Play Ball...or Not!
Many Provident clients know that I am an avid baseball fan. A number of them have even accompanied me to Detroit Tiger games. If you are a client residing in the Detroit area or coming for a visit, I would love to take you to a game! I have been a (partial) season ticketholder for most of the past two decades except for 2018-2020 when the team was especially futile.
Opening Day is typically the best day of the year for me. It is a sign that Michigan winters will give way to spring and summer…eventually. And my team is finally competitive again! From 2006-2016, the team had a winning record in eight of eleven seasons (with one .500 year) and two appearances in the World Series. For the following seven years, however, the Tigers lost more games than they won, including two seasons with the worst record in baseball.
After winning just 47% of its games from April through mid- August, the Tigers surprised all of baseball in 2024 with a 70% winning percentage over the final seven weeks of the season to clinch a playoff berth for the first time in almost a decade. The team remained just as hot throughout most of 2025, leading Major League Baseball more than halfway through the season before a stunning collapse resulted in the largest blown division lead in baseball history. Despite barely making the playoffs, the Tigers won the first playoff series and pushed their second round series into the 15th inning of the deciding game.
Despite my enthusiasm, baseball hasn’t been America’s Pastime for many years. The sport has been cursed by a “benefit” that isn’t found in any other major American sport. More than 100 years ago, the Supreme Court granted Major League Baseball an exemption from antitrust laws. Team owners exercise greater control over the business side of baseball such as the granting of territorial exclusivity, restricting the relocation of struggling teams to better markets, and controlling the number of minor leagues and their players’ pay. For much of baseball’s history, the sport even had the right to control player salaries and limit their opportunity to seek better pay from rival teams. Baseball’s open collusion led to a lost court case that led to free agency for players and ultimately to legislation limiting the antitrust benefit. The antitrust exemption no longer provides any meaningful advantage compared to other sports leagues, but the damage was already done.
I described the antitrust exemption as more of a curse than a blessing. Freedom from competition always seems like a blessing at first. But competition keeps one sharp, and lack of competition can lead to complacency. The ultimate humiliation came when the 1994 World Series was cancelled over a labor dispute. Even when much more was at stake during World War I, the Great Depression, and World War II, the World Series still went on.
The 1994-1995 strike accelerated the loss of fan interest in baseball. An antitrust exemption to preclude direct competition couldn’t stop fans from turning to other sports and non-sport activities. That was the real competition, and owners still haven’t figured it out.
The first Commissioner of Baseball was Kenesaw Mountain Landis, a federal judge and ardent baseball fan. He was brought in by owners following a gambling scandal in 1919 and a battle between the American and National leagues. Landis cared for the institution of baseball and demanded near full autonomy to oversee the sport. That tradition largely continued until the term of Fay Vincent (1989-1992). However, Mr. Vincent was ousted by a faction of owners who then installed one of their own as commissioner (Milwaukee Brewers owner Bud Selig from 1992-2015). Over the past decade, the commissioner has been Mr. Selig’s right-hand man, Rob Manfred. Rather than looking after the best interests of the institution of baseball, commissioners now openly represent the interests of owners.
The Collective Bargaining Agreement covering minimum player salaries and other labor terms are negotiated every four years. The current contract expires after this year’s World Series. Owners are demanding a salary cap, an idea that has been tossed about for many years. The other major sports have such a limit on team payroll. Players obviously abhor any limitation on their pay. Baseball does, however, have a “luxury tax” that penalizes very high payrolls. What is different this time is the extreme difference between payrolls as certain teams seem willing to spend unlimited money in their pursuit of a world championship. Meanwhile, cord cutting has reduced TV revenue to most small- and mid-market teams. While players and owners salvaged the 2022 season despite a multi-month lockout that ended in March of that year, some feel that the upcoming negotiation could lead to lost games from a labor stoppage for the first time since the damaging 1994-1995 strike.
Is there any point to be made other than to further document Scott’s obsession with baseball? The laws of economics are like the law of gravity. You can work around them for a while, but they ultimately have their way. For decades, baseball owners used their antitrust exemption to resist the laws of competition, but rival forms of entertainment won out anyway. Today, both owners and players are ignoring the competitive threat to their mutual success. They are killing the goose that lays golden eggs for all of them, millionaires arguing with billionaires. None of them seem to care about their customers, the fans; the public might just wish a pox on both their houses.
While I am a free market person to my core, major sports operate more like cartels than free markets. A sports team is really a franchise of a big business (MLB, NFL, NBA, NHL) than an independent business. The other sports recognize this by dedicating a percentage of revenue to labor (the players). This incentivizes all parties to work to maximize league revenue even as they compete on the field, the court, and the ice. I hope that Major League Baseball comes to its senses as there are fewer diehard fans like me than there used to be.
Scott D. Horsburgh, CFA®