The Business of Baseball

Phil Birnbaum recently had a pretty interesting article in Slate about the business behind Major League Baseball. He contends that the Pittsburgh Pirates, despite being notoriously awful, is actually a pretty profitable business organization; and as the result of MLB's goofy revenue sharing scheme, there's good reason to believe spending more money to win more games would actually reduce profits.

(from Flickr user daveynin)

We can't know exactly how MLB team spending will effect profitability, but let's temporarily assume the Pirates are being a profit-maximizing enterprise by being terrible. Does that mean the team's owners are content with being losers?

Maybe, but maybe not. While owning a professional sports team is, in many instances, a great way to make money; most professional sports owners are already successful and wealthy business people well before the time they purchase a team. There are plenty of sports owners with gigantic egos. Profits have value, bragging rights have value too.

Admittedly, I'm ignorant about the Pittsburgh Pirates and its ownership. But the point applies to more than a single team - even if Birnbaum's back-of-the-envelop calculations are correct, winning games has value to sports owners, even if it means less money in the bank at the end of the season.


    Well, there's a difference between making less money and not making money at all, and there's a difference between being not terrible and winning the World Series (or even making the playoffs). The problem with baseball teams in the small markets is they can't pay high enough salaries to reliably compete with the Yankees and Red Soxes of the world, so the question turns from "How much are willing to pay to win?" to "How much are you willing to pay to be respectable, seeing as winning is impossible?", and that's where the bottom line maximizing instincts of a successful businessman are going to kick in.

    I wasn't aware that MLB had any revenue sharing at all, but that's certainly what the revenue sharing is designed to address.