Major league baseball has been facing an ongoing struggle with the distribution of royalties between the players, owners, and fans of baseball. Baseball, known as “America’s Pastime” has literally began to be the “pas-time.” The growing popularity of the NBA and NFL has helped with the loss in popularity of baseball, but the player strike in 1994, and constant struggles with money issues has taken away from what baseball was, a family and fan oriented sport. Baseball, however, has seen a reassurgance of popularity over the past five years due to the big time media coverage of the breaking of the season homerun record, and the great post-seasons it has experienced. It still has a great problem that needs to be solved, the ever expanding disparity in revenue between large market teams, as in the Yankees, and small market teams as in the Montreal Expos.
The fact is that Major League Baseball is in bad shape financially. Many teams in the league are facing near bankruptcy due to the inability of the league to share revenues equally. Baseball is going to lose fans, and money if they keep up with the way that they are operating now. A salary cap will help fix their problems.
——–Since the 1994 strike, clubs with payrolls in the upper half of the league have won every playoff game. Furthermore, nine of the ten clubs participating in the last five World Series had payrolls ranking in the top 25 percent of the league, according to Baseball America Online. Given access to financial statements, the consultants concluded that over the course of the last five seasons since the strike, MLB owners have lost a collective $1.4 billion, and that only three teams – New York Yankees, Cleveland, and Colorado – have been profitable. According to several leading sports economists, however, sports teams often legally rework the numbers to reflect a purported loss. Nevertheless, it seems that many of the panel’s recommendations were inspired by the notion that, for the good of the sport, the owners must pool together their resources.
While admitting that no single change in MLB would alone remedy the growing competitive and economic disparity among its members, the panel advocates a comprehensive and sweeping plan. Firstly, a program under which clubs would share between 40 and 50 percent of all local revenues, less ballpark expenses, would mainly serve to assist the weaker franchises, which benefit little from the current 20 percent local revenue sharing plan. The panel also suggested that MLB encourage a minimum payroll of $40 million for all teams, while simultaneously levying a competitive-balance tax of 50 percent on all club payrolls in excess of $84 million. Under the current collective bargaining agreement, only the five highest-spending teams paid a luxury tax of not more than $4 million each, according to the Washington Times.
It is also argued that low-revenue clubs would benefit from a favorable, and possibly uneven, allocation of resources from an expanded central fund, in which monies gained from broadcast, Internet and licensing agreements would be collected. According to the committee, “strategic” franchise relocation should remain as an option for those clubs that cannot compete financially in their current market. Such a provision may lend credence to the allegations which characterize the agenda of the panel as focusing more on developing programs to aid the so-called “middle-class” teams, rather than reaching down to the league’s poorest clubs.
The Goal is Parity
In addressing the issues of parity and competition, the panel proposes including international players in the first-year player draft, eliminating compensation picks for the loss of free agents, and sanctioning the trading of draft picks. In permitting clubs to swap draft picks, currently a proscribed practice, the less-moneyed clubs, which often pass on signing top prospects seeking large bonuses, may be able to receive a better value for their premium picks. Additionally, “chronically uncompetitive”
clubs should be granted extra draft picks. The panel also advocated an annual competitive-balance draft, in which the clubs with the worst eight records would select from a group of players belonging to the eight playoff teams, but who are not on or eligible for a 40 man roster.
With the conclusions of the panel having been rendered, now a greater challenge looms before MLB, how to implement the recommendations, if at all. While no changes are likely until the current CBA expires, probably after the 2001 season, many speculate that the panel’s findings will provide the basis for management’s approach in the anticipated labor showdown. [click here <../Mark’s%20View/MLBBlueRibbonview.htm> for Mark’s View] Certainly, heavy resistance against the panel’s suggested “luxury tax” can be expected to come from the Major League Baseball Players’ Association (MLBPA). As a reform of the entry draft and free agent compensation system are likely to be considered a fundamental change in the existing framework between the owners and the players, the MLBPA would have to approve such measures as well.
Baseball, however, may see clashes on both sides of the bargaining table, as the powerful Players’ Association and the owners of the high-revenue teams would see their dominance diminished in the face of the proposed changes. As the inherent distrust between the owners and the MLBPA is likely to serve as a major stumbling block in an attempt to implement any of the panel’s
recommendations, the decision not to include any representatives from either camp the on the blue ribbon panel has been criticized by many.