac paracetamol tablets india buy phenamax boots aldactone online with out prescription relafen 750 reviews generic plavix us zyrtec d and alcohol buy betapace mg order v-gel online how to use imitrex nasal clomid supplier in uk levothroid lawsuit buy amitriptyline have no prescription cardura medicine isoniazid uk online buy bupropion sr india ordering minomycin buy liposafe online from usa buy indian viagra online uae mevacor maximum dosage how to by albenza online keflex 500mg used for online pharmacy without prescriptions reviews minocin order by phone buy protonix quick what are the side effects of long term use of citalopram isoptin tablets buy buy cozaar online with mastercard cheap luvox online cheapest place to buy met rx deltasone reviews and dosage anafranil drugstore buy benemid with paypal what type of seizures is keppra used for medicine augmentin duo forte how to buy bentyl terbinafine 250mg side effects prednisolone 5mg tablets asthma purchase hydrochlorothiazide in mexico como comprar livros eletronicos na amazon buy allegra d generic indian viagra name is it safe to order suhagra lopid tablets for purchase brand advair diskus without prescription canada where can i get pills for chlamydia is mail order nitroglycerin safe what for glycomet tablets used what is the daily dosage for propecia generic aricept price bactrim 480 mg how can i get doxycycline over the counter amantadine 100 review long term side effects of elocon buy furosemide 500mg online aristocort online forum low dose birth control mircette glucotrol xl maximum dosage furosemide spain viagra generika per nachnahme bestellen hoodia shoppers drug mart crestor interaction with other drugs twitter alli trippy where is lithium found in afghanistan flonase 100mg cheep prednisone for dogs dosage for allergy sex pills for women over the counter cost of emsam purchase rogaine 5 online does alli work diet pill discount coupons price of femara tablets zyprexa for men sale in uk erectile dysfunction viagra generic for zetia 10 mg ethionamide on line no script tricor from europe levitra without prescription walmart cheap viagra sublingual 40 mg retin a 0.1 janssen cilag order meds online no prescription florida trandate fish antibiotics doxycycline tamsulosin 0.4mg capsule can you buy zovirax tablets over the counter discount elimite discount no prescription order carafate online non prescription cytotec much does generic accutane cost canada drugs avalide with prescription without purchase abilify online us online pharmacy no prescription femcare shatavari shelf life low dose cialis safe buy lamisil 50 donde puedo comprar hydrochlorothiazide donde comprar viagra en colombia buy aricept in australia best place to order nolvadex in us generic drug for avapro when will diovan hct become generic discount alphagan tung shueh pills cow;s head brand buy keftab online from usa overnight 500mg brand amoxil accutane class action lawsuit canada can you get high off omnicef target discount pharmacy card order zoloft online no prescription with a visa fluoxetine online ordering order ciprofloxacin 500 mg luvox dosage forms alli 84 price comparison que es sulfato de amantadina buy lexapro 200 alli over the counter diet pill how to import revia no prescription needed kamagra purchase lamictal coupons epilepsy zithromax 100mg tablet what is the safest generic viagra canada buy accutane without prescription order nizoral online no presctiption tetracycline price online viagra prescription generic uk paypal ashwagandha can you get high off doxycycline hyclate 100mg can you buy domperidone usa compare prices zestoretic buy snovitra super power australia albendazole where can i buy it citalopram how long do they take to work genuine trazodone 100mg comprar evista en argentina can u buy alli in canada champix and alcohol side effects quanto costa elocon pomata citalopram pas cher endep side effects australia what does motrin do cheap plavix 75mg online cialis on line pricing in canada buy tramadol online overnight delivery buy doxazosin with visa canadian lamictal tablet ditropan 100 review betamethasone buy norvasc singapore how to buy hydrochlorothiazide in london buy lithium 5 cialis super active drug in usa pharmacy can you buy over the counter in australia zovirax online como comprar levitra sin receta retin-a 0,05 buy uk viagra canada head office prices tadapox without script clomid usa no prescription finally erection medication where can i buy abortion pill in the philippines lioresal 40mg Purchase cozaar 12.5 mg comprar capoten en argentina resources for vytorin amoxicillin pregnancy dosage revatio vs viagra cost pletal 50 mg 60 tablet fast cefixime delivery stieva-a 0.050 para que sirve what drug category is norvasc compazine generics levoxyl side effects como usar serophene 50 mg glimepiride 4 mg picture erythromycin discount no prescription aleve generic brand cheap viagra pills generic generic name for sarafem sawyer permethrin uk lisinopril