News Briefs: Fall 1999

The Numbers

Attendance: 29,210 per game, down 0.3% from 1998's 29,285. This is the first decline since 1995.

Average time of games: 2:53, up six minutes from 1998 and one minute below the 1994 high.

Salaries: Up 13.24%, to an average of $1,567,873. The median salary rose from $427,500 to $495,000. The clubs also have guaranteed salary obligations totaling $2,596,185.253 from 2000 through 2004.

TV ratings:

Regular season: FOX 2.9, down from 3.1 in 1998 but above the 2.7 in 1996 and 1997. ESPN 1.5, down from 1.8 in 1998.

First-round playoffs: 6.9, down 7% from 7.4 in 1998.

LCS: 10.3 rating/19 share, up 21% from 1998's 8.5/17 and the highest since 1993.

World Series: 16.0 rating/26 share, up 13% from 1998's 14.1/24 but still the second lowest on record. (USA Today estimated that NBC earned $5 million from the Series, after Fox lost $15 million in 1998.)

MLB News

MLB restructures, abolishes league presidents. In their most sweeping reorganization since 1920, MLB owners voted unanimously to consolidate all operations in the Commissioner's Office. Matters formerly handled by the league presidents, such as umpires, scheduling and discipline, will now fall under the day-to-day control of Sandy Alderson. NL president Leonard Coleman resigned rather than accept what he considered a figurehead position; AL president Gene Budig hasn't decided what he'll do. A few of the changes require the approval of the MLBPA and MLUA.

The consolidation resolves a fifty-year debate whether league presidents had outlived their usefulness. Before the 1903 AL-NL peace treaty, league presidents governed their own leagues. From 1903 through 1921, league presidents constituted two-thirds of the ruling National Commission, but after Judge Landis became Commissioner, the authority of league presidents dwindled. In 1946, the MacPhail Committee report already noted that league presidents "have little actual responsibility and authority for anything." A 1970 Wharton study recommended consolidating MLB's operations in New York, with central control of umpires and a new title of "deputy commissioner" for the former league presidents, but the plan died after newly-elected NL president Chub Feeney declared that he wasn't moving to New York.

2000 season to start overseas. The New York Mets and Chicago Cubs will open the season in Tokyo with a two-game series on March 29 and 30. The owners and players are also discussing a possible baseball World Cup, a tournament in which major league players and stars from other leagues would compete for teams representing their home countries.

MLB blocks Web telecasting of highlights. Citing a clause in its licensing agreements that bars the Internet broadcasting of MLB programming, MLB's attorneys have forced a number of TV stations to pull baseball highlights from their Webcasts.

MLB-ESPN dispute headed to trial. MLB and ESPN have been unable to resolve their dispute over ESPN's proposal to shift late-season Sunday night games to ESPN. In pretrial filings, ESPN disclosed that in a May 1998 memo to Commissioner Selig, Bill Giles of MLB's television committee concluded that ESPN was paying too little for its MLB rights, and proposed allowing ESPN to shift games to ESPN2 only in return for an agreement to terminate the contract at the end of the 1998 season.

Consolidation murmurs grow louder. Jerry McMorris of the Rockies has been linked to one such proposal, under which MLB's buying two clubs (probably from among the Athletics, Twins, Expos and Royals), folding them, and thereby increasing the remaining clubs' shares of national media and licensing revenue. Reaction outside MLB has been hostile. Many consider the proposal merely an opening salvo for the next labor negotiations. Legislators have warned of possible antitrust consequences if their local teams vanish, while academics have dubbed the proposal "absolutely disastrous" (Andrew Zimbalist of Smith College) and "a legal nightmare," "a public relations disaster" and "economically stupid" (Gary Roberts of Tulane). Stephen Ross of the University of Illinois observed that proposals for consolidation expose the emptiness of teams' threats to move unless local governments build them new stadia.

