Baseball Bosses Plan Double Play: Pay Cap, Shared Income
THE Seattle Mariners may have budding superstar Ken Griffey Jr., but the team's owners expect to lose about $13 million on this year's baseball season.
As with other small-city teams, Seattle is victim of a squeeze play: the combination of low income and high spending on player contracts, with Mr. Griffey's alone valued at $6 million a year.
The team spends about $33 million on salaries. Meanwhile, revenue from local television broadcasts is paltry, estimated by Financial World at $3 million in 1990. The New York Yankees, by contrast, pull in more than $40 million a year from local cable TV broadcasts.
This week, the owners of the 28 Major League Baseball franchises are considering steps to remedy this financial imbalance among their ranks. Meeting at a resort near Milwaukee, owners yesterday began debating a plan to pool more of their revenue. That would help small-city teams like the Mariners at the expense of bigger-city rivals.
The summit comes at a time of financial and regulatory uncertainty for the national pastime: Players have threatened to strike next month; Congress may soon consider legislation to remove the industry's 71-year-old exemption from antitrust laws; and a new contract for national TV broadcasts makes Major League Baseball a joint-venture partner with the ABC and NBC networks, increasing the teams' financial risks. The deal gives the owners responsibility for production and advertising in a bid to boost laggi ng revenues.
But the biggest challenge to the game, some analysts say, is owners' longstanding failure to manage their own affairs.
"They're operating at a historic disadvantage," says Christopher Cameron, a labor law expert at Southwestern University in Los Angeles. He says players have a 20-year tradition of unity at the bargaining table, while owners suffer from internal rivalry.
Even the smallest-city teams "are either profitable or could be" if properly managed, adds Andrew Zimbalist, an economist at Smith College in Northampton, Mass. He calculates, for example, that the San Diego Padres could earn $5 million or $10 million a year, even without recent restructuring that has cut the players' payroll in half from $25 million - a talent sell-off that has angered local fans.
But Sal Bando, general manager of the Milwaukee Brewers, says most teams in small media markets are "struggling to make ends meet." This directly affects their competitiveness against big-market teams, he says.
"Look at Toronto," Mr. Bando says, referring to one of two major league clubs based in Canada. "Their payroll is at almost $50 million now. We're at $25 million. We've got to compete." To do this, greater revenue-sharing is "imperative," the former star third-baseman argues.
Any revamping of the current system must be approved by 21 of the 28 owners. The revenue at issue comes from television, which has grown from 28 percent of major league income in 1970 to about 50 percent today, according to Professor Zimbalist's book "Baseball and Billions." This has occurred even as ballpark attendance has doubled in the same period.
Already income from national broadcasts on network television is pooled, as is a portion of the cash generated by local broadcasts or the cable superstation contracts of teams such as the Chicago Cubs and Atlanta Braves. Yet that system remains very different from the one that has evolved in professional football, where teams split revenue from both broadcasts and ticket sales.
Complicating the effort to expand revenue-sharing, some owners hope to link that move to a cap on player salaries, which have soared to an average of $1 million a year. "It's a foregone conclusion that the players won't accept it," Zimbalist says.
The owners' collective bargaining agreement with players expires this December, and tension over the unstarted talks is rising.
LAST month Donald Fehr, executive director of the Major League Baseball Players Association, talked of a possible strike by the union in September.
Labor-law expert Cameron notes that it will be difficult for owners to prove they need major concessions from players because the market value of baseball franchises appears to be continuing its steady rise: The Baltimore Orioles recently fetched a surprisingly high $173 million in a bankruptcy auction.
"In my view, that throws a monkey wrench into the plans of owners," Mr. Cameron says.
Mark Belanger, a spokesman for the players' union and a former Orioles infielder, also says the game is basically healthy: "We see baseball attendance flying."