on line purchase risperdal tablets uses propecia generico in italia buy venlor online cheapest price on bupropion side effects of voveran d buy cardizem mg online for drug market order lithium asthma inhaler with prescription motilium and breastfeeding zofran 100 canadian elimite cream best price female viagra purchasing compazine online uk torsemide pas cher italie sominex limited india order non generic benzac starting topamax at 100 mg western drug gyne-lotrimin buying pulmicort in manchester uses of tegretol tablets cost of cialis south africa mail order generic aceon albenza capsules sildenafilo teva 50 mg best piracetam dosage kamagra chewable online pharmacy uk how to order rumalaya forte online low price cialis professional uk purchase tetracycline cheap antibiotics cheap crestor united states kamagranow.co.uk where to buy cheap generic lipothin price increase emsam can order premarin canada penegra 50 generic colospa buy canada anafranil prescriptions order aricept cheap augmentin dds dosage for children lortab 5 vs 7.5 to buy maxaman in uk cialis jelly suppliers overseas best place buy hydrochlorothiazide buy norvasc online reviews buy dutas mg online buy nootropil 1200 mg buy dramamine liquid depakote online pharmacy shipped to canada cleocin medication online ampicillin stock concentration vermox for dogs buy what is best for back pain aleve or advil retino-a cream 0,05 where to get low combivent comprar keftab portugal buy cheap prescription abilify online overseas pharmacy no prescription sinequan levitra plus pharmacy vente de flagyl er au quebec albuterol sulfate inhalation aerosol side effects robaxin online pay paypal florida minomycin dapoxetine tablets in india ovary pain after ovulation on clomid sale probalan mgb prinivil express canada buy generic differin gel elocom buy uk desyrel drug schedule levofloxacin generic for levaquin dosage fluconazole thrush how to order wellbutrin sr online legal buy amoxil online canada levlen coupons buy amantadine perth australia canadian pharmacy cephalexin metoclopramide lowest price triamterene india legal buy capoten online canada pcos clomid weight gain prednisona dosis adultos ginseng next day delivery vytorin weight gain buy prednisone online mexico no prescription nizagara capsules buy propecia online canada no prescription capoten sold over counter pfizer zyvox assistance rsvp program what does generic bentyl look like paxil cost in canada valacyclovir hcl generic generic from fluoxetine purchase lisinopril hctz neurontin overnight voltaren tablets for back pain where to requip buy books online australia free shipping best place buy trileptal zyvox shipping overseas treating acne scars after accutane buy lamictal 200 how to order ciplox how to get benzaclin cheap clomid where to purchase menosan pas cher biotech usa hoodia gordonii how much is toradol without insurance dapoxetine tablets 150 mg can you buy fucidin online buy prednisolone online in uk remeron next day delivery aldactone bodybuilding women what is citalopram tablets for liposafe shop atarax without a prescription from mexico where to buy motilium online india cheap remeron 40 mg what is ciplox-d eye drops used for generic celexa us tulasi tablets side effects differin coupon code paxil drugs forum best place buy acticin prazosin manufacturers india order vpxl online without rx ordering penegra clomid and pregnancy rates iui us online pharmacy no prescription valtrex what is seroquel classified as reviews on danazol do you need a prescription for diflucan in australia buy viagra london top 10 online actonel sites atarax pills online in the india cipro 55 sale propranolol tabletki 10 mg cipla medpro jobs cabgolin canada head office prilosec drugstore.com ortho tri cyclen online order proscar over the counter australia order nizoral cheap fluconazole interactions colospa suppliers overseas cheap haridra pills leflunomide arava psoriatic arthritis lipitor pharmacy india donde puedo comprar lopressor seroquel 25 mg tablet zen nerve pain meds for shingles no prescription midamor sale clomid 100 vs 50 cheap zovirax how to use voltaren emulgel walmart cialis price comparison what is the hcpcs code for depo provera cialis 5 mg price cvs where to buy alesse 28 fluoxetine hcl india z pack side effects heart generic sustiva safe best online pharmacy for viagra where can i get cialis professional funny viagra effects pictures power slim acai reviews acheter trileptal pas cher safe zebeta buy prednisone for dogs side effects sale indinavir casodex limited india buy alesse birth control canada yasmin ortho tri cyclen lo active ingredients why is there a shortage of acivir pills cialis online prescription uk prandin online cheap generic viagra online forum cytotec cheap uk pharmacy that sells rosuvastatin alavert in the uk cipla field call password revatio overseas can you buy citalopram over the counter
Home Biz of Baseball - Interviews Interview - Andrew Zimbalist - Sports Economist

