Businessweek Archives

Ste E E Rike? As A Stirring Season Nears Its Climax, A Walkout Seems Ever More Possible


Top of the News

STE-E-E-RIKE? AS A STIRRING SEASON NEARS ITS CLIMAX, A WALKOUT SEEMS EVER MORE POSSIBLE

To baseball fans, it's becoming as much a part of the game as fastballs and home runs. For the eighth time in two decades, the boys of summer are preparing to put down their bats and gloves and attend to the real game at hand: protecting their million-dollar salaries from owners, who claim high-priced players have turned their near-monopolies into money-losers.

Of course, a walkout on Aug. 12, the strike date chosen by the players, would be an especially bad blow to fans. In a near-storied season of long-ball sluggers and an Iron Man shortstop who just played his 2,000th straight game, a rash of records are teetering. And once-woebegone clubs such as the Cleveland Indians suddenly are in the midst of pennant races.

Can all this suspense really end while men in pinstriped business suits with slight paunches haggle over salary caps? Probably. Although negotiators representing the 28 team owners and their players have been huddling in New York in a last attempt to avert a strike, the likelihood looms that stadiums soon will be empty. "We're going to lose the World Series this year," laments Atlanta Braves owner Ted Turner. "If there's going to be a strike, it'll be a long one."

STANDING FAST. Certainly, the rhetoric sounds serious. Baseball's owners claim that a fourfold increase in player salaries since 1984 has created a competitive imbalance between rich big-city teams such as the New York Yankees, with fat regional television markets to tap, and small-city teams such as the Indians, which have few local revenue opportunities (page 28). Sliding revenues, mostly from less lucrative national TV contracts, have helped make at least 19 of the 28 teams unprofitable, owners claim. So they're pressing for a salary cap that would split total league revenues 50-50 with players. However, players now receive 58% of revenues. The upshot: The proposal would slow salary growth for most team members.

Players, armed with a $175 million strike fund, have countered with demands of their own. They want minimum salaries jacked up to $200,000 from $109,000. They also want to cut the years of service needed to take a salary dispute to binding arbitration. And if it takes a strike to get what they want, the players seem solid. "It's something we have to do," says Cleveland first baseman Paul Sorrento. "From the players' point of view, we're willing to sit out as long as it takes."

The owners' central argument: The clubs' payroll disparities distort the game. It's nothing for the Yankees, with local TV and cable contracts that bring in some $50 million annually, to plunk down $46 million on salaries, as they have this year, and still make money. But the Pittsburgh Pirates, who lack millions of fans er a big local television contract, say they're losing $1 million a month even after slashing their payroll to $25 million. "We don't have a viable economic spmrt unless we have sharing of revenue" between owners and players, argues Richard Ravitch, the teams' chief labor negotiator. "If you're a shareholder in the Yankees or [Chicago] White Sox, why would you give money away without getting something in return?"

Unfortunately for the owners, they've been arguing for a salary cap for years without persuading players--or many experts. For instance, there's no correlation between city size and cumulative win-loss records from 1961 to 1987, according to The Business of Major League Baseball, a 1989 book by University of Texas management professor Gerald W. Scully. And the free-agent system, begun in 1977, hasn't changed anything. In fact, "if you look at championships, the big teams won twice as often before free agency," says Scully.

HIDDEN PROFITS? The players' union, not surprisingly, doesn't buy the owners' arguments, either. Donald M. Fehr, the union's chief negotiator, points out that the value of a baseball franchise has skyrocketed, despite the alleged losses. Attorney Peter Angelos paid a staggering $174 million for the Baltimore Orioles last year, more than double what financier Eli Jacobs paid in 1989. And in California, two buyers have bid on a San Diego Padres team that has dumped most of its marquee players.

Besides, salaries only soar when owners bid them up, say players. It was the owners, after all, who signed the likes of Barry Bonds and Frank Thomas to mind-boggling contracts. "I don't recall going in there with a gun and telling them I was going to shoot up the place if I didn't get what we were asking," recalls San Diego agent Tony Attanasio, who cut a $22.5 million, four-year deal in 1993 for Toronto Blue Jays outfielder John Olerud.

Few experts buy the teams' poverty claims, either. Many believe that owners hide baseball profits by shifting them to other companies they own. For instance, large media companies such as Turner's broadcasting empire or Tribune Co., which owns the Chicago Cubs, make money from baseball broadcasting that doesn't show up on their team's balance sheet, experts figure. Others, such as St. Louis Cardinals owner and brewer Anheuser-Busch Cos., promote their other products at the ballpark. In fact, only two or three teams may actually be losing money, says Andrew Zimbalist, a Smith College economist who wrote Baseball and Billions. "The game is in fine shape," he says.

What do players suggest? If disparities are dragging down some teams, the rich owners--not players--should help them out, argues Fehr. He suggests that Major League Baseball share more local revenue among large- and small-market clubs. The owners have agreed to adopt a modest revenue-sharing plan. But that won't by itself solve the disparity problem, says Ravitch.

Given how far apart the two sides are, a walkout could well last the rest of the season. The owners probably won't win unless they hold out to the end, when the current labor pact expires. Only then could they impose a salary cap. But enraged players might continue striking into next season.

For now, fans are left wondering if they'll get a chance to see whether San Francisco Giants slugger Matt Williams can break Roger Maris' record of 61 homers in a season or if the White Sox's Thomas will win baseball's Triple Crown. As the strike date neared, there were some good signs: Ted Turner asked for outside arbitration, and White Sox owner Jerry Reinsdorf opined that he wasn't sure about a salary cap after all.

Even Labor Secretary Robert B. Reich got into the act, explaining that for the good of the economy--and his two young sons, who love the game--he would help if both sides wanted. Maybe that's what the sport needs: someone who cares more about the game played on the field than the one they're playing at the bargaining table.Ronald Grover in Los Angeles and Aaron Bernstein in New York, with Zachary Schiller in Cleveland and bureau reports


Race, Class, and the Future of Ferguson
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus