Baseball's New Austerity

In the midst of a recession that has baseball team owners worried about ticket sales, the free agent market is flooded with players

By Greg T. Spielberg

The idea for "Baseball's New Austerity " came from BusinessWeek reader Nathan Skousen, who is a business intelligence analyst for The Generations Network in Provo, Utah.

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Dodgers shortstop Rafael Furcal was unsuccessful on the free agent market this winter and is returning to Los Angeles for less money in 2009. Harry How/Getty Images

The U.S. recession won't cause major leaguers to trade their stirrups for sandwich boards, but the economic climate is affecting U.S. sports franchises. Nowhere has the new austerity been seen more than in baseball's free agent market.

Just as banks are carefully navigating the financial landscape, Major League Baseball club owners are being relatively stingy with their wallets. "I think there is so much gloom and doom and so much negative rhetoric out there that it would be impossible for the teams not to show some economic restraint," says Alan Nero, a Chicago-based agent and managing director for baseball at Octagon Worldwide, a Norwalk (Conn.) sports marketing firm that represents athletes.

Robert Stavins, a professor of business and government at Harvard University, predicts a drop in single-game sales but not a decrease in season-ticket sales. "Generally speaking, sports are not a necessity of life," Stavins says, adding, "There's a family that's going to go to one game a year" instead of two.

With that prospect in mind, wary owners, fearing half-full stadiums, are scouting less expensive talent. Many older pitchers may enter spring training without a contract and, although the league is well past winter meetings, the free agent list is still well stocked. "I've been doing this 30 years and I've never seen it this slow," Nero says.

Big-name players like outfielders Adam Dunn, Bobby Abreu, and Derek Lowe would probably agree. This winter, all three stars have been hanging around like kids at a pickup game, hoping to land a suitable deal. Chicago White Sox shortstop Orlando Cabrera is sprucing up his résumé by offering to play second base. Rafael Furcal, who earned $15 million last year as the Los Angeles Dodgers' shortstop, swam out into the free agent waters, found them frigid, and returned to L.A. with his blue hat in hand, taking a $5 million pay cut.

NBA and NFL Cut Ticket Prices

While baseball owners speculate about the economy's impact on business, the National Basketball Assn. is already adapting to the recession. The Sacramento Kings doubled the number of $10 tickets to 1,000 and are maximizing existing partnerships. Fans who purchase better seats, at $25.50 apiece, receive $10 gift cards from Subway and Carl's Jr. (CKR) restaurants. In Detroit, the Pistons offer $1 nights on concessions like hot dogs and cotton candy and two-ticket packages for $59. These measures have been taken despite a starting five that have drawn enough clientele to sell out the past 252 home games. Both the Kings and Pistons have begun Girl's Night Out promotions—Sacramento rewards female patrons with a margarita glass and a tank top, and Detroit offers a chance to meet players.

In the National Football League, the Detroit Lions are cutting ticket prices, while the Minnesota Vikings, New Orleans Saints, and St. Louis Rams are all freezing 2009 prices. The Washington Post reported Jan. 9 that despite being ranked the second-most valuable franchise in the league, the Washington Redskins laid off 20 employees, including its salary-cap analyst.