Total Baseball (1994 Edition)/Total_Baseball_1994_Edition_Creative_Multimedia_1994.iso/dp/0017/00175.txt

Text File | 1994-02-14 | 127KB | 1,813 lines

$Unique_ID{BAS00175}
$Pretitle{}
$Title{The Business of Baseball}
$Subtitle{}
$Author{
Mann, Steve
Pietrusza, David}
$Subject{business entertainment money clubs franchises franchise Free-Agency
salaries salary contract long-term contracts Lockout}
$Log{}

Total Baseball:  The Game Off the Field


The Business of Baseball

Steve Mann and David Pietrusza

     Major league baseball, like every other professional sport, is an
entertainment business. And the financial success of any top-level
entertainment business rests on its ability to attract consistently large
audiences. In order to meet that requirement, the business must do two
things. It must assemble and maintain a group of the very best performers in
their field, and it must provide pleasant accommodations for the spectators.
Every other facet of the business is tied to these fundamental necessities.
     In professional sports, the top performers are essentially world-class
athletes. And, by definition, there is always a relatively scarce supply of
such athletes. This scarcity demands constant vigilance on the part of club
management in identifying and developing new talent. The task of maintaining
an ample supply of highly skilled performers is difficult in any sport for the
simple reason that the players have relatively short careers. But it is
especially challenging in baseball because the amateur players, no matter how
gifted and experienced they are, almost invariably need intensive long-term
training to be able to compete at the major league level. To continue
producing that level of talent, season after season, the clubs are obliged to
invest heavily and continuously in scouting and player development.
     Although the association between major league clubs and their towns runs
deep, and one therefore tends to think that the clubs belong to their towns,
major league baseball is actually a form of private enterprise. It is an
industry made up of twenty-eight separate, semi-independent franchises, all of
which are owned by private individuals, groups, or companies. Each franchise
is contractually linked to a half dozen or more minor league clubs through
which it develops its big league talent. The network of those two hundred or
so clubs is organized under the Office of the Commissioner.
     Like any other private industry, baseball has had to depend upon income
and profits for its existence. In the game's earliest days, nearly all of its
revenue came from sales of tickets to spectators. As the sport grew in
popularity, and as bigger and more comfortable stadiums were built to
accommodate the increasing number of fans, the sale of refreshments,
scorecards, pennants and other team paraphernalia became significant new
sources of club revenue. The advent of radio broadcasts in the 1920s brought
yet another form of income to the game: advertising revenue. Sponsors paid
radio stations handsomely for promoting their products during games. And the
stations, in turn, paid the clubs for the rights to carry the games. As the
listening audiences grew, the charges for broadcast rights increased. When
television was introduced, a generation later, a flood of new advertising
money washed over the major leagues. By the mid-1980s, total industry income
from radio and television rights, in-stadium advertising and promotions, and
club shares of ballpark concessions exceeded gate receipts.
     Then, in 1987, baseball commissioner Peter Ueberroth raised several
million more dollars for the industry from an entirely new source, the
national sponsor. Through this scheme, huge corporations pay large sums for
the privilege of becoming the official "mega-sponsors" of baseball. Now, for
example, International Business Machines and Chevrolet are the official
computer and automobile manufacturers, respectively, of the major leagues.
     While all of this new money was being raked in, baseball's resurgent
popularity continued to soar. Attendance records were being broken year after
year. In 1986, every club exceeded the 1 million mark in home attendance, a
major league first. And in 1987, thanks largely to unprecedented competitive
parity on the field (fifteen of the twenty-six clubs were still legitimate
contenders on September 1), even more fans poured through the
turnstiles. Teams such as the Dodgers, Mets, Twins, and Cardinals would
exceed the 3 million mark. The Blue Jays crashed through the 4
million barrier, and would be followed in 1993 by the Colorado Rockies.
     The baseball business also generates revenue for publishers, sporting
goods companies, T-shirt manufacturers, transportation companies, service
stations, restaurants, bars, legal and illegal gambling operations, and a
variety of other business interests. Consequently a major league franchise is
not only a source of pride for its hometown fans but also an economic boon to
the city that houses it.
     Where all this money comes from, of course, is the fans. It is the fans
who pay for the tickets, the fans who purchase the scorecards and yearbooks,
the pennants and caps, the hotdogs and sodas that supplement the gate
receipts. Furthermore it is the fans who ultimately pay for newspaper, radio,
television, and in-stadium advertising, for it is they who absorb the built-in
costs of advertising when they buy the sponsors' goods. And for the moment,
at least, the fans seem quite willing to pay the increasing costs of their
spectatorship.
     Given the huge and still growing influx of income to the baseball owners'
coffers, one would expect that the clubs are by now embarrassingly profitable.
In truth, however, the baseball business is in trouble. The problem is that
throughout the revenue bonanza, the rate of increase in the costs
of running the clubs has far exceeded the rate of increase in income. The
startling rise in costs can be attributed almost entirely to a single category
of club expenses--player salaries.
     On the surface, the issue is simply money. Ownership claims that it still
doesn't have enough of it, and the players seem to behave as though they can't
get enough of it either. Until recently the sports news media tended to pay
only sporadic attention to the dilemma, in part because cries of distress are
hard to accept from either party, and in part because there is no base of
popular support for either party. The fans are generally unsympathetic toward
either camp. In fact, public sentiment on the subject is by and large measured
in terms of resentment for one or both sides, with the players lately holding
a distinct edge in unpopularity.
     The financial situation is quite bleak--major league baseball actually is
teetering on the brink of bankruptcy. The primary cause of baseball's
paradoxical dilemma is the adversary relationship that has existed between the
players and owners since 1879. It was then that the baseball owners first
established a limited version of the infamous "reserve clause." This was a
provision in certain players' contracts that made them captives, virtual
slaves, of their owners. Within six years of its inception, the provision was
extended to include all major and minor league players. The ballplayers did
not obtain freedom from the reserve clause, and thus did not begin to receive
a reasonable share of baseball's income, until the 1977 season.
     For today's players, a century-old legacy of financial slavery and the
personal animosity and political entrenchment that naturally flow from that
condition are neither quickly nor easily erased. In light of the dubious
practices of the clubs since the 1985 season, which include collusion in
dealing with free agents, the players appear justified in maintaining their
basic distrust of management.
     For the owners, the sixteen years since the players gained their freedom
have been a horror show of fiscal ineptitude and mismanagement. They have
watched their own club executives drive salaries to unthinkably high levels.
In several instances they have themselves added significantly to the
escalation. But while many of the baseball moguls privately blame their
fellow owners and themselves for allowing the game's financial crisis to
develop in the first place, their public anger is directed squarely at the
players, their agents, and their union.
     So contrary to popular opinion, the current standoff is not merely a case
of two greedy opponents using hardball negotiating tactics to force
concessions out of each other, all at the fans' expense. Rather it is a clash
over rights and principles. And if greed is at all involved in baseball's
internal conflict, then it is more as a manifestation of that conflict than a
cause of it.
     In fact, the history of the business of baseball is the history of the
tension between individual rights on the one hand and the priorities and
practices of businessmen on the other. Like the game itself, the story is
uniquely American. In many respects it runs parallel to the history of
labor-management relations in America. The story begins in 1846, with the
first match game of the Knickerbocker Base Ball Club, and winds its way
through the institution of the reserve clause and the many challenges to it
over the years, the breaking of the color bar, transcontinental franchise
shifts, rich television contracts, and league expansion. But as these events
are detailed elsewhere in this volume (see the contributions by Voigt, Hailey,
Tygiel, Dellinger, Cohen, and Hoie), the present essay will focus on the
turbulent years since 1968, when the Players Association and the owners signed
the game's first bilateral agreement.

