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Revenue Sharing, not Contraction, the Issue to Watch

21st February 2006

This is no April Fools joke.

On April 1st, MLB can choose to dissolve a team or teams via contraction. They can’t do so before then; they are not beholden to announce which teams they might do so with at that time to the MLBPA, but they must do so by July 1st. This is spelled out in the current Collective Bargaining Agreement. Already there are those in the Minnesota, Kansas City, Oakland, Washington, and Florida press bringing up contraction. “MLB tried last time, and the option is there this time. Contraction is coming.”

Here’s a prediction you can just about bank on: There will be no attempts at contraction.

Forget it’s in the CBA. Forget the mainstream media. Forget about contraction being part of the upcoming Collective Bargaining Agreement, as well. Contraction is going to go the way of the Dodo. Here are a few reasons why:

  • Revenues in baseball for 2004 were $4.1 billion and are projected to be $4.5 billion in 2005.
  • Forbes magazine valuation study of MLB clubs for 2005 notes the average franchise value at $332 million, up from 14.5 percent since 2004.
  • From the Commissioner: “That’s not on the table,” Selig said in July 2005. “I’ll never say never, but I don’t see contraction. I certainly don’t see expansion and I don’t see contraction. As long as I’m commissioner, which is another four years, we have 30 teams and that’s what we’ll have.”
  • From Mike Opat, stadium booster and politician in Minnesota: “When the governor laid out the reasons that contraction could be something to be concerned over, Jerry Bell did correct him somewhat,” Opat said. “He said it wouldn’t be easily done, since baseball would be required to bargain the effects of contraction with the players [union].”
  • Marlins President David Samson in my interview with him earlier this month: My guess is contraction has seen the light of day and has gone back into its hole. I believe contraction is the groundhog who will never see his shadow. I don’t see that as a possibility.
  • Former Executive Director of the MLBPA, Marvin Miller in my interview from 2004: I think first that [contraction] was a straw man. I think it was a kind of double-barreled power ploy. It was a ploy in a sense that they were trying to scare the Union that it was going to have a loss of membership and I think it was a ploy and the usual communities who might balk at public financing of baseball stadiums. In that sense, it was a clever ploy but not really an effective one.

Contraction is not cost effective. It is impractical when weighted against other issues that the MLBPA could heel dig on. And, it is an issue that, given the gaudy numbers listed above, doesn’t show MLB in a depressed state, as they were claiming in 2001, the last time contraction was part of the collective bargaining. That would be something that the MLBPA, and more importantly, Congress, would latch onto.

What will be the key area of dispute within the next round of collective bargaining will be meaningful revenue sharing. While the MLBPA will be a key figure in this discussion, the real battles will be between clubs like the Yankees and Red Sox, and clubs such as the Pirates, Royals, and Twins. A key point of contention between the haves and have-nots is this section from the current CBA:

5) Other Undertakings
(a) A principal objective of the revenue sharing plan is to promote the growth of the Game and the industry on an individual Club and on an aggregate basis. Accordingly, each Club shall use its revenue sharing receipts (from the Base Plan, the Central Fund Component and the Commissioner’s Discretionary Fund) in an effort to improve its performance on the field. The Commissioner shall enforce this obligation by requiring, among other things, each Payee Club, no later than April 1, to report on the performance-related uses to which it put its revenue sharing receipts in the preceding revenue sharing year. Consistent with his authority under the Major League Constitution, the Commissioner may impose penalties on any Club that violates this obligation.

Recall that in 2000, Carl Pohlad (baseball’s richest owner) and the Twins pulled in $21 million in revenue sharing. The problem with this? It was $5 million more than their entire player payroll. Clearly, Selig is not enforcing the provision above, and the MLBPA has noticed. As Don Fehr said earlier this month, “There are teams in major league baseball that receive more money from central baseball from the national television contract and revenue sharing than they spend on payrolls,” he said. “That’s before they sell a ticket, or a hot dog, or a beer, or a parking space. “We have to be concerned about the incentives of the system. So what we will be investigating as we get into bargaining is what are the results of this? Are they positive or negative?”

So, keep an eye on the ball. It’s not contraction that will be the key sticking point in the next round of collective bargaining, but revenue sharing.

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