Boston Red Sox and Babe Ruth salary day

The fiscal dynamics of baseball have changed since Babe Ruth signed a $7,000 contract. Let’s take a look.

On January 15th of 1918, Babe Ruth of the Boston Red Sox signed a new contract for the coming season. The negotiations were somewhat contentious and that was standard for Ruth during his baseball years. Ruth is often viewed – and rightfully so – as a flamboyant and carefree soul, but Ruth knew his value and had the hardscrabble street smarts to hold the line.

As you get older (trust me on this) your reference points on money change considerably as you get mired into what the cost of something use to be. Inflation is a nasty little item and the escalation of prices spiral upwards and baseball is no exception.

I use to look at the Fenway Park parking lot for players and occasionally still do. Back in the 1950s and early 1960s you could walk down Van Ness Street and observe player’s cars through a wire fence with no screening to prevent wandering eyes. Or you could get an aerial view by standing on the walkway behind the grandstand on the first base side. Nothing remarkable, but the years have certainly changed the types of vehicles.

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In the 1950s and early 1960s, it was common to see a Buick, Chevrolet and Ford with the rare appearance of a Cadillac. Players were not rich and often – even a star player – would have off-season employment. The union was still in its infancy and Marvin Miller was twenty years away. The first recorded listing of average salaries is 1964 and that was for $14,863 and that would translate to $128,143 in 2015.

The average salary for an MLB player for 2015 is in excess of $4 Million and the minimum salary is $507,000. Both figures represent a staggering growth in compensation that certainly makes income inequity seem viable when baseball (and other sports) are discussed regarding compensation. This, of course, is funded by the fans and even the non-fans via tickets, merchandising and advertising.

In 1917 Ruth – then of the Boston Red Sox – hit only two home runs and accounted for a meager 14 RBI, but still showed some hitting promise with a .325 average. Ruth was primarily a pitcher finishing 24-13, leading the American League in complete games and posting a 2.01 ERA. Ruth was rewarded with a contract for $7,000 for the 1918 season and that in today’s dollars would translate to $119,976. Certainly not servitude, but less than the highest paid player, Ty Cobb, who received $20,000 from the Tigers.

In 1960, Willie Mays was the highest paid player in baseball with a salary of $80,000 or about $639,000 in 2015 dollars. That last inflation accounted figure is still substantially below the average player salary for 2015 and about 25% higher than the minimum salary for MLB players. And then consider the pension and health care benefits.

When changes in baseball are discussed I take a different tack since it is not about equipment, diversity of players, new venues and a myriad of other topic’s, but all about the money. That has been the most staggering “improvement” in the game from my perspective.

Looking at Ruth, I would wonder just what a salary for a player who it 1918 earned his keep with a league-leading 11 home runs and a 13-7 pitching record? Then toss in the two wins in a World Series. No doubt you could use some of the metrics such as WAR and divine the current worth.

"“I think he’s (Marvin Miller) the most important baseball figure of the last 50 years. He changed not just the sport but the business of the sport permanently, and he truly emancipated the baseball player – and in the process all professional athletes. Prior to his time, they had few rights. At the moment, they control the games.” – Commissioner Fay Vincent"

There are, to me, three significant factors that correlate to the rapid rise in compensation (1) Is Marvin Miller and (2) the escalating revenue – especially media dollars and (3) Franchise value.

With Miller and subsequent free agency, an escalation salary trend took place and much was the willingness of owners to attempt to outbid one another. Free agency may have been a fiscal motivator, but even more so was the process of arbitration that has also significantly contributed to salaries. Miller was a unionizing magician who simply handed owners their lunch in negotiations and with saying sayonara of the reserve clause.

Dollars must come from somewhere and the fans are now that dollar trough. The revenues continue to rise as does the value of a franchise. If there is a way to squeeze a buck out of a stone, then ownership will do it. The Red Sox have branded just about everything in New England as “The Official (fill in the blank)” of the Red Sox. And they will merchandise anything in all sports.

If anyone wishes to examine – say at Harvard Business School – the current methods of baseball operation the Red Sox would be an excellent – if not the best – case study. A magnificent example of savvy marketing, creating a branding machine, taking full advantage of a superior fan base and creating an empire that includes other sports franchises and a real estate empire. For a Red Sox fan, we certainly pay the freight and are fortunate enough (or unfortunate) to have an ownership that is among the best in baseball – maybe the best?

When I first started to follow baseball a significant portion of the owners were not “Baseball Gentlemen” such as Tom Yawkey, but baseball men or baseball families: Veeck, Griffith, Comiskey, Mack, O’Malley and many more. They have all long since cashed in their monetary chips and that is a final change – the incredible value of a baseball franchise. There appears to be no “bubble” in operation when it comes to baseball and sports franchises.

Sources: MLB.com/Baseball Almanac/SABR/The Babe in Red Stockings

The fiscal dynamics of baseball have changed since Babe Ruth signed a $7,000 contract. Let’s take a look.

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