Doug's Business of Baseball Weblog:

May 2003

May 31, 2003: Cubs' Arrogance Hardly at a Premium LINK

Greg Couch of the Chicago Sun-Times finds still more dirt on the crosstown Tribune Company's experiment in scalping its own tickets to Cubs games. Although the Tribune insists that the Cubs and Wrigley Field Premium Ticket Services are separate entities, most of WFPTS's startup expenses were paid out of the Cubs' account.

Not only that, but the Cubs gave WPFTS the right to print game tickets at its own office, and to, in effect, turn back for full credit any tickets it wasn't able to sell at scalpers' prices. WPFTS thus enjoyed all the benefits of ticket scalping with none of the risk. The legality of this practice under the Illinois ticket-scalping law will be tested in mid-August.

May 28, 2003: Johnson Won't Pursue Baseball Team for D.C. LINK

Given Commissioner Selig's outspoken commitment to diversity, Robert Johnson, the billionaire founder of Black Entertainment Television, would seem to have been an ideal owner for the Montreal Expos. Johnson, a D.C. resident who recently acquired an NBA expansion franchise in Charlotte, had joined with Washington Redskins owner Daniel Snyder to bid for the Expos.

Yesterday Johnson walked away from MLB, citing his frustration that "I think the baseball train is moving significantly slower than I thought it would move." MLB President Robert DuPuy offered no apologies for the pace, saying that the decision "should not and will not be rushed."

DuPuy also declared that MLB's negotiations "are intended to ensure the success of a franchise in whatever location is ultimately settled upon." Nonsense. MLB's deliberate pace is designed to extract the largest possible stadium subsidy from the taxpayers of Washington, northern Virginia or Portland, Oregon, then use this subsidy to extract the highest possible price from the eventual purchaser for the enrichment of the other 29 owners. The last thing many of those owners want is a newcomer willing -- or able -- to spend money the way Jerry Colangelo did in Arizona.

May 28, 2003: 11th Circuit Reaffirms MLB's Antitrust Exemption (note: link is a PDF file) LINK

MLB's late, unlamented contraction plan attracted the attention of Florida Attorney General Robert Butterworth, who wanted to ensure that Tampa Bay and Miami weren't among the teams to be killed. Toward this end Butterworth issued civil investigative demands under Florida's state antitrust laws, seeking extensive financial and organizational information from MLB.

Ordinarily such subpoenas are challenged in state court, but MLB reasonably concluded that the Florida courts, which had held in 1994 that MLB's antitrust exemption is limited to the reserve system, would not be a congenial forum. Instead MLB brought a federal action to enjoin the Attorney General's investigation. A federal district judge issued the injunction, and the Eleventh Circuit Court of Appeals has just affirmed the decision below.

Key points of the decision:
  1. It reaffirmed the continued existence of a federal antitrust exemption for the business of baseball, though it described the exemption as "founded upon a dubious premise" and "upheld in subsequent cases because of an equally dubious premise."
  2. It declared that under the circumstances, the federal exemption also preempts state antitrust law. Ironically, this was the key holding of the Wisconsin Supreme Court case which allowed the Milwaukee Braves to move to Atlanta -- a move that broke the heart of the younger Bud Selig.
  3. It rejected MLB's claim that because it could not be prosecuted under the antitrust laws, the Attorney General was necessarily barred from even investigating its conduct.
  4. However, it held that on these facts, the Attorney General's investigation was an improper "fishing expedition" in violation of the Fourth Amendment, since the subpoena was not based on even a suspicion of illegal conduct.

May 23, 2003: Happy Memorial Day weekend! LINK

As this weekend traditionally marks the start of the summer travel season, it's a good time to check out the road trip side of my Website. Highlights include my travelogues from recent and not so recent trips; photos from a number of national parks, with more to be posted soon; a lot of baseball-related photos; and my idiosyncratic choice for America's best road trip drive, several pages of which have been featured by Epic Records on Tori Amos's Website for her latest CD, Scarlet's Walk.

I've also got galleries of motel and restaurant signs from Route 66 and I-80/old US 40 across Nevada; a vintage-postcard tour of the old Lincoln Highway across central Pennsylvania; and an extensive selection of travelogues and highway and roadside books.

Enjoy the weekend -- and I hope to have a useful new addition to the business of baseball side of the site ready by next week.