Like Shoot to Thrill - An AC/DC Tribute on Facebook!

An authentic tribute of AC/DC that covers the best of the Bon Scott era and the best of Brian Johnson's material

Who's Online?

We have 1446 guests online

Atom RSS

Interview - Andrew Zimbalist - Sports Economist PDF Print E-mail
User Rating: / 2
PoorBest 
Written by Maury Brown   
Sunday, 08 August 2004 12:00

Andrew ZimbalistWhen the discussion of the economics of baseball are discussed in the media and beyond, most often you'll find Andrew Zimbalist in the mix.

This interview covers the debate over the public subsidy of stadium development, to territorial rights, especially as it pertains to the Baltimore/Washington, D.C. area, to the current revenue sharing system, plus more, Zimbalist covers all the bases.


The numbers are staggering.

Since 1992, when Bud Selig took over as Commissioner of Baseball, there have been 15 new or renovated ballparks. In the case of the new ballparks, all have had some form of public subsidy involved, totaling well in excess of a billion dollars when all is said and done and leases are fulfilled. This new stadium development is touted by MLB as being a panacea towards overall franchise success, regardless of the fact that many see franchise sustainability being coupled, in large part, to wins and losses as well.

With this large volume of stadia development has been the constant struggle to try to quantify the economic impacts of ballpark development within local, state and regional domains, and one of the most visible economists to speak to this current environment has been Andrew Zimbalist.

Zimbalist serves as Robert A. Woods Professor of Economics at Smith College and his resume is  peppered with consultation as it pertains to baseball. To Wendell, Chritton & Parks in the Florida State League/Florida Marlins arbitration case, to the Major League Baseball Players' Association in collective bargaining, to ABRY Communications in a baseball broadcasting suit, to the United Baseball League, to Krendl, Horowitz and Krendl in Ehrhardt v. Colorado Rockies, to the Portland Oregon Mayor's Commission on bringing another professional sports team to the city, the list is far too long to mention in this space.

To add to this, Andrew has several outstanding books on the economics of baseball. "Baseball and Billions: A Probing Look Inside the Big Business of Our National Pastime", and "May the Best Team Win: Baseball Economics and Public Policy" can be found on the desks of those ranging from politicians, to fellow economists, to baseball researchers.

The following interview covers several areas, from the economics of new stadium development, to the shifting of discretionary income as it pertains to this development, to the territorial claims by Orioles owner Peter Angelos regarding the possible relocation of the Montreal Expos to Washington, D.C., and possible ramifications to further relocation or expansion, to the overall health of small to mid-tiered markets under the current revenue sharing plan. Enjoy! - Maury Brown


BizBall: You’ve been following the economics of baseball for some time now. What has been the biggest fundamental change in how MLB conducts business over the last 10-20 years?

