Major League Baseball

The Boss changed the game of baseball

Published Jul. 14, 2010 4:51 a.m. ET

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The death of George Steinbrenner, who created the blueprint for realizing the economic power of sports franchises in the modern media era, spotlights the profound impact the owner nicknamed "The Boss" had on the business of baseball.

Mr. Steinbrenner's singular focus on winning at all costs drove the market for players and blew up the balance of power in Major League Baseball, dividing the league into two classes: a small group of big spenders and everybody else.

It was largely Mr. Steinbrenner's stewardship of the Yankees over the past two decades that forced MLB to institute an economic system designed to curb spending and spread the Yankees' wealth to teams in cities such as Pittsburgh and Milwaukee.

The new system has hardly slowed the Yankees, whose enormously profitable YES Network has kept spending in overdrive even as Mr. Steinbrenner ceded control of the franchise to his two sons.

"From a media standpoint, Steinbrenner's going to go down as a pioneering owner," said Lee Berke, a sports and entertainment industry consultant who co-wrote YES's original business plan. "He realized the value of his team's media rights more than anyone ever had."

The competitive landscape of baseball before the Yankees' modern run of titles would be unimaginable to fans who came to the game after 1995. Consider that in 1993, the Toronto Blue Jays had just won their second straight World Series with a league-high payroll of just over $45 million.

By 2001, the Yankees had nearly tripled the team's payroll to beyond the $100 million threshold and rattled off four world titles. While a few large-market teams such as the Dodgers, Red Sox and Mets continued to try to compete with the Yankees for costly free agents, most of the rest of the league effectively gave in, ceding the player market to the "haves."

The prevailing view was the game was headed toward "Harlem Globetrotters vs. Washington Generals," former Colorado Rockies owner Jerry McMorris once said.

Mindful of the perils of turning away fans in a growing number of cities with overmatched clubs, baseball in 2002 got its players' union to agree to changes designed to restore competitive balance.

The league instituted a two-pronged system that redistributed revenue from the wealthiest teams and penalized excessive spending through a luxury tax.

The new system has cost the Yankees dearly — the club paid $174 million in luxury-tax payments from 2003 to 2009, according to Wayne McDonnell, professor of sports management at New York University — but it hardly has slowed them. The major reason: the 2002 launch of the Yankees Entertainment and Sports (YES) Network, which is built around broadcasts of the team's games.

Though other sports franchises had started their own networks, none of them took the risks the Yankees did to maximize its value, according to Mr. Berke. The birth of YES was marked by a standoff with Cablevision, which balked at putting YES on basic cable.

Eight years later, YES, valued at $850 million at launch, is said to be worth at least $3 billion. Its success has helped spawn a rash of team-owned regional sports networks throughout baseball and has allowed the Yankees to continue to drive the market for players even as it has had to share more of its wealth with other teams.

Before the 2009 season, the Yankees signed three free agents — C.C. Sabathia, A.J. Burnett and Mark Teixeira — to contracts with a total value of more than $400 million.

"Going forward, YES Network is a monument to his work and his success," said Mr. Berke. "A lot of teams, leagues and college conferences — not only in the U.S. but the globe — have looked to YES as the pinnacle of what a team can do."

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