May 22, 2003: Not So Fuzzy Cubbies LINK

Derek Zumsteg of Baseball Prospectus offers his views on the Cubs' ticket scalping scheme. The article also links to one of his earliest columns, which until now he thought had covered all the ways for owners to hide revenue.

Derek also cites to this Chicago Sun-Times article, published during my vacation, which quotes the Cubs' hired-gun economist's explanation why scalping one's own tickets is actually good for the fans. Unsurprisingly, this economist works for Lexecon (emphasis on the last syllable), a consulting firm formed by economists so in love with their theory of the free market that they refuse to allow mere facts to interfere with the purity of that vision.

If the Cubs want to sell many of their best seats at premium prices, they're free to do so. They can raise the stated price of these tickets and sell them through the regular box office, or even auction off a percentage of the tickets for each game to the highest bidder. But since neither of these approaches would allow the Cubs to report only a small fraction of the true sale price for revenue-sharing purposes, this scam is profitable even though it means renting additional office space to create the illusion of a separate business.

May 20, 2003: New CBA and Pac Bell Park Photos Now Online LINK

New to the site: a .PDF copy of the 2002-06 Collective Bargaining Agreement; a more legible (and smaller) .PDF copy of the 1996-2001 CBA; and a set of photos taken at Pacific Bell Park last Thursday.

May 20, 2003: Theo Knows Who's Overpaid LINK

My May 2003 column for Boston Baseball explains how the Red Sox cut their 2003 payroll by over $11 million while simultaneously improving the team and paying their best players more money.

May 19, 2003: NLRB sides with MLB against umpires LINK

The National Labor Relations Board voted not to file a complaint against the owners over their use of the Questec Umpire Information System to evaluate umpire performance. The umpires claim that Questec is not accurate or reliable enough to be used in evaluating umpires' ball and strike calls.

The NLRB's refusal to intervene means that the umpires' grievance will be heard by a neutral arbitrator in July.

May 19, 2003: Cubs ticketholder lawsuit granted class action status LINK

A Cook County judge ruled last Tuesday (while I was away on vacation -- sorry for the delay) that a case brought against the Cubs under the Illinois Ticket Scalping Act would proceed as a class action. This is a major loss for the Cubs, since the class could include anyone who has bought tickets from Wrigley Field Premium Ticket Services since it opened last June.

The issues certified for class treatment are (1) whether the Cubs scalped tickets; (2) whether WFPTS was a qualified ticket broker; (3) whether the Cubs were involved in WFPTS's business practices; and (4) whether WFPTS's customers suffered financial damage. The Sun-Times article says that if the Cubs lose, the Cubs could be liable for $100/ticket to all who bought tickets for less than $100, and the difference between face value and the amount paid for those who paid more. The trial will likely be held this summer.

May 12, 2003: Judge Sides with Expos' Limited Partners LINK

The judge hearing the RICO action against Jeffrey Loria and others has ruled that during the pendency of the action, MLB must give at least 90 days' notice before moving the Expos. This isn't much of a win for the plaintiffs, though, since as a practical matter at least three months' notice would be required to bring any existing ballpark up to major league standards.

Buried in the article is an item of potentially greater significance: the judge denied the plaintiffs' request for discovery beyond that ordered by the arbitration panel. This means that in the arbitration against Jeffrey Loria, which must precede further litigation against MLB, the plaintiffs won't have all the documents they were hoping to have.

May 12, 2003: MLB's Political Group Gave Over $250K to Candidates LINK

Major League Baseball is the only one of the four major team sports with its own PAC. (Here's a link to its Federal Elections Commission disclosure forms.) It's also the only one with a bizarre, judicially-created antitrust exemption. MLB spent $278,000 last year on campaign contributions and soft-money donations to the political parties.

Stanford economist Roger Noll estimates that "a very significant fraction of the wealth of baseball owners - probably more than half - is attributable to favorable federal policies," including the antitrust exemption, the use of tax-exempt bonds to finance new stadia, and the ability to depreciate player contracts.

May 10, 2003: Players Union to Challenge Salary Tax in Stadium Plan LINK

The MLBPA's not happy about Washington, DC's proposal to raise $4.5 million/year towards the cost of a new ballpark by taxing major league player salaries. The union notes that federal law bars Washington, DC from imposing an income tax on nonresidents.

