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When Did Sports Salaries Explode? Part 1

By Danny Radical

It's a question that is readily answerable. Google when salaries for players got astronomical- like when players were making more money than presidents, or when team payrolls started looking like a small nations GDP- and there you go. Its so simple, why write about it?

Because it's not that simple. There is a "when" moment for all of the major sports leagues. Players in sports all make a lot of money when compared to the average person, but those players themselves are not always in sync with each other. Surrounding those "when" moments are a ton of "why" questions.

In fact, each sport has its own very specific whys. So lets look at those whys, starting our four part series with the national pastime, Major League Baseball.

Baseball's story started with what was seen as the mistreatment of players, with a healthy dose of unionism. Historically baseball was entitled to what was called the "Reserve clause." This clause was an exception to anti-trust legislation, where teams "reserved" the rights to their players annually. What does that mean in English?
A team could choose to sign, trade, sell, or cut a player without the consent of the player. There was no need for any contract length longer than one year, because the team already had reserved the rights to the player as long as they wanted them. The upstart Federal League fought against this, saying that it virtually created a monopoly, as a rival league had no rights to attract players.

The Supreme Court granted baseball special "amusement" rights, which pretty much killed any chance of success of the Federal League (save for leaving behind some little ballpark in Chicago), because the Federal League could not just poach the stars of baseball who had their name and talent developed elsewhere.

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NOT built for the Cubs

This ruling lasted effortlessly from 1922 through 1969, when St. Louis Cardinals Outfielder Curt Flood decided that after giving St. Louis 12 years of service, the team should not be able to trade him without consent.


Why 1969? Two reasons.


In 1966, the Major League Baseball formed the modern Players Association and hired Marvin Miller to run the show. Miller was a United Steelworkers of America leader and knew how to get things done against monopolistic owners. Among Millers initial actions were a overall raise in the minimum wage of baseball (from $6000 a year to $10,000) and in 1970 the introduction of arbitration as a players contractual right.


Also, in case any of our dear readers didn't know, Mr. Flood was a black man. If you read the wording of the 1969 letter he sent to then baseball Commissioner Bowie Kuhn, Flood intimated that baseball was treating him as a slave- property that can be sold to any master without his consent. Black Americans have a specific objection to any kind of association with slavery, because it was brutal, dehumanizing, and heartless. Flood implied that this was a violation of the Constitution. The 1960's was an important decade for the expansion of civil rights, and so Mr. Flood fit right in.

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In 1972, the Supreme Court disagreed with Mr. Flood. It referred his case back to the 1922 ruling against the Federal League, and baseball went on with its day. Without Mr. Flood. Playing only 20 games in 3 years after fighting against every owner of Major League Baseball had been a noble yet suicidal task. Understand, even the players were divided if Mr. Flood was doing the right thing. No active player came out in support of Mr. Flood. Some in the public felt Mr. Flood made enough money (roughly the equivalent of $600,000 today) to just "shut up, play the game, and don't politicize it," paraphrasing the words of yesterday into their very similar modern context.


So Flood lost his case. If Flood failed, why did players start making bank?


Enter Andy Messersmith. And sorta kinda Dave McNally. One and a half risk takers.


Andy Messersmith was a fine pitcher with the Los Angeles Dodgers. Gold Glove winner. Low ERA. 200 plus strikeouts a year. Upon negotiation his 1974 contract, Messersmith wanted a no-trade clause. Dodgers General Manager Al Campanis refused, and even made some nasty personal comments to Messersmith that were so mean that Messersmith refused to sign his contract. Fast forward 12 months later, and the MLB union asked Messersmith if he'd be willing to challenge the reserve clause, since he never signed his last contract.

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The argument of the Union was simple- the reserve clause was a one year issue. Teams could use it for one year, then the players rights were free to be negotiated. Since Messersmith- and newly announced retiree Dave McNally- were the only two players working via the reserve clause, MLBPA argued that these two were now free agents that could go to any club.


Major League Baseball took the fight to an arbitrator, Peter Seitz. Quick question - remember when arbitration rights came to be part of baseball? That matters here, big time. But first, Peter Seitz. Seitz was famous for releasing Jim "Catfish" Hunter from his 1974 Oakland A's contract because the A's didn't honor the clauses in Hunter's contract. And Seitz guaranteed making himself more famous with this next decision- the reserve clause was indeed a one year stopgap.


Baseball was so horrified by the decision that it fired Seitz before the ink was dry on his ruling. As Seitz himself said, he was fired within 2 hours of the decision, with Commissioner Kuhn saying Seitz had "visions of the Emancipation Proclamation dancing in his eyes." But the decision was upheld by a Federal Court of Appeals, and MLB seemed unlikely to win at the Supreme Court level. Baseball responded by locking out its players in order to renegotiate the CBA. And this folks, is where baseball salaries skyrocketed. Because of the owners.

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The unlikeliest sports hero!


