THE BLOG
11/07/2011 10:42 am ET Updated Jan 07, 2012

From CC to the NBA Lockout -- Why Sports Is Not a Logical Business

Much to the relief of Yankee fans (of which I am not one), pitcher CC Sabbathia agreed to extend his 4 year $92 Million contract to one that pays 5 Years and $122 Million. For all the drama generated in print and on sports talk shows one would have thought that the fate of the free world rested on whether CC was going to make $23 million per year or 24.5. But hey, that's the way it is with sports. Sports is a business based on emotion. It is the emotion of the fan behind his favorite team that pays for all the salaries of players and the revenues of teams. This is unlike most businesses where you just sell a product and you can make emotionless decisions.

Sports owners have either made or inherited a lot of money that has enabled them to get into the sports game. Most are very successful business people and buy not as another business decision but because they are fans. They want to be involved in sports to win a world championship. Buying a sports team is an emotional decision they make. This leads them to pay more and more to star players often bidding against themselves even though logical business decisions would have them do otherwise. What if the Yankees had allowed CC to test the market. Likely no team would have paid him more than the Yankees were (none can really afford it) since he was already the second highest paid pitcher in baseball. However the emotional fear of losing him made sports radio hosts and fans insist that they overpay for him some even suggesting an illogical contract of 7 years and $175 million was the solution in order to keep CC a Yankee.

The paradox of all this is that sports owners want to run their teams as if the rules of logical business apply. The franchises should be successful and make money, however their emotional decisions render this nearly impossible for most owners. The rules of logic they have used to make their fortunes do not play in sports. So sports owners need protection from themselves. This is why in the case of the NBA they want to set limits on the amount the players can earn, creating a zero sum game so the next $20 million contract takes money out of another player's pocket. Can't these titans of business operate on a free open market playing field?

If they cannot, they should resign themselves that their sports teams should be for their amusement not profit. If their other business interests are making money, let the teams lose it so they can win. The owners can experience the joy of a championship by getting the players they want and being a winner. Owners like Donald Sterling of the Clippers resign their fans to years of losing because they won't spend to keep good players. I can't imagine what joy he gets from being an owner. His business logic has taken the emotion out of sports ownership.

Free agency allowed free market economics to come into sports. There are certain inequalities between large and small market teams that ideas like revenue sharing can overcome. However, for a lockout to occur because owners are trying to apply the rules of logic to an emotional business is wrong and a betrayal to the fans whose emotions pay for it all. Hey, I miss my NBA. Owners, this is a game, not the business you made your money in. Your emotion got you into this, let it guide you. If you don't have the resources to play the game, your fans deserve someone who does.