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BusinessWeek: January 11, 1993 |
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Top of the News: Commentary
THE NFL SAW THE LIGHT. WILL BASEBALL? Ding-dong, the witch is dead. With the Dec. 22 announcement of a tentative plan to grant National Football League players true free agency, the reserve clause has finally given up the ghost. The clause, one of the most repellent bits of legal chicanery ever to poison labor-management relations, effectively bound a player to one team for as long as that team saw fit to employ him. Major League Baseball abandoned it first, in 1976. The National Basketball Assn. followed suit in 1980. And now, football players, too, at last have the right enjoyed by most American workers--to sell their services to the highest bidder. NFL owners acted only after sharp prodding by U.S. District Judge David Doty and the NFL Players Assn. Yet that shouldn't detract from their achievement. The plan makes a free agent of any player who has managed to survive five years in the league. Each team can protect one star, but it will have to ensure that he is one of the best-paid players at his position. And to prevent the richest owners from bidding prohibitively high for the top talent, each team's salaries will be capped at 67% of revenues from national TV rights fees and ticket sales. STRIKE ZONE. Football didn't just dream all this up itself. Since 1983, the NBA has distributed certain revenues equally among all teams while setting aside a fixed percentage of the pot for player salaries. This brought fiscal sanity and labor peace to a league in turmoil. And it's no coincidence that the NBA and its players now enjoy rapid revenue growth and still rising popularity in the U.S. and abroad. There's a lesson in that, one that the NFL's owners and players got. Now, baseball should learn it, too. There's no denying the need for financial reform in Major League Baseball. The owners have voted to reopen their contract with the players' union, raising the specter of a strike or lockout in 1993--the fifth work stoppage since 1981. That sorry record won't improve until baseball makes sense of its chaotic finances. With any luck, the NFL's new plan will goad some action. If team owners need guidance, they need look only as far as the recently published report of the committee they and the players hired to study the economics of the game. The report lays the empirical foundation for a fairer distribution of baseball's wealth. The best of the report's recommendations is that the 28 baseball teams share more of their revenues. As things stand now, the teams divide equally about $350 million a year from CBS and ESPN, which hold national TV contracts. They also split licensing money, to the tune of some $2.1 million a team in 1991. But those funds amount to only 26% of baseball's total revenues, according to the committee report. By contrast, the NFL's teams share about 90% of league revenues. The revenues that aren't shared equally--in particular, local TV fees--pose the biggest financial threat to baseball. The New York Yankees rake in 18.5 times more local TV money than the Seattle Mariners, according to Smith College economics professor Andrew Zimbalist, author of Baseball and Billions. That disparity doesn't mean the Bronx Bombers will necessarily field a better team than the Mariners. New York may have the wherewithal to sign more big-name free agents, but there's no guarantee those players will produce victories. POOR FARMING. Yet the financial gap does ensure that while Seattle may develop fine young players, it won't be able to afford them once they become eligible for free agency after six years of service. One result: The Seattle club remains in a constant state of rebuilding, losing the hometown heroes needed to build fan interest and loyalty. Greater revenue-sharing is no panacea. There's potential for discord if the money to be shared isn't carefully defined and audited. Look at what happened in the NBA in 1991. The players charged that teams wrongly held millions of dollars out of the revenue pot. While not admitting liability, the NBA paid the players $31 million to settle the dispute. Baseball can avoid such tangles by setting up the proper controls. More important is the principle of giving every team a fair shot at being a contender. No, money alone isn't enough. The Toronto Blue Jays and Atlanta Braves aren't champions just because they're wealthy. Both teams have spent their money wisely. But the Mariners of the baseball world shouldn't be deprived of the chance to troll for talent simply because their local TV market is smaller than the Yankees'. Level the financial playing field, and may the smartest--not the richest--team win. BASEBALL'S BUDGET GAP
The eight most financially powerful Major League Baseball teams generate far
more revenues than the eight weakest. Yet player expenses are about the same
for both groups
Top eight Bottom eight
Total local TV and radio revenues, including cable* $125,610 $72,203
Total big-league player costs* $222,261 $242,402
DATA: MAJOR LEAGUE BASEBALL'S JOINT ECONOMIC REPORT
*Thousands of dollars
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