ABSTRACT

This study uses quantile regressions to evaluate salaries of NBA players in the 2001–2002 season separately for big men and guards. Quantile regression allows the measurement of the return to player attributes for guards and big men at different salary (skill) levels along the distribution of NBA salaries.

І. Introduction

The salaries of National Basketball Association (NBA) players constitute the primary component of costs of NBA franchise operation. Despite this, there is little theoretical or empirical groundings for the salary determining process of players. This analysis estimate players’ salaries, separating players into two groups: big men (forwards and centers in the League) and guards. Additionally, the study utilizes quantile regression procedures to estimate salaries of big men and guards. Quantile regression allows the measurement of the effect of performance attributes on players’ salaries at different points along the salary distribution. Indeed, the returns to attributes may also differ greatly by player position for low-salary, low-skill, bench-warmers on a team relative to high-salary, high-skill superstars.

II. Data and Results

Individual performance statistics of the 409 NBA players listed in the end of the 2001–2002 season rosters of the 29 NBA franchises were taken from the official website of the NBA. Performance statistics are utilized for games played during the regular season, excluding the preseason and playoffs.

Table 1 presents OLS estimation of earnings of NBA players in the 2001–2002 season. The coefficient on exp in column 1 reveals that each year of experience significantly increases earnings of NBA players by 36.8 percent. Findings of large returns to experience are expected given that the individual player salary cap is based on years of experience in the league (Staudohar, 1999 ). An increase of 1 assist per game significantly increases earnings by 7.4 percent. Additionally, an increase in average block shots of 1 per game results in significant earnings increase of 16.3 percent whereas, an increase in the average number of points scored per game by 1 point significantly increases salaries of NBA players by 4.4 percent. Earnings of blacks differ insignificantly from their white counterparts. These findings are consistent with recent evidence of no employer earnings discrimination of NBA players (Kahn, 2000). The findings for the coefficient on big-men reveal the NBA premium for centers and forwards from their size that is not a result of observed performance statistics. Big men significantly earn 18 percent more than guards, after accounting for other performance attributes.

Tables 2 and 3 present the results of the quantile regressions for guards and big men, respectively. The coefficient on exp is large and significant for guards at each skill level; however, the coefficients are much larger for players at intermediate skill levels relative to low-skill players and superstars at the tails of the distribution. Indeed, the returns to each year of NBA experience is 52, 51, and 53 percent for guards at the 25 th, 50 th, and 75 th quantiles, respectively — but, only 34 percent for low-skill players at the 15 th quantile and superstars at the 90 th quantile. This finding indicates greater returns to human capital accumulation for intermediate level, role players (occurring in the middle of the earnings distribution) relative to low-skill players and superstars. This could reflect team owners’ willingness to reward guards who are role players for doing the subtle things necessary to win that are not accounted for in performance statistics — for instance, diving on the floor to save a ball from going out of bounds.

Low-skill guards (15 th quantile) are unique in being significantly rewarded for steals (a 1 percent increase in steals per game increases their earnings by 62 percent) and discounted for rebounds (a 1 percent increase in rebounds per game decreases earnings by 13 percent). The negative returns to rebounding for low-skill guards may appear odd at first glance; however, in the transition from offense to defense, one of the primary responsibilities of guards is to be the first players back on defense. Thus, guards prevent the other team from scoring fast-break points. If guards remain on their offensive end of the court for rebounds, the opposing team is likely to score easy fast-break points. Moreover, low-skill guards’ decreased returns to rebounding may indirectly capture the negative effects for rebounding and not getting back on defense when the opposing team fast-breaks. Furthermore, the negative effect diminishes as skill level increases — possibly indicating that higher skilled players are more athletic or have superior decision-making abilities, which allows them to discern the opportune times to remain on the offensive end for rebounds versus getting back on defense. Scoring points is significantly rewarding for guards at all levels of the earnings distribution.

Table 3 presents the regression results for the quantile earnings estimates for big men. Similar to guards, the returns to each season of NBA experience for big men is greater for players at intermediate skill levels relative to low-skill players and superstars at the tails of the distribution. Additionally, blocking shots is a very lucrative attribute for intermediate and high-skill big men, but not for their lower skill counterparts—medium- and high-skill big men receive a significant premium (between 15.6 and 25.7 percent for a 1 percent increase in blocks per game) but the returns for low-skill big men are smaller in magnitude and insignificant. In contrast, low-skill big men receive the highest returns to rebounding (12.6 percent) — with the returns to rebounding declining in magnitude and significance as skill level increases (a significant increase of 10.2 and 7.4 percent increase at the 25 th and 50 th quantiles, respectively, and insignificantly increasing at higher skill levels). Low-skill big men (in the 15 th quantile) are unique as the only big men who are significantly rewarded for assists or penalized for increased average steals. A 1 percent increase in average assists increases their earnings by 16.6 percent. However, a 1 percent increase in average steals reduces their earnings by 10.4 percent. A possible explanation for low-skill big men’s salary discount for steals is that in a half-court defense, big men are often positioned near the basket — constituting the last line of defense in preventing easy lay-ups for the opposing team. If a big man goes for a steal (rather than staying in between the basket and the offensive player) the big man may be unsuccessful in stealing the ball — leaving the offensive player near the basket for an uncontested lay-up. Moreover, the low-skill, big-men discount for steals may reflect the negative effects of going for steals, but failing to steal the ball. Also, the negative effects diminish as skill level increases, possibly indicating that higher skilled big men are more athletic or have better decision-making abilities which allow them to discern the opportune times to go for steals versus remaining in defensive position (between the offensive player and the basket).

