A Look at the Agreement

By Marshall Adesman

In all sports we are told that the best trades are the ones which benefit both sides. We are also told that often you can't fairly evaluate a trade until several years have passed. 

It is my opinion that the labor agreement negotiated by the Major League Baseball Players' Association and the major league club owners may bring some benefits to all sides, but don't expect miracles, and don't try to evaluate its true worth for several years. 

First the good news: there was no work stoppage. That allowed the players to keep playing (and drawing their paychecks), the teams to continue generating revenue, the non-uniformed employees to keep on earning a living (or supplementing their regular incomes), and the fans to remain faithfully in their seats. In the short run, everyone wins, hallelujah.  

The players and owners agreed to random testing for anabolic steroids, a luxury tax based on payroll, and increased revenue sharing, all of which were management initiatives. The institution of a worldwide draft, and the elimination of two or more major league teams, was scrapped for the four-year life of this contract, which pleased the players. On the surface, it would appear to be a deal that makes everyone happy. 

The steroid testing is just a first step, and will undoubtedly come in for modification down the line. Both sides are feeling their way here, so this was the most imperfect clause in the agreement. But the fact that they actually agreed to deal with the issue was momentous. Of course, it is my understanding that most steroid use occurs in the off-season, so that by the time spring training rolls around the users will probably not test positive. If this is true then it is a problem that will need to be addressed, and may prove to be an issue the next time around.

The luxury tax received a fair amount of ink as negotiations came down the home stretch. It certainly was an important point, but in reality it was an internal issue. This was the major thrust of small-market clubs to blunt the spending power of the Yankees, Red Sox, Dodgers, Rangers and those select few who can afford to add whatever players they need in order to reach the post-season. The theory is that, if such a toll exists, even the rich clubs might think twice before adding a significant salary that would put them over the payroll limit and thus cause them to pay millions in tax. They even included an escalation clause that will further penalize repeat offenders. But to me this will be no more a deterrent to some owners than the death penalty is to a hired killer. Would the higher levels of the luxury tax, as agreed to by the negotiators, have prevented the Yankees from trading for Raul Mondesi, or the Red Sox from signing Manny Ramirez? I don't think so. I expect that the large-market clubs will still go to extraordinary lengths in order to win, and will simply increase local sales to build up a protective nest egg against the tariff. And when the next agreement is negotiated, it wouldn't surprise me if this luxury tax doesn't come in for a major overhaul. 

The higher levels of revenue-sharing has the potential to be the most significant financial aspect of this agreement. Last year $168 million was distributed, but this will be increased incrementally until it reaches $301 million in 2006. This ought to be good news for small-market clubs, but will their fans share in the windfall? The agreement does not require teams to spend this money on acquiring players, nor does it institute a minimum payroll. So suppose you're Carl Pohlad and your Minnesota Twins have a payroll of about $40 million, the third-lowest in the majors. And suppose next year you receive a revenue-sharing check of $25 million. Does this mean you can now afford to add Scott Rolen's bat or Greg Maddux's arm, or dole out long-term contracts to several of the good young players who won the AL's Central Division? Yes, of course. BUT YOU ARE UNDER NO OBLIGATION TO DO SO; in fact you can simply stick the money in the bank. And what about your fans, the hard-core devotees and paying customers who only ask for a competitive club? The hell with them! 

Please understand I'm not picking on Carl Pohlad, there are a number of other names I could substitute. The point is this: we've heard a lot from Bud Selig and others about competitive balance, about how so many teams know as soon as Opening Day that they have no chance at sniffing the post-season. But while they did a good job of negotiating for greater revenue-sharing, they didn't add the necessary corollary of requiring each club to spend so much on payroll. Remember how the Marlins decimated their 1997 squad immediately after winning the World Series? Their 1998 team had a bare-bones payroll and lost 108 games, and this agreement does nothing to address this situation. It could easily happen again in the next four years, it could happen to your club. 

And if competitive balance was so important, how did the June draft get missed? This has long been one of my pet peeves. We all know that certain elite high school and college players can practically dictate which team will select them by hinting that they will ask for an outrageous sum of money. This effectively takes the poorer clubs out of the game, and they wind up choosing (and signing) somewhat less-talented athletes for significantly less money. Meanwhile, the better prospects go to the teams who can afford them. The draft was instituted in the 1960s as a way to prevent the richer clubs from attracting the top amateur talent. It was designed to level the playing field and it did, essentially, for more than a quarter of a century. But the draft hasn't been equitable for about a decade or so, and this agreement did not allude to the issue at all. No, I'm wrong, there was one reference: the idea of a worldwide draft, which would have affected players from outside North America, was dropped, at least for now (it may be studied later). The rich teams can continue to shop in the Asian or Latin American markets, while their poorer brethren can only watch and wish. 

But at least there will be no contraction for the next four years. What this means is that all endangered clubs, with the possible exception of the Expos, have four years to raise their revenues. So if a new stadium is deemed "The Solution" (like in Minnesota and South Florida), then teams have four years to get the job done or they might find themselves vaporized. And this doesn't mean that a team cannot be moved during the life of the agreement. The Expos are most assuredly gone, if not at the end of this season then after 2003, depending on lawsuits and whether their new home can offer them even a temporary field while can erecting a state-of-the-art facility. If economics don't improve in the game in the next four years -- and this agreement gives me no reason to think that it will ­ the major league landscape could look very different in 2007, with the elimination of perhaps as many as four clubs.  

And this, really, is the most important point. All the talk about changing the economic structure of the game seems to have been just talk, which is exactly what happened in 1994-95. The core problems were not really addressed head-on. The owners are hoping that the stiffer luxury tax and greater revenue-sharing will attack, and solve, the problems from the periphery, kind of like sharp-shooters winning the battle from a distance. I'm not a military expert but I don't think this is very likely. I think that, once again, both sides missed an opportunity to make some meaningful inroads in ensuring the game's long-term financial viability.  

So why were we spared a strike? From the players' standpoint, a strike would have been devastating to their image. As we have discussed before, the casual fan would never have understood why millionaires were walking the picket line yet again, and public opinion would have been overwhelmingly on the side of management. Then why didn't the owners try to back the union into a corner? To paraphrase the first Clinton campaign, it's the debt, silly. A great many owners are leveraged up to their eyeballs. A strike might have meant defaulting on loans, and a bank like PNC might have wound up owning more than the name of a ballpark, they might have owned a couple of teams as well. In the final analysis, in this high-stakes money game, the banks were the ones holding all the cards. 

On the whole, we can be cautiously optimistic that, because there was no work stoppage, a new plateau was reached that will only make the next round of talks more amenable and more productive. But for fans of small-market clubs such as Kansas City, Cincinnati and the like, your general managers are still going to have rely on guile and carefully-crafted strategy, rather than big bucks, if they want to build a winner. Perhaps some of that revenue-sharing loot can be used to invest in a way to clone Oakland's Billy Beane.