The Storm Before the Calm: 1968-1975

     When Ford Frick retired as commissioner in 1965, the owners hired an
unheralded Air Force general by the name of William D. Eckert. "Spike," as he
was known, was openly pleased to be a ceremonial chief. But he assumed the job
just at the time the Players Association was beginning to make bold moves.
     To deal with the growing strength of the opposition, owners created a
Player Relations Committee in 1967. The PRC, as it is commonly called, was
headed by John J. Gaherin, former president of the New York City Newspaper
Publishers Association. It included the two major league presidents and three
owners from each league and was supported by a legal staff. As its name
implied, the Player Relations Committee's sole function was to act as a link
between the Players Association and the owners, delivering information to and
from both bodies and assisting in the formulation of management policy.
     The first big item on the PRC's agenda was a collective-bargaining
agreement, something that the association had been angling to get for some
time. The purpose of the agreement was to make some inroads into the standard
contract. It was not yet time to launch a frontal attack on the reserve
clause.
     The document which emerged from the negotiations was officially entitled
the Basic Agreement. Signed in February 1968, it was the first in a still
unbroken series of such accords. It established a formal grievance procedure
for the players and provided for subsequent study of the reserve clause by
both parties. Probably the most important feature of the first Basic
Agreement was that it would take official precedence over the old major league
rules wherever they were found to be in conflict. This meant that players
were involved in major league policymaking for the first time.
     By now the players had racked up a series of important victories, and it
was clear that William Eckert's administration was overmatched. During the
short period in which Eckert held office, the players hired Marvin Miller,
built their Park Avenue office, and successfully negotiated the first Basic
Agreement. The war was on, but General Eckert was in the wrong army. The
owners fired him in December 1968.
     Within three months of Eckert's removal, and with the commissioner's job
still vacant, the owners were confronted with a crisis. Management had
offered the players a contract package that was a distinct improvement over
the previous deal. The Players Association had rejected the offer because
they felt they deserved additional increases in health care, life insurance,
and pension benefits. Both sides were angry, and neither side would yield an
inch of ground. So the players refused to sign contracts and threatened to
strike. Spring training was scheduled to begin in a couple of weeks, and it
appeared that the players were prepared to delay its start.
     The PRC called on one of the National League lawyers, a big pleasant chap
named Bowie Kent Kuhn, to see if he could untie the knot. Kuhn, in a style
which would become his trademark, devoted most of his time to calming and
soothing his irritated management colleagues. Having accomplished that
not-so-easy feat, he gave the players everything they had asked for. Six
months later, he was rewarded for his efforts with an eight-year term as the
commissioner of baseball.
     Within seven months after he assumed office, Kuhn was confronted with the
Curt Flood case. Flood had been a very fine outfielder with the Cardinals for
twelve years when he was informed by a low-level club official after the 1969
season that he would be playing ball with the Phillies in 1970. The Phillies
had finished 24 games behind the Cardinals, and Flood apparently didn't much
like the town of Philadelphia anyway. So he wrote a letter to the
commissioner requesting that he be permitted to "consider offers from other
clubs before making any decisions."
     Kuhn could not grant the request without simultaneously and
singlehandedly overturning the reserve clause. He denied Flood's request.
With the Players Association behind him, Curt Flood decided to take the issue
to court. The case reached the United States Supreme Court, but, as usual,
yet another player went down in defeat.
     Why did it always turn out that the lawmakers and judges, many of whom
were openly sympathetic to the players' cause, were unwilling to rule in the
players' favor? Essentially it was because no less than the relationship
between government and private industry was at stake. If Congress or the
United States Supreme Court had chosen to modify or overturn the reserve
clause, it would have immediately established a fundamentally different and
presumably more equal balance of power between the players and the owners, but
with unknown results. The uncertainty was the hangup. Whatever the effects
of altering the reserve clause might be, the publicity such an action would
receive would be enormous. Sports fans and politics watchers, a sizable
audience to say the least, would be riveted to the issue. And if major league
competition and franchise stability were indeed sacrificed through the removal
or modification of the reserve clause, as the owners had been warning would
happen since 1885, then the government officials responsible for the decision,
either the Supreme Court justices or the members of Congress, would be held
accountable. If baseball could not right itself in a reasonable amount of
time or, worse, if it were to collapse, this would be especially embarrassing
and possibly damaging to nothing less than a branch of the United States
government.
     Except in the most extreme circumstances, neither Congress nor the
Supreme Court is inclined to take a potentially profound step where the
outcome of its decisions is so thoroughly unpredictable. Both bodies would
much prefer that basic struggles of this sort be brought to a higher level of
resolution before they will bring their heavy conclusive weight to bear upon
them. Not a single meaningful aspect of the reserve system had been altered
yet. The real effects of altering or removing the controversial clause were
still basically untested. So it is reasonable to conclude that in the eyes of
Washington politicos baseball's eternal adversaries had a long way to go
before the federal government would get seriously involved.
     Despite the risks involved, the Supreme Court's decision to retain
baseball's antitrust exemption in the case of Flood v. Kuhn was a upheld by a
narrow 5-3 margin. Subsequent revelations concerning the justices who ruled
on the case suggest that the issue troubled a few of them deeply and that the
vote was even closer than the final tally indicated. It could have gone
either way. Furthermore public opinion at the time was overwhelmingly on the
side of Curt Flood.
     These were definite signs that the owners were in a lonelier position
than they had ever been in before. Indeed, they were cornered. And
Commissioner Kuhn's previous behavior as well as the personal risks his job
entailed should have been clear hints to the owners that he would be more
inclined to commiserate with them than fight for them when the going got
tough.
     The Players Association, which had responsibly cautioned Flood against
pursuing his case, was nonetheless delighted that he had chosen to disregard
their advice. Flood's case would keep the reserve system in full public view.
     This was just the first loud shot in what would become an unceasing legal
siege on baseball management. Starting with the Flood case, the two sides
have engaged in major confrontations roughly once a year ever since. Just
during the time that the Flood case was being heard, the association fought a
battle over the second Basic Agreement in 1970, which it followed up with a
players' strike in 1972, which was in turn followed by a third Basic Agreement
in 1973 that gave the players the right to outside, impartial salary
arbitration.
     Between these big surges, the union maintained a barrage of smaller
assaults. And in what was effectively a flanking operation, they directed a
flurry of attacks on the renewal clause of the uniform baseball contract.
What the renewal provision said, in brief, was that a player who did not sign
a new contract for the coming season at a salary set by the club would still
be the property of his current club for one year--the renewal year. What it
did not say was what would happen after the renewal year. Would a player be
free to sell his services to any club at the conclusion of the renewal year?
Thus a pivotal legal question remained unanswered, a question that shared its
legal border with the reserve clause.
     In 1969, pitcher Al Downing of the Yankees made a serious inquiry into
the matter. He wanted to play the 1970 season without signing so that he
could become a free agent the following year. After being cautioned by Marvin
Miller against testing the renewal clause, Downing was told by Yankees
management that if he refused to sign his 1970 contract, he might as well not
bother to show up at spring training. Downing signed. He was then traded to
Oakland before the 1970 season began.
     In 1972 St. Louis catcher Ted Simmons came even closer to testing the
renewal clause. He played unsigned for half a season before finally agreeing
to a two-year contract with the Cardinals. From 1973 to 1975, seventeen more
players started seasons without contracts, all of whom threatened to play out
their options for a stab at becoming free agents. Two of them, pitchers Dave
McNally and Andy Messersmith, carried out the threat--they never did sign.
     Meanwhile, association gains were piling up. The 1970 Basic Agreement
had given the players the right to arbitrate grievances. The Flood case had
led to the inclusion of the "five-and-ten" rule in the 1973 Basic Agreement,
by which players with ten or more years of major league service who have
played for at least the last five years with one club have the right to
approve a trade to another club. Though the rule affected only a very small
segment of the major league population, it marked the first time that any
group of players had any control over where they would ply their trade. A
breach of contract by Oakland A's owner Charles O. Finley had made pitcher
Catfish Hunter a free agent in 1974. That decision had been of little direct
value to other players, except to grant them protection against illegally
drawn contracts. But it had demonstrated the determination and the growing
strength of the union.
     Next on the agenda was a full test of the renewal clause by Messersmith
and McNally in the fall of 1975. Both pitchers had played the entire 1975
season without contracts. The bounds of the Basic Agreement had thus been
exceeded, leaving the two pitchers in a legal no-man's-land. Would the parent
clubs still own the contracts of the players after the renewal year, or would
the players become free agents, thereby allowing them to sell their services
to other teams? That was the multimillion-dollar question.
     The case was to be heard by a three-man arbitration panel. The panel
chairman was Peter Seitz, a man with twenty years of experience as an
arbitrator. Marvin Miller and John Gaherin were the other panel members, so
naturally their partisan votes on the case would cancel out. This meant that
Seitz would, in effect, be making the most important decision in the history
of baseball's labor-management relations all by himself.
     Although the issue was ostensibly the renewal clause, it was really the
reserve clause that was on trial. For if Seitz ruled that the two pitchers
were free, then every other player in the major leagues could take the same
circuitous route to freedom. It would be a cavernous loophole, but a
perfectly legal one.
     Seitz tried vigorously to get the two sides to work out the problem
through bargaining. Like Congress and the Supreme Court, he felt that the
matter was far too important to be adjudicated in any other way. He even went
so far as to write a letter to management, explaining that the weight of the
case was definitely on the side of the players and warning that he would not
shrink from his duty to act, and act quickly, on the case. But the owners
stonewalled it. They rejected Seitz's recommendation.
     Two days before Christmas 1975, Mr. Seitz placed a nicely wrapped gift
under the owners' tree--a sixty-one-page decision in favor of Andy Messersmith
and Dave McNally.
     The owners' first response was to fire Seitz. Then they sent their
attorneys around to all of the courts that would listen, trying desperately to
appeal the decision. The courts listened, but did not heed the call. Every
appeal was rejected, the last one coming in March 1976. Spring training had
not begun. The owners had locked the players out. Another delay in the start
of a big league season was looming on the not-too-distant horizon.
     Then, suddenly and very uncharacteristically, Bowie Kuhn defied the
owners and opened the training camps. Recognizing the unpopularity of their
position and having exhausted all of their legal options, the owners entered
into negotiations with the Players Association for a new Basic Agreement. By
this action, the owners had officially surrendered.
     The specter of the Messersmith decision cast a pall over the management
negotiators. They knew that they were going to have to yield expensive turf.
The only question was how much. This was it, the big face-to-face showdown
between baseball management and labor, and the culmination of an ancient quest
by ballplayers for a proper share of major league revenue.
     On the face of it, the Basic Agreement that emerged from the negotiations
in July 1976 did not seem revolutionary. Indeed, to the astonishment of many,
it retained nearly all of the elements of the original reserve clause. But
there was one historic exception: a provision that any player with six or
more years of major league service would now have the right to declare himself
a free agent.
     Was this what all of the commotion had been about--the freedom to sell
one's services after six full major league seasons? The answer was a
resounding "Yes!" The new provision gave the players all the freedom they
would ever need. In fact, 1976 was a year of unsurpassable celebration for
the union members. It marked the two-hundredth birthday of the United States
of America, the one-hundredth birthday of major league baseball, and the
erection of a fountain of wealth for the men who play the game.
     Thus ended the first long chapter in the history of labor-management
relations in major league baseball. Nearly a century of internal struggle had
been devoted essentially to the revision of a single sentence in the standard
player's contract, a single clause that meant the difference between economic
slavery and economic freedom. Although the new 1976 version of the reserve
clause still restricted that freedom, and although no one could predict what
effects limited free agency would ultimately have, the players had finally
built a tunnel to the outside from their financial prison. And golden rays of
sunshine immediately began to pour into the cells of some of the veteran
inmates.
     The peculiarities of the baseball industry had produced a strange, even
unique form of economic struggle. The last attempt to establish a third
baseball league had been crushed sixty years before arbitrator Seitz's ruling.
So the baseball players received none of the large and lasting financial
boosts that the American Football League, the American Basketball Association,
and the World Hockey League had generated for professional football,
basketball, and hockey players. And with little more than expressions of
positive sentiment on the part of the fans and the politicians, they had had
to fight their salary battles in virtual isolation. The transiency of the
major league labor force had made it extremely difficult for them to mount a
sustained offensive. Furthermore, by paying many of the star players rather
handsomely, ownership had bought most of them out of opposition. Given the
ease with which the owners could remove ordinary players, who would not be
terribly missed by the paying customers anyway, it was next to impossible for
the players to get a grassroots movement started. Troublemakers and
malcontents generally found themselves tied up in court, or quickly dispatched
to the minor leagues, or dispensed with altogether. Besides, it truly was a
whole lot better to be turning double plays for a living than turning sod in a
field or flapjacks on a grill.
