The Reserve Clause (1879)

Part 1 of our series on Important Moments in Team Building.  See introduction, and up-to-date list.

 

Arthur Soden

Boston Red Stockings owner Arthur Soden had a problem. He and the other National League magnates, who had set up their new league just a few years earlier, were losing money. Over the NL’s first three seasons no team turned a profit, and in 1879 only Providence had made money. It was not supposed to be this way. When their league was established in 1876, the NL owners thought they had addressed the flaws of its predecessor, the National Association. Under the leadership of Chicago owner William Hulbert, the man who should really be considered the father of American sports leagues, at its start the NL agreed on four principles soon taken for granted.

First and foremost the owners took control over who could be a member, creating what we now refer to as a “franchise”. No longer could ten guys from Keokuk, Iowa — who might have ponied up a dollar each for the $10 entry fee — compete with established teams from Boston and Philadelphia (as had happened with the National Association). Secondly, the owners granted territorial exclusivity to their member teams. Also, the league created a common schedule so that teams played a similar amount of games against the other teams in the league – the National Association left it up to their member teams to schedule games as they wished, meaning that some teams played vastly more games than others. Lastly, the league registered player contacts with a central office so that teams could not poach players under contract to other teams.

Nevertheless, it was not enough. Most significantly, with most players on one-year contracts, once a season concluded teams would lure players from their competitors by offering higher pay or other perks. Salaries in those early NL years consumed nearly two-thirds of a team’s operating budget. Not surprisingly, having players “revolve” between teams also hurt fan interest. As the financial losses piled up, teams disbanded on a nearly annual basis. Only the fact that some new hopeful would pop up to take their place kept the league from folding.

After four years of this, Soden had a solution. He recommended that each team be allowed to “reserve” five of their contracted players (which was about half of the team) for the next season—no other team would be permitted to sign them. On September 30, 1879 Soden’s scheme was secretly adopted by the National League. Once implemented, the system had its desired effect. Salaries fell dramatically, profits rose, and the league’s franchises became much more stable. The reserve system proved so successful for the owners that they eventually made it public and expanded it to nearly all the players.

With no competition for their services, reserved players had little recourse other than to hold out – to refuse to sign their contract. The associated threat that the player would retire to some other line of work was hardly more than a hopeful bluff. In a period of less than a decade players had gone from being able to jump from team to team for better salaries to being tethered to whatever team held their contract, effectively forever. The launch of the American Association as a competing major league in 1882 offered new competition for the players, but the respite was short lived as the two leagues quickly agreed to respect each other’s reserve lists.

John M. Ward

The players had one brief stab at power a few years later under the leadership of John Montgomery Ward, a star infielder with New York. Ward organized the first real players union, the Brotherhood of Professional Baseball Players, in the mid-1880s. In 1890, with backing from wealthy investors, the players launched their own league, the Players League. Once again salaries soared, but this time the National League fought back in the courts, arguing that the reserve clause, now inserted into the players’ contracts, legally prohibited players from negotiating with any other team. The NL owners did not win any of these challenges, and the Players League landed many of the top stars.

In the end, however, it didn’t matter. The Players League folded after just one year; the National League and American Association continued to agree to respect one another’s reserve lists; and the players once again had no leverage. Owners and GMs could go about their team building with only the most cursory concern over the desires and needs of their players.

The reserve clause remained a bedrock principle of the major leagues for the next 85 years. Even after an arbiter, and various collective bargaining agreements, chipped away at the scope of the clause beginning in the 1970s, most major leaguers (all those with less than six years service time) are bound by the clause to this day.

Today, much of the hot stove talk is around where various free agents are likely to land and their impact on a team’s chances in the coming year. Under the reserve clause regime there was no way to access significant mid-career players other than through trades or outright purchases from other teams. The former obviously required surrendering one’s own talent while the latter was only available under unique financial circumstances. For nearly a century, Soden’s 1879 brainstorm defined player-owner relations and narrowed teams’ roster options.

 

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One thought on “The Reserve Clause (1879)

  1. A limited reserve system is justified by the investment teams put into player development. However, paying minor league players peanuts is not justifiable.

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