MLB's Biggest Lie Yet

Peter Gammons' November 10 column opens with the following assertion:

"A month ago, baseball's banker went to Milwaukee, laid out their spreadsheets and told Bud Selig that his industry had drawn $4.5 billion worth of losses in the last few years, was in the process of losing another $500 million in the next calendar year."

Oh, really?

It's reasonable to assume that Peter Gammons wasn't actually in the room during this meeting. It's also reasonable to assume that he didn't get this tidbit from the bankers. That leaves Major League Baseball as the source. And when this statement is measured against MLB's own prior financial disclosures -- let alone the estimates of impartial outside observers -- it's evident that whoever talked to Gammons was lying through his teeth.

In July 2000, MLB released the report of its "Blue Ribbon Economic Panel." This report, which relied entirely on financial information supplied by MLB and its member clubs, contained several tables purporting to show MLB's shaky financial footing. Here's MLB's self-described bottom line for 1995-99:

 Year  Revenues ($ millions)  Profits ($ millions)
 1995  $1,385  ($326)
 1996  $1,775  ($197)
 1997  $2,067  ($176)
 1998  $2,479  ($138)
 1999  $2,787  ($212)
 TOTAL  $10,493  ($1,049)

As I've written elsewhere, these figures are highly suspect. For example, according to MLB, from 1996 to 1999 revenues rose by more than $1 billion. Other figures show that player salaries rose by about $550 million over this period...yet according to the Blue Ribbon Panel, losses actually increased. Where did the other $450 million go? But whatever its flaws, there's certainly no reason to believe that the Blue Ribbon Panel report understated MLB's losses.

MLB's own figures thus show that over the five-year period beginning with the strike year of 1995, MLB lost, at most, 10 cents on every dollar of revenue. Assuming that revenue and loss trends continued in 2000-01, total revenues from 1995-2001 would total about $17 billion, and total losses would approximate $1.7 billion. Yet Gammons' source told him that MLB lost more than 2-1/2 times as much as MLB itself claimed less than 18 months ago!

Fat chance. In fact, there's no credible evidence that MLB as a whole has sustained any real losses over this period. Franchise values continue to rise. Analyst Michael Ozanian, who has been following MLB's finances for Forbes and the now-defunct Financial World for the past decade, estimates that MLB was profitable every single year from 1995 through 2000. Since free agency began, no owner has ever sold his team for less than he paid for it, and according to Forbes, most franchises have appreciated by 10% or more per year since their present owners purchased them.

During the 1994-95 labor dispute, Bud Selig told Congress that without a salary cap or similar restriction on salaries, numerous clubs would soon file for bankruptcy. Instead baseball's revenues have grown by almost 20%/year, and franchises have appreciated by 10%/year. Even the owners of franchises Selig wants to contract -- franchises he has said "have a long record of failing to generate enough revenues to operate a viable major league franchise" -- are to be paid $150 million or more to close businesses Selig insists would soon fail on their own. Does that make any sense?

The next time Selig and his stooges cry poverty, laugh in their faces. It's the only appropriate reaction that won't get you arrested.

Copyright © 2001 Doug Pappas. All rights reserved.

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