     Baseball players had always been a young, hungry, competitive lot,
generally unschooled in and intimidated by corporate matters. So most of them
were quite content to play ball for a living, regardless of the level of pay.
And they tended to look back on their major league experience, their days in
the sun, not with rancor, but with understandable pride and satisfaction.
What resentment the players did harbor for the barons who owned them generally
lasted no longer than their careers.
     Under these circumstances, and given the socioeconomic climate of America
during baseball's first seventy years, all that the baseball owners had had to
do to protect their dictatorial monopoly was play hard-fisted defense. They
and their cadre of lawyers and bureaucrats practiced the traditional corporate
techniques of stonewalling, name-calling, delaying, and postponing.
Furthermore they were an integral part of the business establishment. This
had given them unfettered access to and clout with the sports media. Add to
those advantages the reluctance of the Congress and the courts to intervene
meaningfully on the players' behalf, plus the relative indifference of the
fans to the whole matter, and management had been practically invulnerable.
Being as ambitious, competitive, and self-interested as they were, management
had never even attempted to accommodate the players, in any area, not even
when Commissioners Kenesaw M. Landis and A.B. Chandler had advised them to do
so.
     The owners were The Club. And they had ruled with the club, primitively
and uncompromisingly, for one hundred years. The only club the player had had
was made of hickory or ash and called a bat. It was the only club he had had,
that is, until the star players took up the cause.
     The stars were the ones who had attracted the crowds in New York in the
1850s and 1860s and put baseball on the map. It was they who had received the
game's first big paychecks and eventually prompted the restrictive methods
adopted by the owners, including the oppressive reserve clause. It was the
stars upon whom the hapless rival leagues had pinned their takeover attempts.
And it was they to whom the established clubs had paid even higher salaries to
keep them in the fold.
     To the fans the stars were kings, to be envied. To the owners they were
pawns, to be played against the other players and the rival leagues in the
interest of minimizing salaries and maximizing profits. To the players the
stars were the winners in an environment in which it was every man for
himself.
     Baseball's stars had let their teammates down for seventy-odd years. Ty
Cobb's steely disregard for his fellow ballplayers at the Celler Committee
hearings in 1952--when he spoke of the necessity for maintaining the reserve
clause--was perhaps the most galling example. But in the early 1950s, the
stars turned and the rest of the players gradually joined the effort. Perhaps
the courage of Jackie Robinson in his fight for integration had inspired them
to act. Perhaps Branch Rickey's treatment of Ralph Kiner--paying him far less
than his performance warranted, simply because he played for an inferior team
("We could have finished last without you" were Rickey's immortal words)--was
the pivotal event in their crusade. Perhaps it was the continuing emergence of
the Roosevelt-inspired middle class, or the conclusion of the war. Probably it
was all of those things, and more. But whatever their personal reasons, the
commitment of stars such as Kiner, Bob Feller, Allie Reynolds, and Robin
Roberts to their fellow players, a commitment that led to the very formation
of the Players Association in 1954 and would require their continued attention
and devotion to the cause after their own careers were over, was the key to
the success of the players' revolt. Others played very significant roles.
Marvin Miller, Curt Flood, Andy Messersmith, and Dave McNally are among the
most obvious. Dozens of lesser-known participants made important
contributions, too. But when the stars finally took action, that is when the
scenery really started to change. And by 1976 the stage was set for a new
period in major league history--the free-agency era.
     The baseball industry had undergone another dramatic change from the late
1950s to the mid-1970s. During that time the mantle of club ownership was
being gradually handed over to a new genre of proprietor, the corporate
magnate.
     Prior to the 1950s, one did not need excessive wealth to become a club
owner. Thanks to the reserve clause, operating costs had always been
relatively low. And the monopoly status of the sport had served as protection
against outside competition, especially after the Federal League incursion had
been quashed in 1916. Clubs were generally owned by individuals or small
groups of investors. Most franchises were family-run businesses that depended
for their survival and success more upon baseball savvy and blood-and-guts
determination than upon managerial sophistication or huge cash reserves. The
ballclub, in most cases, was the livelihood of the owner. And his fortune
normally rose and fell with the standing of his team or the general economic
health of the major leagues.
     Through the 1950s the motivation to own a ballclub came from the prestige
that one automatically acquired, the profits that one stood a very good chance
of making, and, perhaps above all, a deep devotion to the game. For without
an abiding attachment to baseball, one would have succumbed to the
unrelenting, undifferentiated demands of the job. The fact that the game was
a cash business practically mandated that management personnel be family
members or highly trusted friends. Someone, after all, always had to keep an
eye on the till.
     In those days, most owners assumed major responsibility for the
day-to-day running of their clubs. In nearly all cases, it was they who
dictated and negotiated player contracts. This gave the sport a head-to-head,
man-to-man character. All were in it together--the owner, his cadre of
management personnel, and the players. But the relative intimacy of ballclubs
did not promote fair and equitable treatment for club employees. Most of the
front-office people and their assistants fared no better than the players.
     The fellowship that existed resembled the sort that is found in military
organizations. There was a strict top-down chain of command, in which orders
were obeyed, rights and privileges were decreed, and nonsense was not
tolerated. But along with that stern order came a unity of purpose among all
involved and a high level of camaraderie among the troops. Those qualities
helped to keep the teams and the sport intact throughout its embattled
development.
     The quasi-military nature of the sport helped to foster a public
perception of team loyalty and stability. That perception grew after the
Black Sox scandal and flourished during the Landis regime. In the meantime,
the big league clubs had become embedded in their cities. For exactly fifty
years, starting in 1903, not one of the sixteen American and National League
franchises left its hometown. The music had stopped and the chairs were in
place. The sport and each of its teams had become seemingly permanent
features of the American cultural landscape.
     Then, in 1953, all of that began to change. After having won the
National League pennant in 1948 with a record of 91-62, the Boston Braves
began to slide. By 1952, they had fallen to seventh place with a 64-89
record. The next year, the franchise moved to Milwaukee. This was the first
in a rapid shakeout of two-team cities. Towns like Milwaukee had been aching
to obtain major league clubs for years. Since there were as yet no firm plans
to expand the major leagues, the obvious takeover targets for the
disfranchised towns were the weaker clubs in two-team cities.
     The next two teams to move out were both from the American League. The
St. Louis Browns became the Baltimore Orioles in 1954, and the Philadelphia
A's moved to Kansas City in 1955. Both clubs had been last-place finishers
the year before they pulled up stakes. And both had been distinctly weaker,
competitively and economically, than their National League counterparts for a
long stretch of time. As a result, these first club relocations in a
half-century were rather easily accepted by the hometown fans. And the
general perception of franchise stability remained unshaken.
     During this brief period, the Players Association was being formed, and
television had begun to expand the reach and the income of the baseball
business. A decade had passed since the end of World War Two, and the jet age
was just beginning. It was a new world with new frontiers. And the big
leagues could not buck the momentum of change.
     After the 1957 season, the baseball industry was thoroughly introduced to
the magnitude of that momentum, for it was then that the New York Giants and
the Brooklyn Dodgers were moved to San Francisco and Los Angeles,
respectively. Both franchises had maintained huge and loyal followings. Thus
the decisions by Giants' owner Horace Stoneham and Dodgers' owner Walter
O'Malley to go west sent shock waves through the baseball community. It was
one thing to sell a wilting franchise to an enthusiastic new owner and a
hungry new town. But it was quite a different matter for an owner simply to
rip a solid club away from its faithful fans. The Brooklyn fans were
particularly enraged. Their team had been one of the very best in baseball
for the preceding decade. In their eyes, and in the eyes of many others,
mainly from the East, baseball had broken a social contract by allowing the
moves to take place.
     From the perspective of Stoneham and O'Malley, the uprooting was strictly
a sound business decision. Both viewed California as an untapped source of
practically boundless opportunity. And despite the strong base of support in
New York and Brooklyn, the industrial East was stagnating. Attendance at
Giant and Dodger home games, though respectable, did not match the quality of
the teams, especially in the case of the Dodgers. Walter O'Malley recognized
that baseball was in the midst of a transition to a more demanding, higher
profile, and more lucrative entertainment industry.
     The Dodgers' first year in Los Angeles was a bust on the field. The club
wound up the season in seventh place, 21 games behind the pennant-winning
Braves. But the club set its all-time attendance record, reaching nearly
1,850,000. Only twice before had the Dodgers drawn in the 1.8 million range,
in the immediate postwar years of 1946 and 1947. And this was only the
beginning. After he built his own stadium in 1962 and assumed control of all
ballpark concessions, O'Malley's new vision was complete. By putting a solid
baseball organization in the booming Los Angeles area and securing ownership
of all related property, O'Malley constructed the most successful baseball
operation in the history of the sport. For its first sixteen years, club
attendance averaged slightly better than 2 million. For the last twenty
years, it has averaged close to 3 million. Until the Blue Jays moved
into the SkyDome and the advent of the expansion Rockies no other clubs
remotely approached that degree of success at the turnstiles.
     Meanwhile, up the coast, the Giants were trying to win at the same game.
The first several years, the years of Willie Mays, Juan Marichal, and Willie
McCovey, were magical. Great talent continued to flow into the organization,
enabling the club to be a serious contender for most of its first fourteen
years in San Francisco, through the 1971 season. But attendance in the city
by the bay never reached the dizzying heights attained by the Dodgers. From
1958 through 1967, average attendance held at around 1.5
million, which was well above the league average of roughly 1
million for the period.
     Then, however, the A's moved from Kansas City to Oakland. The Giants'
attendance plummeted overnight. By the time the club had lost its edge on the
field, in 1972, annual attendance had settled in the 700,000 range, making it
one of the weakest draws in the National League. Attendance languished at
that level for five more years, during which time the A's were busy winning
three World Series and attracting 900,000 fans per year. It was immediately
evident that the San Francisco Bay area would have difficulty supporting and
sustaining two major league clubs. And Candlestick Park, with its sixtyish
temperatures and its erratic, blustery winds, was becoming progressively less
acceptable, both to the fans and to the new principal owner of the club,
Robert Lurie. Giant attendance bounced back, reaching an all-time high of
2,059,829 in 1989.  A franchise shift to St. Petersburg was
narrowly averted when Bob Lurie sold the club to Peter Magowan in 1992.
     By the mid-1960s, the financial stakes had become higher for the major
league baseball business, and the new California teams highlighted some of the
opportunities and risks involved.
     The most important transformation in the character of big league club
ownership started in the 1960s, when corporate interests began to replace
family ownership groups. Overall baseball attendance had ebbed by then, due
in part to a severe drop in run production caused by a legislated increase in
the size of the strike zone, and due in larger part to the ascendancy of the
National Football League. The nation was in a countercultural frenzy at that
time, with drugs, sex, rock-and-roll, and the Vietnam War sharing center
stage. Under the circumstances, football was hot, baseball was not. There
was a growing sense among the members of the major league establishment that
the national pastime would have to kick into a higher gear to keep up with the
faster pace and more indulgent interests of the society. The first big
corporation to get into the act was the Columbia Broadcasting System. CBS
purchased the New York Yankees in 1964.
     One way to meet the demands of the time was to replace old, typically
small, and in some cases dilapidated, baseball parks with large new
all-purpose stadiums. Twenty-three of the twenty-eight stadiums in use in 1993
were built since 1960.  New parks will open in 1994 in
Arlington and Cleveland.
     Until the opening of Camden Yards in 1992, the new stadiums reflected the
comparatively cold, artificial, plastic, hyped qualities of the new era they
were ushering in. They were equipped with massive electronic scoreboards and
message boards. Giant sound systems piped advertising jingles through the vast
concrete terraces of plastic seats. Spectators were led in cheers, taunts, and
songs by computer-graphic instructions flashed on the huge, usually garish
message machines. In the Houston Astrodome, touted for its first several years
of existence as the eighth manmade wonder of the world, fans were even
prompted to applaud by the center field message board, where jerky animated
figures of hands would suddenly appear, clapping to the synthesized beat of a
high-technology organ.
     By way of these innovations, several ballparks became enormous television
studios, filled with all of the technical gadgetry and special accommodations
needed to put on dazzling spectacles, both for the in-stadium and at-home
spectators. Even the playing fields did not escape the reconstruction trend.
Artificial grass was developed for the sun-starved floor of the Astrodome in
1966, and it soon spread through the big leagues, as though it was the real
thing. In 1993 ten stadiums were paved with plastic turf.
     So by the mid-1970s the surface features of baseball had been altered
markedly. For the clubs that joined in the reconstruction movement, the
immediate and long-term financial costs were high. The new gimmickry, by
itself, was very expensive. The cost of building a stadium had become so
great by the mid-1960s that practically every one of the newer stadiums was
funded by a local bond issue. And even with the local populaces paying for
the ballparks, the annual rent charges to the clubs had become quite costly.
Club organizations needed to become more diversified to keep up with the
increasing complexities of the business. More importantly, to some of the
old-style owners the game was turning into a promotion-ridden circus. The
days of pure unadulterated baseball entertainment were numbered. As a result,
the business was being invaded by public-relations-minded corporate magnates.
     And the Messersmith-McNally decision was hanging over the industry,
threatening to restructure its century-old financial foundations.

