Baseball’s latest economic study committee recommended a vast increase in revenue sharing and possible franchise moves, but it did not say the sport needs a salary cap.
To increase competitive balance, the committee today urged baseball to impose a 50 percent luxury tax on payrolls above $84 million; proposed sharing 40 percent to 50 percent of local revenues after ballpark expenses; and recommended that national broadcasting and licensing revenue be distributed unequally to assist low-revenue clubs, provided that they meet a minimum payroll of $40 million.
The New York Yankees, with a payroll of about $115 million, would have to pay a tax of about $15 million, under the committee’s proposed formula. Minnesota has the low payroll, about $20 million.
The panel recommended that players born outside the United States be included in the amateur draft, that there be an annual “competitive balance draft,” and that baseball relocate franchises “when necessary to address the competitive issues facing the game.” No specific cities were mentioned.
In addition, the panel said baseball should expand its domestic and international promotion of the sport.
Haves and Have-Nots
“We do not pretend to believe these changes will be easy or universally popular,” said former Senate Majority Leader George Mitchell, one of the panelists. “We do believe them to be a solution to the alarming disparities between baseball’s haves and have-nots. We offer them to the commissioner, the ownership of Major League Baseball, the players and to the fans of the game.”
Also on the panel were former Federal Reserve board chairman Paul Volcker, Yale president Richard Levin and political commentator George Will.
Baseball has not moved a team in almost 30 years.
“If an area doesn’t want to support a team, that answers itself,” Volcker said.
“Clubs that have little likelihood of securing a new ball park or other revenue-enhancing activities should have the opportunity to relocate,” Mitchell said.
Three Teams Had an Operating Profit
For now, the committee opposed eliminating teams — an idea that is being discussed by owners.
“We would not look to a contraction except as a last resort,” Volcker said. “I don’t think that the industry should exclude it.”
To support its contention that baseball has a growing revenue disparity, the committee released dozens of economic charts, among them one that showed the Yankees generated the most revenue last season, $177.9 million, while Montreal generated the least, $48.8 million.
In 1995, the first year following the strike that wiped out the World Series, the Yankees led baseball with $97.7 million in revenue, while Montreal had the least, $27.6 million.
According to the report, only the Yankees ($64.5 million), Cleveland ($45.9 million) and Colorado ($12.4 million) generated an operating profit from 1995-99.
San Francisco had the largest operating loss from 1995-99 ($97 million). Toronto lost $87.6 million and Anaheim lost $83.3 million.
As an industry, baseball had an operating loss of $212 million last year on revenue of $2.787 billion.
Team Elimination Opposed — For Now
Before the meeting, owners appeared set to put off the issue of realignment until 2002 and there was talk they might even discuss getting rid of the Montreal Expos and another team.
Colorado owner Jerry McMorris first discussed this so-called “contraction” idea a year ago.
When asked about it last weekend, commissioner Bud Selig said: “I don’t want to rule anything out because there’s no question that we do have to solve that problem, because [disparity] is getting worse by the day.”
While contraction may not be on the agenda, two owners, speaking on the condition they not be identified, said the idea is being given increased attention because of Montreal’s inability to get a new ballpark.
“It is being taken more seriously,” McMorris said Thursday night. “It’s just because of disparity and how do we find our way out of difficult situations.”
If baseball decides to shrink, its central fund, which gets money from national broadcasting and licensing contracts, could be used to buy back the Expos along with one other team, one of the owners said.
“If we disappear, they’re going to have to come up with another club that could produce as many Guerreros and Martinezes and Walkers,” Expos manager Felipe Alou said, referring to Vladimir Guerrero, Pedro Martinez and Larry Walker, who became stars in Montreal.
While there is no obvious choice for a second team, Florida, Minnesota and Oakland have failed to get new ballparks, and Tampa Bay has seen a big drop in attendance.
As for realignment, Texas wants out of the AL West, where it has late TV start times for intradivision road games. But the Chicago White Sox, Kansas City and Minnesota were against the plan to place six teams in the AL Central and just four in the AL East and AL West.
In addition, Arizona objected to the plan, under which it would move from the NL West to the AL West.
Selig, several owners said, does not appear ready to call for a vote on realignment soon, effectively putting it off until the 2002 season at the earliest.
“I think most likely significant realignment will be put off a year,” said Houston Astros owner Drayton McLane.
The two owners who spoke on the condition of anonymity confirmed McLane’s assessment that no realignment would take place for 2001.
The one change owners were to hear today is the format for next season’s schedule: Teams will play division rivals 18 times each instead of 12 or 13.
And in another new twist, the Astros and Texas Rangers will meet in interleague play for the first time.