Baseball's New Austerity

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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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Squeezed Between Fans and Players

In the world of pro baseball, which has no salary cap, owners are pressured from both sides—players demanding competitive pay and fans seeking affordable entertainment.

The Pittsburgh Pirates have kept prices flat for the past seven seasons, a streak they will extend to eight. Nearly half the league's franchises are freezing or cutting ticket prices, including Atlanta, Houston, San Diego, Oakland, and San Francisco. The last time Major League Baseball ticket prices decreased was in 2002, when the average dipped from $18.99 to $18.31. In 2008, the average ticket cost $25.43. Even in Boston, where the cost of a seat at Fenway Park has escalated for more than a decade to an average of $48.80—tops in the majors—ticket prices are frozen.

The New York Yankees, notorious for the size of its players' paychecks, keep spending, while asking fans to do the same. With a new, upscale stadium opening this spring, Yankees games will likely be packed—and will need to be to support the contracts of a few key acquisitions. The Yankees signed first baseman Mark Teixeira to an eight-year deal worth $180 million and pitchers C.C. Sabathia and A.J. Burnett to a total of 12 years at $243.5 million collectively.

Bargains for Teams with Deep Pockets

For most players though, owners' economic fears mean tempered salary expectations and shorter contracts. Teams are looking for players to prove themselves before making risky, multiyear investments. "Baseball teams aren't in jeopardy of falling apart but they don't want to go out on a limb," says ESPN (DIS) baseball analyst Buster Olney. The small-money Tampa Bay Rays—reigning American League champs—exploited the weak market this winter by signing outfielder Pat Burrell to a two-year deal worth $16 million—only 11% more than he made in 2008 with Philadelphia. For aging stars there are no golden parachutes, only hope. Storied journeymen like Jeff Kent, Pedro Martinez, Ken Griffey Jr., and Nomar Garciaparra are among those likely to take huge pay cuts or, similar to veterans in salary-cap sports, to show up at camp to compete for a roster spot. "We're going to find out how much they love to play baseball," quips Olney.

While most baseball players and their agents are finding the 2009 offseason hard to love, this owners' market is an aberration from two decades of escalating salaries. Arbitration and an uncapped salary model have taken baseball far from the days of the 1980s, when club owners discussed salary caps and actually sought to limit contracts to no more than three years.

Just as hard times produce business casualties, teams with cash stand to benefit from recession bargains. Olney points to Boston as one deep-pocketed franchise likely to find advantage in the current era. "The Red Sox are absolutely loaded," he says.

Spielberg is an intern at BusinessWeek.com .