IV. Conclusion

We utilize quantile regressions to examine salaries of NBA players — allowing for a different distribution of earnings for big men and guards. Our findings provide further insights into the salary structure of NBA players — as players with a range of skills and playing different positions receive significantly different salary rewards and penalties for performance attributes.

REFERENCES

1. Dupree, David. “2001–02 NBA Salaries” USA Today, (November, 15, 2001).
2. Hamilton, Barton H. “Racial Discrimination and Professional Basketball Salaries in the 1990s.” Applied Economics 29 (March 1997): 287–96.
3. Kahn, Lawrence M. “The Sports Business as a Labor Market Laboratory.” Journal of Economic Perspectives 14 (Summer 2000): 75–94.
4. Koenker, Roger and Gilbert Bassett. “Regression Quantiles.” Econometrica 46 (January 1978): 33-50.
5. Nance, Roscoe. “10-Year Vets Bide Time on Market.” USA Today, (July 31, 2003).
6. Staudohar, Paul. “Labor Relations in Basketball: The Lockout of 1998–99.” Monthly Labor Review 122 (April 1999): 3–9.

 Table 1

Salaries of NBA Players in 2001–2002 Season

Note: * (**, ***) denotes significance at the .10 (.05, .01) level.

Table 2

Salaries of Guards in the NBA in the 2001–2002 Season

Note: t-statistics are in parenthesis, * (**, ***) denotes significance at the .10 (.05, .01) level.

Table 3

Salaries of Big Men in the NBA in the 2001–2002 Season

Note: t-statistics are in parenthesis, * (**, ***) denotes significance at the .10 (.05, .01) level.

NOTES

See Koenker and Bassett (1978) for a review of this procedure.

During the 2001–2002 NBA season there were 29 teams. Since then, one team has changed locations, the Charlotte Hornets moved to New Orleans and, another, the Charlotte Bobcats, was added in the 2004–2005 season.

Data for this analysis were obtained from http://www.nba.com, last viewed April 30, 2004.

The marginal impact of a characteristic on the salaries of the group in question is found by taking the exponential of the estimated coefficient minus one and multiplying by 100.

ABSTRACT

Sports and spirituality may be an oxymoron. What could be less spiritual than ‘big business’ sports? This paper serves to review the apparent growth in ‘spirituality’ as a concept within wider society and its relevance to the world of sport. It will examine how sport in modern society is arguably the new spirituality.

Introduction

Sports are clearly more important than ever to both the individual and society in economic, cultural and financial terms. Take for example, the growth of the Olympic Movement. Increases in broadcast revenue over the past two decades have provided the Olympic Movement and sport with an unprecedented financial base. From 1984 until 2008, the International Olympic Committee (IOC) has concluded broadcast agreements worth more than US$ 10 billion (IOC, July, 2004). In the United States alone, General Electric and the National Broadcasting Company (NBC) paid the IOC $3.5 billion for the broadcasting rights for all winter and summer Olympics between 2000 and 2008 (Phillips, 1999). The appeal of sport as a televisual spectacle is not in dispute (Lash and Urry, 1994). The mass appeal of sport is something that is clearly not lost upon the commercial organisations spending $2.4 million for a 30 second advertising slot on what is traditionally the highest rated programme of the year, the 2005 superbowl (Nader, 2005). Displays of what in traditional religious vernacular could be termed liturgy and ritual and mass idolatry are part of the fabric of the game and the fourteen day build-up.

This article will attempt to analyse the use of sports in the 21 st Century as a vehicle for spiritual upliftment in the place of contemporary religion.

The Collapse of Orthodox Religion

The dramatic growth in the popularity of sports is in sharp contrast to the near collapse of formal or orthodox religions in many countries (Robertson, 2004). Inglehart and Baker (2000) observe that “not only has weekly church attendance plunged, but Latin American countries are now sending missionaries to ‘save the souls’ of their former colonizers” (p.20)

Further testimony to the decline of ‘formal’ religion is provided by the UK experience. The results of the Social Trends Survey (2002) demonstrated that approximately 24% of the UK population attended a sports event as a spectator, while half of all adults aged 18 who belonged to a religion have never attended a religious service. Religion, particularly Christianity is in numerical decline throughout the Western world. William Docherty, a professor at the University of Minnesota, notes that children’s participation in religious activities has decreased by 40% from 1981 to 1997 (cited in Hofferth, 2001).

Spirituality’ through Sport?

Whilst dissatisfaction and alienation from traditional religious practices is increasing, there is a continuing, if not growing interest in the concept of “spirituality” (Lipsyte, 1973; Novak, 1993). The term “spirituality” is evidently an emotive and contentious one. “Some people, especially baby-boomers, reject the idea of religion, but believe they are ‘spiritual’” (Roberts, 2004, p.9). This perception may require networks to allow the individual to develop their own concept of spirituality. In sports spirituality is cultivated through allegiance or commitment to a team, either as a fan or as a spectator. Themes within sport may also typically include freedom and escape from normal life, discovery of meaning in life, commitment to a set of ethics and possibly a rediscovery of play in its purest sense.

