Baseball aims to share wealth, health

With new deal, sport eyes competitive balance, but it may be wishful thinking

September 11, 2002|By Jon Morgan | Jon Morgan,SUN STAFF

For a sport that traditionally governed its clubs with an every-man-for-himself philosophy, Major League Baseball has become practically collectivist.

The collective bargaining agreement ratified last week by club owners will require the teams to share more revenue among themselves than ever before, an average of nearly $260 million annually over the next four years.

Expanding on innovations in the last labor deal, baseball has become No. 2 in shared revenue among America's four major- league sports. Only the NFL - which is as close to a socialist state as exists this side of Cuba - swaps more cash.

Baseball hopes its share-the-wealth program, along with a tax on the big-spending clubs, a draft for foreign players and other measures in the new collective bargaining agreement, will reduce a yawning gap that has some of its teams earning three times more money than their poorest rivals.

But is it enough? Will the economic remodeling prop up weaker franchises and keep fans engaged? Will it make baseball more like the NFL, where a cellar dweller one season can be a champion the next?

"It will help us stabilize the situation. It will give more franchises the opportunity to build teams that are competitive. That's the ultimate goal: to make every team competitive," said Orioles owner Peter Angelos, one of five bargainers for management. "I believe we have made a substantial step in that direction."

Critics note that the tax will actually raise less money than previously and that the increase in revenue sharing falls short of what baseball said it needed to level its playing fields.

Moreover, research by Moag & Co., a Baltimore-based investment firm specializing in sports, shows that the new terms, had they been in place last year, would have narrowed the income gap between the richest and poorest teams. But the economic divide still would have been wider than that of pro basketball, football or hockey.

Fay Vincent, who was ousted as baseball commissioner in 1992, said the new pact will have the desired effect only if it forces teams to spend less on superstars. He doubts it will.

"My sense is it is not the answer, but it is a good thing they are trying," Vincent said.

Baseball is trying to break habits developed over many years. Before the 1995 labor contract, teams shared only a fraction of their income. Fees paid by national television networks and income from official baseball merchandise were divided evenly. But, unlike income in the NFL, that represented only a sliver of baseball's pie.

The real money was home grown: ticket sales and local TV and radio rights. None of that broadcast money was shared, and only a pittance of the gate collected by the home team was shared with the opponent.

Starting with the settlement that ended the 1994-1995 strike, the owners and players agreed on a formula in which each team would contribute 20 percent of its local income to be distributed among the clubs.

Under the new agreement, the contribution will grow to 34 percent next season. That, and other means of redistributing money, will result in an average of $258 million shared annually, up from $169 million last season, according to estimates by Major League Baseball.

Had the deal been in place last year, the Yankees would have paid $47.6 million to help their less-wealthy rivals, instead of $26.5 million. The Montreal Expos would have received $36.9 million instead of the $28.5 million they got, according to the Moag & Co. analysis, which used figures released by the league.

That's not enough for a Mike Piazza. But it is enough for a few Marty Cordovas.

The Orioles would have paid $7.8 million, or $1 million more than they did.

Moreover, the sport has altered the so-called luxury tax that it imposes on the payrolls of free-spending teams. Under the 1995 agreement, the five teams with the highest payrolls paid about a third of the amount by which their payrolls exceeded that of the sixth highest-paying team.

The new agreement sets specific thresholds, $117 million in the first year rising to $136 million in 2006, and tax rates that vary according to how many years a team exceeds the mark. The money raised will be diverted to baseball's benefits plan, industry promotion and the development of foreign players.

Fewer teams will be affected - only three at current levels - and the amount collected probably will be less. But baseball's leaders say the thresholds will prove a better deterrent to big spenders than the rolling average, especially if the thresholds can be held firm or eventually reduced.

The strategy is twofold: limit how much wealthy teams pay for players and boost the ability of poorer teams to hire talent. If effective, baseball's bounty - its revenues have tripled since 1994, to $3.6 billion a year - will be more evenly spread among the 30 clubs.

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