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Blame the Bosses

Oct. 10, 1994
Oct. 10, 1994

Table of Contents
Oct. 10, 1994

Whitaker-McGirt
College Football
Labor Unrest
Pro Football
SI 40th Anniversary
Pro Basketball
Fathers And Sons
Point After

Blame the Bosses

The owners' unjustified demands for a salary cap have shut down two sports and threaten a third

How did it come to this? The final seven weeks of the baseball season were erased by a players' strike, then the playoffs, which were to begin earlier this week, and the World Series were scrapped. Last Friday the NHL season, scheduled to open the next day, was put on hold for at least two weeks by an owners' lockout, and it's possible the puck won't drop at all. NBA camps are scheduled to open on Friday, but there's the threat of a lock-out either when the season is supposed to begin, on Nov. 4 or shortly afterward.

This is an article from the Oct. 10, 1994 issue

There is college and NFL football on the weekends but little meat in the Monday-through-Friday sports diet. In fact the current period of inactivity represents the longest break in the seamless continuity of the three sports (postseason baseball into hockey into pro basketball into baseball into postseason hockey, etc.) since the NBA's birth in 1946. And even more than the hard-core sports fans, hundreds of team and stadium employees (following story) are hurting too.

So how did this happen? According to the studiously neutral, pox-on-both-their-houses rhetoric that has dominated public debate on the leagues' labor woes, it happened simply because of squabbles in each sport between greedy owners and greedy players about whether a cap should be imposed on players' salaries: The owners want a cap, the players don't. But in analyzing sports' labor woes, it's a mistake to reduce the dispute to a single issue. It's also a mistake to remain neutral.

At the heart of the disputes in baseball, the NHL and the NBA are fundamental differences about the economic and competitive health of the respective games. Team owners are habitual poor-mouthers, forever crying about their supposedly dire circumstances. To hear them tell it, a frightening number of franchises are ailing financially and, in some cases, in danger of going under. The disparity in income between big-market and small-market clubs, they say, threatens to cripple competitive balance. Payrolls are so out of control, they contend, that relief from the overpaid players is necessary—a cry that emanates even from the NHL, which remains virtually devoid of free agency.

But much of this is nonsense. A pox on one of their houses—the owners'. If player salaries are high, the owners are to blame; nobody forced the New York Yankees to lavish a five-year, $25.5 million contract on free agent Danny Tartabull (he hit .257 the first three years of the deal), or the Ottawa Senators to bestow a five-year, $12.25 million contract on 18-year-old Alexander Daigle, or the Charlotte Hornets to toss aside Larry Johnson's six-year, $20 million contract after two years and upgrade him to a 12-year, $84 million deal (page 56). Why should the players be called upon to save owners from their own profligate impulses? And are so many teams really hurting? It's well known that clubs hide parking and concession fees, among other sources of income, in other owner-controlled entities. In the NHL and NBA, constant battles over disclosure of the clubs' balance sheets have helped to create an atmosphere of distrust between players and owners.

Some teams are unquestionably losing money—for example, the San Diego Padres and Seattle Mariners in baseball, the Edmonton Oilers and Quebec Nordiques in the NHL—but easing their pain by imposing a salary cap is a stopgap solution that exacerbates tension and distrust. To be sure, a decade ago implementation of a salary cap helped save the NBA, which in 1981 had 16 of 23 teams losing money and was playing to 58% of capacity. The cap gave its co-inventor, David Stern, now the league's commissioner, a reputation for genius, bailed out several franchises and was celebrated in the media and in business textbooks. Often overlooked, though, is that a major impetus for implementation of the NBA's cap was the fiscal foolhardiness of owners, such as the late Ted Stepien of the Cleveland Cavaliers, whose free-spending ways helped push salaries to unrealistic levels throughout the league. In any event the NBA is now financially sound, which is why the players' union, over Stern's strenuous objections, wants to do away with the cap.

In simplest terms, the cap has outlived its usefulness, and that applies even in the NFL, which only last June achieved labor peace—after seven years without a collective bargaining agreement—by striking a deal with its players' union whereby unfettered free agency was granted in return for a lid on salaries. But efforts primarily by large-market owners to stretch the intentions and the rules of the cap have pitted player against team and club against club. Look what happened when the San Francisco 49ers wanted the services of free-agent Deion Sanders but were snug up against the NFL's cap. They juggled the contract terms of a few other players and—voilà!—came up with $1,134 million for Sanders, along with the tacit promise that he will be an unrestricted free agent again in 1995. Why have a cap when the rich teams will create a way around it, as they also usually have done in the NBA?

