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The Economics of Baseball: Analyzing Player Salaries and Revenue Dynamics

This presentation by John Lyons, Thomas Mauro, and Ryan Rogan examines the rising player salaries in baseball, which surpassed $2 billion for the first time in 2002, with a notable average salary increase of 5.2% to $2,383,235. The analysis explores revenue sources, including ticket sales and media income, and compares baseball salaries to those in other sports like the NBA and NFL. It highlights the growing disparity between wealthy and struggling teams and questions whether player salaries have outpaced reasonable limits, illustrating the transformation of baseball into a significant business.

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The Economics of Baseball: Analyzing Player Salaries and Revenue Dynamics

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  1. The Economics Of Baseball Presentation By: John Lyons Thomas Mauro Ryan Rogan

  2. Are player salaries too high? • Baseball salaries topped $2 billion for the 1st time in 2002 • $126 million by the Yankees led the league • Players will earn $2.023 billion up from $1.934 billion last year • Average salary rose 5.2% from last year to $2,383,235 • From 1967 when the salary was $19,000, average salary increased 126-fold while the CPI has gone up only five-fold since then. • Baseball player average salary (per day) = $13,000 • The average annual household income in US = $57,045

  3. Facts and Figures Cont. • What about other sports? • NBA averaged $4.2 million • NHL averaged $1.4 million • NFL averaged $1.1 million • The gap is growing between the rich and poor teams since the 1994-1995 strike

  4. *Click on Charts for Source

  5. Sources of team revenue • Ticket Sales • Venue (stadium) revenue • Media revenue • Because of the low amount of revenue taken in by some clubs, the league has thought about eliminating 4 of the teams – Milwaukee Brewers, Montreal Expos, Minnesota Twins, and Tampa Bay Devil Rays, however they have decided on to hold of this decision until more studies are done.

  6. Conclusion • Baseball clubs get the majority of their revenue from the fans who pay to come and watch the games. • Fans are drawn to clubs that have big name players or clubs that have a good team. • Owners are pressured to draw the big name players with money to keep their teams profitable. • Baseball, while once a sport, has turned into big business.

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