Zimbalist:
I would think that the biggest change has been the introduction of its revenue sharing system in 1996 and the extension of that system in 2002. Prior to that system the only thing that got shared in baseball was gate revenue. And in the American League they shared about 20% of gate revenue, and the National League about 5% of gate revenue. There was a program that they introduced in the 80’s to do some sharing in the American League of pay cable back then, but basically it amounted to just about nothing. So fundamentally out of all the revenue that got generated they only had either the 20% [shared] in the American League and roughly 5% in the National League; nothing else was shared.

And then when local television contracts really began to take off -- the Yankee contract that was signed with MSG back in 1988 was a 12 year contract worth $493 million over the period -- you had the emergence of TBS with the Braves and WGN with the Cubs, and the Mets had a big contract, the Red Sox got a big contract, baseball’s revenues became very sharply imbalanced.

And, the other thing that’s happening of course in the early 90’s is the introduction of the new stadiums, beginning with Camden Yards, or some people might want to date it to a year earlier in 1991 with the new White Sox stadium. But the retro-set architecture stadiums begins with ‘92 Camden Yards. Those stadiums for many teams ended up generating an extra $30 million a year for the team, so that together with the local television contracts and no revenue sharing meant that the revenue disparities between top and the bottom teams, which were actually no greater than $30 million back in 1989, all of the sudden exploded, so that by the end of the 90’s those disparities are up over $200 million. Or around $200 million, let’s say.

And in this context baseball introduced the revenue sharing system. I think it’s a really major change. It required a shift in political alignments, to get the big city teams to go along with that, to get Steinbrenner to go along with that, O’Malley at the time still owned the Dodgers, to get him to go along with it in ’96, to get the Chicago teams to go along with it, the Tribune Corporation, was a major political accomplishment. And they began sharing revenues, so I think that’s the big number, and of course as I’ve said elsewhere the system doesn’t work as well as it ought to because the incentives that are built into it are perverse, they’re backwards, they actually assess a higher marginal tax rate on low revenue teams than on high revenue teams. It therefore in my view has not done what it is supposed to do, which is to equalize payrolls.

BizBall: A common claim among economists is that spending on sports simply shifts spending from other entertainment options (movies, etc.). This theory assumes that most individuals have a finite amount of discretionary income to spend on entertainment. Some might argue that a high percentage of Americans have enough discretionary income to choose to attend most of the entertainment events that they would like to attend. If season ticket holders of an MLB team suddenly lost their franchise, would it follow that each season ticket holder would add 81 nights of other entertainment activities annually to their life?

Zimbalist: [laughter] Well, first of all, I don’t think that season ticket holders go to all 81 games. Most of them don’t, anyway; I think they end up sharing their ticket, or giving away their ticket to some other people, at least for some of the games. But no, I don’t think it follows that way, and look, I don’t think the proper argument is that there is a 1-to-1 trade off here. The argument is simply that for most people who go to ballgames they have a finite amount of discretionary income and there is a substitution effect working, but again, it’s not a 1-to-1 effect, maybe it effects 80% or 90% of the money that would otherwise get spent at the ballpark.
And it certainly is not the only basis for the argument that there is no positive economic impulse or developmental impulse from having a new stadium or a new team in your town.

One of the reasons is the substitution effect, but another very important reason is the leakage effect. Which is to say that if money gets spent at a ballpark, something like 60% of it on average goes to players, who have an average income of $2.4 million, and when money goes to those players, and most players don’t live in the town where their team is anyway, then the money leaks out, because a millionaire has a very high savings rate, much higher savings rate than somebody with ordinary income, thirty or forty thousand dollars, and that money they save goes into the world money markets, it doesn’t get spent at the local cities, and even more that’s true because the player doesn’t live in the city, so his permanent home is elsewhere, or if he has family elsewhere, a lot of the money gets sent back to the family.