And the fact is, salaries are not as out of line in pro sports as owners make them out to be. For example, the "average salary" figure tossed around by the baseball owners is $1.2 million. But that number is virtually meaningless, thrown out of whack as it is by the price tags on players like the Detroit Tigers' Cecil Fielder ($36 million over five years) and the New York Mets' Bobby Bonilla (the highest-paid player in 1994, at $5.7 million). More relevant is the median salary, which was about $500,000 last Opening Day, a figure, incidentally, that had dropped in the two previous years.

Anyway, teams that can summon the discipline to impose their own de facto salary caps are free to do so. Last year the Mariners set out to reduce their payroll from $33 million to $29 million and, after making a few clever deals, did exactly that. The loudest sound coming from baseball front offices last spring was the moaning of general managers complaining about having to live within a salary budget set by their respective owners. Here's news, fellas: Everybody else lives within a budget.

Strangely missing from the owners' clamoring for a cap is any suggestion that the value of franchises, like salaries, ought to be capped too. Nine years after Norman Braman bought the Philadelphia Eagles for $65 million, he sold the franchise this year for $185 million. Did we miss something here? As the University of Chicago's Allen Sanderson, an expert on the economics of sports observes: "Braman let the forces of the free market increase the value of the team, but he and other owners would not let free-market forces set the salaries of the players."

Players have no reason to respect many of the economic decisions made by owners, decisions affecting the revenue that would determine the parameters of any salary cap. Baseball is and the NHL was until very recently light-years behind the NBA and NFL in generating revenue through marketing and promotion—indeed, the ill-conceived Baseball Network is that sport's owners' idea of imaginative thinking. And it has come to light—the question of trust again—that some owners hide revenue (from luxury suite and advertising sales, for instance) that should be counted toward the cap, as several NBA teams were found to have done after their bookkeeping was made public in a 1990 lawsuit.

The cap is presented as a panacea for the supposed competitive inequities between rich-and/or large-market teams (such as the Toronto Blue Jays, the New York Knicks and the NHL's Blues), many of which are owned by large corporations, and small-market clubs (such as the Pittsburgh Pirates, the Utah Jazz or the Calgary Flames), many of which are owned by groups of investors. But do such inequities really exist?

Early in baseball's current labor dispute the owners released a chart, labeled The Competition Problem, showing eight teams with total revenues less than or equal to the $55 million payroll of the Blue Jays. Not too smart, guys. Four of the bottom six teams—the Montreal Expos, the Mariners, the Houston Astros and the Cleveland Indians—were in first place or within two games of first at the time of the strike, suggesting that there was little or no competitive imbalance. (The exceptions were the Padres and the Pittsburgh Pirates.) As for the $55 million Jays, they were far out of the pennant race.

Indeed, over the past 15 years, the one thing baseball can truly boast about is relative parity on the field. Excluding the newest expansion teams, the Colorado Rockies and the Florida Marlins, 23 of the 26 clubs have won division titles during that span, 18 of 26 clubs have won league championships, and 12 teams have won a World Series.

The NFL, whose mantra has been "parity" for years, hasn't done badly in this regard, either: Twenty of its 28 teams have reached the playoffs in the last three years. The NHL is a little more like the NBA, with certain teams forming mini-dynasties, but this has long been the case, and the situation has nothing to do with small-market vs. big-market considerations. Witness the 54-year Stanley Cup drought of the New York Rangers and the fact that eight of the last 11 Cup champions have been from low-revenue cities. And if the NBA's domination by five or six teams over the last few decades represents a "competition problem," it must also be acknowledged that the league reaped much benefit out of the rivalries between the super teams—the Los Angeles Lakers vs. the Boston Celtics and the Detroit Pistons vs. the Bulls, to cite two examples. Indeed, there was never less competition in the NBA than during the league's first 25 years, when the owners kept the players low-paid and tied to a single team—and when the Lakers and Celtics won 16 championships.

And look at those four recent NBA mini-dynasties now—all except the Bulls are down. In most cases, if you're down, you're eventually going to go up. If you're up, you're eventually going to go down. That is the cyclical nature of sports.

