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TRIMMING THE FAT IN BASEBALL HAVING LEARNED HOW TO SAVE MONEY UNDER THE OLD SYSTEM, WHY DO OWNERS NEED A NEW ONE?

Dec. 04, 1995
Dec. 04, 1995

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Dec. 4, 1995

TRIMMING THE FAT IN BASEBALL HAVING LEARNED HOW TO SAVE MONEY UNDER THE OLD SYSTEM, WHY DO OWNERS NEED A NEW ONE?

On Dec. 7, a date already awash in infamy, it will have been
three years since baseball owners decided to reopen their
collective bargaining agreement with the players. The owners
could not stay in business, they said, without a radical change
in the system of how players are paid, later proffering a salary
cap as their must-have remedy. Now that cap is as outmoded as a
fedora and as forgotten as Richard Ravitch, the owners'
erstwhile chief negotiator.

This is an article from the Dec. 4, 1995 issue Original Layout

Ravitch's demands for fixed labor costs have been answered by
the owners themselves with a radical idea, for them: It's called
a budget. Owners don't need an overhaul of the system anymore,
because over the past three seasons they proved they could rein
in salaries through their own prudence and ingenuity.

According to the owners' Player Relations Committee, the median
1995 salary--half the players earned more, half earned less--was
$275,000, a level last seen in 1988. "When I first heard that
number," says Atlanta Brave president Stan Kasten, "I thought it
had to be a mistake."

Says Gene Orza, associate general counsel for the players'
union, "It's reflective of a trend to use younger
players--players who have no rights."

While that median hardly calls to mind compensation for, say,
tool and dye makers, it's more representative of what's
happening to player compensation than the overused
average-salary figure, which was $1,089,621 last season. But
even that bloated number represented a 5.6% drop from the
previous season. That's a significant dip considering that many
high-end players arranged their multiyear contracts so that they
received substantially less money in 1994--in anticipation of a
strike--than in '95, when they believed a strike would be over.
Also, the average salary has remained flatter than a bad slider
over the past four seasons, with little differential between its
low in that time ($1,012,424 in 1992) and its high ($1,154,486
in '94). In the four years before '92, the average salary almost
doubled.

"There's a de facto salary cap," says agent Barry Axelrod. "I
have teams talking to me about salary slots, just like they do
in the NBA. This is the era of the finite budget. We don't need
a salary cap or some taxation system. They're doing a better job
than they ever did." The union has no complaint. Says Orza, "As
long as the market is a free one, that's all we ask. The union
has never asked for money. It's only asked for a process."

Some of the poorer teams still need some assistance. But that
aid could come from a revamped system of revenue-sharing among
owners and even a revenue-based taxation system. The owners
don't need to ask the players for permission to implement those
measures. All of which means there's no reason now that the two
sides can't quickly cut a deal similar to the existing labor
agreement before they risk further damage to the game.

Two key revenue streams are already picking up: Owners can be
encouraged by a new $1.7 billion television contract (it doubles
the gross national-TV money to each club, from $5.5 million last
year to $11 million in 1996) and indications that fans are ready
to come back. The poststrike World Series drew a TV rating 15%
higher than that of the '93 Series. What's more, cash-starved
franchises in both Seattle and Milwaukee soon will be flush with
the currency generated by publicly financed stadiums replete
with luxury boxes.

General managers have even learned how to create a buyer's
market for players: flood it. The spigot opens full bore on Dec.
20, the deadline for tendering contracts to unsigned players.
Rather than risk being clobbered in arbitration or bound by a
rule that prevents them from cutting a player's contract by more
than 20%, the clubs will cut loose numerous players, a group
that could include Cleveland Indian 16-game winner Charles Nagy,
San Francisco Giant reliever Rod Beck, Baltimore Oriole pitcher
Ben McDonald and even Chicago Cub outfielder Sammy Sosa, whose
big 1995 numbers--36 home runs, 119 RBIs and a $4.3 million
salary--might be dwarfed by the size of an arbitrator's award for
'96.

With most teams planning to cut their payroll next year, the
market remains recessionary. When Jose Canseco, coming off $5.8
million in 1995 earnings, asked Boston for $6 million per year,
the Red Sox offered him half his asking price. Prized free
agents Roberto Alomar, Craig Biggio, David Cone, Jack McDowell,
Fred McGriff and Randy Myers are still available.

"The market is taking a hit," says Axelrod, who sees the
"further Hollywoodization of the salary structure." Marquee
players get big money, and the supporting cast gets scale. Last
season 12% of the players gobbled up 54% of the total
payroll--that's $485 million for 100 stars and $413 million for
724 members of the chorus.

The Jehovah's Witnesses recently declared it no longer would
announce dates on which the world would end. Owners, take heed.

COLOR PHOTO: JOHN BIEVERNagy could be a payroll casualty after Dec. 20. [Charles Nagy]