And, also players are encouraged, and most of them follow the encouragement or the advice, they’re encouraged to save a lot because their life in baseball and their lifetime earning the mega-salaries is a very short one.

It’s not like what happens to me, an economics professor. I got into the business of being an economics professor when I was 25 years old and I could do that for decades, but for professional baseball players if you’re lucky you play 5 to 10 years and you don’t earn the mega-salaries your whole life. So, they’re encouraged to save a lot of money, and again the pattern is for the money to go into the world money markets and not to be spent in the local cities. So, there are leakages. And, of course, a lot of money goes to the owners and the owners have a similar pattern to the players, and those leakages are much higher than if the entertainment dollar gets spent at the bowling alley or restaurants, where the money ultimately goes to entrepreneurs who have a much more normal income, and who live in the local towns. So, very high leakages are another factor here. And, another factor still is that ballparks these days get financed with hundreds of millions of dollars of local tax money and if taxes go up then it means that that money is not being spent by consumers in other areas of the local economy. Either that or the city might rig -- I guess I’m not sure about this --either the services, and either higher taxes or lower services doesn’t help the local economy. So, if you put all of those effects together, the empirical research suggests that the expectation should not be that you get an increase in employment or an increase in per capita income.

BizBall: What about in cases where there are personal income taxes in some states? Wouldn’t there be money collected from the players and management in that framework?

Zimbalist: Yeah, there would be, but again the evidence is that the amount of expenditure that goes out of the public coffers in order to finance the debt service that they have to incur to build the stadium, or to improve the infrastructure, or both of those things, the amount of outflow is greater than the amount of inflow.

BizBall: Along the same lines, in the case of several cities, and possibly some new locations should relocation or expansion be considered, there are cities that border other states. Is there a case to be made that monies from bordering states cross over into these locales and therefore help the economies of these host cities via tourism?

Zimbalist: Yeah, sure, and in fact I made that case in part with the New York Nets leaving New Jersey and going into New York, in this case Brooklyn. So it can happen.

There are possibilities for, in essence, cannibalizing revenue across state lines.

And if what you’re interested in is the fiscal situation of a government on one side of the state line as opposed to the other side of the state line, yeah, there can be a shift in that way. It doesn’t end up producing a tremendous amount of difference, but there can be a small gain as a result of that.

It’s a different argument than an argument for regional development, though, because in terms of the overall metropolitan area the money is still in that area. But it might very well cross a political boundary and help one side of the boundary to the detriment to the other side.

BizBall: How much of the financial forecasting that MLB presents to the press and government do you feel is done to leverage the public in terms of stadium development and for collective bargaining purposes?


Zimbalist: Some of it. I tend to believe that those are not the main motivations today. Of course historically the other factor has been to hold on to the anti-trust exemption, or the  presumed anti-trust exemption, when they testify to Congress. But more recently I think the strongest motivation that teams have to color their financial picture is to avoid revenue sharing. That is to say, if you can push your revenue off your baseball books onto your media books or onto your stadium books, or some other, as in the case of the Chicago Cubs onto their premium ticket company, then you can avoid some of baseball’s revenue sharing taxes. So I think there are a variety of motivations to do that, but it’s hard to believe in this day and age that Don Fehr or Gene Orza or Mike Weiner are very misled by claims of penury that either Selig issues for all baseball or individual teams issue. Because they’ve been down that road and they know the game pretty well.


BizBall: On that note about dispersal of revenues, the Yankees and Red Sox have been talking about doing a merger of TV packages. Do you think this continues to blur the line for revenue sharing purposes?

Zimbalist: Well, first of all, that story is simply the product of our idiotic media. There’s no truth to that story.

BizBall: Could you elaborate?

Zimbalist: I mean, look, what happens in a situation like that is that there are two people who are having a conversation over a drink who are connected to either the Yankees or the Red Sox, and there’s a third person there, and this person happens to hear one of them who sort of throws out this idea that they might bat around for thirty seconds or something. So that third person then calls up his friend who’s a journalist and the journalist wants to break the story so he goes out and writes the story. But I don’t think there’s any factual basis to the story. I’ve spoken to owners on both sides and they disclaim any such notions and even if you just look at it logically it’s absurd.