People statistically may not want church (if evidence of declining attendance is accepted), but they do appear to question a purely materialistic view of life. They want to believe in something more, even if they do not know-or want to know – what that something is (Hamilton, 1995). The growth in the popularity of sports may be in part explained by society’s emphasis on “individualism” in the 21 st Century (Blake and John, 2003). Arguably, the more individualistic the society, the more intensely people may need some means of regaining a sense of group identity.

The research of psychologist Abraham Maslow (1968) may help to partially explain the way in which spectator sports act as a means of fulfilling individuals’ spiritual needs to belong. Maslow placed the “sense of belonging” halfway up his hierarchy of needs, with self-actualisation at the top. The need to belong is commonly regarded as a crucial part of an individual’s support of a sports team. However, only the athletes themselves reach the top and experience self-actualisation, spectators experience it vicariously. Theoretically, when people fail at discovering meaning in their lives they may use sports to fill this vacuum. Through sport individuals potentially find meaning in life.

Sport and Spirituality – harmful to the spirit?

Sport is clearly one of the most successful ways of taking up time in an activity which, from a Marxist perspective, may have no “utilitarian value” (Jakubowski, 1990, p.86). For many it may be a total irrelevance. Take the joke concerning golf ruining a beautiful walk in the countryside. Carroll (1998) argues that this view neglects the notion of “anima mundi” or soul. Sport for the ancient Greeks and Romans represented an avenue to find the connection to soul. The battle, whether it is on the golf course or in the boxing ring offers this opportunity to re-connect to the soul.

The enthusiasm to participate in sport, either vicariously as a spectator or directly as a participant may be intrinsic. Testimony to this manifests itself in a child’s playful actions (Trotsky, 1994). The desire and enthusiasm to engage in distraction and play may be intrinsic to the human psyche, but Trotsky argues that in order that “spiritual requirements may flourish it is necessary that physical requirements be fully satisfied”. (Trotsky,1994, p.28). As the Jesuit scholar Hugo Rahner has put it; “To play is to yield oneself to a kind of magic … to enter a world where different laws apply, to be relieved of all the weights that bear it down, to be free, kingly, unfettered and divine” (cited in Prebish,1993, p.211).

The above is potentially reinforced through sport with its inherent ideals of “fair play” and “codes of conduct” enshrined in the rules and regulations. This is disputed, however by George Orwell in his essay, “The Sporting Spirit” written in 1945 where he comments upon the nature of modern sport, concluding that it has nothing to do with fair play. “It is bound up with hatred, jealousy, boastfulness, disregard of all rules and sadistic pleasure in witnessing violence; in other words war minus the shooting” (Orwell,1945, pp.62-3).

Does the pursuit of sport harm the spirit? The prevalence of cheating and drug abuse does seem to challenge this aspiration of a connection to a “higher calling”. Does spirit become severed in elite sport? This question raises the issue of “sportsmanship” or the practice of ethical behaviour in modern sports. Sportsmanship is characterised by notions of civility and is “a matter of being good (character) and doing right (action) in sports” (Grough, 1997, p.21). Fair play and sportsmanship are challenged by what many regard as increased emphasis on a philosophy of “win at all costs” (Pilz, 1995). The impact of the coach is crucial in mediating the importance of sportsmanship and with it the notion of a games inherent spirituality. How individuals reconcile “the shifting definitions of sportsmanship with the objective of winning” (Buford May, 2001, p.387) is a complex task.

Conclusion

The intrinsic appeal of sport for many people is the uncertainty of outcome. Historically, however, this has never prevented mankind from attempting to tip the balance of uncertainty through various forms of cheating; indeed, the emphasis upon victory in sport defies and corrupts the ethics of fair play. If sport does indeed offer a vehicle with which to fill the spiritual void left by the demise of traditional forms of religion, it may do well to adopt the Buddhist philosophy which states that “Life is a journey”. When sports and spirituality are passengers, is the destination cynicism? Every journey requires an ending.

