Baseball is nearing economic collapse, the game’s leaders told us just five months ago. The industry was more than $2 billion in debt, bleeding red ink everywhere and grappling with skyrocketing imbalance between big market and small market teams. Commissioner Bud Selig said the game was in need of major changes.
Then, in a two-day period this week, came $533 million in contracts to just three players Alex Rodriguez, Manny Ramirez and Mike Hampton. The combined sum obliterates all previous salary records that it tops the current estimated worth of every baseball team but the New York Yankees.
So are the owners really strapped for cash or not?
That’s the $533 million question baseball now faces as it prepares to start negotiations for a new collective bargaining agreement with the players union. The current pact expires on Oct. 31, 2001, and the three signings will likely serve as a flashpoint in a bitter struggle between both sides to gain leverage and concessions from the other. Either a strike or an owner’s lockout at the start of the 2002 season remains a distinct possibility.
In the meantime, Rodriguez’s 10-year, $252 million pact with the Texas Rangers will set a very lofty bar for all future signings, particularly considering Rodriguez’s typical offensive output is equal to or less than about two dozen of the game’s top hitters. Baseball will start the 2001 season with an average player salary of more than $2 million, about 40 times higher than the typical wage in 1976 when free agency began.
“The hole between us and the big-revenue clubs just got a little deeper again, didn’t it?” said Herk Robinson, general manager of the Kansas City Royals, which ended 2000 with a $24.5 million payroll, or $700,000 less the Rodriguez’s average salary. “I can’t see anything beneficial about these signings at all, and the industry as a whole can’t support it. There’s no doubt it will deflate the fans here a bit, and make it harder for us to keep our guys.”
Because of frequent sentiments such as Robinson’s, most owners agree with the Commissioner’s Blue Ribbon Panel on Baseball Economics. The panel released a much-ballyhooed report in July that contended the game is being quickly destroyed by massive payroll and revenue imbalance. The report calls for far greater revenue sharing.
Conversely, the union feels free-market economics can reign. The recent signings are just the latest evidence of baseball’s good health. Not only are stars’ salaries reaching unprecedented heights this offseason, but middle and lower-tier players are also setting records.
The debate, at its core, is the same one the owners and union have feverishly fought for decades, with Curt Flood, Andy Messersmith, Nolan Ryan, Roger Clemens, Kevin Brown and other important figures of baseball’s labor history serving as the Alex Rodriguezes of their day.
But never before have the owners unabashedly cried poverty. And never before have the new deals outpaced the previous records to such a large degree. Rodriguez’s deal beats the previous annual record $17 million, set just eight weeks ago by Toronto’s Carlos Delgado by a mammoth 48 percent. Throughout history, each record deal has rarely topped the previous one by more than 20 percent.
The owners’ latest round of bullish spending stems largely from three recent events.
Baseball set an all-time total attendance record in 2000; it recently signed a six-year, $2.5 billion TV pact with Fox Sports; and it planned to dramatically rework and monetize its Web site, www.mlb.com, in 2001.
“On balance, this is still a very healthy industry,” said Adam Katz, agent for Chicago outfielder Sammy Sosa, who is also looking for a significant raise. “One or two signings does not a market make, but these are clearly extraordinary players whose signings reflect their market value.”
None of baseball’s most recent windfalls, however, is a sure thing. Despite the total attendance records, 15 of 30 teams actually declined at the turnstiles in 2000, and significant ticket price increases for more than a dozen teams in 2001 threaten to diminish crowds. TV ratings for both this year’s All-Star Game and World Series were the worst ever, and profiting from the Internet remains tenuous long-term.
“It would seem that these signings signal the health of one or two teams, rather than everybody,” said Mark Lamping, president of the St. Louis Cardinals, which recently raised ticket prices 21 percent to add $10 million to payroll. “What I do know is that if these signings puts pressure on raising our payroll more than we already are, it will be tough to keep up.”
Selig, who three weeks told a Senate subcommittee he had the owner support to implement revenue sharing and disincentives to salary growth, declined to comment on the signings.
As the baseball industry as a whole grapples with its financial future, observers also wonder whether the Rangers can turn a profit with Rodriguez in the lineup. The total value of his contract is $2 million more than owner Tom Hicks and his partners paid for the Rangers just three years ago.
Hicks insisted the Rangers will make money in 2001. The team earned a profit in 2000, but lost nearly $39 million between 1995 and 1999. Hicks’ optimism is predicated on several ifs: including developing a restaurant/retail complex around the Ballpark at Arlington; finding a lucrative naming rights sponsor for the stadium; and improving attendance beyond its 2000 average of 35,001 the fourth best in the American League.
“We can pay this kind of money and make a profit,” Hicks said Monday. “It’s going to fit in our resources.”
Such optimism, union advocates say, nullifies any management argument of economic distress.
“There’s no question there’s incongruence between what’s happening and what’s in [the Blue Ribbon report]. Just on its face, there’s patent incongruence,” Katz said.