There was a precedent that players becoming free agents would bloat salaries. The aforementioned Catfish Hunter, upon the nullification of his $100,000 a year contract, was promptly signed to a 5 year, $3.75 million deal by the New York Yankees. And the challenger in the Seitz case, Andy Messersmith? Instead of the reported Dodgers offer of $150,000, he was given a three year, $1 million deal, which like many free agent signings, he never lived up to.


Why did players make so much money? Because there were owners willing to pay it.


George Steinbrenner knew almost nothing about baseball when he bought the Yankees, but he knew he had a better chance to win if he acquired good players. Starting with the Hunter decision, Steinbrenner used free agency and a wide open checkbook to attract star players to the Yankees, like Reggie Jackson, Sparky Lyle, Gregg Nettles, and even Andy Messersmith! Ted Turner was not one to be outdone, using his cable television money to bring in Andy Messersmith and attempting to give him the nickname "Channel" to promote Turners' channel 17. Teams like the Padres were willing to use that McDonalds money of Ray Kroc to bring in players like Gaylord Perry (traded for cash), and the Houston Astros were willing to make Nolan Ryan baseballs first million dollar player, which was surpassed 20 years later by baseballs first $25 million a year player in Alex Rodriguez.


Want to know why else baseball players started bringing in the big bucks? Because Marvin Miller knew basic economics better than the baseball owners did.

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100% should be in the Baseball Hall of Fame

Owners feared that each player would want to negotiate salaries. This would have in fact driven down salaries, as a player would have zero leverage. There would be a vast supply versus a limited demand- think of it like this: what if EVERY first baseman needed a job at the same time? You'd set the market low with the top guy, then lower for everyone that signed after. Think of it as a professional athlete dollar menu.


By agreeing to a system where a player had to serve a certain amount of time to get rights rather than just immediately grant free agency from day one, Miller created a limited supply of a product, and that inflated their value. Think of it like this- players spend 5 years cultivating their talent. After 5 years it's an open market for their services.
Where owners expected a wild west of players making demands, Miller knew how to manipulate a market to benefit all players who proved their worth. It allowed for an initial pay structure to happen, with a raise even, then for players who built reputations in City A to sell that to any buyer that wants an upgrade to what they have or needs to fill in a hole and can do so with an established player.


Does free agency go wrong? Absolutely. Look at how many bad, bad free agent deals that have happened in baseball. Think of your favorite. As a Mets fan, still paying for Bobby Bonilla is astounding. But look at how teams have reinforced themselves with a key signing at infield, outfield, starting pitching, or relief pitching.

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Somehow, his ex wife gets half. Never played an inning.

And does free agency work perfectly? No. Owners are dishonest. They colluded to work together to suppress player salaries. Only the owners who put winning before their financial interests - which ironically created those owners greater financial assets- played by the rules of the system. The other owners tried to depress wages in the mid 80's, and were caught and fined each time. This kind of cheating is akin to fixing a pennant race or World Series, yet these owners will be voted into the Baseball Hall of Fame. And Marvin Miller will certainly not be in his lifetime.

1980's Cubs acquisitions didn't go so well.


And baseball still is the only major professional sport in the United States without a salary cap, which shows how insane the argument that the reserve clause was for the financial good of the game truly was.


Which means that from an historical standpoint, Mr. Flood was the winner. Baseball CBA's eventually adapted the Curt Flood rule- if a player has 10 years in baseball and 5 years with the same team, that team needs consent to trade him. And more credit to Flood- the United Stated Congress created the Curt Flood Act in 1998, amending the Sherman Anti- Trust Act to include Major League Baseball under its trust busting legislation.

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Why was Dave McNally a hero? Because McNally announced his retirement after playing out his reserve clause year. To attempt to influence McNally's decision, the Montreal Expos offered him a contract to just show up to spring training and retire. The amount? More than he made in any year of his fantastic pitching career. That, my friends, is an insult. I'm pretty sure McNally was felt the same way with the sudden generosity of the owners, because he never signed that deal for free money. In fact, McNally was seen as a hero because if he folded and took the sell out money, Messersmith probably would have been given his no trade clause, and there wouldn't have been free agency in baseball. McNally passed on a huge payday to benefit players he never met that had not played one inning of pro baseball. And their children.


Would you do that?


Now, there's another thing just mentioned. 20 years after Ryan became the first million dollar player, ARod became a $25 million player. Why did salaries escalate so much in the 90's and 2000's?


You can look at TV rights, the boom in the prices of cable packages, teams owning their own TV channels, free money given by taxpayers and cities to owners in the form of tax breaks for staying in a city, internet viewing rights, national sports packages sold individually, the explosion of values of sports teams, escalation of ticket prices (especially luxury boxes), and the players marketing themselves more and more effectively. But that initial boom that came by 1980 was 400% higher in 1990, and 500% higher from 1990 to 2000. That trend for the 1990's is going to be a repetitive one in all sports, as we'll see in our future installments.


And if you're watching this 2018 free agent market for Major League Baseball, with so few prominent signings midway into January? You can bet the Players Union will be floating the collusion idea again very soon.