The Business of Steroids in Baseball

by Michael Lenhardt March 14 2010, 18:16

Introduction

For the past decade Major League Baseball has been forced to deal with the fact that at least one hundred of its players have been linked to steroid use, with the actual number probably far greater than that. [1] The Mitchell Report, an independent investigation into the illegal use of steroids in Major League Baseball done by George Mitchell of DLA Piper, alone uncovered forty seven players who have used steroids. [2] Surprisingly, steroids were not added to Major League Baseball’s banned substance list until 1991, and testing of major league players did not begin until the 2003 season. [3] While the use of steroids and other performance enhancing drugs may be inherently wrong to some because of baseball’s almost holy status of “The American Pastime,” their use may also have strictly economic implications for players and Major League Baseball alike.  

Steroid Use and the Economic Impact on Players  

Setting aside ethical considerations, a player has the choice between using steroids and possibly increasing his production, but risk being caught, versus not using steroids and possibly sacrificing millions of dollars.  Analysis done on the increase in offensive production with the use of steroids found that a player’s OPS, a combination of a players on-base percentage and their slugging percentage, increased on average .104. [4] This is a significant increase considering an OPS of .900 is generally recognized as the elite cutoff level, with players like Ken Griffey Jr. having an OPS of .947. [5] Also, additional analysis done on a player’s OPS and its impact on potential salary found that an increase in OPS of .100 leads to a salary increase of $2 million. [6] With the average career of a major league baseball player lasting six years, using steroids can increase a player’s total salary by $12 million. [7] Which such a powerful incentive, it is easy to see why many players have been tempted to use steroids.  

On the other hand, some argue that the use of steroids leads to an increase in the number and severity of injuries, thereby shortening a career and negating the benefits gained from steroids.  “The principal reason for baseball injuries associated with steroid use is that the increase of muscle mass or increased speed associated with anabolic steroid use is not accompanied by a proportionate increase in strength of the tendons, ligaments and joints.”[8] The types of injuries seen in baseball today result from muscles ripping away from tendons and joints that can no longer support them, which was typically not seen years ago. Although the negative effects of steroids are widely known, the use of Human Growth Hormone (HGH) may allow a player to realize the gains from steroids without incurring the costs.  In the medical world, HGH is a post-operative recovery tool which helps patients with rehabilitation, while in the baseball world HGH allows players to recover faster, play longer, and is seen as more of a performance enhancer. [9] The combination of steroids and HGH allow a player to gain all that muscle mass with the steroids, while simultaneously increasing the size and strength their joints.” [10] 

Not only does HGH make the use of steroids more attractive by reducing the health concerns associated with them, but players are not even tested for HGH in Major League Baseball because league officials are skeptical about the validity and reliability of existing tests. [11] That all changed in February 2010 when a British rugby player became the first athlete publicly identified as having tested positive for HGH. [12] This prompted Major League Baseball officials to implement testing for HGH in the minor leagues. [13] Whether or not HGH testing will be implemented in the Majors in years to come, and how this will affect the use of steroids, remains to be seen. Leaving ethical and moral considerations out, economically speaking it is easy to see why many Major League Baseball players have been tempted to use steroids.  Using steroids can mean an additional $12 million, and with HGH reducing the health concerns, the incentive is even stronger.   This simple cost-benefit analysis shifted dramatically in November 2005 when new penalties for steroid use were enacted.  The first positive test is a fifty game suspension, second is a one hundred game suspension, and the third positive test is a lifetime ban from the sport. [14] Still, greed is a powerful motivator and these stricter penalties may just force a player to be more careful not to get caught.  

Steroid Use and the Economic Impact on the League  

Players are not the only group who stand to benefit from the use of steroids.  “While franchise values fell during the early 90’s, they increased dramatically during the Steroids Era, with the average MLB franchise value rising from $140 million in 1994 to $332 million in 2004.” [15] In fact, steroids may have saved baseball after the 1994-1995 strike, which angered fans and resulted in attendance dropping by almost 10 million in both the National and American leagues. [16] .[16]  It was not until Mark McGwire and Sammy Sosa’s 1998 steroid fueled homerun race that the League began to recover.  “Attendance in 1998 increased to almost 39 million in the National League, up seven million from the season before, and the fact is, the increase of almost seven million fans coincided with an increase of almost 400 home runs in the sport.” [17] Despite Major League Baseball’s current tough stance on steroids, individual franchises clearly had incentive to look the other way with regard to steroids in the mid-90’s.      

Conclusion   

Rather than thinking about steroids as illegal and immoral drugs, it is interesting to think of steroids as high-risk, high-reward investments.  Analyzing steroids in this manner provides insight into why every month it seems a new player has been implicated for using steroids, and why the League and individual franchises seemed oblivious to the rampant use of steroids in the mid-90’s.  Whether the cost of tougher penalties and increased testing can overcome the benefits, namely the millions of dollars a player stands to gain from using steroids, remains to be seen. 

[1] Players Linked to Steroids and Human Growth Hormone (HGH), BaseballSteroidsEra.com, http://www.baseballssteroidera.com/bse-list-steroid-hgh-users-baseball.html   .

 

[2] The Mitchell Report.  MLB.com, http://mlb.mlb.com/mlb/news/mitchell/index.jsp  (last visited Mar. 14, 2010).

[3] Mitchell Grossman, “Steroids and Major League Baseball,” http://faculty.haas.berkeley.edu/rjmorgan/mba211/Steroids%20and%20Major%20League%20Baseball.pdf   .

[4] Id.

 

[5] MLB: OPS – What Does it Mean?, Buzzle.Com,

http://www.buzzle.com/editorials/4-18-2001-3026.asp (last visited Mar. 14, 2010) .

[6] Grossman, supra note 3. 

[7] Id. 

[8] The Correlation Between Steroids and Injuries in Baseball, TheSteroidEra.com, Aug. 2006,

http://thesteroidera.blogspot.com/2006/08/correlation-between-steroids-injuries.html.

[9] Tom Farrey, HGH: Performance Enhancer or Healer?, ESPN the Magazine, Sept. 2006. http://sports.espn.go.com/espn/news/story?id=2574291 .

[10] The Correlation Between Steroids and Injuries in Baseball, supra note 8. 

[11] Michael S. Schmidt, Baseball Plans to Test for HGH in Minors, N.Y. Times, Feb. 2010. http://www.nytimes.com/2010/02/24/sports/baseball/24hgh.html . 

[12] Id. 

[13] Id.

[14] Steroid Penalties Much Tougher With Agreement, Nov. 2005. ESPN.com http://sports.espn.go.com/mlb/news/story?id=222483  

[15] Grossman, supra note 3. 

[16] Lucas Mayer, How Steroids Saved Baseball, Feb. 2010. http://iusportcom.com/2010/02/08/how-steroids-saved-baseball/ ,

[17] Id.

 

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