Bibliography

1. Blake, J., John, A. (2003) The world according to Margaret Thatcher. Michael O’Mara Books.
2. Buford May, R. A.(2001).The Sticky Situation of Sportsmanship: Contexts and Contradictions in Sportsmanship among High School Basketball Players. Journal of Sport and Social Issues, Vol 25, No.4, pp.372-389. Sage Publications
3. Carroll, J. (1998) Ego and Soul: the Modern West in Search of Meaning. Harper Collins
4. Grough, R. (1997) Character is everything: Promoting excellence in sports. New York: Harcourt Brace College.
5. Hamilton, M. (1995) The Sociology of Religion. Routledge.
6. Hargreaves, J. (1982) Sport, Power and Ideology. Routledge Kegan and Paul.
7. Hofferth, S.L “Changes in American Children’s Time, 1981-1997.” University of Michigan’s Institute for Social Research, Center Survey, January, 1999. National probability samples of American families with children ages 3-12, using time diary data from 1981 and 1997. Findings on how time use is associated with children’s well-being are reported in Hofferth, S. L. (2001). How American Children Spend Their Time. Journal of Marriage and the Family, 63, 295-308.
8. Inglehart, R. F., Baker, W.E. (2000) Modernization, Cultural Change, and the Persistence of Traditional Values. American Sociological Review Volume 65, Number 1. February 2000. pp. 19-52
9. International Olympic Committee (IOC) Television Rights. July, 2004. Retrieved from http://www.olympic.org/uk/organisation/commissions/tv_and_internet/full_story_uk.asp?id=917
10. Jackubowski, F. (1990) Ideology and Superstructure in Historical Materialism. Pluto Press
11. Lash, S., Urry, J. (1994) Economics of signs and space.Sage
12. Lipsyte, R. (1975)SportsWorld: An American Dreamland.NY: Quadrangle/New York Times
13. Maslow, A. H. (1968) Toward a Psychology of Being, D. Van Nostrand Company
14. Novak, M. (1993) The Joy of Sports End Zones, Bases, Baskets, Balls and the Consecration of the American Spirit. Madison Books
15. Nader, R. (2005) Superbowl advertising. Progressive trail.org. Retrieved from http://www.progressivetrail.org/articles/050131Nader.shtml
16. Orwell, G. (2000) Collected Essays, Journalism and letters of George Orwell, volume 4, 1945-1950, Penguin Publishers, pp.62-3
17. Phillips, R. (1999) Big Business Demands a Corporate Olympics. Retrieved from http://www.wsws.org/articles/1999/mar1999/olym-m16.shtml
18. Pilz, G.A. (1995) Performance sport: Education in fair play? International Review for the Sociology of Sport, 30,391-418
19. Prebish, C. S. (1993) Religion and Sport: The Meeting of Sacred and Profane. Greenwood Press
20. Roberts, K. A. (2004) Religion in Sociological Perspective. Thomson
21. Robertson, T. (2004) Religion Losing To Youth Sports On Weekends. Boston Globe. February 16^th 2004
22. Social Trends Survey. No.32.(2002) The Stationary Office Editors: Jil Matheson Penny Babb London: The Stationery Office (www.statistics.gov.uk). Retrieved from http://www.statistics.gov.uk/downloads/ theme_social/Social_Trends32/Social_Trends32.pdf –
23. Trotsky, L. (1994) Problems of Everyday Life. Pathfinder Press.

Abstract

This research paper examines how antitrust laws have played a role in shaping the financial operations of the professional sports industry of today. Different aspects of economical, historical, governmental, cultural and financial perspectives have been identified as vital sources in the professional sports industry of the past, present and future. This paper will also provide case studies and other field research to reveal how the influence of economical, historical, governmental, cultural and financial perspectives stem from antitrust laws that have shaped the world of professional sports today in the NFL for football, NBA for basketball, NHL for hockey, and MLB for baseball.

Chapter I: Introduction

The professional sports industry has evolved into an intriguing social phenomenon. As a means to make a living and to relax the mind and body, the sports industry is both a recreational and economical entity that enjoys “certain privileges and immunities.” Just as the Supreme Court’s interpretation of the Fourteenth Amendment have nationalized rights and liberties, the professional sports industry now appeals to and employs individuals from very diverse background. As time has progressed, there has been an increase in women and minorities in both the player and managerial ranks. As a result, the professional sports industry finds refuge under public policies. As an entity of private ownership in this capitalistic American society, the professional sports industry has become a thriving market.

Purpose of the Paper

The purpose of this research paper is to examine how antitrust laws have played a role in shaping the financial operations of the professional sports industry of today.

Research Questions

In this paper, many issues arise about this televised giant called the “professional sports industry” (PSI). These issues manifest both simple and complex questions. A set of questions emerges from economical, historical, governmental, cultural and financial perspectives that are listed as follows: What actions and reactions have most often occurred in the PSI and our society in response to governmental regulations? What is the projected role of government in the PSI? Does the PSI operate under the same governmental regulations, as do other private industries? Which branch of government has been most effective in regulating the PSI? Are there applicable statutes or judicial proceedings affecting the PSI? Has the principle of judicial review been able to effectively control the PSI? Do antitrust laws have a negative or positive impact on the financial aspects of the professional sports industry? What is the economical impact of the professional sports industry? With these questions in mind, it is essential that definitions of various terms be included to provide more background information in this area of research.

Definition of Terms

Firstly, what is antitrust law? Simply stated, according to Corley and Reed (1996), antitrust law is used to describe all laws that intend to promote and regulate competition and make our competitive economic system work.

Secondly, what is the economic giant known as the professional sports industry? According to the Adams and Brock (1997), professional sports are a textbook example of a bilateral cartel made up of club owners and unionized players engaged in intrastate and interstate commerce. The club owners exercise monopoly power in the product market and monopsony power in the input market, whereas, the players try to countervail that monopsony power. For example, according to Wikipedia, i n economics, a monopsony is a market with only one buyer in the market, often an input market (Wikipedia, 2004). At the same time, this is analogous to the case of a monopoly in which there is only one seller in a market. These cartels confront each other in a love/hate, cooperation/conflict relationship with neither being strong enough to exercise total dominance over the other (Adams & Brock, 1997).

It is from these two definitions of antitrust law and the professional sports industry that the significance of this study, literary review and summary/conclusions will arise.