Supreme Court rejects Minnesota's request to review antitrust exemption. After the Minnesota Supreme Court ruled that MLB's antitrust exemption barred the state from even investigating whether MLB teams were conspiring to extort taxpayer-funded stadia from local governments, the Attorney General of Minnesota asked the U.S. Supreme Court to review the scope of the exemption. The Supreme Court declined to do so.

"Resigned" umps go quietly, fight for reinstatement. Hours before their resignations took effect on September 2, the 22 umpires not invited back by MLB accepted a deal whereby they received their full pay and benefits for the rest of the season and the right to arbitrate their dismissal, in return for dropping their lawsuit and unfair-labor-practice charges. But if the umpires lose the arbitration, the salary will be deducted from their termination pay.

The battleground then shifted to the MLUA itself, where a dissident group headed by John Hirschbeck and Joe Brinkman are battling Jerry Crawford and others loyal to Richie Phillips for control of the union. The dissenters, who are being advised by long-time player agent Ron Shapiro, have filed a petition to decertify the MLUA.

Adding to the arbiters' woes, the AP learned that their union dues were about 25% higher than the players'. In 1998 the MLUA billed umps $500/year plus a $1,000 initiation fee, and called for an additional $351,922 in special assessments, for an average of $5,756 per umpire. The MLBPA charges players $25/day for each day on an active roster, or $4,575/season, but negotiates licensing agreements on their behalf so lucrative (more than 10 times the annual dues) that the players never lay out a dime.

Congress asks MLB to reinstate Shoeless Joe Jackson. See accompanying article.

Around the Majors

Angels reportedly on the block. After failing to launch a regional cable network built around the Angels and the NHL's Mighty Ducks, Disney may sell the clubs. One source says that the Angels have lost $40 million over the past three seasons. Orange County billionaire Henry Nicholas III, chairman of the Broadcom semiconductor group, was identified as a likely purchaser, but backed out of negotiations.

Diamondbackers asked for $24 million. The Arizona Diamondbacks earned $21.1 million from baseball operations in 1998, while reporting a depreciation-related loss of more than $30 million. Nonetheless to meet a reported cash shortage the club asked its limited partners to contribute an additional $24 million to the team coffers. 24 of the 29 agreed to do so.

Costs already rising for proposed New Fenway. As of early November, the cost of the proposed new Red Sox park has risen to $595 million: $350 million for the stadium, $50 million for public improvements, $80 million for public parking garages, $65 million for land acquisition and $50 million for site preparation. The Sox say they're willing to pay the $350 million stadium cost, but would have to borrow virtually all the money, thereby reducing the economic benefit of the new facility.

Indians sold for record $320 million. Attorney Larry Dolan has agreed to purchase the Cleveland Indians for $320 million - $9 million more than Rupert Murdoch's News Corporation paid last year for the Los Angeles Dodgers, Dodger Stadium, Dodgertown in Vero Beach, Florida, and other real estate interests. Dolan is the brother of Charles Dolan, head of Cablevision, who's reportedly interested in acquiring the New York Mets. Last year Richard Jacobs, whose family paid $35 million for the Indians in 1986, sold 4,000,000 shares of the club to the public at $15/share; Dolan will pay about $22.50/share.

Reds' sale approved. Heaving a huge sigh of relief, MLB brought the Marge Schott era to a close by approving transfer of a controlling interest in the Reds for $67 million to new managing partner Carl Lindner, George Strike and William Reik. The deal, for 36.7% of the club, implicitly values the Reds at $181.8 million.

Marlins offer profit-sharing in return for public financing of new park. Owner John Henry hopes to build a retractable-roofed, 42,000-seat park (estimated cost: $400 million) in downtown Miami or Fort Lauderdale. As an incentive for local taxpayers to pick up 3/4 of the tab, Henry is offering them 90% of operating profits or profits on the sale of the team.