Other obstacles to relocation of the Expos in time for the 2004 season: RFK Stadium needs six months of renovations before it's baseball-ready, and the plaintiffs in the RICO action against Jeffrey Loria, Bud Selig and others have promised to seek an injunction against any move. (The litigation is otherwise on hold because the plaintiffs, limited partners in the Expos under Loria, are bound by the partnership agreement to arbitrate their dispute with him.)

May 9, 2003: The New CBA: First Thoughts LINK

I'll be writing a weekly series on the new CBA for Baseball Prospectus, walking through the document from beginning to end and placing its key provisions in the context of the past 35 years of MLB labor history. This introduction (part of BP's free content) summarizes a few things I learned during my first pass through the CBA.

May 9, 2003: Seats Still Available LINK

MLB has stopped releasing year-to-year attendance comparisons, but a USA Today analysis concludes that attendance is down about 5% for the first five weeks of the 2003 season. This article, and its accompanying chart, present team-by-team attendance data. Unsurprisingly, crowds in Anaheim are way up, while the woeful Tigers are barely outdrawing Tampa Bay.

May 9, 2003: Wicked Ticket: Deceit Is Name of Game LINK

The Cubs' ticket scalping scandal grows uglier by the day. Greg Couch of the Chicago Sun-Times reveals that when the team owned by his employer's crosstown competitor started Wrigley Field Premium Ticket Services last year, it withheld over 37,000 tickets from public sale. WFPTS received 650 seats for each home game after June 1, mostly in the desirable boxes and bleachers. That WFPTS could only resell about 3,000 of them suggests they were overpriced even for scalpers' seats.

Mark McGuire, President of WFPTS and Vice President of the Cubs, submitted an affidavit last year declaring that some of these seats came from a pool MLB requires be held back for VIP giveaways. MLB denies that any such holdback rule exists. McGuire said others came from the pool set aside for guests of the players and umpires. As Couch points out, player guests and VIPs don't have to reserve their tickets in advance, so the Cubs can't possibly sell tickets from this pool months before game day.

Like many clubs, the Cubs give season ticket holders first chance to buy single-game seats. This year no such tickets were available for games against the Yankees, White Sox and Cardinals. Couch, and several angry season ticket holders, suspect that these are the tickets the Cubs are sending to WFPTS: that the Cubs are screwing over their own season ticket holders, their very best paying customers, to scalp their own tickets at a hefty premium.

No one from the Cubs or WFPTS has yet said whether the club reports the full value of the scalped tickets to MLB for inclusion in the revenue sharing pool. Somehow I doubt it. This vile practice should be outlawed before it spreads.

May 8, 2003: D.C. Proposes $338 Million Subsidy for Baseball LINK

The new proposal from Washington Mayor Anthony Williams includes $275 million toward construction of a new park; $15 million to renovate RFK Stadium for interim use; and $48 million for interest and financing costs. The club owner would be expected to contribute another $125 to $150 million.

The anticipated $24 million/year in financing costs would come from a 10% tax on concessions and parking (as this tax is forecast to raise $10.1 million/year, it must also include a tax on admissions); a tax on player salaries ($4.5 million); and a graduated tax on D.C. businesses with more than $3 million/year in gross revenue ($9 million).

If the D.C. Council approves this proposal, Oregon's bid is doomed, and Virginia may have to open its wallet again to stay in the running.

May 8, 2003: Stadium Bill on Second Base LINK

The Oregon House approved the bill by a 33-25 vote. It now goes to the Senate, which is expected to put up more resistance.

The bill in its current form provides for the stadium to be financed from income taxes levied on players and club executives. The state would enter into agreements to direct the revenue from the new tax into a special Major League Grant Fund. Someone else, presumably the club owner, would guarantee that this fund would cover the expenses of stadium bonds.

The Oregon Legislative Revenue Office predicts the tax will only raise $5 million/ year, which isn't enough to finance the proposed $150 million of stadium bonds. In the event of a shortfall, the Oregon legislature would be asked each year for a supplemental appropriation sufficient to cover the bonds. The legislature would not be obligated to do so, of course, so if the tax didn't cover the debt service on the bonds and the legislature refused to appropriate additional funds, the guarantor would be responsible for funding the difference. Moreover, investors would demand a higher interest rate because the bonds would not be backed by the full faith and credit or taxing power of the State of Oregon.