Significance of the Study

Answers to these questions and terms should provide relevant and significant information pertaining to the professional sports industry as a whole. By identifying governmental perspectives of the PSI, the importance of the antitrust law will be revealed through a financial perspective. This paper also contains case studies of actions and reactions in the PSI that will further support the significant role of the antitrust law in regards to the PSI from a financial perspective. This paper further pinpoints how the professional sport of baseball best exemplifies the implementation, application, and interpretation of the antitrust exemption issues.

Chapter II: Review of Literature

The professional sports industry is a very unique entity. As an entity, it controls both activities and attitudes, solicits actions and reactions, and demands the immediate attention of fans, arbitrators, mediators, lawyers, judges, players, television networks, and management. However, as an entity, it is regulated as a business activity with and without exemptions from the federal government. To limit the framework of both the professional sports industry and antitrust activities, the underlying meanings of past, present and future perspectives will be discussed.

Past Perspective: The Historical Role of Antitrust Laws

in the Professional Sports Industry

Historically, antitrust law has played a role in developing regulations, controls, and protections in the professional sports industry of today. Laws that include such major statutes as the Sherman Act of 1890, the Clayton Act of 1914, the Federal Trade Commission Act of 1914, the Norris-LaGuardia Act of 1932, the National Labor Relations Act of 1935, and other antitrust and labor relations acts (Corley & Reed, 1996). Court decisions and/or interpretations include such parties as: Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Clubs, 259 U.S. 200 (1922); Flood v. Kuhn, 407 U.S. 258, (1972); Haywood v. NBA, 401 U.S. 1204 (1971); Brown v. Pro Football, Inc., 116 S.Ct. 2116 (1996) and Wood v. NBA, 809 F.2d 954 (2d Cir. 1987). Also, there is a history of concepts relating to protections and guarantees to all parties involved in the professional sports industry. Case studies show that in baseball, the “reserve clause” was the owner’s primary weapon for eliminating free competition in the market for players. Once a team obtained contractual rights to a player, it enjoyed exclusive rights to his services. Unless those rights were waived, traded, sold, or otherwise assigned to another team, the player was literally owned by the team with which he signed the original contract (Adams & Brock, 1997). Also, certain sports in the professional sports industry are classified as with antitrust labor exemption, whenever the players can file complaints with the government alleging unfair labor practices or without antitrust labor exemption, whenever the players cannot file complaints with the government alleging unfair labor practices (McGraw, 1998).

On the other hand, case studies show that in football, basketball, and hockey, the emphasis has been on the relief granted through the application of antitrust laws (McCormick, 1989). A final aspect focuses on what is the historical, legal, economic, and future role of antitrust laws in the professional sports industry of Major League Baseball (MLB)? In evaluating this aspect, each area seems to address in its’ own way the evolution of the antitrust policy in their particular industry. For example, according to U.S. News & World Report, all four of the sports leagues enjoy some measure of antitrust exemption, which allows teams to pool their broadcasting-rights fees, and in the case of baseball, prevents the players from filing complaints with the government alleging unfair labor practices (McGraw, 1998).

Throughout the history of sports, several events have occurred leading to how antitrust laws are now applied along with their financial impact. The following timeline from “Major League Baseball’s Labor Turmoil: The Failure of the Counter-Revolution” by Jeffery S. Moorad (1997) is explained in the Villanova Sports and Entertainment Law Journal. It provides a running account of actions that have been taken by leagues and set the stage for legal court challenges: It also provides a historical time line leading up the formation of the American Association and present day (MLB) baseball.

• 1882 The alternative league, American Association, to the National League began play. The American Association abolished the reserve clause, sold tickets for half the price of those sold by National League clubs and allowed beer and whiskey in the stands on Sundays.
• 1883 The American Association entered into a pact with the National League in and accepted the policies of the National League. Two additional leagues, the Union Association and Players League, soon followed, but both failed within one season and the National League absorbed all three leagues.
• 1892 The only alternative league to gain foothold during this period was the American League, which emerged as the Western League.
• 1900 By the turn of the century, the American League had wooed 100 players from the National League, and was drawing 500,000 more fans per season. Once again, club owners found competition not to their liking.
• 1903 The two leagues came to an agreement under which the National League accepted the American League as an equal, and together the two leagues formed the bicameral system that characterizes Major League Baseball today.
• 1913 The Federal League was established–the last alternative league of the pre-World War II era. Next to the American League, the Federal League was the most successful of the alternative leagues, lasting for three seasons, until a dissolution agreement between the National League and Federal League owners. As part of this agreement, the National League absorbed some of the Federal League’s team, while others were simply bought out.
• 1922 The first court challenge of antitrust laws in the professional sports industry of baseball occurred.

These events helped to establish present day antitrust law exemption and how we view Major League Baseball (MLB).

Present Perspective: Legal Case Analysis of Antitrust Law and the Professional Sports Industry with the Antitrust Exemption from a Present Day Angle

Legally, in our present day and time, antitrust legislation and court decisions with labor exemption show variations in features of provisions, applications, and interpretations of significance. From the inception of the professional sport industry to the present, actions involving antitrust have helped shape this sport. For example, cases in the past have focused on issues of antitrust and labor exemptions to professional players. According to the Antitrust Bulletin, the issue of whether sports leagues are protected from antitrust attack by the labor exemption has arisen primarily in cases challenging league rules or devices designed to restrict the unfettered movement of veteran free agent players from one team to another when their contracts with the former team expired (Roberts, 1997).

