Television's Effect on Baseball Salaries

The first Major League Baseball game was televised on August 26, 1939 as the Cincinnati Reds beat the Brooklyn Dodgers 5-2 in the first game of a doubleheader. While only an estimated 3,000 people watched the grainy black and white broadcast, network executives quickly realized the potential of broadcasting baseball on television. Over the past 70-plus years, television revenues have influenced player's salaries, team payroll and a player's marketability.

  1. Televison Revenue

    • Television revenue for Major League Baseball grew 450 percent between 1964 to 1987, while players' salaries grew 750 percent during the same time. Prior to television, the majority of baseball revenue came from tickets sales and concession. By 2003, however, 50 percent of a team's local revenue came from broadcasting games on both regional and national networks. As teams began to make more money, players demanded a larger cut of the overall revenue through increased minimum salaries. A 1976 court ruling declaring the owners' reserve clause illegal opened the door for players to become free agents, further escalating salaries.

    Baseball on Cable

    • A team's ability to generate revenue through local television contracts determines how much money the team can spend on players' salaries. The New York Yankees, for example, generated $93 million in broadcast revenue from the organization's cable contract deals with the Yes and My9 networks for the 2011 season. New York's payroll for the 2011 season is estimated at more than $203 million. The league's No. two and three teams in local television revenue, the New York Mets and Los Angeles Angels, ranked seventh and fourth, respectively, in estimated team salaries for 2011.

    Revenue Sharing

    • Because of the discrepancy in television revenues, MLB decided to implement revenue sharing between large-market and small-market clubs as part of the league's 2002 collective bargaining agreement between players and owners. Large markets teams such as the Yankees must now share part of their revenue with teams in small markets, such as Kansas City and Tampa Bay, which cannot generate as much television revenue. The money these teams receive helps them remain competitive by paying the escalating salaries of their players.

    Demand

    • Prior to television, the only way fans could see another team's star players is when that team would visit town. Today, fans can watch every game from the comfort of their living rooms. Because of the increased visibility of star players, large-market teams feel an immense pressure from their fan base to sign prized free agents, regardless of the cost. In 2008, C.C. Sabathia pitched the Milwaukee Brewers into the postseason for the first time since 1982 by going 11-2 with an 1.65 earned-run average. The resulting TV coverage of Sabathia's performance made him the most sought-after free agent in the off-season. Sabathia would go on to sign with the New York Yankees for a record $161 million.