The Free-Agency Era: 1976-1989

     The Messersmith-McNally arbitration decision put major league salary
matters on hold for a full year while labor and management worked out the
details for implementing free agency. Neither side could predict what effects
the new arrangement would have, so both sides were inclined to proceed slowly
and cautiously in laying it out. As a result, free-agent bidding did not
begin until the fall of 1976. The two sides also agreed to suspend the salary
arbitration process through the 1977 season.
     What emerged from the 1976 bargaining talks was a salary system made up
of four basic elements: a guaranteed minimum salary of $19,000, maximum
salary cuts of 20 percent in one year and 30 percent over a two-year period,
the right for players with at least two years but less than six years of major
league service to have their salaries determined through arbitration, and the
right for players with six or more years of service to declare free agency and
sell their services to any club.
     The first two components, the minimum salary and the maximum permissible
cuts, were the players' defensive weapons. Both had been in place for many
years. Arbitration, which was first adopted after the 1973 season, was
designed to allow any player dissatisfied with a club salary offer to have his
dispute heard and ruled upon by an impartial arbitrator. It was intended to
give the player an opportunity to raise his income to a level commensurate
with other players of similar ability and experience and thereby protect him
against salary gouging. Free agency was strictly an offensive instrument. It
enabled the player to determine his dollar value through free-market bidding
by clubs.
     In theory, an ordered salary structure would emerge from the new
four-part system. There would now be three mutually exclusive "classes" of
players.
     At the bottom of the salary pyramid would be those players with less than
two years of major league service, who would have no explicit rights beyond
the major league minimum. Their salaries would be unilaterally determined by
management. If such players felt they were underpaid, their only recourse
would be to hold out, refusing to play unless and until they received higher
pay. Holding out had been the players' only real source of negotiating
leverage for one hundred years. Now, just those players with less than two
years of service would be forced to rely on such an extreme negotiating
measure, and only on rare occasions.
     In the middle would be the arbitration eligibles. If they did not want
to accept a club's offer, they would be free to take the matter to an
arbitrator.
     The salary arbitration procedure is essentially simple and
straightforward. If, in the course of negotiations, a player has reason to
believe that his club will not offer him as much money as he feels he is
worth, then he officially files for arbitration by a specified date in early
January. If he and the club are still unable to reach an accord as of a
second deadline, at the end of January, then both sides are required to submit
a salary figure. Within twenty-four hours of the submissions, the player, the
club, the Players Association, and the Player Relations Committee are notified
of the salary amounts that the two parties have submitted. An arbitration
hearing is then scheduled for a specific morning or afternoon between February
1 and February 20, the official arbitration period. If the two parties remain
unable to reach a settlement before the appointed hearing, then the case is
heard in a four- to six-hour session. The arbitrator then has twenty-four
hours to select one of the two submissions. It is an either-or proposition;
there is no middle ground. Thus if the player is seeking, say, $350,000 and
the club is offering $250,000, the arbitrator must choose one or the other
figure. He may not, for example, split the difference and award the player a
$300,000 contract.
     In its first two years of implementation, in 1974 and 1975, arbitration
did not amount to much. Indeed, it could not amount to much because nearly
all salaries were relatively low. The average salary was between $40,000 and
$45,000; the median was between $30,000 and $35,000. In those years,
arbitration battles were generally fought over differences in the
$10,000 to $20,000 range.
     The top salary class in the new structure would consist of the players
eligible to be free agents. They would either receive enough income from
their original clubs to stay with those clubs or they would declare themselves
free and seek higher pay elsewhere. In either event, there would be pressure
on the clubs to pay all players with six or more years of service well enough
to secure their services, assuming, of course, that the clubs would uphold the
letter and the spirit of the free agency rules by earnestly bidding for
players.
     The scheme, as a whole, follows the logic of military employment. Like
the armed services, the owners would be giving the players training and
instruction in the minor leagues in exchange for six years of active duty, at
which point the soldiers of summer would be free to remain with their original
employers or strike out on their own. Under the circumstances, this seems to
have been a surprisingly fair and reasonable resolution of the players'
ancient problem. Management had cornered itself, legally, in its dealings
with the Players Association and with arbitrator Seitz. So they might well
have been backed into a deeper hole by the players. But this final salary
arrangement appeared to give the clubs plenty of financial breathing room.
     When free agency was set into place in November 1976, it had immediate
impact on veteran players. Their salaries took off. In that first year, the
average major league salary increased by nearly 50 percent, jumping from
$51,501 to $76,066. The median increased by a similar percentage, going from
around $40,000 to around $58,000. But the extra $25,000 per player was not
distributed evenly. The 1976 minimum salary of $19,000 was retained in 1977,
which meant that the younger players had received no boost at the bottom end.
So most of the significant raises were going to players with six or more years
of major league service behind them. Those veterans represented approximately
40 percent of the player population. Thus what had happened was that the
six-year veterans had realized an average increase of about $50,000, while the
players with less than six years of service had, as a group, made only
marginal gains. This dichotomy was to have been expected. For not only did
the younger players not possess the valuable right of free agency, but they
also had no access to arbitration. And even if they had been able to take
salary disputes to arbitration, the awards would have been limited by the fact
that players of similar skill and experience were not making big salaries
either.
     Over the next three years, the same principles held. The result was a
lopsided three-tiered salary structure, with the youngest players hovering
around the minimum, the arbitration eligibles a full notch higher, and the
veterans far, far ahead. And the costs of retaining the older players
continued to climb steadily and dramatically, widening the gap even further.
     The average salary for all players shot up to $113,500 by the end of the
1979 season. Management took on a siege mentality, with owners and executives
privately and publicly predicting doom for the baseball business. But the new
system created a good deal of interest in baseball's backstage politics. If
anything, it contributed to a resurgence in the game's popularity--and in the
owners' revenue. The American League's expansion in 1977, from twelve teams
to fourteen, and increasing competitive balance on the field in both leagues
provided additional boosts to club income. The dollar value of clubs began to
skyrocket. More corporate owners bought into the business, and few
family-owned and -operated clubs remained. With the stakes now so high, the
small owner was simply unable to compete for the better players.
     For the players, the last years of the 1970s were an exciting beginning.
At long last some of them had started to share in the profits of the
entertainment industry that they were the center of. But the huge gap between
the arbitration eligibles and the free-agency eligibles kept growing. Even
the star players with less than six years of major league service were unable
to bridge that gap. What had happened was that the two groups had become
segregated. Veterans were being compared with veterans, and younger players
were being compared with younger players, due strictly to the difference in
service. Consequently middling players with many years of service were
generally earning quite a bit more than stars with less than six years of
service.
     This development kept the rate of salary inflation from getting
completely out of control. It was the silver lining in the cloud that had
formed over the owners. To the players and their union leaders, it was
illogical and unfair that a number of over-the-hill veterans were making
hundreds of thousands of dollars more per year than many outstanding young
players, such as Eddie Murray, Keith Hernandez, Pete Vuckovich, and Dennis
Eckersley. In their view, too much credit was being given for sheer longevity
and not enough for quality of play. But under the new salary system, the only
way the younger players could move toward the veteran salary range would be
through arbitration. The owners certainly weren't going to elevate their
salaries out of generosity.
     Meanwhile, the arbitration arena was becoming an interesting sideshow
feature of the big league circus. Once the combination of free agency and
arbitration was permitted to function, after the 1977 season, arbitration
began to take on the character of a high stakes pokerfest. The spreads
between player demands and club offers were occasionally reaching six figures.
Then, after the close of the 1979 season, a major showdown started to take
shape. Relief pitcher Bruce Sutter of the Chicago Cubs had completed his
fourth year of unsurpassed excellence on the mound. Every big league club
would have loved to have Sutter in its bullpen. At the winter meetings in
Toronto, in December 1979, several club executives expressed the view that
Sutter was among the three or four most valuable players in the game. Some
felt that he was the topmost banana in the whole bunch. December trades and
purchases of players had dried up considerably as a direct result of the new
salary system. As a result, much of the attention of the press and the clubs
was given to arbitration, especially to the Sutter matter. The rumors
floating around the headquarters hotel suggested that Sutter would be seeking
more than a half million dollars for the 1980 season, while the Cubs would not
be willing to spend much more than a quarter of a million for his services.
     In January the arbitration filing figures came out. The Cubs were
offering their relief ace $350,000, a very high amount at that time for a
player with barely four years of service, but not much higher than the income
he had received the previous year. Sutter's demand was $700,000, a staggering
figure that, if granted, would place him near the top of the salary pyramid
despite his nonveteran status. In February the case was heard. And to the
astonishment of management, Sutter was declared the winner.
     This was the first big crack in the wall that separated the free agents
from the younger players. The decision implied that a star is a star,
regardless of his prior service time, and that he should be paid accordingly.
That is to say, he should earn a salary consistent with, though perhaps not
quite as high as, that of a veteran with a similar qualitative performance
record.
     Inside the baseball establishment there was a swirl of controversy
surrounding the Cubs' handling of the case. Suggestions were made that Cubs'
management committed one or two key tactical blunders. Whether those claims
are valid or not, the Sutter case suggested that a few weak links among the
clubs with respect to the negotiation and arbitration of salaries could have
impact on all other cases and clubs. The case also helped to establish a new
high-paid class of player, the relief ace.
     The clubs were badly shaken by the Sutter decision. A few of the owners,
particularly George Steinbrenner of the Yankees, Ray Kroc of the San Diego
Padres, and Brad Corbett of the Texas Rangers, had already sent the salaries
of free agents into the stratosphere. Now the clubs felt that they would have
to give equal attention to the growing threat of salary arbitration. For even
though the Sutter decision was the act of only a single arbitrator, the full
precedential impact of which would not be determined for at least a few years,
it was a strong signal of danger.
     How the clubs responded to their deteriorating position is mystifying.
It is also of bottom-line importance to the history of the baseball business,
because that response more than anything else is what led the clubs into the
deep and dire financial straits in which they are currently mired.
Management's convoluted strategy proceeded more or less along the following
lines.
     It was obvious to all of the clubs that free agency was costing them
dearly. It was equally clear that the big bidders had not reached a plateau,
so there was no telling when, where, or if the veterans' spiraling salaries
would stop.
     By 1980 the $1 million mark had been surpassed by several players. In
the meantime, the overarching priority for nearly all of the clubs was still
to put the best possible team on the field. That was their business. A
handful of less well-off owners refused to enter the fray and simply turned
their backs on free agents. But they were too few to buck the inflationary
trend. They were on their way out of the industry anyway. For the rest, the
problem was not only to decide if and to what extent they would get involved
in bidding for free agents. They also had to figure out how they could keep
their better young players on their teams once those players reached the sixth
year of service and became free agents. Front-office people throughout both
leagues dreaded the prospect of having to lose players whom they had selected,
trained, and groomed for eight or more years just because some other club
would be willing to pay more for them in free-agent bidding. The anxiety was
particularly acute among the clubs in the smaller and less profitable media
markets. So a defensive contract strategy was needed.
     A few clubs responded to the dilemma by entering into long-term contracts
with their most prized young players. Such contracts had been virtually
nonexistent prior to free agency. The reserve clause had made the player the
permanent property of his club, so there had been no good reason for the clubs
to guarantee anyone more than the coming year's salary. Now, however, there
was a special incentive to sign players for several years at a time. The
reasoning went as follows. If a club had an All-Star quality player with four
years of service, then by signing that player for, say, five years the club
would retain ownership of his contract through the player's ninth year of
service. In other words, the club would in effect buy out three years' worth
of the player's free agency rights. In practical terms, this meant that the
clubs would be willing to risk wheelbarrows full of current dollars on players
purely for the purpose of being able to hang on to them for an additional one,
two, three years, or more.
     The multiyear contract would typically be of great benefit to the player,
for no matter what might happen during the term of the contract, most or all
of the money would be fully guaranteed. Thus if the player's performance were
to fall off, or if he were to become incapacitated through wear and tear or
injury, his financial future would be secure.
     There were only two risks to the player in agreeing to a multiyear deal.
With salaries escalating at a wild rate, no one could know what the future
dollar value of a player might be. Consequently a salary of $750,000 in year
four of the contract might appear irresistible to the player upon signing, but
he could actually be worth much more than that in the major league market by
the time that fourth year rolled around. The other risk of entering into a
long-term contract was that the player's performance might improve
dramatically, again raising his relative dollar value. If both possibilities
came to be, then the player might lose hundreds of thousands of dollars, or
millions, by taking the multiyear offer. Though there weren't very many of
them, future Hall of Famers Johnny Bench and Tom Seaver were among the
principal victims of the multiyear contract. Each of them missed out on an
income bonanza by agreeing to a long-term deal early in the free agency era,
before salaries went through the roof.
     Having bitten the multiyear bullet, the question now facing the clubs was
how exactly to design these long-term contracts. Since each player belonged
to his club through year six, it seemed unnecessary to pay any player more
than a fair wage for years three, four, or five. One would have expected,
therefore, that the clubs would have granted modest raises prior to a player's
sixth year of service, and that they would have built much larger raises into
the contract for all subsequent years, raises that would make the player's pay
consistent with free agents of similar ability. In fact, what the clubs
started to do was to offer free-agent level salaries for each and every year
of a multiyear contract.
     A hypothetical example will help to illustrate this critical issue. Let's
say a club had a better-than-average third baseman who had earned
$100,000 in his third year of major league service in 1979. The club wanted
to ensure that it would keep the player on the team for as long as reasonably
possible. So it decided to offer the player a six-year deal covering the
years 1980 through 1985. Comparable third basemen with less than six years of
service were making between $150,000 and $250,000. Comparable free agent
third basemen, however, were earning between $600,000 and $700,000 per year.
With both the player and the club anticipating continued, rampant salary
inflation, they might agree that the player would be worth more than $1
million by the beginning of the sixth year of the proposed contract. A fair
contract, under these circumstances, might have been constructed as follows:

Calendar Yr.      Yrs. of Service      Contract Yr.        Salary
------------------------------------------------------------------
   1979                   3                  --           $100,000
   1980                   4                  1             200,000
   1981                   5                  2             300,000
   1982                   6                  3             700,000
   1983                   7                  4             850,000
   1984                   8                  5           1,000,000
   1985                   9                  6           1,150,000
------------------------------------------------------------------
   Tot. Cum. Salary                                      4,300,000

In the first two contract years, before the player would have reached free
agent status, he would have been paid at a rate slightly higher than, but
generally consistent with, the pay of other third basemen who had not accrued
six years of service. Then his salary would have leaped up to the free-agent
level in contract years three through six.
     What the clubs in fact did in many such instances was draw up contracts
that looked more like the following:

Calendar Yr.        Yrs. of Service       Contract Yr.       Salary
--------------------------------------------------------------------
   1979                    3                   --           $100,000
   1980                    4                   1             500,000
   1981                    5                   2             650,000
   1982                    6                   3             800,000
   1983                    7                   4             925,000
   1984                    8                   5           1,050,000
   1985                    9                   6           1,175,000
--------------------------------------------------------------------
   Tot. Cum. Salary                                        5,200,000