Example of Antitrust Laws and the Professional Sports Industry with Antitrust Exemption: Major League Baseball (MLB)

Professional baseball is the most representative of professional sports with labor exemptions in many ways.

Firstly, there is the role of the “reserve clause. According to Leshanki (2003), the reserve clause essentially stated that the teams had the right to renew a player’s contract following each season. In this way all rights to a player’s contract belonged to the team and a player could never escape from that club or seek competing bids from other teams. Players were not even able to invalidate a contract by sitting out for a year and then returning to the game. In essence, the club could buy, sell or trade a player via his contract as if the player were livestock. Even though surveys suggested that the players’ initial reaction to the reserve lists was positive, it soon became clear that reservation was not in the players’ best interest.

Secondly, according to Villanova Sports and Entertainment Law Journal, reservation brought an end to the free market for their services, along with an end to their salary increases because of two reasons: (a) reactions to the reserve clause and (b) the control it provided to owners. Moorad (1997) discussed how players and other individuals established alternative leagues, which forced the development of competition for players’ services and how players’ associations were formed (Moorad, 1997) such as the Major League Baseball Players’ Association to represent the players in union negotiations with owners.

Additional court challenges show many features of the economical, recreational, and governmental institutions. They are explicit in issues, parties involved, decisions, and the extensiveness of governmental regulations, controls, and protections. In the Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Clubs, 259 U.S. 200 (1922) case, the Federal Baseball Club made two arguments against the defendants. These arguments were as follows: (1) that several defendants, including the American and the National League of Professional Baseball Clubs, monopolized the market for baseball players in violation of section 2 of the Sherman Act and (2) that the defendants were monopolizing the market because once a team was placed in the American League or the National League, the reserve clause precluded players from “jumping” to the upstart rival Federal Baseball League.

The Supreme Court’s unanimous opinion, written by Justice Holmes, held that although baseball players and their equipment were physically moved across state lines, putting on “baseball exhibitions” was “purely a state affair” that only had an incidental effect on interstate commerce and thus fell outside of the Sherman Act’s jurisdiction. Although the Court recognized that baseball was in fact a business, it also held that “personal effort, not related to production, is not the subject of commerce (Ross & Dimitroff, 1997).

Another case in 1953 revisited the exemption via the reserve clause in Toolson v. New York Yankees, Inc., 346 U.S. 356 (1953). The plaintiffs alleged antitrust violations between organized baseball and the Mexican League because they had entered into various agreements binding each to respect the other’s reserve clause, thereby eliminating each league’s rights to contract with certain baseball players. In a per curiam opinion, the Court reaffirmed baseball’s exemption on the ground that it should only be removed or limited by legislation and since Congress had repeatedly declined to do so, it shouldn’t be changed. As a result of this happening, this meant that antitrust and antitrust exemption fell into the hands of Congressional legislation. In a nutshell, the majority’s opinion effectively held that organized baseball in the United States could enter into a worldwide conspiracy in restraint of trade with baseball leagues in other countries and yet the conspiracy would be exempt from U.S. antitrust laws. Therefore, the Court’s decision had more severe potential repercussions than simply affirming Federal Baseball (1922). Also, it effectively expanded baseball’s antitrust exemption to reach global conspiracies (Ross & Dimitroff, 1997) through its impact on the overall sports world. Furthermore, according to Justices Burton and Reed in Toolson v. New York Yankees, Inc., 346 U.S. 356 (1953), the defendants (Yankees) were now engaged in interstate trade or commerce as those terms are used in the Constitution of the United States and the Sherman Act (Ross & Dimitroff, 1997).

In 1972, the court again considered the exemption issue in Flood v. Kuhn, 407 U.S. 258, (1972). In this case, the St. Louis Cardinals traded outfielder Curt Flood to the Philadelphia Phillies at the conclusion of the 1969 season. Unhappy about the trade, Flood sent a letter to Commissioner Bowie Kuhn stating his displeasure and asked the commissioner to declare him a free agent for the upcoming season so he could consider offers from teams other than the Phillies. Kuhn refused, and informed Flood that his only choices were to play for Philadelphia or not to play at all. Flood decided to sit out the 1970 season and filed suit against the commissioner, the teams, and the owners, thereby taking on the reserve clause’s 50-year exemption from the antitrust laws. This attempt by Curt Flood thus left the antitrust exemption in the hands of the Supreme Court for another challenge to see if legislation by Congress was the determining factor.

As a result, the Supreme Court recognized that baseball’s long-standing exemption was an aberration since no other professional sport had been similarly favored, at least not without special legislation from Congress. Further, the Court reversed the underpinning of Federal Baseball (1922) by holding that professional baseball is engaged in interstate commerce.

But, in a close decision, the majority again explained that Congress had considered the issue and tacitly approved the exemption by refusing to overturn it. In addition, the Court held that baseball and its reserve system are also exempt from state antitrust laws. The exemption was therefore not only left intact, it was again extended (Ross & Dimitroff, 1997).

Despite the seeming lack of rhyme or reason to its holding in Federal Baseball (1922), the Court has continued to staunchly clutch to its ruling in subsequent decisions (Ross & Dimitroff, 1997). This is true because baseball’s antitrust exemption has proven to be remarkably resistant to challenge despite the suspect reasoning behind its creation (Moorad, 1997). On the other hand, a district court opinion in 1993, took at least a chink out of the exemption’s protective armor. The federal district court in Pennsylvania held that the exemption applies only to the reserve clause in Piazza v. Major League Baseball, 831 F. Supp. 420, 422 (E.D. Pa. 1993), (Ross & Dimitroff, 1997).

