"The Business of Baseball...The Salary Cap"

     Is a salary cap needed in Major League Baseball?  Salary caps are used around the world by the following
major sports leagues. In North America, we have The National Hockey League, The National Basketball
Association, The National Football League, Major League Soccer, The National Lacrosse League, Canadian
Football League and minor leagues in various sports. In England, the top level leagues in both rugby codes--The
Super League in rugby league and The Aviva Premiership in rugby union have salary caps.

Benefits of a Salary Cap:

     In theory there are two major benefits derived from salary caps: Promotion of parity or equality between teams
and control of costs.  First and foremost, an effective salary cap prevents wealthier teams from particular destructive
behaviors, such as signing a number of high salaried star players, preventing rival teams from accessing or acquiring
talented players and insuring victory through superior economic power.  Secondly, with a salary cap in place, each club
has the same or similar power to attract players, thereby contributing to equality---roughly equal playing talent on each team in the league, subsequently bringing economic benefits to the league and to the teams that are a part of that
league.

    One of the biggest reasons that Major League Baseball does not have what is classified as a hard salary cap in place is
because of the players' union hard, bitter and successful fight against it.  The hard cap is the cap imposed on the overall team payroll.  It is a simple prospect to envision---Once teams have reached the magic payroll number, they are forbidden to spend more.  Salaries are thus reduced in two ways: Teams going over the cap are removed from free agent bidding(or trade targets that are too pricey) which gives players fewer options and thereby reducing bidding pressures; and by causing teams below the cap to resist blowing their budgets on a single player.

     What Major League Baseball has done instead has adopted two modified cap type options or mechanisms:  Revenue
sharing and the luxury tax. The luxury tax, after a trial run in the late 1990s, was instituted in the 2002 collective bargaining
agreement.  It is essentially a soft cap.  A team can bust its budget, but at the risk or cost of being taxed.  A better word
would be "fined" for the excess amount.  The tax starts at 22.5 percent and goes higher for repeat offenders.  As a three time repeat offender(recidivist), the Yankees paid a 40% tax on their 2005 excess spending.  It's not too difficult to see
how a 40% tax would create a lag on spending.  Spending $20 million a year for a superstar player is one matter, but
adding another $8 million in payments to the league could make a deal untenable.  Look at it this way---How would
the average individual react if they had to pay a 40% surcharge on every gallon of gas purchased over the ten gallon
mark? It is almost a certainty, that unless it was a small car,  they would be filling their tank anymore. On my next blog,
I will cover the second method of this cap, the revenue sharing.david.mosher3993@my.sinclair.edu

"The Business of Baseball"

Is baseball really a business? I'm sure whenever the game was invented, and whoever it was invented by, intended it to be a sport and never would have believed in their wildest dreams that players' salaries and contract prices would be what they are today.  Although legend has it that the game was invented in 1839 by Abner Doubleday, this is difficult to imagine because in 1839 Doubleday was in military training at West Point Military Academy. There was also no mention of this in
his obituary published in the New York Times in 1893 when Doubleday died.

In 1934, while Joe DiMaggio was playing for the San Francisco Seals, he tore ligaments in his left knee while stepping out of a jitney for a dinner engagement at his sister's house. It almost ruined his career.  Although the Seals wanted to sell his
contract for $100,000,  he was acquired in November 1934 for $25,000 and five players. DiMaggio was allowed to play for the Seals through the 1935 season.

Let's jump ahead to the current century.  Since the Cincinnati Reds are the oldest organized professional baseball team,
I chose them to be represented here. As mentioned in the previous paragraph, Joe DiMaggio's contract was purchased
in 1934 for a meager $25,000 and five players. On January 10, 2010,  almost 76 years later,  the Cincinnati Reds purchased the contract of one Aroldis Chapman, a Cuban defector, and one of the stars of the 2009 World Port Tournament, for a six year term for the amount of $30.25 million. Although not one of the largest contract purchases in MLB history, it is a far cry
greater than the meager $25,000 given in 1934 for Joe DiMaggio.

This blog is prepared by a paralegal student as a class project, without compensation.  The content of this blog contains
my opinion, and is offered for personal interest without warranty of any kind.  Comments posted by others on this blog are the responsibility of the posters of those messages. The reader is solely responsiblefor verifying the content of this blog and any linked information.  Content, sources, information, and links will most likely change over time. The content of this
blog may not be construed as legal, medical, business or personal advice."The Business of Baseball"