by Timothy Moreland

Created on: February 08, 2007   Last Updated: October 31, 2008

Imagine a job in which the employees could make ten, even twenty, million dollars every year. This is the situation of many professional baseball players. High salaries lead to the common belief these athletes are overpaid. However, the salaries earned by these men are reasonable and appropriate for multiple reasons. Firstly, major league players produce millions of dollars in revenue for the owners of sports teams. Secondly, the ways in which contracts are set up restrain younger players from making as much money as equally talented veterans. Thirdly, both owners and fans are willing to spend the money, which ultimately leads to these high salaries. Therefore, major league baseball players' salaries are justified, and in some cases not high enough, based on the revenue generated by players, the contract structure, and the willingness of the market to spend.

Every player on a baseball team affects the income of the owner of the team, most notably in local revenue. Local revenue includes "gate receipts, local television, radio and cable rights fees, ballpark concessions, local advertising, sponsorship and publications, parking, suite rentals, postseason revenue, and spring training revenues" (MLB Updated). Players provide the attraction responsible for providing the flow of money from all of these categories. Without the athletes, owners would not be able to televise games or sell tickets. The significance of local revenue appears in the rate at which it grows. This type of revenue increased by eighty-seven percent from 1995-1999, making it the quickest increasing element of revenue for the baseball industry. As a result of the growth, one billion dollars were added to the total revenue (MLB Updated). A considerable amount of this growth directly relates to the presence of the players.
While the players make the attraction possible, revenue accumulates more for a successful franchise. Fans are more willing to watch a winning team than a losing one. According to a study by University of Texas - Arlington Professor Depken, in 1997, every additional win added $1.6 million to revenue (10). This study used an array of performance statistics such as homeruns and found the correlation between them and winning. After finding the correlation, the professors were able to determine how much each player contributed to the revenue of a team. The results of this research displayed that even the highest paid players were underpaid based on income provided to the owner. Eight

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