Until about 1975, major league baseball players almost never enjoyed free agency. They could not shop themselves to other teams unless their employer no longer wanted them. They typically received a one-year contract during the offseason, but when the contract ran out the “reserve clause” reserved that player to his current ballclub for one additional season. His only option was to sit out an entire year unpaid, an option very few players chose to pursue.
Michael J. Haupert writes in the Economic History of Baseball:
Player contracts have changed dramatically since free agency. Players used to be subject to whatever salary the owner offered. The only recourse for a player was to hold out for a better salary. This strategy seldom worked, because the owner had great influence on the media, and usually was able to turn the public against the player, adding another source of pressure on the player to sign for the terms offered by the team. The pressure of no payday – a payday that, while less than the player’s MRP, still exceeded his opportunity cost by a fair amount, was usually sufficient to minimize the length of most holdouts. The owner influenced the media because the sports reporters were actually paid by the teams in cash or in kind, traveled with them, and enjoyed a relatively luxurious lifestyle for their chosen occupation. A lifestyle that could be halted by edict of the team at any time. The team controlled media passes and access and therefore had nearly total control of who covered the team. It was a comfortable lifestyle for a reporter, and spreading owner propaganda on occasion was seldom seen as an unacceptable price to pay.
For example, in 1953, Augie Busch bought the St. Louis Cardinals and and the St. Louis Browns moved to Baltimore, leaving the Cardinals as the only game in town. That season Stan Musial of the Cardinals hit .337 with 30 homers and 113 RBIs, 127 runs scored, 53 doubles, and 105 walks, so the St. Louis Cardinals cut his salary from $75,000 to $57,500. Musial responded by hitting .330 with 35 homers and 126 RBIs, so the Cards cut his salary to $50,000.
How could you not make money owning a baseball team under monopsony?
I also like how the Boston Red Sox cut Ted Williams’ salary from $90,000 in 1951 to $50,000 by 1956. Then after 1957 when Williams batted .388, with a .526 on-base average, and a .731 slugging average, the Red Sox gave him a raise back to $60,000.
Mickey Mantle was the best player in the American League as judged by Wins Above Replacement each year from 1955-1958. In 1957, Mickey batted .365 with .512 on-base average and a .665 slugging average and the Yankees gave him a raise from $60,000 to $65,000. (Don’t assume that the ball was juiced in 1957 — Mantle and Williams were just playing in their own universe that year.)
In 1959, Mantle fell all the way to the 3rd highest WAR in the AL, and Yankees cut his salary from $70,000 to $60,000.
Ah, the Yankees … The greatest winner in the history of baseball was the Yankee’s catcher Yogi Berra, who played in 14 World Series from 1947 through 1963, winning 10 of them. With almost twice as many teams today, that record will likely never be broken. Derek Jeter, for instance, has been in seven World Series, winning five of them.
In the seven seasons from 1950-1956, during which the Yankees won five World Series, their catcher Yogi Berra was no lower than fourth in the AL Most Valuable Player voting, winning three MVPs. In 1957 he fell to 14th in the MVP, so the Yankees cut his pay. The next season he was 18th so they cut his pay again. Then he clawed his way back to 12th most valuable player in the league, so they let him have the same salary.
The funny thing is that when the arbitrator threw out the Reserve Clause and free agency finally came along in the mid-1970s, many people were convinced baseball would be ruined.
The movie business had a similar gimmick where the studios could arbitrarily extend an actor’s seven year contract whenever he refused to appear in a movie with a bad script. That’s the ending to the Coen Brothers’ “Barton Fink:” the mogul takes a disliking to the writer Fink, so he vows to extend his contract forever.
Here’s the tough guy who stood up to the Hollywood studio cartel and filed a lawsuit in 1943 arguing that seven years meant seven calendar years.
She eventually won in the California Supreme Court.
A rumor is that when Sandy Koufax and Don Drysdale teamed up to threaten to hold out unless they got raises from the Dodgers after going 26-8 and 23-12 respectively in the Dodgers’ 1965 World Championship year, they threatened to sue in California by analogy to the De Havilland rule. Eventually, the Dodgers caved in and gave them modest raises.