Let's Make A Deal Sorting out baseball's labor mess is easier than you think. Here's SI's simple plan, based on the owners' and players' latest proposals, to avoid a strike

Aug. 05, 2002
Aug. 05, 2002

Table of Contents
Aug. 5, 2002

Let's Make A Deal Sorting out baseball's labor mess is easier than you think. Here's SI's simple plan, based on the owners' and players' latest proposals, to avoid a strike

This time around we're wise to you. We have no more rooting
interest in your recurring labor contretemps than we do for a
Tonya Harding-Paula Jones "celebrity" boxing match. We don't
want to hear your plaintive yelps, Drayton McLane, as you
threaten to sell your Houston Astros if a new economic system
isn't put in place. This is the system you bought into; you
can't complain about the mortgage payments after you've agreed
to buy the house.

This is an article from the Aug. 5, 2002 issue Original Layout

And we don't want to hear you, Barry Bonds, insouciantly
claiming that if you go on strike, we'll come running back at
the drop of a settlement with our hearts and wallets wide open.

We have watched both sides, baseball players and owners, play
this game of chicken for more than a year, heading full tilt
toward a ninth work stoppage in 30 years. The diligent,
constructive negotiating sessions of last week were somewhat
encouraging, if long overdue. But unless there is swift movement
toward an agreement, you players will set a strike date for some
time within the next six weeks, and the jihad will begin again.

We know, however, that this time is different. We know that with
work stoppages, as with knee surgeries, the likelihood of
recovery diminishes each time. Baseball took an immediate 20%
hit in attendance after the 1994-95 strike, for instance, and
hasn't fully recovered. Despite the oft-heard bleatings that Cal
Ripken Jr., Mark McGwire and Sammy Sosa "saved" baseball in the
wake of that strike, baseball never has returned to its 1993
attendance rate, even with the help of a humming '90s economy.
The current economic backdrop? It's dark enough to make a
light-hitting middle infielder put down his Robb Report and
think twice about buying that yacht.

Here, however, is the most important reason we have zero
tolerance for your latest march toward oblivion: We know you're
tantalizingly close to a deal. If you took a syringe--to use an
analogy the modern ballplayer understands--and drained from the
bargaining process the venom and the mistrust, you'd be left
with the makings of a compromise. In interviews with SI three
high-profile agents, three owners and a key negotiator from each
side agreed that a deal should be easily achieved. Even Donald
Fehr, the executive director of the players' association, said
on July 8, "It's somewhat surprising to me that at least on
these issues, the differences are being portrayed as [so] wide.
We don't see it quite that way."

Every baseball labor negotiation centers on the tug-of-war
between owners trying to put a drag on salaries and players
trying to preserve the status quo. This time, though, the owners
aren't asking the players to swallow a radical change, such as
the salary caps or pay-for-performance systems that they've
proposed in the past. The owners have finally learned that the
least destructive approach is to advance their cause in
increments--to play for one base at a time instead of relying on
the long ball.

The meat of the owners' proposal consists of two items that the
players have signed off on in past negotiations: revenue sharing
and a luxury tax. There's no philosophical gulf. Both sides
agree that a portion of the $3.5 billion that the 30 major
league teams cumulatively gross annually needs to be distributed
among the financially strapped clubs.

The biggest obstacle to a settlement is that each side loathes
the other. (We know where you're coming from on that front.) The
players might be more sympathetic to the owners' proposals if
the lords didn't keep sending over Trojan horses. For instance,
the owners asked for the right to keep an "information bank" on
free-agent offers (a euphemism for legalized collusion) and the
right to cut a player in January if they didn't like the number
he submitted for salary arbitration (which would undermine the
arbitration process).

The owners also tried to shove the poorly conceived contraction
plan down the players' throats immediately after a stirring
World Series. Led by their Minister of Doom, commissioner Bud
Selig, the owners also regularly disseminate forecasts of
financial disaster that have been questioned by Congress and
even within their own house. (Selig's top assistant, Bob DuPuy,
quickly moved to squash the commissioner's July 10 claim that
two clubs were in dire financial straits.) According to the
owners' figures, seven of the top 10 revenue teams finished in
the red last year; if that's the case, how do they justify
asking those teams to send even more money to the lower-revenue

At the same time, we can relate to the owners' distaste for the
players' intractability and sense of entitlement. The players
only grudgingly acknowledge the game's competitive imbalance,
which is ludicrous. For years they have held that the owners
should solve their own problems without the players' assistance,
but when the owners offer to share half of their revenues among
themselves, the players protest: "No, we didn't mean that much."
The players believe rich teams might have less incentive to
raise revenues--and would therefore have less to spend on
salaries--if they have to fork over half of what they take in.
Also, the players have shown no initiative in response to the
revelations of rampant steroid abuse in their ranks.

So it's time for the gamesmanship and the public relations
gambits to stop. It's time to set aside the history of distrust
and to focus on the major issues. Here's what those issues are,
and here's SI's plan for a compromise that would resolve them:

Revenue sharing and luxury tax.

