Drowning in a Field of Greed
IT used to be called baseball, and for years it was known as America's national pastime, projecting an innocence that eventually became obscured by dollar signs.
Today ``greed'' is the name of the game. History shows that owners and players have never been able to grow separately without growing apart. The wedge has always been money. There is enough strike blame on both sides to last a lifetime.
How did major league baseball, which doesn't seem to have learned much about economics in 125 years of business, find itself hanging over a cliff? It happened because the owners didn't use sound business practices years ago when network television was delivering $14 million per club in annual revenue.
Free agents, some coming off surgery, were given outrageous guaranteed contracts in the millions. Clubs, to hold onto established stars in option years, doled out millions more. Undergraduates, many not yet in their 20s and basically unproven, were given huge signing bonuses after being selected in baseball's annual college draft.
Owners assumed that television money would never run out, especially after CBS-TV paid baseball $1.06 billion the last time it bid for the rights to its games - and came home in a barrel. Today baseball is reduced to taking a percentage of TV profits, based on how well it performs in the marketplace - the all-important ratings. When that $1.06 billion became public knowledge, players and their union wanted to be handsomely compensated. Through negotiations and several other work stoppages, players' salaries went from an average of $25,000 a year in 1970 to $1.2 million in 1994. Players have become unrealistic about how high their compensation and benefits can go.
Baseball can no longer tolerate the escalating salaries of New York Mets' player Bobby Bonilla, who earns a daily salary of $31,148; Baltimore Orioles' Cal Ripken, at $26,230 a day; or San Francisco Giants' Barry Bonds, who collects more than $11,000 every time he comes to bat, whether he hits safely or not. Nearly 200 major league players now make more than $2 million a year.
This situation never should have happened. But it did, and now it has to be resolved.
Owners want a salary cap so they can stabilize costs. Players want a complicated tax system where the rich-market clubs (New York, Chicago, Los Angeles, and so forth) would share their earnings above a certain figure with small-market franchises (Milwaukee, Seattle, San Diego).
It's the old story that if a team can't compete at the bank, it can't compete on the field. Even though the owners of all 28 major league franchises are millionaires several times over, they are the ones taking the long-range risk, not their players. Once a player's career is over, he no longer has an obligation to the game. But an owner's financial commitment goes on as long as he owns the franchise.
Owners' payrolls are mind-boggling. Yearly maintenance costs are staggering, even if they rent their stadiums. They must develop new players, hire scouts, and maintain a farm system. The cost of training a player who eventually makes the big leagues, as opposed to the hundreds who are signed, given a bonus, and don't make it, is estimated at close to $1 million. Most big-league teams also have a front office that employs between 75 and 100 workers, many of them specialists.
One of the big pluses for owners is that they can still, subject to IRS challenge, depreciate players. Say a person buys a baseball team for $100 million, claiming that 75 percent of it goes to player contracts. The owner eventually gets to depreciate $75 million over the life of the team's players, on the theory that players are subject to wearing out just like a machine.
I'm not saying that players don't deserve high salaries. For years, before establishing a union, most owners took unfair advantage of them. But the pendulum has not only gone as far as it can in the other direction, it has broken its moorings.
In addition to salaries that would make most corporate executives blush, baseball has a marketing wing that for several years has given each player $82,000 at the end of the season. That revenue comes from the nationwide sale of licensed jerseys, hats, autographed baseballs, and novelties. Players also get $64.50 a day for meals every time their team goes out of town.
Some kind of downward adjustment of salaries will have to be made for baseball to survive and maintain ticket prices that families can afford.
Since owners won't open their books to players or the public (would you?), it is impossible to determine what their yearly profit margin should be, but it needs to be controlled.
Nevertheless, once baseball finds a way to get Casey at the Bank back to Casey at the Bat and players making millions a year start to get tired of sitting at home, fans will again support what many still think is the best game ever devised. The Opinion/Essay Page welcomes manuscripts. Authors of articles we accept will be notified by telephone. Authors of articles not accepted will be notified by postcard. Send manuscripts by mail to Opinions/Essays, One Norway Street, Boston, MA 02115, by fax to 617 -450-2317, or by Internet E-mail to OPED@RACHEL.CSPS.COM.