The first two years of this deal, while not quite at the free-agent level, are
roughly double what a comparable player would have been worth in normal
negotiations or arbitration. And the total value of the second contract is
$900,000 greater than the first, more than a 20 percent boost.
     Of course, by adopting this approach major league executives cost their
clubs both immediate and long-term cash. But, far more important than that,
they set into motion a wave of big salary increases via the arbitration
process. Why? Because the third baseman from the above example would be used
as a basis of comparison by players of similar quality who had also not yet
obtained free agency rights. In negotiations, a comparable young player would
point to that contract and any others like it, claiming that if the other
third baseman were worth $500,000 after just four years in the big leagues,
then so, too, was he. And if the club didn't accept the claim, then the
player would take the case to an arbitrator. More and more players did indeed
take such cases to arbitration.
     By the end of the 1983 season, this almost breathtaking act of fiscal
self-destruction on the part of club management had become standard policy.
Nearly every major league club had a few players with less than six years of
service who were reaping very hefty incomes. As a result, the salaries of the
arbitration eligibles, as a group, had increased by several hundred percent.
Although they were still a clear notch or two behind the veterans in income,
they had pulled away from the players with less than two years of service, who
had no arbitration rights. Had the clubs not overplayed their new defensive
strategy, which they clearly did not have to do, the arbitration eligibles
might still have salaries within hailing distance of the major league minimum.
It was by this time, of course, too late for the clubs to correct their grave
strategic error. And the wall separating the younger players from the
veterans had been reduced to an embattled trench.
     To make matters worse for management, the Sutter precedent continued to
exert its own upward pressure on the salaries of arbitration eligibles. That
is, the players were still trying to establish the principle that a star is a
star, regardless of his prior experience, and that he should be paid the full
wages of a veteran star. The nub of their reasoning was that a young star has
at least as much present value as an older star, and certainly greater future
value to his club. The clubs continued to insist that service time is the
bedrock of the salary structure, just as seniority is in other industries.
     The first three years of the free agency era can be regarded as an
experimental phase. No one on either side of the table knew precisely what
was unfolding or how it would play itself out. As of 1980 it was evident to
the clubs that free agency was producing an unchecked inflationary spiral and
that arbitration would demand very serious attention.
     Help for the clubs in the arbitration arena was already on the way.
Talbot M. "Tal" Smith had been the president and general manager of the
Houston Astros from 1975 through 1980. He was renowned in management circles
as a tough but fair-minded chief executive with extraordinary skills in fiscal
management. Smith had also brought the Astros from the depths of mediocrity
to a division championship in his relatively brief tenure at Houston. But he
and the new Astros owner, John McMullen, did not see eye to eye on a number of
internal club matters, particularly the assignment of contracts. So despite
his club's 1980 success on the field, Smith was fired almost immediately after
the Astros lost the League Championship Series to the Eastern Division
champion Phillies, three games to two.
     Smith had gotten his feet wet in arbitration prior to his last season at
the helm. Although he had lost both cases, his interest in the arbitration
process had been piqued by the experience. He genuinely enjoyed the challenge
of the specialized competition that arbitration is. So he decided to offer
his personal services to a few of his front-office colleagues. The Oakland
A's took him up on the offer. The club was headed toward contract battles
with two of its best players, outfielder Tony Armas and pitcher Mike Norris.
With Tal Smith representing them, the A's prevailed over both players in
arbitration.
     The victories prompted Smith to set up a business, Tal Smith Enterprises,
to extend his salary services to other clubs. At the end of the 1981 season,
six major league clubs retained Smith for support in salary negotiations and
arbitration. Smith quickly assembled a small group of legal and statistical
experts to round out his salary team. He had commented, privately, in his
last months as the president of the Astros that backup catchers were now
earning more than general managers. He felt strongly that the financial
survival of major league baseball was in jeopardy and regarded his new role as
a mission, a financial crusade, to save the game. His lament over fiscal
conditions was sincere, and it was music to the ears of a lot of club
executives.
     Prior to the formation of Tal Smith Enterprises, the Player Relations
Committee had been solely responsible for providing advice, counsel, and data
support to the clubs. The PRC's executive director, Raymond Grebey, was a
gruff and rather arrogant veteran of labor-management wars. He had headed the
PRC since 1978, but had not scored many victories for the clubs. Instead of
allying himself with Smith, Grebey seemed to view Smith as a competitor for
Grebey's rightful role as management's protector. He even attempted in
various ways to thwart Tal Smith's efforts. This bureaucratic pettiness
exemplified management's internal divisions over policies and methods for
combatting the gains being racked up by the Players Association and its
constituents.
     Grebey notwithstanding, Smith and his band of Young Turks put on
a dazzling display in the 1982 arbitration campaign. Of the eight cases that
went to hearings, the Smith team won seven. It was a previously unheard-of
margin of victory, and it helped to quell Grebey's opposition. More
importantly, it sent a strong message to the players and their agents. They
would have a better organized and much more formidable arbitration adversary
than they had ever before encountered. A line had been drawn in the
arbitration sand, giving the clubs a small but significant beachhead.
     As the 1982 salary returns came in, it was plainly evident that the clubs
were routinely granting enormous percentage increases to arbitration eligibles
and free agents. There was a rising tide of salaries that was lifting nearly
all boats. Furthermore, the clubs, inexplicably, were tendering virtually no
salary cuts, even though they were empowered to do so. Equally difficult to
explain was the fact that franchise sales were proceeding apace, with prices
going up, way up. With the exception of the O'Malley family, the last
of the family owners was gone, and corporate
interests were evidently still anxious to gain membership in the baseball
owners' club.
     Tal Smith Enterprises' accomplishments the year before led six more clubs
to sign up after the 1982 season. Smith had to expand his workforce and
computerize his operation to keep up with the demand for his services. The
client load increased to thirteen clubs the following year and remained at
that level through 1986. Smith was, thus, representing half of the clubs in
baseball.
     Smith's presence no doubt tempered the submissions of a sizable
percentage of players in arbitration, and it helped to slow the pace of
inflation in normal negotiations carried out by his client clubs. But the
Smith team compiled only a .500 record after its first splashy campaign.
Inherent in the arbitration process is a tendency for the arbitrators to split
their decisions, for if they come down too heavily on one side they are likely
to be permanently removed from the pool of arbitrators by the opposing side.
This worked against Smith, perhaps even unduly after his highly publicized
rookie campaign. Moreover, even Smith's clients saw their payrolls rise at a
bankrupting rate. The past practices of ill-prepared clubs had gone on too
long and they were precedential. Those practices had helped to establish the
micro-rules of the arbitration game, and there was little that Tal Smith or
anyone else could do about it. Besides, of the more than 700 contracts that
are signed each year, only 25 or so end up in hearings. And of that total,
only about 60 percent, or roughly 15 cases, are handled by Smith. In other
words, Smith brought too little, too late. The structural damage had already
been done even before he had officially hung up his shingle. To make matters
worse, by the end of the 1985 arbitration season many of the club executives
and the player agents were complaining that arbitration had become a random
process. Decisions were almost totally unpredictable. The term being bandied
about was "crapshoot"--arbitration, many were saying, had turned into a
crapshoot.
     Throughout the first decade of the free agency era, labor-management
relations worsened. The clubs' hiring of Smith had put an additional buffer
between the players and the clubs, just as the cadre of player agents had done
several years earlier. By adding such layers of representation, the
ballplayers and their owners became a step more detached and alienated from
each other. The more intimate love-hate relationship that had existed between
the old family owners and their players, which was more akin to the
relationship between troops and their generals, or between sons and their
fathers, steadily gave way to an entrenched business relationship after World
War Two. Meanwhile, salaries continued to rise. The labor-management war
drums were beating, perhaps more loudly than ever before. But now the owners
were the Indians.
     More bad news greeted the besieged front offices after the 1985 season.
Two years earlier, baseball had signed a six-year television contract with ABC
and NBC that was worth approximately $8 million per year to each club. The
$1.3 billion deal was triple the value of the prior network-TV contract. But
now there was open talk that TV revenues had passed their peak. The networks
were initiating an industry-wide reduction in personnel and a streamlining of
their corporate structures. Accordingly, they were letting it be known that
baseball could fully expect a decline in income--a fear that proved
unfounded--when the next contract came up
for negotiation in 1989. The clubs also began to see their cable television
income level off. And prices for tickets, parking, and concessions had all
risen steadily as the players' salaries increased. Those prices were now
barely, if at all, increasable. And radio and in-stadium advertising and
promotions were rapidly reaching a saturation point.
     To demonstrate the gravity of the situation, the owners made the
unprecedented and startling decision to open the clubs' financial books in the
fall of 1985. The central purposes of this action were to prove management's
claims of insolvency and to obtain changes in the Basic Agreement that would
reverse, or at least stem, the flow of red ink. By their accounting, the
industry was losing roughly $58 million per year, or a bit more than $2
million per club. The Players Association had its own financial analysts
review the data. They concluded that the clubs had actually netted $9 million
in profits in 1985. According to one highly placed club executive, the
financial data were so poorly organized, so incomplete, and so out of date
that no one could draw reliable conclusions with respect to club costs or
revenues.
     Wherever the truth lay, it was clear that no more than two or three clubs
were regularly showing profits. The Los Angeles Dodgers were, and still are,
in their own special category at the top of the heap. The rest were fighting a
losing battle. Nonetheless, between 1982 and 1985 the Detroit, Minnesota, and
Cincinnati franchises were purchased--at then astronomical prices. And there
was talk, encouraged by the game's new commissioner, Peter V. Ueberroth, that
the expansion of the major leagues to twenty-eight or thirty teams would take
place in the relatively near future.
     Given the extremely discouraging financial conditions of the baseball
industry in the 1980s, one wonders why anyone, including the high rollers who
had replaced their generally less wealthy predecessors, would want to get into
the business. By 1985, every big league club was backed by at least one big
corporate entity. In name, almost every club was owned by an individual or a
group of individuals, but in reality the clubs belonged to large parent
companies. The list included a variety of large media corporations, an
international brewery, a blue-chip jeans manufacturer, a nationwide pizza
franchise, a big-time law firm, a regional car dealership, and two major
shipbuilding companies. What distinguished the new breed of owners from the
earlier model was that the new baseball moguls were uninvolved in day-to-day
club operations. Several owners meddled in important personnel and salary
decisions, but club management was now essentially in the hands of
front-office executives. This absentee style of ownership was a clear
indication of the relative unimportance to the owners of the financial
condition of their baseball franchises. It also suggested what the main
motivation to own a ballclub had finally become--promotion. For whether or
not a club made money, the individuals and the corporate interests that
undergirded them would constantly be in the national limelight. Thus the
clubs had turned into the promotional, public-relations playthings of their
corporate overlords. How else can one explain the appreciation in club values
in the midst of the game's financial plunge? Is the alternative view, that so
many ultrawealthy parties are just slipshod businesspeople, really credible?
After all, if the new owners are so terribly lacking in business acumen, how
have they gotten to where they are?
     Whatever their individual reasons for buying into the baseball business,
the new hands-off owners relied on front-office personnel to oversee their
organizations. Within the front offices there had always been a barrier
between business and baseball. The baseball people--general managers, player
personnel directors, farm system directors, assistants in those areas, scouts,
and all the rest--had jealously protected their professional turf and the
inside information upon which their jobs rested. They were also a relatively
uneducated group, the bulk of whose professional experience was limited to the
playing field. The finance people, stadium operations people, ticket office
personnel, and so forth minded their own business. This kind of
compartmentalization of responsibility and authority was another of the quasi-
military aspects of the sport. The new owners in most cases empowered their
one or two top baseball executives to hire and supervise the business
personnel, thereby keeping the old order intact. As a result, salary matters
generally fell to people ill-equipped to deal with salary techniques and
strategies.
     Salary determination is inherently a blend of performance evaluation and
comparative salary analysis, and a rather exacting intellectual exercise. But
with the owners basically uninvolved and with the traditional organizational
barrier still standing, there were very few club personnel qualified to do a
creditable job in the salary arena. The rapid and broad success of Tal Smith
stood as proof that the clubs could not adequately manage their own salary
matters. And if there was a single area on which the current and future
financial health of each franchise depended, it was undeniably the area of
salaries. It is for these reasons that free agency and arbitration led to
rampant inflation. To put it another way, the Messersmith-McNally decision
had freed only the veterans; it was the unsupervised and fiscally deficient
baseball executives who had made the rest of the major league players wealthy.
In effect, they had given away the store while the owners were fishing.
     The first loud signal of ownership's recognition of its managerial
shortcomings came when the owners' council selected the business entrepreneur
Peter Ueberroth to replace the attorney Bowie Kuhn as baseball's commissioner.
Ueberroth had demonstrated his take-charge, no-nonsense, profit-oriented
approach to sports when he organized the 1984 Olympic Games held in Los
Angeles. The owners' appointment of Ueberroth was nothing less than a
reversion to the strong-commissioner strategy that had brought Judge Landis
into baseball and saved the game in the aftermath of the Black Sox scandal.
It showed that they were deeply concerned about the existing state of affairs.
It was also a virtual admission that when the going gets tough, the
ever-divided house of owners must seek outside help.
     When Ueberroth took office as the commissioner at the beginning of 1985,
baseball was awash in red ink and the tide was still rising. The clubs could
not unilaterally rewrite the Basic Agreement. Nor could they control the
behavior of arbitrators. They had opened their books, but the players
remained unconvinced that they were in trouble. How, the players asked, could
the clubs possibly be insolvent and at the same time have a string of anxious
buyers waiting in line to pay exorbitant and still escalating prices for those
clubs? Management was becoming desperate.
     The new commissioner was not the type of administrator who would simply
sit back and allow a bad situation to deteriorate further. In late September
of 1985, Ueberroth addressed the club owners and their representatives at a
regularly scheduled quarterly meeting. After the season ended, he attended
two more of management's private meetings. His broad message to the clubs at
those gatherings was that they would have to exercise fiscal responsibility in
order to keep their industry viable. His more specific advice to them came in
the form of a negative statement that he made at the general managers' meeting
at Tarpon Springs, Florida, in early November:

     "It is not smart to sign long-term contracts."