In this case, several investors (including Vincent Piazza, father of New York Mets’ all-star catcher Mike Piazza) sued Major League Baseball when it refused to approve the sale and relocation of the Giants from San Francisco to Tampa Bay. Major League Baseball filed a motion to dismiss, citing the antitrust exemption. The federal district court denied the motion on the ground that the exemption is restricted to the reserve clause, even though Piazza analyzed the exemption in terms of stare decisis. The court also pointed out that the Supreme Court itself had acknowledged that the trilogy between the cases of Federal Baseball, Toolson, and Ford was limited to the reserve system because professional baseball’s reserve system is within the reach of the antitrust laws” (Ross & Dimitroff, 1997) and did not apply to teams’ attempts to move from city to city (Moorad, 1997). Basically, the holding in Piazza signaled that the current restrictions on the sale or transfer of major league baseball teams were not included because this action may not be insulated from the Sherman Act by baseball’s antitrust exemption (Ross & Dimitroff, 1997).

Other issues that have been recent challenges are between owners and players. According to Moorad (1997), when the owners tried to gain back some of the ground they had lost in the most recent set of bargaining talks a decade ago, the players refused to budge. The standoff ultimately led to a season long strike in 1994-1995. Although the World Series had survived two world wars and even natural disasters, it could not survive this labor dispute and was not played for the first time in 90 years. Moorad (1997) estimates that the hard out of pocket losses to both sides as a result of the 1994-95 strike were one billion dollars. The aftershocks of the unseemly and distressing strike were still being felt in 1997; with attendance and TV ratings significantly lower than pre-strike figures. Fans begin to realize that they could live without baseball and found other ways of spending their time. More importantly, fan sympathy, which had traditionally been with the players, turned into fan annoyance at both the owners and the players (Palm, 1997). One additional argument that could have shed light during this period is the belief held by Isidore: (a) even if the team’s payroll increases significantly, market forces limit the amount owners can charge fans (Isidore 2002, April 5) and the proliferation of variable pricing is further evidence that player salaries do not drive ticket prices (Isidore 2002, December 27). With this additional note, it can be seen why some stability has returned to baseball.

In the last few years, this stability has returned because the owners and players have reached a new collective bargaining agreement. Thanks to the strength of the union, the agreement allows the players to retain the mobility that they had. Secondly, it creates the notion that the owners and players are in a joint venture, as opposed to the players being mere employees. Thirdly, from an economical standpoint, the agreement also begins to address the great disparity of financial benefits and burdens between the major market franchises and the smaller market franchises with modified profit sharing among clubs and a luxury tax imposed on clubs whose salaries exceed certain levels. Furthermore, the agreement contains important exceptions to a full profit sharing approach. However, there is a long way to go before the gap between the big and smaller markets are closed (Palm, 1997) even though the professional baseball industry is enjoying a period of relative tranquility (McCormick, 1997). For example, the demand for baseball and football increased between 1996 and 2002 as compared to the overall demand for hockey and basketball (Rishe & Mondello, 2004). This demand, whether increased or stagnant, led to the following economic values in 2001 as described by Howard and Crompton (2004) for the four major leagues:

Economic Value of the Major Leagues

MLB *Gross Revenue: $2.79 Billion *Net Worth: $6.55 Billion

NHL *Gross Revenue $1.82 Billion *Net Worth: $3.75 Billion

NFL *Gross Revenue: $3.51 Billion *Net Worth: $12.80 Billion

NBA *Gross Revenue: $2.1 Billion *Net Worth: $6.01 Billion

Future Perspective: An Outlook of Antitrust Law in the

Professional Sports Industry Beyond 2004

What does the future hold for the role of government in business regulations, controls, protections, and exemptions in the professional sports industry and their reactions? Based on this research paper, and according to Palm (1997), the future for professional sports is uncertain. Although the intersection between labor in the professional sports industry, antitrust laws and finance is clearer than it was, recent decisions in each of the sports leagues may result in a “decertify today–recertify tomorrow” mentality which may make professional sports even more unstable. For example, if players unionize and engage in collective bargaining, then they receive the benefits arising from the labor laws and collective bargaining, but lose virtually all of the protection that the antitrust laws would afford. In such cases, the labor laws primarily govern the relationship between the players and the owners, and the antitrust laws will be largely applicable due to the nonstatutory labor exemption. This action of decertification is primarily focused on players keeping or breaking up their unions. On the other hand, if the players choose to decertify their unions, then they obtain the full protection of the antitrust laws, but will enjoy the benefits of the labor laws and collective bargaining (McCormick, 1997). Ultimately, the parties have to come to grips with the issue of whether the financial pie will be distributed more equitably among the players and owners. The real dispute may become whether it should be more of a partnership model or remain an employment model (Palm, 1997). Regardless of what model the two parties choose, the value of professional sports franchises has been appreciating at double-digit rates annually for the past 30 years (Howard & Crompton, 2004) and should continue to grow in the future.

