Tuesday, January 11, 2005

What's in King George's wallet? 

After my ecstatic Red Sox October, you might think I'd be despondent now with the rumblings of George Steinbrenner and the Yankees. I'm actually not, for reasons Stan McNeal explains. Richard Sandomir (who, btw, is the best "business of baseball" reporter in the country and needs to be on more radio shows) argues that the Yankees are losing money but that it's all about the winning. John Palmer wonders about King George's motivations.
Another possibility might be that it is a good consumption purchase by a team owner who is willing to sacrifice profits in order to purchase the utility of winning games -- an owner who might rather sniff the jocks of winners than losers.

I'm not buying that one, Doc, not after watching Tom Yawkey in baseball gear on the field year after year and still coming up short.

John's first instinct is still the best: player salaries depend on the additional revenue a player brings to a team (what economists call "marginal revenue product" or MRP), and the extra revenue a player brings to the Yankees is higher than almost anywhere else. The Mets, getting their own TV contract, could conceivably make as much, which is how they justify getting Pedro Martinez and Carlos Beltran.

It's also worth noting that, for a while, the fact that the Yankees have NOT won the title makes the MRP for them higher, as their fans both expect a title and will pay through the nose to watch it happen. In contrast, some of the MRP for the Red Sox might have left with the weight (or wait) of 1918.