Friday, August 16, 2002
Baseball owners at odds with themselves
Yankees must lose for others to win
By Cliff Peale, cpeale@enquirer.com
The Cincinnati Enquirer
If you are looking for the key match-up in Major League Baseball's labor wars, don't think Bud Selig versus Donald Fehr. Think Carl Lindner versus George Steinbrenner.
Baseball commissioner Selig's management team and union head Fehr's negotiators are trying to head off a ninth work stoppage in the last 30 years. They've been meeting all week, but unless some kind of deal is reached today, the players say they will set a strike date, reportedly Aug. 30.
History inspires pessimism, considering the players and owners are 0-8 in completing contracts without a strike or lockout. The past is particularly forgettable for the owners, who have walked away from the negotiating table with the same record, 0-8.
The fact is, the owners have been their own worst enemies, rich versus poor, big market versus little. And this time, the biggest and richest of them all looms as the union's greatest weapon.
Mr. Steinbrenner.
The owners don't necessarily need him on board to win their battle against the union, but they need to control him to take back control of the game and make it more competitive.
Indeed, the revenue Mr. Lindner's Reds long to share starts with the wealth Mr. Steinbrenner's Yankees would have to sacrifice. The owners want to share a bigger chunk of their local revenues and put a 50 percent luxury tax on team payrolls exceeding $100 million, although the union is worried this will curb salaries.
The players have always stuck together on such issues.
“The owners are never unified on anything,” former commissioner Fay Vincent says. “It's really Selig and most of the clubs versus the real rich ones.”
Some take it even further: It is all about the Yankees.
“The Yankees probably stand by themselves,” baseball economist Andrew Zimbalist says, “as a team that is unwilling to curb their spending.”
While the Reds collected $46.5 million, according to financial results presented by baseball officials earlier this year, the Yankees brought in $217.8 million. That explains why the Yankees' four top pitchers this year combine to make more than $40 million, close to the entire Reds' payroll of about $45 million.
Mr. Selig's biggest challenge is to keep the owners from bushwhacking each other during negotiations. He wants owners to share more of their local revenues and to place a luxury tax of 50 percent on payrolls exceeding $100 million. It will curb overall spending while making the industry healthier and more competitive, Mr. Selig reasons.
Convincing the union that baseball needs this is only part of the challenge. Convincing the owners to stay together is the other. There has not been a full owners' vote on any proposal, but Mr. Selig needs only three-quarters support — 23 teams — for approval.
“I have the votes for any reasonable revenue sharing. Now. Done,” Mr. Selig says. “There are enough votes to pass it.”
There certainly have been changes since the last work stoppage began in 1994. Fifteen of the 28 teams have new owners, and two expansion teams were added.
No talk, plenty of tension
To try to limit the damage the owners could do to themselves, Mr. Selig has gone so far as to institute a gag order on them. Again. That order was reinstituted recently after Mr. Steinbrenner and Cleveland Indians owner Larry Dolan exchanged barbs through the media.
Mr. Dolan called Mr. Steinbrenner “a large part of our problem.” The next week, the Yankees' owner responded: “Since the day that Babe Ruth was acquired, the Yankees have been the envy of many in the game and subject to the jealousies that success brings.”
Several owners, including Mr. Lindner, declined to comment for this story, citing Mr. Selig's order.
ESPN.com recently reported that operating losses for the 30 teams this year could almost double to about $450 million. According to the owners' numbers, the Reds lost only $285,000 in 2001 after the $13.4 million revenue-sharing payment. Mr. Lindner has said the club probably will post a small loss this year.
Even if players and owners reach a deal, the sport's long-term competitiveness in cities such as Cincinnati rests on finding common ground between big- and small-market owners, says Cincinnati's Bill Williams, who owned the Reds with brother Jim before selling to Marge Schott in December 1984.
“The first thing they've got to do,” Mr. Williams says, “is get the owners in a room and make them realize what they have to do to make baseball good everywhere.”
The rich-owner/poor-owner argument is nothing new in baseball, really — nor are transactions with money in mind.
Washington Senators owner Clark Griffith once sold his son-in-
law, Hall of Fame shortstop Joe Cronin, to the Boston Red Sox in 1934 for $225,000 to keep his franchise running. Fifteen years earlier, the same Red Sox sold a young Babe Ruth to the New York Yankees for $100,000.
But for generations, owners could keep salaries under control because of the reserve clause in the standard contract, which effectively bound the player to that team for his entire career. The only leverage a player had was the threat of a holdout or of being disruptive.
Even with the reserve clause, there still were divisions among owners, which often showed in labor negotiations. U.S. Sen. Jim Bunning, R-Ky., who was a union player representative from 1960 to 1971, remembers offering the owners a contract in 1971 that included only restricted free agency after a player had played for eight years. That meant the player's existing team could match any contract offer. But the owners rejected the contract, Mr. Bunning says.
“They laughed at us,” he says. “They said, "We like it the way it is. It's never going to change.”'
In 1975, the world changed when arbitrator Peter Seitz upheld the arguments of players Andy Messersmith and Dave McNally and granted them free agency, eliminating the reserve-clause system. A year after the decision, Mr. Seitz compared the owners to “French barons of the 12th century.”
“They had accumulated so much power that they wouldn't share it with anybody,” he said.
It became more difficult for teams to keep players they had signed and developed. Between free agency and arbitration — which put salary disputes in the hands of a third party, who would use the statistics and salaries of other players as points of comparison — salaries skyrocketed. Owners claimed they couldn't keep up, all the while outbidding each other for top players.
And while players stayed unified during labor battles, maintaining if not expanding their freedoms, owners broke ranks and caved in.
Over time, their interests diverged even more. Increasing national television deals helped everyone, but other moneymaking opportunities, such as local cable-TV deals and income-producing stadiums, brought more disparity. Salaries kept rising, but not every team could pay them.
“The divisions never showed up as much as they do now,” Mr. Bunning says, “because you didn't have the salaries.”
Corporate owners take over
The year before the Messersmith/McNally case, the average major-league salary was $44,676. Now, the minimum salary is $200,000, and the average salary is $2.3 million.
To compete, teams need to generate so much money that individual, family-controlled ownership groups such as the one led by Mr. Lindner are increasingly rare.
Mr. Selig says the corporate structure formed by Mr. Lindner in 1999 to buy the Reds from Mrs. Schott was a model for the rest of Major League Baseball. It includes Mrs. Schott, local businessman George Strike, Northern Kentucky native and New York money manager William Reik, local philanthropist Louise Nippert and Enquirer owner Gannett Co. Inc.
“Rarely will you see an individual own a club, as Powel Crosley did,” Mr. Selig says. “You will see groups of local people come together to preserve baseball.”
Deep-pocket corporations are more common these days, with AOL Time Warner owning the Atlanta Braves, for example, and Tribune Co. owning the Chicago Cubs. The attraction is high when a corporation not only owns a team, but has a network to televise it. The Yankees joined that game, forming their own Yankees Entertainment & Sports LLC — known as the YES Network — to broadcast Yankees games and other sporting events.
Such mixing causes credibility problems for Major League Baseball when it says the clubs' combined debt approaches $3 billion, In its own analysis, Forbes magazine said the Reds earned $4.3 million in operating profit, $2 million more than the official figure.
But there is no dispute that the money coming from local broadcasting has separated teams. In 2001, the Reds collected $7.9 million in local radio, TV and cable money, according to management numbers.
The Yankees collected $56.8 million.
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Baseball owners at odds with themselves