While arguing the merits of revenue sharing and a luxury tax and
crunching the corresponding numbers, the owners and players
should actually be negotiating only one number--the total amount
of money to be transferred from the richer teams to the poorer
teams. That's the nut of this crisis. The two sides should then
work backward by debating how to arrive at that number through
contributions from revenues, a luxury tax and the commissioner's
discretionary fund (a pot derived largely from TV and licensing
revenues and doled out as the commissioner sees fit).

Based on the owners' three-pronged proposal--sharing 50% of
local revenues ($253 million), a 50% tax on payrolls above $50
million ($80 million) and an $85 million contribution by the
players to the commissioner's fund--the total shared revenue, or
magic number, would be $418 million. The players' current
offer--22.5% of local revenues ($188 million), no
counterproposal on a luxury tax ($0) and a $40 million
contribution to the commissioner's fund--would redistribute $228
million. Take the midpoint between the two plans, and you have
the basis of a settlement: $323 million.

Obviously, each side would have to make concessions to reach the
$323 million magic number. For instance, if the players insist
on no luxury tax, then the owners should get their 50%
revenue-sharing plan while cutting the commissioner's
discretionary fund to $70 million. Or the owners could drop
their revenue-sharing percentage and increase the fund money to
arrive at the same number.

Thus far owners have insisted on a tax, claiming that revenue
sharing without a "compression mechanism" at the top would be
inflationary. If they don't budge on that, they would have to
accept the players' 22.5% revenue-sharing plan with $55 million
going to the commissioner's discretionary fund. However, the
players are on record in favor of the tax concept and in 1995
proposed a 25% tax on payrolls above $50 million. Our solution
(chart, left) includes middle-ground compromises on revenue
sharing and the commissioner's fund, with a luxury tax plan like
the one the players proposed in '94.

After the magic number is agreed upon, and the two sides
compromise on where the money will come from, the last step will
be to determine how to divide the shared revenue. The owners
believe it should be split equally among the 30 teams in what's
called the straight pool concept. The players want a split pool,
from which more money is funneled to the seven or eight
lowest-revenue clubs. The solution is a hybrid plan in which 80%
of the revenue is shared equally and the remainder is divided
among those clubs with revenues below the industry average.


The talent pool isn't shallow enough to warrant eliminating
teams, and under a deal that redistributes $323 million, plus
additional changes to the game that would improve competitive
balance (laid out in the pages that follow), contraction is

Steroid testing.

When players sign on to play major league baseball, they place
themselves in a public trust. Think of baseball as a publicly
traded company and the fans as stockholders. Fans must have full
confidence that the talent and outcome are untainted; otherwise
we're talking about pro wrestling. That's why we have rules
prohibiting players from betting on baseball. And that's why
steroid testing is needed.

This should be a no-brainer. The fans want testing. The owners
want it. The clear majority of the players want it, according to
a recent USA Today poll. Now it's up to the union's board to make
it happen.

An independent agency should administer and monitor the testing,
which should be random and year-round, as it is for the NFL and
IOC, because the off-season is a popular time for bulking up
with performance enhancers.

The first year of testing should be used for administrative
purposes only. That is, players who test positive should not be
disciplined, other than to be steered toward an educational
employee assistance program. In subsequent years positive
results would bring suspensions, with the severity of those
suspensions consistent with the frequency of the offense.

Amateur draft.

Both sides agree that players from outside the U.S. should be
included in the pool for the June draft, thus preventing
deep-pocketed teams from cornering the market on Japanese free
agents, Cuban defectors and the like. The owners want the draft
to be 38 rounds, the players want 16. Call it 27 and move on.

Seven years ago the players agreed to the concepts of increased
revenue sharing and a luxury tax, which were put in place for
only the 1997, '98 and '99 seasons. Both prescriptions might
have had the desired effect, but the dosages were inadequate,
and they did virtually nothing to narrow the widening gap
between the richest clubs and the poorest. Salaries weren't
curbed; the average has more than doubled since the last strike,
in '94. Players took home 56% of the revenues last season, up
from 38% in '90 and 21% in '75, the last year before free agency.

Now both sides agree that the revenue-sharing formula must be
more potent. The common ground is easy to see, but getting there
requires something as rare to the labor landscape as rain is to
the desert. It requires a spirit of cooperation.

Take a closer look at the issues on the bargaining table at And read more
from Tom Verducci every Tuesday in his exclusive online column at

COLOR PHOTO: PHOTO ILLUSTRATION BY JOE ZEFF [T of C] FLAY BALL! The national pastime has taken a beating that only a quick labor settlement can stop.TWO COLOR ILLUSTRATIONS: ILLUSTRATIONS BY ALISON SEIFFER


The money to be transferred from the richer teams to the poorer
clubs would come from three sources: revenue sharing, a luxury
tax and the commissioner's discretionary fund. Here's a breakdown
of how much money is currently shared from those sources, how
much the players and owners have offered to transfer and how SI
proposes to bridge the gaps. (All figures are in millions and
based on 2002 Opening Day payrolls.)


CURRENT SETUP $167 $0 $0 $167
PLAYERS' PROPOSAL $188 $0 $40 $228
OWNERS' PROPOSAL $253 $80 $85 $418
SI's PROPOSAL $220.5 $40 $62.5 $323

This time the owners aren't asking the players to swallow a
radical change.