Number one, baseball has television territories that it would violate, and they’d have to get MLB’s permission. Number two, they’d be inviting anti-trust scrutiny from the Justice Department if they tried to combine forces and get more leverage in the cable television market. Number three, any synergies they might get that would increase their revenues would then have to be shared between the two teams. Number four, the Yankees and the Red Sox play at similar times during the day, or at the same time during the day, very often, and they have competing claims on the time.

There’s just an infinite number of complications. And number five, and perhaps most importantly, the Yankees and the Red Sox have gone out of their way to develop a classic baseball rivalry, and if they start jumping into television bed together it totally undermines the perception of that rivalry. And quite apart from personality differences that might make it a complicated thing to do, I don’t think it ever made any sense, and it’s just one journalist trying to get a jump on a story based on a silly rumor.

BizBall: Peter Angelos has made quite a lot of noise about fan attendance and cable share being diluted for the Orioles should the Montreal Expos relocate to DC or Northern VA. Do you subscribe to those arguments?

Zimbalist: Well, I think he’s correct that there would be some dilution in his television ratings and some dilution in his attendance. Whether the reductions would be 5%, 10%, or 15% in each case, I don’t know. I don’t think it would be more than 15%. But basically I would say to him, “Tough noogies.” You’ve got two substantial media markets there and  you can host two teams in those markets. I mean, you might as well have Jerry Reinsdorf come along and say, “Hey, the Cubs dilute my revenues.” And that would be true, too. So Reinsdorf might as well go to Major League Baseball and petition Bud Selig, and say, “Hey, Bud, you’re my friend. I’ve supported you. The Tribune Company really isn’t your friend. Why don’t we just eliminate the Chicago Cubs?” And to me, logically, there’s not too much difference in those two arguments. Politically it might be a little different, of course, because it’s harder to eliminate a team that’s been around for time immemorial than it is to create a new team into a market.

But, D.C. used to have a team. In fact, they used to have two different teams, and I think it’s a premier market and they ought to have a team. And whether or not Angelos ends up effecting Selig in the ultimate decision by baseball, I don’t know, but certainly I don’t think that he should.

BizBall: Buried deep within the wording of a bill before congress is verbiage that would allow sports franchises the same ability of other business to write off 100% percent of their intangible assets, such as TV revenues, on an evenly divided basis over 15 years, as opposed to the current system which only allows for half of the assets. Beyond the huge windfall for sports owners for long-term investment, is this simply a case of having all businesses treated equally?

Zimbalist: No, it’s not.

First of all, you can’t amortize goodwill; that rule has changed, so businesses don’t get to amortize or depreciate all of their assets. Secondly, look, they might go for public relations purposes and say that this is to treat sports franchises the same as other businesses but the fact of the matter is that sports franchises, which might be valued depending on the league and the team anywhere from $100 million to $1 billion, don’t have many hard assets to establish that value. The main thing that a sports franchise has is a berth in a monopoly sports league which you could call goodwill, you could call it a going concern, and if you want you can somewhat falsely attribute it to television or other media contracts.

The IRS has always historically said that television contracts are non-depreciating assets or non-amortizing assets. They are always renewed. In other words, if I buy a car, it depreciates each year, it gets a little less valuable each year, that’s a physical deterioration that happens. But if I buy a baseball team and the baseball team buys a local television contract, if you go back and look at the historical records, when that contract is over there’s always a new one! And historically it’s always been a larger one. But whether it’s larger or not, the value is pretty much ongoing. Now in some cases something might happen that’s unanticipated, and then you might have an impairment of the asset, and they ought to be able to account for an impairment of assets, but generally speaking, baseball teams and other sports teams, almost all of their value is intangible.