I don't see either MLB or any prospective club owner embracing these terms.

May 6, 2003: New 2003-06 CBA Now Available LINK

It's a 775K PDF file. It can be downloaded directly from the MLBPA's Website through this link.

I'll eventually post it to the Data section of my Website, but to avoid being hit with frightening over-bandwidth charges, I'm happy to let someone else handle the mega-volume of early requests...

May 6, 2003: Who Is This Man? LINK

"Your 15 Minutes of Fame Are Up" Department:

Two weeks ago, a 30-year-old unknown named Craig Marquardo came to Oregon with a startling proposal: he and his unnamed investors wanted to buy the Montreal Expos and move them to a privately financed stadium in Portland.

Marquardo also claimed to have pitched for the PCL Tucson Toros, and in the Yankees and Red Sox farm systems. If that wasn't enough, he also claimed to have been a Gulf War veteran; to have sung backup for his friend Sting; to have interviewed Leonard Nimoy for an interview published in a local weekly; and to have a multi-book deal with Simon & Schuster.

Unfortunately for Marquardo, the nasty media insisted on checking his tales. (Tip to would-be liars: don't fabricate a career in professional baseball or embellish the details of your military service. Those are far too easy to verify.) Now Marquardo has departed in a huff: "We are completely withdrawing our interest in Portland for a major league baseball team. My ownership group is not happy with the treatment we've gotten."

May 3, 2003: 2003 Salary Data Added. LINK

I've added 2003 Opening Day salaries to the downloadable data page, and to the do-it-yourself downloadable database of salaries since 1985.

May 1, 2003: All-Star Game Winner to Get World Series Advantage LINK

The MLBPA has accepted the owners' proposal on a two-year trial basis. I've discussed the new format in more detail elsewhere. The players don't seem thrilled by it; even the press release announcing the deal quotes Don Fehr of the MLBPA as saying that the agreement also involves "further discussions about other structural changes in both the All-Star Game and post-season."

Other parts of the agreement:
  • All-Star Game rosters are expanded from 30 to 32 (groan).
  • All teams will still be guaranteed at least one representative.
  • Starting position players will still be selected by the fans, but one reserve at each position, and the first eight pitchers, will be chosen by a ballot of players, coaches and managers. The manager and the Commissioner's Office will fill out the remainder of the roster.
  • No pitcher will be required to pitch more than three innings, and all starting position players must bat at least once.

May 1, 2003: Cubs invent new way to gouge fans, fellow owners LINK

Want to buy front-row seats for the Yankees' visit to Wrigley Field this summer? A $45 ticket will cost you $1,500 from "Wrigley Field Premium Ticket Services." If the bleachers are good enough, WFPTS will sell you a $30 ticket for $155.

WFPTS sits a block from Wrigley Field, on land owned by the Tribune Company. Its President, Mark McGuire, is also a Vice President of the Cubs. Its books are handled by the Cubs' accounting department. It sells tickets which the Cubs have never made available to the general public. According to McGuire's deposition in a lawsuit brought by fans challenging the practice, these are "VIP tickets" which would otherwise not be available to the public at all. Yet a WFPTS spokesman insists, "We're not related to the Cubs ticket office."

Of course not. Illinois law requires the Cubs to sell their tickets at their stated face value. The Tribune Company thinks it can avoid this law by establishing WFPTS as a separate corporation, selling many of the club's most popular tickets to this corporation at face value without ever offering them to the public, then allowing WFPTS to resell them at scalper's prices. A more contemptible treatment of the Cubs' die-hard fans, the ones who stand in line for hours during a freezing Chicago winter to obtain single-game seats as soon as they go on sale, is hard to imagine.

And MLB has every reason to crack down on this practice, too. Like the Cubs' "negotiations" for TV and radio rights with commonly-owned WGN, this related-party transaction allows the club to move revenue off the team's books, where it would be subject to MLB's revenue-sharing formula, into another of the Tribune Company's pockets. If MLB is serious about reducing the financial disparity between clubs, increasing the portion of shared revenues isn't enough. The next step must be greater auditing of club books to ensure that all money properly attributable to baseball operations is shared.

All otherwise-uncredited content on this page is copyright © 2003 by Doug Pappas. All rights reserved.