Another projection, according to U.S. News & World Report, is that some officials consider the practices of the leagues and the teams to be monopolistic. Some economists propose breaking sports leagues into separate businesses, much like AT&T was broken into Baby Bells. Others propose government regulation, such as a federal sports commission that regulates ticket prices, team relocation, salaries and the like because it has gotten to the point where huge amounts of tax money are aiding and abetting the behavior of an industry that is gouging its consumers (McGraw, 1998).

Even others, such as Howard and Crompton (2004), predict that part of future expansion in sports is likely to take the form of increased globalization. Women’s sports are rapidly emerging as a component of the professional sports mosaic in North America, and there has been growth in niche sports, which have a relatively small but avid following. These authors found that this growth has been aided by the multitude of cable television channels that are in constant need of new programming to fill their 24-hour schedules.

Chapter III: Summary and Conclusions

Conclusively stated, the writer found that the emergence of the professional sports industry has become an entity with which public policies have significantly affected the sports arena. Specifically, it was found that there are several features and trends that are observable about the role of antitrust laws in the professional sports industry from a financial perspective.

Secondly, the writer found that governmental controls, regulations, and protections make up an array of historical, legal and economic factors involving owners, players, and fans.

Thirdly, according to the Economist, the historical role of antitrust laws in the professional sports industry shows that this law has affected the industry through antitrust exemption granted in baseball, and not granted in football, basketball, and hockey (Andrews, 1998) and the writer agrees with this finding.

Fourthly, findings from the Antitrust Bulletin show that if the structural reorganization of professional sports is the goal of the public or government, antitrust offers the requisite weapons for achieving it. For example, in professional sports, where a cartel of club owners exercises a monopoly power in the product market, and where powerful trade unions dominate the relevant labor markets, there is an almost irresistible tendency toward tacit vertical collusion (Adams & Brock, 1997). It is the writer’s view that this exercise of power will continue as each major league sport continues to become more commercialized through the websites of: www.nfl.com; www.nba.com; www.mlb.com; and www.nhl.com.

Finally, the writer believes that antitrust laws will continue to play a very important role because as history shows us, the professional sports industry has had many landmark cases that have helped to shape the industry of today from a financial and legal standpoint. Therefore, antitrust laws will affect the professional sports industry of tomorrow because of the principle of judicial review and profit-sharing. Furthermore, the author believes that the world of reality sports, including fantasy league sports participation, by billions of fans, will contribute to the growth of this “intriguing social phenomenon” and now “worldwide social phenomenon” known as the professional sports industry.

References

Adams, Walter and Brooke, James W. (1997, Fall). Monopoly, Monopsony, and Vertical Collusion: Antitrust Policy and Professional Sports. A ntitrust Bulletin, 42, (3), 721-747.

Andrews, John. (1998, June 6). Survey: The World of Sport: Setting the Rules.

Economist, 347 (8071), S20-S21.

Corley, Robert N. and Reed, O. Lee. (1996). The Legal and Regulatory Environment of Business (10th ed.). New York, NY: McGraw-Hill, Inc.

Howard, D.R., & Crompton, J.L. (2004). Financing Sport. 2nd Edition. Morgantown, W.V.: Fitness Information Technology, Inc.

Isidore, C. (2002, April 5). Players’ Pay Doesn’t Hit Fans. CNN Money. Available at http://money.cnn.com/2002/04/05/commentary/column_sportsbiz/strike_reaction/

Isidore, C. (2002, December 27). Fans to Pay Price(s). CNN Money.

Available at http://money.cnn.com/2002/12/27/commentary/column_sportsbiz/ticket_prices

Leshanki, Jonathan. (2003). What Every Baseball Fan Should Know: The Curt Flood Case- Part I-the reserve clause. At Home Plate, Inc. Retreived October 3, 2004 from http://www.athomeplate.com/flood.shtml

McCormick, Robert A. (1989, Spring). Labor Relations in Professional Sports- Lessons in Collective Bargaining. Employee Relations Law Journal, 14, (4), 501-512.

McGraw, Dan. (1998, July 13). Big League Troubles. U.S. News and World Report, 125, (2), 40-46.

Moorad, Jeffery S. (1997). Major League Baseball’s Labor Turmoil: The Failure of the Counter-Revolution. Villanova Sports and Entertainment Law Journal, 4, (1), 53.

Palm, Craig W. (1997). Strife, Liberty, and the Pursuit of Money: Labor Relations in Professional Sports. Villanova Sports and Entertainment Law Journal, 4, (1), 1.

Rishe, P., & Mondello, M. (2004). Ticket price determination in professional sports: an empirical analysis of the NBA, NFL, NHL, and Major League Baseball. Sport

Marketing Quarterly . 13 (2), 104.

Roberts, Gary R. (1997, Fall). Brown v. Pro Football, Inc.: The Supreme Court it Right for the Wrong Reasons. Antitrust Bulletin, 42 (3), 595-639.

Ross, Michael Eric and Dimitroff, Sashe Dimanin. (1997, Fall). Whose field of dreams: Antitrust relief against restrictions on the sale or relocation of major league baseball teams. Antitrust Bulletin, 42, (3), 521-539.

Wikipedia. (2004). Monopsony. Wikipedia: Free Encyclopedia. Retreived October 3, 2004 from http://en.wikipedia.org/wiki/Monopsony.