     Shortly after that meeting, sixty-two players filed for free agency.
Though the list was long, it was perhaps the least impressive group,
talentwise, since free agency was instituted. It was loaded with marginal and
soon-to-retire players. One of the few exceptions, however, was All-Star
outfielder Kirk Gibson. The twenty-eight-year-old Gibson had been with the
Detroit Tigers for his entire professional career, and he was coming off his
best season as a major leaguer. Many clubs would normally have had serious
interest in obtaining a player of Gibson's caliber. But the deadline for
bidding on free agents came and went, and not a single club made an offer to
Gibson. In fact, practically all of the free agents had been completely
ignored by the clubs. Of the group of sixty-two, only five changed clubs.
And all five were players in whom their previous employers had officially
indicated no interest by waiving their right to negotiate with them.
     To the Players Association, it was obvious that the clubs had entered
into a tacit agreement not to pursue any free agents that their most recent
employers wished to retain. In their view, that amounted to a conspiracy to
violate the terms of the Basic Agreement. The legal term for such behavior is
collusion. So the association lodged a grievance against all twenty-six
clubs, claiming that they had violated Article XVIII of the agreement, which
states that "the Clubs shall not act in concert with the other Clubs" in
signing free agents.
     Veteran arbitrator Thomas Tuttle Roberts began hearing the case in the
summer of 1986. In September the owners attempted to dismiss Roberts from the
case. He had just ruled, in a separate case, that the clubs could not insert
drug-testing provisions in players' contracts without the consent of the
Players Association, and that had angered the owners, or so they claimed. The
association felt that this was merely an excuse and that management was
engaging, as it had done for more than a century, in delaying tactics. For
the longer it would take to resolve the collusion case, the more opportunity
the clubs would have to defy free agency and maybe even wreck it.
     To the delight of management, the case dragged on through the winter of
1986-1987. This time, however, the free agent pool was one of the best on
record. It included perennial All-Stars Tim Raines, Andre Dawson, Jack
Morris, and Lance Parrish. But, true to form, the clubs continued the
practice of the previous year. They made no bids for free agents whom their
previous clubs wanted to keep. And, not surprisingly, the Players Association
filed another grievance.
     Then the final 1985 salary tallies came in. What those results showed
was that management's initial attack on free agency had had little if any
effect on salaries. The major league payroll had continued to grow at a
bankrupting pace. Management was sweating bullets, and they were looking more
and more ready to fight back in other ways.
     Some of the provisions of the Basic Agreement had been changed through
prior negotiations between the players and the clubs. The changes went into
effect after the 1986 season. The most important of them dealt with
arbitration rights. Players now would have to complete three full years of
major league service instead of just two to become eligible for arbitration.
Using the new provision to full advantage, the clubs grossly underpaid some of
the game's brightest young stars, including 1986 Cy Young Award winner Roger
Clemens of the Boston Red Sox. It was, as it always had been, within the
clubs' rights to unilaterally assign contracts to such players. But by recent
standards, the salaries tendered to Clemens and a half dozen other outstanding
young players were, in each instance, hundreds of thousands of dollars below
the established scale. Several of the players threatened to hold out for the
1987 season. Clemens did hold out until shortly after the season began. In
addition, the clubs took a firmer stand in arbitration than ever before. They
submitted several offers that represented no raise over the previous year's
salaries, and they even went so far as to try to cut a few salaries by way of
arbitration. Given the almost total absence of holds and cuts in prior
arbitration proceedings, these were highly risky actions.
     The 1986-1987 arbitration results revealed the chaotic state into which
the process had lapsed. At the bottom end of the salary scale, the clubs had
cleaned up. Twenty-six players had taken their cases to arbitration and seven
of them had returned without salary increases. Four of those had received
cuts in pay. But at the high end, Yankee first baseman Don Mattingly received
an award of $1,975,000, which was at the time the largest arbitration
award to date. Overall, the clubs won sixteen of the twenty-six cases. And
the players realized the lowest percentage gain in income in the
history of arbitration.
     The most interesting case was that of Detroit pitcher Jack Morris. Morris
had gone to arbitration four years earlier and had lost. After the 1986
season, he declared himself a free agent. But because the Tigers wanted to
keep him, none of the other clubs would bid for his services. His agent,
Richard Moss, decided to throw the Tigers a curveball. He advised his client
to pursue a new option available to free agents, namely to withdraw his
declaration of free agency and subject himself, once again, to arbitration.
Detroit management was over a barrel. Morris was one of the best pitchers in
the game, and he had plenty of statistical evidence to back up that
assessment. So the club knew that if it were to accept the offer, it would
stand a pretty good chance of getting clobbered in arbitration. On the other
hand, if the club were to turn down the offer to arbitrate, it would not be
permitted to negotiate with Morris until May 1, a full month into the 1987
season. The club consented to arbitrate. Jack Morris won this one, and it
cost the club a whopping $1,850,000 to retain his services for the 1987
season.
     When the final figures for 1987 came in at the end of November, it
appeared that the array of extreme measures taken by management had at last
reversed the salary inflation trend. In fact, the average major league salary
had declined by a few thousand dollars. And Tal Smith Enterprises was still
proudly leading the cost-reduction crusade on behalf of the ballclubs.
     But it was not yet time for the owners to celebrate, because two months
earlier arbitrator Tom Roberts ruled that the major league clubs had indeed
operated "in concert" when they shunned the free agents after the 1985 season.
In September 1989 that translated into awards of $10,528,086.71 to the 139
players he held had been victims of that first round of collusion. Seven
players--including Kirk Gibson and Carlton Fisk--were given "new look" free
agency.
     In August 1988 arbitrator George Nicolau, after reviewing 8,346 pages of
testimony, found owners guilty once more of collusion, this time against
seventy-nine free agents following the 1986 season. In October--he had
delayed his action to avoid disrupting the pennant races--he granted "new
look" free agency to twelve more players, including Bob Boone, Jim Clancy, and
Willie Randolph, all of whom signed with new teams.
     A "Collusion III" case was filed by the union in January 1989 regarding
those who had become free agents after the 1987 campaign. In July 1990
Nicolau again found for labor. Seventy-six players, including such stars as
Jack Clark, Gary Gaetti, Jack Morris, Dave Righetti, Mike Witt, and Paul
Molitor, were involved in the case, which revolved around management's
creation of an "information bank" in the winter of 1986-87. This data bank
reported all salary offers made to free agents. Nicolau wrote he found it a
"quiet" form of cooperation between supposedly rival clubs endeavoring to keep
tabs on what each competitor was offering on the supposedly free market. By
the time damages would finally be determined, they would exceed the $100
million mark.

New Sources of Revenue

     Reports of the demise of television's profitability proved premature.
Toward the end of Ueberroth's tenure, a series of blockbuster
broadcasting deals were negotiated. The biggest was a four-year deal with CBS
in December 1988 for $1.06 billion. The network received rights to the
All-Star Game, League Championship Series, World Series, and twelve
regular-season weekend games. Criticism surrounded the cutback in
regular-season broadcasts, but Ueberroth answered with an unprecedented deal
with the cable industry. ESPN outbid such rivals as TNT and USA in January
1989 for a four-year, $400-million pact, featuring 175 regular-season games,
including groundbreaking Sunday-night cablecasts. No one knew how successful
the package would be, but even ESPN officials admitted they would lose money
for at least the first two years. At the same time a $50-million, four-year
agreement with CBS Radio for the Game of the Week, All-Star Game, and
postseason contests was made final.
     Not only was Organized Baseball as a whole cashing in; so were the
individual clubs. George Steinbrenner obtained a $500-million, twelve-year
agreement with Madison Square Garden cable. His colleagues incorrectly worried
that he would again attempt to corner the free-agent market. Big Apple fans,
at least what Yankee fans remained, worried over the cost of their cable bills
(as did fans nationwide following the ESPN negotiations), but the deal was
done.
     At the conclusion of Ueberroth's breathtaking round of broadcasting
conquests, the Commissioner noted baseball's newfound prosperity and
respectfully requested owners to hold the line on ticket prices. He was
ignored.
     Another segment of the business of baseball--and an increasingly
lucrative and ugly one--was memorabilia, autographs, and baseball cards. In
1989 it was estimated that these "extras" accounted for $1 billion in
business. Its culmination came during a particularly dark day in baseball
history. Hours after a disgraced Pete Rose was expelled from the game by
Commissioner Giamatti, he appeared on a cable network and peddled $1.2 million
in bats, plaques, and balls, taking home $100,000 in pocket money.
     While that may have shocked many, it was not the only seaminess marring
the trade. Ballplayers peddling autographs at card shows soured stomachs from
Fenway to Anaheim. Forgeries and fakes surfaced with regularity. Jose
Canseco was sued for his failure to appear at one card show. Two dealers were
charged with ripping off an infirm "Cool Papa" Bell of his mementos. A
seventy-five-year-old man was killed over memorabilia in the Midwest. By 1990
reports from the New York City area held that the boom was losing steam, that
crowds were thinning out at shows, and that overpriced gimcracks were starting
to gather dust.
     Tying in to this facet of the game was the licensing of logos and related
products. Initiated nearly three decades ago by the National Football League,
licensed sports marketing now produces over a billion dollars in annual sales
in baseball.