Owners reject Royals sale. At their September meeting, MLB owners voted 29-1 (the Royals dissenting) to ask the trustees who control the Royals to consider other offers besides the $75 million bid by a group headed by Miles Prentice. Two months later the owners notified Prentice that his deal would never be approved, prompting Buck O'Neil, one of his investors, to lament, "They knew months ago that they weren't going to let us have this team. Why didn't they tell us then?" Prentice vows to continue battling for the Royals. The trustees of Ewing Kauffman's estate have until January 1, 2002 to find a local buyer before they can offer the team to outsiders.

Former Warner Brothers head to run Dodgers. Bob Daly, former co-chairman of Warner Brothers, has been named chairman and CEO of the Dodgers. As part of the deal, Daly bought 10% of the club from News Corporation for about $30 million. One of Daly's first headaches may be the loss of the club's best prospect, Adrian Beltre, who was reportedly signed before his 16th birthday in violation of major league rules. Beltre, who's represented by owners' nemesis Scott Boras, has asked to be declared a free agent.

Brewers to remain in County Stadium for 2000. The July 14 collapse of a 2,100-ton crane will delay Opening Day at Miller Park until 2001.

Twins sale in limbo. Carl Pohlad tentatively agreed to sell the Twins for $120 million to a group headed by the owners of the NBA Minnesota Timberwolves and NHL Minnesota Wild. However, the deal was contingent on construction of a new stadium in St. Paul, and by a 58-42 vote, St. Paul voters rejected a proposed half-cent sales tax increase to finance 1/3 of the estimated $325 million cost of a new open-air park. The plan called for the state to pay another third, and the Twins the final third - but for the Twins to retain virtually all revenue from the facility. No word at press time whether the deal can be restructured.

Expos' sale on hold. At their September meeting, postponed consideration of the proposed sale of the Montreal Expos to a group headed by New York art dealer Jeffrey Loria. This decision, unlike those affecting the Royals and Athletics, was motivated by specific substantive concerns over financing for a proposed new stadium.

Yankees' merger with New Jersey Nets pending. George Steinbrenner and the owners of the NBA's New Jersey Nets have created a holding company called YankeeNets. While the deal provides that Steinbrenner will continue to operate the Yankees, MLB's approval may be required because the proposed deal involves at least the technical transfer of ownership and control. The new entity is reportedly studying whether to sell stock to the public.

With both the Yankees and Mets planning new stadia, a New York Post survey of sports industry executives concluded that each club could raise $500 million for its new park by selling naming rights, luxury boxes and club-seat licenses, without any contribution from the owners or the taxpayers.

Athletics' sale postponed. In September, the owners voted 28-2 (Oakland and the Chicago Cubs dissenting) to postpone all action on the proposed $122.4 million sale of the Athletics until after Bud Selig's task force completed its study of baseball economics. Since owners Steve Schott and Ken Hofmann had set a September 21 deadline to close the deal, the purchasers - and Oakland city officials - were furious over the last-minute imposition of a new obstacle. If the Athletics subsequently move, look for another antitrust suit rivaling the one Oakland filed over the Raiders' move to Los Angeles.

Phillies fight over location of new park. The Phillies have their financing in place, but not their site. The club wants to play at Broad and Spring Garden Streets in downtown Philadelphia, while city officials want to build the park in South Philadelphia, adjacent to the Eagles' new football stadium.

Padres report $6.9 million loss in 1998. According to audited financials released in late August, San Diego's revenues rose from $59 million to $79 million in 1998, while expenses climbed from $67 million to $86 million. The Padres attributed $15 million of this increase to player salaries, but offered no explanation for the remaining $4 million. These figures don't include ownership's roughly $16 million in depreciation-related tax breaks for 1998. Meanwhile, next year $10 million in Qualcomm Stadium signage revenue will be diverted from the Padres to the Chargers.

Copyright © 19998 Doug Pappas. All rights reserved.
Originally published in the Fall 1999 issue of Outside the Lines, the SABR Business of Baseball Committee newsletter.

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