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January 29, 2002

The Daily Prospectus

Goals

by Joe Sheehan

Right at the end of 2001, I had a long phone conversation with Rany Jazayerli, much of which was about the economics of baseball. Rany is my best friend on our staff, the guy who brought me into Baseball Prospectus. He is also one of the smartest people I know, which is why his viewpoints surprised me a bit; we disagreed on a number of basics, from the impact of a salary cap to the validity of various revenue-sharing schemes.

It impressed upon me that these issues are complicated, and that no matter how convinced I may be of my arguments, there are people of good intention and high intellect who may see these things differently. Talking to Rany made me realize that it's important to test my ideas by exposing them to criticism. I can't say I changed my opinion based on our talk, but I did come away from it with a better understanding of my own arguments.

So I decided to take a handful of columns--once Baseball Prospectus 2002 was safely at the printer--and try and lay out my opinions on these matters. For better or for worse, being a baseball fan these days means having a grasp of the economics of the game, and a working knowledge of the issues being addressed in labor negotiations. One of my goals for BP has been for it to be a leading voice in this arena, because I don't believe the issues are well covered in the mainstream sports media. They're complicated, and to a large segment of sports fans, not terribly interesting. One of the luxuries we have is we don't have to worry about reaching everyone--although that would be nice--or more mundane concerns such as news holes or column inches. Doug Pappas's work for us over the past two months has been a source of great pride, because it's the kind of detailed analysis that you don't often see elsewhere, the kind of thing for which I'd like BP to be known.

So with that in mind, let me start this with one basic principle. The most important thing to remember about the ongoing labor negotiations is this:

The goal of the owners is to reduce labor costs.

The owners don't want some kind of "partnership" with the players. There's 130 years of evidence that they don't care about "competitive balance." They certainly don't care about "the fans," except when paying lip service to doing so helps them in the public-relations battle.

Take a look at the plan currently on the table. The owners would increase revenue sharing to 50% of all local revenue, after stadium expenses, while applying a 50% tax on player payrolls above $98 million. The combination of taking more money from revenue leaders, while penalizing teams at the top of the payroll charts--basically, a double whammy on four to eight franchises--would effectively create a salary cap at $98 million.

This represents virtually no movement, no change in thought, from eight years ago. The owners are willing to share more revenue... as long as it's the players who pay for it. Or, more specifically, George Steinbrenner gives money to David Glass, and gets it back from Nomar Garciaparra. There's no provision for how the revenue-sharing money would be used, keeping in place the disastrous element of the last revenue-sharing scheme: a disconnect between team performance and team profitability. There's nothing about this plan that addresses the so-called competitive balance problem; after Glass gets his money, there's no rule that makes him spend it.

The plan on the table does one thing, and one thing only: reduces labor costs.

A business wanting to reduce labor costs isn't a bad thing in and of itself. What's bad is the way in which the owners will wrap their desire to do so in every kind of half-truth imaginable, trashing their product, misleading a Congressional committee, and insulting the intelligence of anyone smart enough to do basic math. They've been doing this for nearly 30 years, ever since the Peter Seitz decision on the reserve clause gave baseball players the same rights as the rest of American employees. Whether it's "meaningful compensation," "cost certainty," "teams will fold unless we have a change," or "competitive balance," it's all just code for "those damn players make too much money."

Once you accept that the owners have one goal, their actions make a lot of sense. Should they have a broader plan? Of course. In fact, their focus on labor costs has led to one fairly consistent point in the free-agent era: MLB always underestimates its potential for revenue growth. There is a ton of money to be made in baseball, and as much as salaries have risen since 1975, revenues have grown right along with them, despite the constant proclamations of doom.

As you watch the labor negotiations, keep this one principle in mind, and don't be fooled by the rhetoric that accompanies the owners' moves. Once you do, their actions make sense, and their shortsightedness becomes clear.

Joe Sheehan is an author of Baseball Prospectus. You can contact him by clicking here.

Joe Sheehan is an author of Baseball Prospectus. 
Click here to see Joe's other articles. You can contact Joe by clicking here

Related Content:  Labor Negotiations

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