View Point

A VIEW ON MODERN SPORT

By: Stephen Sachs

Our society has trouble understanding sports today. Unlike the glorious years gone by, we no longer feel connected to our athletes. We are aghast by their outlandish salaries, endorsements, and have trouble understanding how a human being could be worth outlandish amounts of money simply for their ability to play a game. Many theories have been put forth to try and decipher this strange phenomenon how humans could justify paying and looking at these people for inspiration. Perhaps it is the ability, the raw superhuman strength or agility that many of us do not possess. Perhaps it is a deep-seeded need for us to have heroes in our society: men and women (men in particular) who can be superhuman and defeat mortal enemies. We no longer have soldiers, so we look to these people (or many of us) in the awe reserved for great generals of battle in the past. What is true is that the relations between sports athletes and modern society have become more strained. When Babe Ruth signed his contract with the Yankees for I think $80,000, people could not understand how a human could be worth that much money. Today we scoff at contracts worth $80,000. Recently Alex Rodriguez signed a contract with the Texas Rangers for $250,000,000 to play shortstop. Granted he is thought to be the best player in baseball today, but is a human being worth $250,000,000, or do we have to change our perception of sports and humans in general?

The purpose of this paper is to show that sports athletes are not what they once were thought to be. Today, we are in a state where athletes are no longer human beings. Athletes are seen as something else: an asset on a balance sheet. They are appraised with astronomical contracts and endorsements because they have worth attached to them. Sports in general, and baseball in particular, are indicative of a wider trend in society. When one looks at the billions of dollars being paid for companies in technology who have yet to turn a profit, they begin to appreciate the current trend. Companies which are unprofitable are commanding share prices (or did until the most recent stock market correction) of hundreds of dollars- and they have not shown black on their balance sheets. There is an inflationary bubble being created throughout society and sports is a manifestation of this bubble. I am not claiming that these athletes are technology companies and unproven. In fact, Alex Rodriguez is a great bet if one were putting together a portfolio. He would be one player that Warren Buffett would invest in. A-Rod, as he is known, has been repeatedly touted as the "one player any owner would build their team around." In our modern age, that means you pay top dollar for such an asset- the same as you would pay for a solid stock in your portfolio. A-Rod is part of a greater trend which is coming to our society: the dominance of corporations. This paper will argue therefore that athletes are in fact assets, teams are becoming corporations, and humans are dislocated because of the confusion which occurs when a human is viewed as corporate- an asset and therefore cannot cognate the distinction which is being made all around us.

Sports athletes are worth millions if not billions of dollars to advertisers, owners, and just about anyone who wants to sell something. Athletes can bring in customers for whatever because of their visibility. Great players and teams bring fans to stadiums, paying about $30 a ticket (for average seats in baseball), and multiplied by 50,000, those numbers begin to climb. However, there is more to the equation than that. Good teams can command money from television because of the exposure these teams can bring advertisers. The better the team, the more people who watch. The more people who watch, the more stations can charge advertisers. Therefore, these athletes on a macro scale can command more money because in fact, they generate more money. We are inundated with such theories making fans upset at the amounts being paid to athletes in general. Then, sympathy is very limited especially when our athletes in their "players unions" go on strike for even more money. As people sit at home, most struggling to make ends meet, and listen these men go on about how they are "being exploited," the fans begin to feel sick, if not disgusted. Here are people making millions, and some tens of millions, to play a sport which many of us would do for free. Athletes are given more money, which in turn makes it more difficult for people to afford going to a game. Thus, the fans become alienated from their heroes because they no longer see them in person. More fans have to resort to watching their sports on television, which increases the revenue for advertising. Basic economics will show the trend developing. As television stations make more money, teams demand a greater share of that revenue. In turn, players want more money from the revenue being made by television contracts, which also raises ticket prices and squeezes the fan further. Moreover, sports viewing becomes more exclusive. While regular fans are being squeezed, owners begin to look to other places to fill their seats. Sports viewing becomes a novelty, making it a great form of entertainment to impress certain people. Therein lies the second trend, the corporate attraction to sports. They pay for clients and executives to attend these events because it impresses, not to mention offers an element of separation from normal people.

As we look at our modern sport landscape, those trends described above are currently taking a greater prominence. Regular people (whatever that term means) are no longer able to see their favorite players. Families do not attend these games en masse, frankly because it is too expensive. We see a trend where professional sports have alienated its fan base, while making itself more accessible than ever. Now more fans can watch the games, but they cannot do it at the stadium. Meanwhile, with the corporate funding and popularity of sports, teams are demanding new stadiums. Once these stadiums are built, the focus is to attract a greater portion of corporate business. Luxury boxes line the stadium, box seats are a necessity, and left over is a smaller portion for regular fans. As any economics student can tell you, the law of supply and demand is being enacted here in sports. With a smaller amount of seats for fans to attend these games, the price will inevitably go up. Moreover, with greater demand by corporations, those seats can command a greater price. In a double whammy, economics and the market place have removed the fan from his or her sport. No longer is it economical to take a family to a game. No longer is it economical for ordinary people to hold season tickets for their favorite team. Then the whopping salaries get told to these fans, and they know that the boot will further be put to their neck. As football fans are well aware, the higher the salaries translates into more commercials where there they were not before, longer games and less time to watch their heroes. Fans are still attracted and disgusted all the while. That is sports today.

It is time fans realize what is going on around them. It is time fans take notice that sports is now a business. For many years we have been told this, but we have not take notice of this fact. Getting back to the A-Rod case, it is evident that Rodriguez is going to bring more money in Texas than they would have without him. He can attract greater television revenue, sell corporate boxes and justify ticket prices being raised. In the democracy of sport, ticket prices are raised to all, therefore corporations and their tax-write-off boxes are given the same percentage raise as the other season ticket holders. Let us call it the A-Rod tax. Better players will be attracted to Texas than before because of A-Rod's presence and their commitment to winning. Better players mean a better team. A better team means more money. The worth of it on paper goes up. Each player is viewed as an asset, almost a corporation within a conglomerate. Each can be bought and sold, and they serve to bolster the team more. Therefore Texas paid the most for the best company on the market. Rodriguez's salary is just the minimal price that Texas will pay for the use of his name and ability. Fans and people in general have to realize that the world around them is changing. Sports athletes are no longer human. They may look human, but they are commodities, bought and sold in a special marketplace. What is now infecting sports has been infecting entertainment in general for many years. Being paid hundreds of millions of dollars to appear in a movie is now commonplace in Hollywood. The same is occurring in sports, and it is expected that the same "bang for the buck" will take place.

Ordinary fans are sickened by the approaching situation where players will be paid more than a billion dollars for ten years. Yes those days are coming, but not for a long time. If there is anything people can take heart in, there is a bubble being created in sports. Eventually the money will have to run out. Owners are making a fundamental mistake in taking the games out of the hands of regular fans. Corporate money, albeit more plentiful now, is fickle and much less powerful than the great fan base has been in the past. Furthermore, just as the vicious cycle stated above takes place, it too can unwrap itself. If fans do not watch these events, then television revenue will drop. If that occurs, then the prices being commanded will drop, and players and owners will see their mistakes being manifested in less money for them to be paid. For some reason, that scenario seems unlikely, but is nevertheless theoretically plausible. What is going to happen is that sports will reach an end point, that salaries will not rise much more than they already are. In fact, at closer inspection, A-Rod's salary of $250,000,000 is more shocking than it is real. The contract is over 10 years, and therefore making it worth in theory, $25,000,000 a year. However, that is not entirely true as well. There is an option in the one of the latter years where either side can remove itself from the contract, and the majority of the salary in those following years. Moreover, the contract will not be paid all at once, but in installments over a subsequent number of years following the contract's expiration, which in itself means the value of it is less than it seems today, and means the salary is not as astronomical as we might think. However outlandish it might seem, CEOs make that much money in stock options daily. One stock option exercised by the CEO of Home Depot last December totaled $1,000,000,000. That is right, a CEO of a company can be a billionaire, why cannot a sports athlete who is the CEO of his own company? And finally, that athlete is making their money at a younger age than most would like to see or understand, but their money theoretically must last longer too. It is therefore worth less as time goes on unless they are investing it right.

What I am saying here is two fold. One, there is a true trend in sports which does alienate fans, and makes it much more inaccessible. That trend is all over society today, and we are all aware of it, just not articulating it. Another trend is that these athletes are in fact making many dollars. It is a perceptional problem which does not allow us to understand how they can demand so much money. We think they are employees just like us. We have to subject ourselves to the whims of our employer and so should they. In fact, athletes are not just like us. They are employees of themselves, able to take their talents elsewhere at a moments notice. The better the athlete, the more marketable they are. If you want the talent, you pay for it. Instead of stock options, these people get their salary in cash. How are they any different than our corporate executives who make millions in salary and make tens of millions in stock options? They are not different at all. We just assume that since athletes are unionized, since they are allegedly employees, they are therefore the same as other employees. This is not true. Their salaries are dictated by supply and demand, but the fact no one, no matter how good they are at anything, is as talented as these people and deliver or command the monies justifying their salaries. It might do better for us to view teams no longer as a bunch of guys but as mini-conglomerates. Those who are on the field at any given time are the best money can buy for those positions. And one other thing people should realize. Teams are not worth much on paper, as the demonstration of the Texas Rangers being bought for $250,000,000. Try doing a leveraged buy-out. The sum of the parts is worth a hell of a lot more than the whole. They are the last frontier of cheap value and great wealth. Because all this is so complicated, fans cannot understand how their team can lose so much money and still be bought for millions, how they pay so much and yet cannot be profitable. The value is in the team not the organization. Ladies and Gentlemen, sports are a perfect place for all of us to learn about modern business in general, its underhanded and deceptive way of conduct, and perhaps another area for us to vent our frustration with the constant fleecing citizens that humans daily endure.