The Franchise Game

     In 1988 Peter Ueberroth admitted that four years earlier twenty-one out
of twenty-six big league clubs suffered financial losses. By 1987 the
situation had seen a dramatic turnaround, and twenty-two out of twenty-six
clubs either broke even or were profitable. There had always been an interest
in ballclubs as rich men's toys, but when it appeared that once again money
could be made at the national pastime, bidding went through the roof (dome?)
for franchises.
     Even the most moribund teams were selling for big bucks. Somewhat
understandably the New York Mets changed hands for $100 million, and Baltimore
sold for $70 million, but when the woeful Seattle Mariners were peddled for
$77 million (George Argyros had paid $13.1 million for these latter-day St.
Louis Browns in 1981), it was clear that the economic balance had been
tilted.
     Back in the early 1980s Commissioner Ueberroth had announced that the
majors would feature two new AL and four new NL clubs by 2000, but calling
progress snail-like would have exaggerated its speed. By the late 1980s the
game faced increased pressure from a number of sources for expansion. The
Players Association wished to open up more jobs for its members. The U.S.
Senate formed a fourteen-member panel on the subject. A new league, organized
by agent Dick Moss and at one time backed by Donald Trump's ephemeral
billions, was another threat in the summer of 1989. Baseball now announced a
willingness to add two more NL franchises.
     Nothing really happened until the summer of 1990. Slowing up matters,
some said, were the recent TV contracts. Established owners were loath to
share their newfound riches with any newcomers, and hence expansion would not
occur until the current broadcasting contracts expired. Each of the
twenty-six teams received $16 million yearly from the national package, but
with more dollars going to such stars as Viola, Clark, and Canseco, the owners
still felt they needed every last penny.
     As a result, a 1993 target for expanding came into view. The National
League announced its two newest members in September 1991. The expansion
franchises would draft entry-level minor-league players in late 1991 and
actually operate farm systems in 1992. During that season, they would
draft college and high school players. Major league expansion drafts
occurred after the 1992 World Series. An interesting--and definitely
different--aspect of this draft was that the newest senior-circuit clubs
drafted personnel (thirty-six for each club) from both major leagues, the
logic being that if the two newcomers cut into the TV and radio revenues of
all clubs, they should draft from all clubs. A corollary of this, of course,
is that both the AL and the NL would divvy up the $95 million franchise fee
each rookie owner would fork over.
     While Organized Baseball did not exactly pooh-poohing those hefty
initiation fees, they were not the only factors involved in the initiation
process. Such considerations as "substantial financial resources" (obviously)
and "long-term commitment" to their local communities were cited. Multipurpose
stadiums were deemed passe. Local politicos were told to be cognizant of "the
necessity of the club receiving parking, concession, signage, pay TV, and
luxury box revenue."
     Frontrunners for the new franchises included Denver (where voters in 1990
approved a new 40,000-seat stadium), St. Petersburg (which nearly hijacked the
White Sox in 1988 and the Giants in 1992), Miami (assisted by recently retired
Mike Schmidt), Buffalo (where the Rich family runs a big-league operation at
the AAA level), and Washington (a two-time loser, but a loser with political
connections).
     The huge franchise fees plus a projected $65 million in startup costs (a
figure that ultimately reached $95 million) began to cause several prospective
backers to think twice. Nonetheless, despite a downturn in the national
economy, there was no shortage of takers.
     Major league expansion also triggered minor league expansion, as the new
clubs would require farm teams. With such franchises as Oklahoma City going
for $4.5 million, the price tag at the AAA level would not be cheap. Most
observers estimate it would be $5 million per club (consider that the Mets had
cost $1.8 million in 1962 and the Kansas City Royals had cost just $5.55
million in 1969). Even applying for a minor league club required a $5,000
nonrefundable deposit (an unprecedented situation for the bushes), but in
September 1990 eighteen groups sent in their checks.
     As minor league franchises were being bought and sold for record prices,
the major league clubs took notice. Claiming they no longer saw the wisdom of
subsidizing such "profitable" ventures (in all too many cases the only profit
comes from selling to the next party willing to take operating losses), the
big leaguers started to place heavy-handed pressure on their farm clubs in
1990. On a single day in August 1990, sixty-three working agreements were
dropped. That was followed by a threat to bring fifty-nine bush-league teams
to Florida and Arizona in 1991 for summer versions of complex baseball.
Hardball was the name of the game on all negotiating fronts.

The Lockout of 1990

     Baseball's Basic Agreement expired on December 31, 1989, and despite the
prosperity that both sides now enjoyed, open warfare was imminent. The
Players Association was hardly blind to the marvelously round figures
Ueberroth had pried out of the networks. Beyond that they were particularly
irritated by the year of arbitration they had given away in the last
settlement. Club owners, on the other hand, were tired of forking over
millions through the arbitration process. The problem for management was not
simply the cost of losing specific arbitration cases. Winning could also be
costly. In the winter of 1989-90 the ten losers in the process received
average raises of $477,050. Average salaries doubled for only the second time
in the fifteen-year history of the process. First-year arbitration players
saw paychecks skyrocket by 166 percent. While the vast majority of disputes
were settled before they got to arbitration, they still involved huge
increases, such as Teddy Higuera's $2,125,000 stipend and Tom Browning's
pact for the same figure. Fred McGriff saw his income rise from $325,000 to
$1,450,000 in a prearbitration settlement.
     A showdown had to occur.
     Negotiations dragged on during the winter of 1989-90, and it was widely
believed that the players would collect their checks for a few months and then
strike at midseason, when the owners were gearing up for large crowds and were
most vulnerable. To thwart this plan, management struck first, engaging in
yet another lockout of spring training camps.
     The owners' strategy was to hold firm on the third-year threshold for
arbitration. The PRC tendered a number of alternatives to the Players
Association, including one granting 48 percent of club profits to players and
another offering a cumbersome $4 million bonus-pool scheme to be shared by
two-year players.
     After thirty-two bitter days, Donald Fehr, the union's combative new
representative, and Charles O'Connor, the new PRC negotiator, hammered out a
compromise. Seventeen percent of the second-year players would now become
eligible for arbitration. The minimum salary would rise from $68,000 to
$100,000, the largest percentage increase ever. Management would contribute
$55 million to the players' pension fund, up from $39 million. To the casual
observer this seemed a victory for labor, but the players had wanted $80
million and the settlement was a giant step back from the traditional
one-third of national TV revenues that players had contended was their right.
Additionally, it was written into the agreement that baseball would announce
its long-stalled expansion plans within ninety days.
     It was not a settlement that established any great principles, and most
fans were no doubt just as puzzled as ever as to what all the shouting had
been about, but it appeared that the process had cooled some tempers. Even
the Players Association's Don Fehr, never one to look away from controversy,
discerned a "measurably lower degree of hostility" at the lockout's
conclusion.


Baseball Enters the Nineties

     In the 1991 season salaries, arbitration settlements, and attendance
continued to climb in dizzying fashion. The average player salary soared an
astonishing 42.5 percent to $851,383. The highest stipend was accorded to Los
Angeles' Darryl Strawberry--$3,800,000--while the average Oakland paycheck was
a handsome $1,394,119.
     In January 1991, 159 players filed for arbitration. They secured average
raises of $540,000--a 102 percent boost. Big winners were Wally Joyner ($2.1
million) and Doug Drabek ($3.35 million).
     Overall, major league attendance hit an all-time high of 56,813,760,
paced by Toronto's exceeding the 4 million mark, the first time a club had
smashed that barrier.
     Long-stalled National League expansion finally occurred in June 1991 with
$95 million franchises being granted for the 1993 season to the Colorado
Rockies, headed by wholesale beverage dealer John Antonucci, and the Florida
Marlins, led by Blockbuster Video tycoon Wayne Huizenga. Huizenga's
appointment of Pirates executive Carl Barger to be the Marlins' first
president caused some controversy as Barger had played a key role in the
expansion process. Also on board as Marlins GM was Dave Dombrowski, who had
previously done much to fortify the Expos farm system. Commissioner Fay
Vincent ruled that American League teams would receive $42 million of the
franchise fees.
     Issues such as disparities in local television revenue continued to
fester. Local television, cable, and radio rights generated $200 million for
Major League Baseball, but just four teams--the Yanks, Mets, Phils, and
Dodgers--garnered more than 35 percent of the total. The Yankees' $41.5
million per year deal towered over the funding available to such small market
franchises as Pittsburgh ($5.8 million), Kansas City ($5 million), and Seattle
($4 million). In September 1991 the American League voted to channel 20
percent of local broadcasting "net revenues" into a pool which would be shared
equally (the NL formula, on the other hand, now calls for sharing 25 percent).
Controversy was expected over what revenue is to be considered "net."
     As the 1991 season ended, another round of free agent signings ensued
with the New York Mets snagging Pittsburgh's Bobby Bonilla with a five-year,
$29 million pact. This largesse was soon eclipsed by the Cubs' signing of
thirty-two-year old Ryne Sandberg to a four-year $28.4 million agreement. At
the lower end of the spectrum, the big league minimum wage inched up to
$109,000--an almost meaningless figure with the average major league salary
now at $1,043,156.
     Big losers in the free agent-big salary game were the 1992 Mets, Dodgers,
and Red Sox. These teams spent $130.5 million in finishing a collective 82
games out of first as their attendance plummeted by a total of 1.5 million
paying customers.
     Despite another 4-million-plus season in Toronto and the million-fan
boost given by the opening of Baltimore's Camden Yards, major league
attendance dropped by 1.6 percent in 1992. Major league profits plummeted from
$143 million in 1990 to just $8.7 million in 1991 to virtually nothing in
1992. Nervousness increased over the coming end of the lucrative CBS
television contract after the 1993 campaign. Given these alarming indicators
of doom, it was mistakenly anticipated that the unprecedently large number of
free agents testing the market after the 1992 World Series--including such
stars as Barry Bonds, David Cone, Kirby Puckett, and Greg Maddux--would find
few takers.
     As the World Series ended, a bombshell struck baseball's already shaky
financial structure. ESPN announced it would not exercise its option for
television coverage in 1994-1995. Claiming that so far it had lost more than
half of its investment in the deal, the decision makers at ESPN chose a $13
million buyout rather than further payments of $250 million for the two
seasons available to them. The cable network left the door open for
negotiations, but obviously at a much lower starting point. Among other
factors, baseball was losing its popularity was American youth: Neilsen
ratings revealed a disconcerting 24 percent drop in viewership of regular
season games by 12-to-17-year-olds from 1989 to 1992. In that time NFL ratings
in that age group were up 16 percent; the NBA rose a startling 31 percent.
     Meanwhile in the minors, 1992 provided the highest attendance total since
1950, with 27,180,170 fans passing through the turnstiles. Major league
expansion had appeared to create a trickle-down growth for the minors. Yet the
capital demands on minor league owners, a product of the hardball Professional
Baseball Agreement that Major League Baseball had pushed on the National
Association, were coming due in a recessionary atmosphere, and fewer
municipalities were willing or able to foot the bill for new ballparks or for
upgrades of existing facilities.
     The saga of Bob Lurie and the San Francisco Giants went on and on. In
June 1990 he received permission to shift the club thirty-five miles south to
Santa Clara County, California. But that November voters in fifteen Santa
Clara County cities turned thumbs down on a 1 percent utility tax to pay for a
new stadium--the third year in a row such a referendum had failed. In January
1992 Lurie announced plans to move to San Jose if a new $155 million,
48,000-seat stadium could be constructed. The plan foundered on the shoals of
a projected 2 percent increase in the city's utility tax. On August 7, 1992,
Lurie (who had paid $8 million for the franchise in 1976) announced the sale
of his Giants for $115 million to a group headed by Vincent J. Naimoli bent on
relocating the club to St. Petersburg, Florida. That triggered a $100 million
counteroffer from local investors headed by Safeway magnate Peter Magowan and
stockbroker Charles Schwab, who were intent on keeping the team in the Bay
area. The National League, by a 9-4 vote on November 10, 1992, rejected the
St. Petersburg offer, leaving the status of the Magowan offer up in the air,
although it was ultimately settled in Magowan's favor. The maneuvering sparked
new Congressional interest (particularly that of the Senate Judiciary
Committee) in baseball's anti-trust status.
     Several other franchises changed hands in 1991-1992. On November 2, 1991,
John Labatt Ltd. paid $67.5 million (Canadian) to acquire majority control
(going from 45 percent to 90 percent ownership) of the Blue Jays. In a
controversial move that sparked xenophobic and racial responses, Jeff Smulyan
turned the woeful Seattle Mariners over to Japanese interests connected to the
Nintendo corporation for $106 million. John McMullen unloaded the Astros to
Texas business executive Drayton McLane, Jr. $115 million. Finally, after
draining an estimated $23 million from the Detroit Tigers' coffers, Domino's
Pizza baron Tom Monaghan peddled the club to fellow pizza magnate Mike Ilitch
(a former Tiger farmhand) for a relatively paltry $85 million. The Orioles
were rumored to be on the block for $200 million.
     The biggest casualty of the 1992 season was Commissioner Fay Vincent, who
was ousted on September 7, 1992. (For more about his "resignation," see the
articles by Stephen S. Hall and Adie Suehsdorf.) Brewers owner Bud Selig
stepped in as Commissioner Pro Tem. The first tangible result of Vincent's
departure was recision of his controversial National League realignment plan,
which would have placed the Cardinals and the Cubs in the NL West and the Reds
and Braves in the NL East.
     Some observers felt that Vincent's downfall was foreshadowed in December
1991 when owners hired Richard Ravitch, a one-time candidate for mayor of New
York City, to the post of President of the Major League Player Relations
Committee at a salary $100,000 greater than Vincent's. The owners did not want
Vincent interfering in labor relations as he had when he intervened in the
1990 spring training lockout. Vincent's dismissal only fueled the false
rumors, already rampant, of an owner-generated lockout for 1993.
     Sales of Major League Baseball licensed products continued to soar--from
$200 million in 1987 to $1.5 billion in 1990 to $2 billion in 1992. Despite
the fact that items with Mets and Yankees logos account for 20 percent of all
sales, revenues were split equally among the twenty-eight franchises. To
compete with the rival NBA and NFL in an increasingly global struggle for fan
dollars, MLB started to promote overseas sales and by 1991 was doing $20
million a year in foreign sales.
     In 1992 even the minors got into the act with a similar centralized
licensing approach (under the control of Major League Baseball Properties,
which can keep up to 30 percent of the royalties). National Association
licensed sales in 1992 were an estimated $12 to $15 million. Hopeful plans are
being drawn up to go "international" with bush league caps and gimcracks.


1993: A Season of Fear--and Profits

     Early in 1993 it was oh-so-fashionable to write baseball off as a sport
which for all intents and purposes was finished. Newspapers, magazines, and
even entire books purported that baseball's long-awaited crash had finally
occurred. Demographic reports and television ratings were trotted out to prove
conclusively that the National Pastime was on the ropes.
     Attendance figures proved otherwise. Major League Baseball set an
all-time record of 70,257,938--a figure 23.7 percent above the record set in
1991. Even factoring out the two expansion teams, the Rockies and the Marlins,
and factoring out the National League's new method of counting attendance (the
same method employed by the American League, based on tickets sold, not on
actual bodies in the park), attendance was estimated to be 5.2 percent above
the 1991 record and 7 percent over 1992.
     The Giants, on the ropes in 1992, drew 2.6 million in 1993. Montreal,
another moribund franchise, also showed signs of life. "The amazing thing is
not simply that our crowds have been good," said Expos owner Claude Brochu,
"What's really significant are the demographics. We're getting a very young,
vibrant audience."
     The Reds, lackluster on the field and tarnished by the Marge Schott
fiasco and the Tony Perez firing, were estimating a $12 million profit for the
season. The Rockies, who had projected a debut season attendance of 2.5
million, attracted nearly 4.5 million customers and suddenly were looking at
ways to increase the size of their new Coors Field.
     And a new record was set for the value of a franchise. The Orioles sold
for a record $173 million at bankruptcy court auction. The club's new owners
were led by Baltimore attorney Peter Angelos and Cincinnati businessman
William DeWitt. Minority partners included movie director Barry Levinson,
author Tom Clancy, broadcaster Jim McKay, and tennis star Pam Shriver.
     The minors topped 30 million fans for the first time since 1950, when
there were 446 clubs. Average 1993 per-game attendance in the National
Association was 3,316--the highest in history. Eight leagues (the
International, Eastern, Southern, California, Carolina, South Atlantic,
Northwest and Appalachian) posted attendance records. The International League
set an all-time minor league attendance record, drawing 4.6 million customers.
     In the Courts and in the halls of Congress, rumblings continued regarding
removal of baseball's special legal status. On August 4, 1993, U.S. District
Court Judge John Padova of Philadelphia, in a move many interpreted as a
distinct restriction of baseball's antitrust exemption, denied Organized
Baseball's request to dismiss a suit brought by disgruntled St. Petersburg
interests. Padova ruled that the 1922 Supreme Court decision exempted O.B.
from antitrust legislation only in those things that were unique to baseball,
such as players' contracts. Thus, the buying and selling of clubs was not
covered. "We're very disappointed with the ruling," said a spokesman for Major
League Baseball, "We disagree with the judge's interpretation...."
     Hearings were scheduled for September 30, 1993 (but delayed until 1994)
in the Senate Judiciary Committee on a measure sponsored by Howard Metzenbaum
(D-Ohio) revoking baseball's anti-trust exemption. Threatened Judiciary
Chairman Joseph Biden (D-Del.): "Unless baseball gets its act together in a
way that is monumentally different from where they are now, this committee
will be back with the votes that will change the status of baseball."
     What was billed in advance as the most important meeting in the history
of baseball took place in Kohler, Wisconsin on August 11-13, 1993, under the
leadership of Richard Ravitch. The session was not all it was cracked up to
be. But it did provide some new developments. A widely anticipated agreement
on revenue-sharing failed to come about, but owners did pledge to refrain from
a threatened lockout of players in spring training 1994. However, Ravitch
refused to rule out a lockout later in the 1994 season.
     At this writing, about one-third of major league revenues are shared; in
the national Football League the figure is roughly 75 percent. How Major
league Baseball will divide its spoils between "big market" teams and "small
market" franchises is anybody's guess, but it is theorized that a new
revenue-sharing formula will go hand-in-hand with some sort of salary cap.
Complicating the situation have been threats by small market clubs to veto
televising of games from their parks by visiting clubs. The small market clubs
would have the power to do this except for games covered by the various
national TV contracts.
     Salaries continued to escalate in 1993, and the grossly underachieving
Mets started the year with an average salary of $1,534,007. But some teams
featured relatively low average salaries: the expansion Rockies at $327,000
and Marlins at $649,876, for example, and the more established Expos at
$513,149 and Indians at $541,989.
     The Padres angered many fans by ruthlessly trimming salaries and talent
in the 1993 season. Star performers such as Fred McGriff, Tony Fernandez,
Darrin Jackson, Gary Sheffield, and Bruce Hurst were all sent packing. General
Manager Joe McIlvain abandoned ship as owner Tom Werner successfully pursued a
course of lowering the payroll from the $30 million level in 1992 to a goal of
$18 million in 1993.
     "They have been losing money ever since the purchase," explained Richard
Ravitch. "They lost $12 million the last two years.... And they're going to do
what Milwaukee is doing, what Houston did under its prior ownership, what
Pittsburgh is doing in order to be able to operate within their resources."
     The most significant event of the year was the change from a two-division
to a three-division league setup, a concept favored by the Players
Association. Formal approval occurred on September 9, 1993, by a 27-1 vote,
with only Texas' George W. Bush dissenting. Playoffs would involve the three
division winners, plus a so-called wild card team, i.e. the non-division
winner with the best won-lost record. The first round will be a best-of-five
format; the second, a best of seven. Potential ramifications regarding the
move include a cutback of the 162-game schedule and an accelerated expansion
schedule, perhaps as early as 1996.
     Some saw the "wild card" provision diminishing interest in tight pennant
races, but they noted that it could have been worse. Elements in the owners'
camp had originally pushed for two wild-card teams, playing the two division
winners. It was the Players Association that championed the plan eventually
adopted.
     Also causing controversy were fears that a team with a regular-season
losing record could conceivably win a World Series. However, that possibility
had already existed under the two-division system, as witnessed by the barely
over-.500 Mets lasting until the seventh game of the 1973 World Series.
     A new (less lucrative) television contract was signed in May 1993 with
ABC and NBC covering the 1994-1999 seasons. It did little to silence critics
of Organized Baseball. Aside from postseason play, Major League Baseball will
continue to have little presence on network airwaves. There will be no games
telecast before the All-Star Game, and only twelve after that point (with
coverage split between ABC and NBC). This represents a continued downturn in
recent history's already scant level of network coverage (i.e., from sixteen
games in 1993 and from forty-three as recently as 1987). Most controversial is
the concept that league playoff games will not be broadcast nationally, but
rather regionally. Broadcaster Tim McCarver was among many predicting "a
serious public backlash on this."
     While the issues of regionalization and regular season broadcasting drew
the most attention, just as significant (if not more so) were the financial
terms of the deal.  Unlike the $1 billion CBS TV contract (on which the
network claimed it lost $500 million), no money changed hands. Instead a joint
venture was set up between Major League Baseball and the two networks involved
to sell advertising for the telecasts. It was estimated that this arrangement
would prove only half as lucrative to baseball as the CBS deal.
     Signs of fiscal retrenchment involved scouting and the minors. A cutback
in the Major League Scouting Bureau was announced in the late summer of 1993.
All twenty-one part-time scouts employed by Bureau were laid off September 1,
1993, with as many as thirty of the fifty full-time scouts also being let go.
Only those scouts with a year to go on their contract were retained.
     Facing opposition from minor league clubs and financially strapped local
communities, the Major Leagues relented on the ballpark improvement provisions
of the Professional Baseball Agreement, delaying the deadline for its
provisions to April 1, 1995. The minors on their part agreed to put off
reopening the entire PBA until September 1994.
     The minors in 1993 also featured the creation of three independent
circuits. Two of them, the Texas-Louisiana and the Frontier Leagues, were
unmitigated flops, but Miles Wolff's Northern League showed that, under the
right circumstances, such entities could succeed.


The Spoils of War

     For the better part of a century, major league baseball players fought
for a reasonable portion of the proceeds of their entertainment industry.
However, with no viable competition from outside the baseball monopoly, the
players were forced to accept whatever salaries and conditions their owners
saw fit to give them. They eventually made progress, but only after they
pulled together as a bargaining unit and slowly and painfully loosened the
grip of the reserve clause. In the end, what they obtained was not a specified
level of income but rather a system of salary determination. The system
contained no financial guarantees beyond the major league minimum salary. How
much money the players would ultimately receive through free agency and salary
arbitration would rest entirely on the behavior of the clubs.
     What the system did was create a form of free-market competition within
the monopoly. In a sense, it turned a single business into twenty-odd separate
businesses and unleashed a self-destructive frenzy of interclub competition.
To the players' amazement and joy, they saw their salaries reach heights that
they could not have imagined were possible.
     To most of the fans and the press, the dizzying escalation in their
incomes made the players appear baldly greedy. And when filthy-rich players
began to complain that they were being underpaid compared to other individuals
or groups of players, the public's growing distaste for them was
understandable. But greed really was not the issue. What was at stake for the
carping millionaire pitcher or outfielder was not the money but rather his
standing as a ballplayer. Money had become the measure of his talent, and
every player wanted and still wants his money to match his skills. So when he
sees that a player whom he considers himself superior to is earning more than
he is, he feels underrated, cheated. That is his value system.
     Unfortunately, as long as the salary system remains a chaotic hodgepodge
without fixed standards of evaluation, in which the negotiating skills of
agents and club executives are often more of a factor in determining the
players' worth than their actual on-the-field contributions to their teams
are, a good number of players will always feel cheated. And the clubs will
continue to be and to feel besieged.
     The players will continue to earn astounding sums of money and the club
owners will continue to bask in the national limelight, thereby getting plenty
of public-relations bang for their otherwise poorly managed bucks. And the
fans will continue to be the ones who ultimately pay for the follies of both
sides. Thus one of the key questions facing the major leagues is how long the
fans will go on subsidizing the war of principle between the players and the
clubs.
     Whether or not the fee-per-game plan is implemented, the recent and
steady shift from free over-the-air telecasts to paid-for cable-TV telecasts
is continuing. This development is taking viewing opportunities away from
those people who either do not have cable access or cannot afford to pay the
monthly fee. The problem is already rather acute for New York Yankee fans,
because there is no cable television in the Bronx at this time and the
majority of Yankee games are broadcast exclusively on MSG, a cable-TV
operation.
     In the long run, the shift to cable may diminish the size of the baseball
viewing audience, which would erode the major league fan population and
thereby reduce the future income of the sport.
     The shift also raises a fundamental question concerning baseball's
exemption from antitrust laws. The matter has been addressed by Charles E.
Schumer, a member of the House of Representatives from New York's Tenth
Congressional district. In an article for the New York Times written in the
summer of 1987, he posed the following challenge:
     If baseball is simply a "business," then why should it have a special
antitrust exemption? On the other hand, if baseball enjoys protection from the
nation's laws because it is a national treasure, then Americans have a right
to demand reasonable access to it.
     Congressman Schumer has introduced legislation which would require that
the Yankees and major league baseball choose between two alternatives. They
must, in his words, "either act like a business and receive no governmental
protection, or behave like a great national pastime by making sure that New
Yorkers can see the game on cable or free TV."
     There is an eerie quality to the maelstrom in which baseball now finds
itself. For none of the central issues that have haunted the game since its
inception has really been resolved. The business is still a monopoly. Many
individual players are still dissatisfied because they do not feel that their
contracts reflect their relative value as on-the-field performers. Members of
Congress are beginning to consider legislation aimed, as before, at removing
baseball's antitrust exemption. And baseball's un-merry-go-round, the seamier
side of the industry, keeps spinning on its own goofy axis. In the words of
Yogi Berra, "It seems like deja vu all over again."
     Nevertheless, the game is bringing in more spectators and more money than
ever before. And the irrepressible club owners, though they are now more a
clique of promotion-minded high rollers than a league of dyed-in-the-wool
baseball men, seem undaunted by the growing financial threats to their
industry.