Boxer Floyd Mayweather’s annual salary of $285 million and soccer star Cristiano Ronaldo’s $56 million help the rest of us understand how Maseratis and 10,000 square-foot homes even exist in the first place.
The interesting thing is, though, that athletes didn’t always earn superstar wages – which begs the question: How did athletic salaries go from that of the average factory worker to levels far above those of most CEOs, doctors, and inventors? Even with inflation accounted for, today’s great athletes out-earn yesterday’s fifty, sixty, and even seventy times over. Baseball phenomenon Babe Ruth made just $110,000, the equivalent of $1.4 million in today’s dollars. That record stood for three decades, until Joe DiMaggio and Mickey Mantle finally began earning similar salaries in the 1950s.
How did society come to value top athletes so wildly, with more money than they could ever spend?
1950s: Today’s Wages Brought to You by Your Favorite Sponsor
Before the 1950s, fans flocked to stadiums to watch their favorite teams play; but these arenas were no Rose Bowls with 92,000 seats. Room for just 5,000 to 25,000 in the early stadiums clearly limited ticket sales, but when televisions began spreading throughout cities and suburbia, soon everyone was watching larger-than-life professional players work their magic. Television allowed sporting events to reach multitudes of fans, and suddenly advertisers could push their products during game pauses. It didn’t take long for companies to hook up with the players themselves, too. With endorsements come big checks.
A sampling of athletes’ salaries in the 1950s includes Mickey Mantle, who earned $100,000 ($1,002,000 in today’s dollars) per year, and Jackie Robinson, who earned $35,000 ($351,000 today). In the 1920s, golfer Gene Sarazen began milking an endorsement deal with Wilson Sporting Goods – an arrangement that lasted for a whopping 75 years.
The first million dollar contract didn’t land on an athlete until 1964. And despite what you may expect, it wasn’t given to a first baseman or a quarterback. It all turned on who had the biggest audience – and in the early 60s, that was six-time bowler of the year Don Carter. Bowling ball manufacturer Ebonite paid Carter to spread the word of the Don Carter Gyro-Balanced ball. Now an international company owning many other bowling equipment brands, Ebonite clearly benefited from the relationship, despite the high price.
1960s-70s: The Power of Negotiation
Prior to the 60s, professional players usually signed long-term contracts that weren’t open to negotiation; the professional ball clubs had all the power. But in 1966, Don Drysdale and Sandy Koufax – the two-star pitchers for the L.A. Dodgers – engaged in negotiations that led to a one-year contract of $110,000 for Drysdale, and $125,000 for Koufax. (That’s $818,000 and $930,000 in today’s money for the two best pitchers in the league!) Those were the largest two contracts in baseball history, and it demonstrated that ball clubs no longer held all the cards.
Soon after, the MLB Players Association (a union-type organization) hired Marvin Miller, a United Steel Workers negotiator, to fight for better salaries. In 1968, the minimum salary was raised up from $6,000 per year to $10,000 per year ($70,000 today).
Players gained even more power when federal legislation entered the scene, allowing them to become “free agents.” This designation meant that players could now solicit offers from other teams while still under contract with a current team. Die-hard sports lovers and attorneys quickly became agents, negotiating on behalf of their clients for better pay. By 1975, the free agent system had exploded.
In the 1970s, Bobby Hull with the National Hockey League won a million dollar 10-year contract with the Winnipeg Jets. Baseball player Dave Parker signed a whopping $5 million 5-year contract with the Pittsburgh Pirates. Still, these salaries topped out at one million or less per year.
1990s: Breaking Records On and Off the Court
With a layer of agents brokering deals between clubs and players, the sports industry spent the next fifteen years negotiating contracts and sorting out salaries. When renowned basketball player Michael Jordan stepped onto the professional court in 1984, his skills and personality not only won him the love of basketball fans everywhere, but also spurred one of the biggest leaps in the history of sports salaries. During most of his career, the astounding Michael Jordan received a “mere” $2 to $3 million each season. For the 1996-1997 season, however, the Bulls put Jordan’s worth at $30 million, more than any player before or since (yes, even LeBron). The following season, Jordan exceeded his own record, signing a $33 million contract with the Bulls.
That’s not to mention the earnings Jordan pulled in through product endorsement deals. Throughout his career, the basketball superstar has been a spokesman for Nike, McDonald’s, Coca-Cola, Chevrolet, and more. His endorsement of Gatorade earned him a whopping $18 million, ten-year contract. With athletes taking on celebrity status throughout the 90s, marketers became more and more willing to shell out big bucks for endorsements that would likely skyrocket their sales. The big players found rapidly growing potential in their opportunities to earn income both on and off the court; and for some, those opportunities continue even after they’ve stepped off the court for good – in 2014, years after retiring from the NBA, Michael Jordan raked in $100 million in endorsement deals and royalties from his own personal brand.
Today: The Great Divide
Like the salaries of most Americans today, sports salaries stand on either side of a radical divide.
Average players earn far less than the superstars. In 2012, the average Major League Baseball salary was $3.4 million. The top player, Alex Rodriguez, earns nearly ten times that, since signing his $275 million-dollar contract with the Yankees in 2008. Those in other sports also earn huge salaries; with soccer’s Lionel Messi bringing in $52 million, basketball’s LeBron James $20 million, and golf’s Phil Mickelson nearly $3 million. Endorsements, of course, more than make up for lower salaries – with the handsome Roger Federer winning just $9 million in salary, but $58 million in endorsements. Mickelson, too, reaps great rewards from endorsements, earning $51 million from Eliquis and others in 2015.
The bottom line is that sports, like every industry, exists in a market economy. Salaries are a factor of the choices consumers make. If consumers are willing to pay high ticket fees and gear prices, then prices will continue to rise. Athletes make this level of money because everyone, from the fans to the stadium builders to the ticket sellers, is willing to reward them at that level. And, if the past four decades are any indication, fans aren’t going to stop watching their favorite teams any time soon.