Baseball's management has oversold the notion that teams with high payrolls necessarily have a winning edge. According to the owners' figures, only the Padres ($15.5 million) have a lower payroll than the Expos (about $20.5 million). Yet Montreal had baseball's best record in this strike-shortened season, an accomplishment wrought of a solid minor league system (of which Marquis Grissom, Larry Walker, Cliff Floyd and Wil Cordero are products) and a knack for stealing players (such as Moises Alou and John Wetteland).

The Houston Rockets won the NBA championship last season even though their payroll ($16.8 million) was much less than that of the runner-up Knicks ($22.1 million) and even the struggling Celtics ($21.2 million). The Boston Bruins have always been near the bottom of the NHL's salary scale—as of last Saturday their $12.71 million payroll ranked them 19th of 26 teams—yet they've made the playoffs every year since 1968. Conversely, the Blues' profligate spending has put them at the top ($23.5 million) of the NHL payroll board but, by and large, only in the middle (they finished fourth in the Central Division last season) of the standings.

So much for competitive imbalance. As for the financial gulf that separates some teams, where is it written that money-losing owners deserve the protection of a salary cap? Baseball's chieftains like to present the Padres' Tom Werner as Exhibit A in their case for a salary cap. Werner was losing so much money, he claimed, that his only recourse was tearing down his team by trading stars like Fred McGriff, Gary Sheffield, Tony Fernandez and Darrin Jackson and letting others like Randy Myers and Benito Santiago leave. But the explanation for the Padres' losses was that Werner, a refugee from the entertainment industry, was in over his head from the beginning. He borrowed most of the $75 million he needed to buy the club in 1990 and then found out he actually needed additional funds to run it. Some owners may not deserve to be saved.

And while it sounds heartless to say, it may also be that some cities don't deserve teams. That could be the case in Montreal, where, despite a successful and well-run baseball franchise, the citizenry—hockey zealots through and through—hasn't produced a season's attendance of 2 million since 1983. Montreal already lost the Alouettes of the Canadian Football League seven years ago; there's nothing to say the Expos shouldn't suffer the same fate. Why should Montreal have a team it doesn't support when the people of St. Petersburg thirst after one?

If a club has to move to greener pastures—or even go belly up—it's not the end of the world; these things happen in other businesses every day. Furthermore, if leagues were truly worried about their teams' expiring, they could call a temporary halt to expansion. If there are rich people willing to spend $100 million for an expansion franchise (just about the minimum price tag for getting into baseball or the NFL these days), why not coax them to spend $100 million to turn a failing franchise around instead?

The keys to labor peace and fiscal sanity are the same in all sports. Owners have to make up their minds: When they sell their teams, they're committed capitalists; when they seek to rig salaries in what should be a free market, they're the most enthusiastic collectivists since Marx and Lenin. They can't try to have it both ways and expect anyone—the unions, the fans, the media—to take them seriously. Also, they must make a clean breast of their finances (as part of the negotiated NFL peace, independent auditors now have access to the owners' books), thereby establishing greater trust not only between owners and players but also between owners and owners. To deal with economic inequities, the owners should increase revenue sharing among clubs to include the pooling of gate and local broadcast receipts; as things stand, the degree of revenue sharing in pro sports varies greatly, from a lot (the NFL) to very little (baseball). The owners should stop trying to link revenue sharing, as they invariably do, to a salary cap, for the reason that the one doesn't rely on the other.

Owners and players: It's time to get back to the bargaining table. The owners must scrap the cap, work with the unions to settle all other issues on the table and lei the games resume. Work stoppages have occurred before in sports, and always the fans have returned. No doubt labor and management alike are counting on that happening again. And they may be right. As Michael Givant, chair of the sociology department at New York's Adelphi University, says, "You can't just replace sports with something like going to the movies. This isn't how fans' souls are arranged. We are talking about people who miss weddings for games, who miss anniversaries."

But Givant allows that even the most rabid devotees of sports may feel less kindly about them when the lights go back on in the now-darkened arenas and stadiums. After all, he says, "die-hard fans measure their lives by milestones in sports, moments that define part of their lives. They remember a year as the year the Giants made the Super Bowl on Matt Bahr's field goal, or as the year Seattle Slew won the Triple Crown. Those sorts of things are now being lost."

ILLUSTRATIONEVANGELOS VIGLISILLUSTRATIONEVANGELOS VIGLISLasting trust can't be built until owners open their books.ILLUSTRATIONEVANGELOS VIGLISIf an ailing team now and then has to pull up stakes, that's life.