In contrast, if you look at a manufacturing company, most of their value is tangible. They’ve got machinery, they’ve got technology, they’ve got patents, and so on. And therefore if you allow them to amortize some of their intangible assets, it’s going to be a minority of their  overall asset value. But if you allow a sports team to amortize the intangibles, you’re basically allowing them to amortize the whole thing. So it’s different for sports than for other businesses.

And to me the more fundamental question is, what is the theoretical basis for saying there’s any depreciation at all in the tangible assets? And I don’t think there is one. And so I see it as an improper give away, and I see it as once again as kind of absurd politicking wherein you have special interests who get politicians whom they donate money to to stick it onto a bill that has nothing to do with the operation of sports franchises.

BizBall: From an economic perspective, is MLB going to be able to have sustainable and healthy franchises in existing smaller markets, and how does this impact possible relocation of franchises and/or expansion?

Zimbalist: Well, it all depends on the economic system that baseball has. If baseball has a sound revenue sharing system they can put teams in smaller markets. But it also depends in part on what you mean by smaller market. Is Portland, Oregon a smaller market because it has fewer than three million people? Well, I don’t think so. It seems to me that Portland, Oregon is perfectly capable of hosting a sports team in a league that’s properly designed. And Portland is a town that has been experiencing very good population growth and looking down the road they ought to be able to have a baseball team. As should some other cities. I guess you could argue that Nintendo should make the same argument that Angelos does: “My goodness, if you put a team in Portland there’ll be some dilution in our fanbase!” And that’s true. They’ll be some. But whether it’s 2%, 4%, or 5%, or 6%, who knows? But also, who cares? Because the people of Portland deserve a baseball team just as much as the people of Seattle do.

BizBall: I think they’re hand-wringing over this situation because it really does open up and set precedent if they pay off Angelos when he doesn’t have territorial rights to D.C. And it opens up a can of worms, like you’re saying with Howard Lincoln and Nintendo, Seattle and Portland, even though it’s 175 miles away they deem this a territorial market from a regional cable perspective and radio broadcast perspective.

Zimbalist: Look, I’ll tell you what, you have two territories for a baseball team. One is the physical territory; it used to be determined by 75 miles, now it’s defined in terms of counties.

And then you have another market--that’s the television market--that is much broader. And in fact the television markets span territories so that they bump up against each other. And therefore, they cover the whole country.

And so there’s no reason why Major League Baseball would not allocate like the whole state of Arkansas to a team, like the Houston Astros, for instance. They wouldn’t say, “Oh well, you know, it’s more than X number of miles from your ballpark and therefore you can’t have it.” No, they’re not going to leave the potential fans in Arkansas without access on local cable to watching a team.

So what they do is allocate: television markets are allocated to everybody in the United States. Therefore, whenever you contemplate adding a team you’d be interfering with somebody’s television market. And if you held that argument as decisive that, “Oh, you’re taking away part of this guy’s television market,” then you’d never be able to have expansion. Not now and not in forty years. Even when the U.S. population might be 350 million instead of 290 million. So that argument can’t possibly be a conclusive argument in my view.

BizBall: How much of the current growth in MLB is attributed to the recent honeymoon effect of new stadium development and do you see a trend in which there will be repercussions when these honeymoon periods fade?

Zimbalist: The honeymoon effect is very short-lived unless the owner is smart enough to take advantage of it.

A new stadium gives the owner an opportunity to get more revenue out of his players, and if his players generate more revenue they should be paid more. And so the smart owner says, I’m going to take advantage of my new stadium by increasing my payroll and putting a better team on the field, and getting my fans really excited. If the owner does that you can get a honeymoon effect that lasts five, six, seven, eight years.

If the owner doesn’t do that, then there’s a curiosity effect that can last two or three months, after which the fans get ticked off that the owner isn’t doing anything to improve the team. So honeymoon effects are very differential. It depends on the strengths and acumen of ownership.

That said, yes, of course, baseball has had a building renaissance, since 1991, and that renaissance has, although some teams more than others, that renaissance has generally raised attendance appreciably. And as the newness of some of these stadiums fades into the past, they won’t have that factor to boost attendance anymore. So other things being equal, yeah, that would make attendance drop a little bit.

