Why the corporatization of MLB is the real threat to baseball

As baseball shifted from a game run by the eye test and counting stats to Statcast and biometrics, the people running baseball teams have changed as well. Fewer and fewer “baseball lifers” run teams, their ranks filled by (mostly) men who would look as comfortable with McKinsey or Deloitte as the Dodgers and Yankees.

Part of this was by necessity: you need people within your organization who can interpret and action all the data that teams have these days. In a lot of ways, the transition is similar to the flood of science backgrounds into Wall Street in the 80s; as technology changed the way traders do business, they needed “geeks” to work within the new bounds of the industry.

It’s a fair argument to say that the increased scientific approach to trading has led to poorer results from financial services. An increasing reliance on automated trading has led to a lack of oversight, increased wealth accumulation at the top income bracket, and a general shrouding of how financial services work these days. Similarly, I think an argument can be made that the increased corporatization of baseball has led to poorer outcomes for fans.

One of the ways this manifests itself most obviously is ticket prices. Teams don’t really want to sell out their stadium anymore; to do so would likely mean decreasing the price of tickets to a suboptimal level. Instead, clubs optimize their ticket revenues. I can sell 50,000 tickets at $10 a pop, but if I increase that to $20 and only sell 30,000 tickets, I’ve made more money despite drawing fewer fans.

This is a simple example, but I think a powerful one. Teams have a mandate to charge whatever they want for tickets, and there’s nothing expressly wrong with making as much money as possible. The problem arises when you’re trying to grow the game to future generations. Baseball is a sport best enjoyed in the park, and optimizing rather than maximizing attendance disincentives parents from bringing kids to the game, hurting the future fans of the sport.

This increased corporatization of MLB at the club level also affects how free agents are compensated, and this is really where the Yankees lead the pack. We’ve spilled a lot of ink talking about free agents, and the fact that the Yankees regularly do still sit near the top of the payroll leaderboards league-wide. What they don’t do is extend out contracts - Aaron Hicks and Giancarlo Stanton are the only contracts the team has acquired with a longer than five year term since Masahiro Tanaka.

Patrick Corbin was a victim of this last year, where the Yankees publicly balked at the idea of a sixth year on the deal. The AAV of the Yankees’ offer was similar to the final Nationals contract, and J.A. Happ’s deal wasn’t that far off in annual value either, but the term was what kept the Yankees out of the sweepstakes. Maximizing future flexibility while optimizing current revenue through attendance and the newly-reacquired YES Network provides a financial platform for the team at the possible expense of the on-field product and of the game itself.

I write a lot about how baseball is a copycat sport. Teams look for edges within the league and follow the examples of other teams. The Houston Astros are probably the worst example of introducing the often morally-challenged management-consultant type into baseball, but the problem is becoming endemic to the game. Bad PR like the type from Jeff Luhnow or Randy Levine hurt the sport, and I think a lot of the complaints about the way the game is played on the field can be drawn back to the Bain Capital Copycat Strategy front offices seem obsessed with.

One of the chief complaints about the modern game is the use of bullpens: constant pitching changes make the game longer and suppress offense. On an inning by inning basis, relievers are generally better than starters so sure, it makes baseball sense to leverage them more. It’s also true that they earn less, and their year-to-year volatility makes them more likely to accept team-friendly contracts than a starter would, incentivizing teams to build more bullpen-reliant rosters. Convenient, that is.

Baseball is now and always has been a business. What’s different is the adoption of management strategies that focus on reducing costs and maximizing short term financial performance, in a business model that was always predisposed to long-term capital appreciation. If the game is struggling, it’s not because players don’t steal bases or use Twitter, but because ownership and front offices would rather be the Boston Consulting Group than the 2018 Boston Red Sox.