The Daily Prospectus: Goals

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.