BizBall: In your book, May the Best Team Win, you talk about how the Yankees have incentives to increase their stadium expenses, new stadia development, and a number of other areas. The last Chapter is entitled, “What is to be done?” Can you touch on this facet of the book, and tell us if any of the points within that chapter have changed since publication?

Zimbalist: You mean things that I would recommend?

BizBall: Yes.

Zimbalist: Well, I wrote that book at a time when baseball was talking about contracting by two or four teams. And I believe that as long as baseball maintains that posture, especially after a period where its revenues have been growing by 15-16% per year, that the U.S. Congress ought to go after baseball and say, “We’ve had enough. Your demand is increasing by 15% a year. If you want to reduce your output, we’re going to force you guys to have competition so that we can have an appropriate level of output.” Meaning more baseball teams rather than less baseball teams when demand is growing at 15% a year.

That’s what I believe.

And I believe in general that it would better serve U.S. fans, U.S. consumers, to have more competition in the baseball industry. But I don’t believe, at this point in time, that it’s in the cards, because baseball isn’t talking about contraction anymore, and therefore it makes more sense when talking about policy to focus on more realistic policy options.

And for me the most important thing for baseball to do is to get their revenue sharing system right. Because this year they’re going to be sharing about $280 million, top teams to the bottom teams, and it’s not going to do anything, in my view, to improve competitive balance. Because the bottom teams face this higher tax rate than the top teams. And payroll disparity has actually grown since 2002 when this new revenue sharing system was introduced.

So, I think they need to get their incentives right.

Right now the way the incentive system works in the revenue sharing system is that successful teams get penalized, and poorly performing teams are rewarded. Failure is rewarded and success is penalized. And I think you need to have a revenue sharing system that does the opposite, where teams are motivated to improve themselves. And so that would be the first thing that I would change.

Second thing that I would change, although I recognize that Bud Selig has done some good things, I don’t think baseball’s commissioner should be an owner. And I think that Selig’s  botched a lot of stuff. And so I think they need to replace Selig. I don’t think that they will, but I think they need to replace Selig, get some independent, intelligent, outside businessperson who knows a great deal about baseball, and leads the sport in a way that doesn’t suggest that there’s any conflict of interest, or that there’s any inability on the part of the commissioner to act in the best interests of baseball rather than the best interests of a coterie of owners.

BizBall: I understand that you have another book slated to be published. Can you tell us about it?

Zimbalist: Very briefly, I’m writing a book with Stefan Szymanski, who’s a British sports economist. What we’re doing is looking at the evolution of basically soccer leagues and the evolution of baseball and other closed leagues in the United States. Soccer Leagues in Europe and throughout the rest of the world are organized on an open basis and systems of promotion and relegation, where the top teams in the league get promoted to a higher level league, and the bottom teams in the league get demoted or relegated to a lower level league.

That system creates a very different pattern of incentives and fan responses than the closed system that we have in the United States, closed meaning that the existing owners determine if there will be expansion, and if there is expansion, who gets to own a team. And that creates a system of leverage and monopoly that gives teams an ability to extort large public subsidies and deprives fans in many cities of getting to have a professional team, when they warrant one, given the economic size of the city.

So, these are very, very different ways of organizing sports leagues, and they generate very different kinds of tensions and problems, and have different kinds of successes.

So what we're trying to do in the book is to explain how the systems are different, explain why they evolved the way that they did, looking at economic and political and cultural factors.

And then, finally, trying to figure out where the systems are heading, and whether the two systems can learn anything from each other.

The following interview was originally published on the SABR Business of Baseball website, and can be read here: SABR Business of Baseball Interviews Page

Interview conducted by Maury Brown on 8/9/04. Edited by Jeff Sackmann.

 
 
Banner

Poll

Should MLB Force Jeffery Loria to Sell the Marlins?