Let's Make a Deal

Sorting out baseball's labor mess is easier than you think. Here's SI's simple plan, based on the owners' and players' latest propsals, to avoid a strike

By Tom Verducci

Issue date: August 5, 2002

This time around we're wise to you. We have no more rooting interest in your recurring labor contretemps than we do for a Tonya Harding-Paula Jones "celebrity" boxing match. We don't want to hear your plaintive yelps, Drayton McLane, as you threaten to sell your Houston Astros if a new economic system isn't put in place. This is the system you bought into; you can't complain about the mortgage payments after you've agreed to buy the house.

And we don't want to hear you, Barry Bonds, insouciantly claiming that if you go on strike, we'll come running back at the drop of a settlement with our hearts and wallets wide open.

We have watched both sides, baseball players and owners, play this game of chicken for more than a year, heading full tilt toward a ninth work stoppage in 30 years. The diligent, constructive negotiating sessions of last week were somewhat encouraging, if long overdue. But unless there is swift movement toward an agreement, you players will set a strike date for some time within the next six weeks, and the jihad will begin again.

We know, however, that this time is different. We know that with work stoppages, as with knee surgeries, the likelihood of recovery diminishes each time. Baseball took an immediate 20% hit in attendance after the 1994-95 strike, for instance, and hasn't fully recovered. Despite the oft-heard bleatings that Cal Ripken Jr., Mark McGwire and Sammy Sosa "saved" baseball in the wake of that strike, baseball never has returned to its 1993 attendance rate, even with the help of a humming '90s economy. The current economic backdrop? It's dark enough to make a light-hitting middle infielder put down his Robb Report and think twice about buying that yacht.

Here, however, is the most important reason we have zero tolerance for your latest march toward oblivion: We know you're tantalizingly close to a deal. If you took a syringe -- to use an analogy the modern ballplayer understands -- and drained from the bargaining process the venom and the mistrust, you'd be left with the makings of a compromise. In interviews with SI three high-profile agents, three owners and a key negotiator from each side agreed that a deal should be easily achieved. Even Donald Fehr, the executive director of the players' association, said on July "It's somewhat surprising to me that at least on these issues, the differences are being portrayed as [so] wide. We don't see it quite that way."

Every baseball labor negotiation centers on the tug-of-war between owners trying to put a drag on salaries and players trying to preserve the status quo. This time, though, the owners aren't asking the players to swallow a radical change, such as the salary caps or pay-for-performance systems that they've proposed in the past. The owners have finally learned that the least destructive approach is to advance their cause in increments -- to play for one base at a time instead of relying on the long ball.

The meat of the owners' proposal consists of two items that the players have signed off on in past negotiations: revenue sharing and a luxury tax. There's no philosophical gulf. Both sides agree that a portion of the $3.5 billion that the 30 major league teams cumulatively gross annually needs to be distributed among the financially strapped clubs.

The biggest obstacle to a settlement is that each side loathes the other. (We know where you're coming from on that front.) The players might be more sympathetic to the owners' proposals if the lords didn't keep sending over Trojan horses. For instance, the owners asked for the right to keep an "information bank" on free-agent offers (a euphemism for legalized collusion) and the right to cut a player in January if they didn't like the number he submitted for salary arbitration (which would undermine the arbitration process).

The owners also tried to shove the poorly conceived contraction plan down the players' throats immediately after a stirring World Series. Led by their Minister of Doom, commissioner Bud Selig, the owners also regularly disseminate forecasts of financial disaster that have been questioned by Congress and even within their own house. (Selig's top assistant, Bob DuPuy, quickly moved to squash the commissioner's July 10 claim that two clubs were in dire financial straits.) According to the owners' figures, seven of the top 10 revenue teams finished in the red last year; if that's the case, how do they justify asking those teams to send even more money to the lower-revenue clubs?

At the same time, we can relate to the owners' distaste for the players' intractability and sense of entitlement. The players only grudgingly acknowledge the game's competitive imbalance, which is ludicrous. For years they have held that the owners should solve their own problems without the players' assistance, but when the owners offer to share half of their revenues among themselves, the players protest: "No, we didn't mean that much." The players believe rich teams might have less incentive to raise revenues -- and would therefore have less to spend on salaries -- if they have to fork over half of what they take in. Also, the players have shown no initiative in response to the revelations of rampant steroid abuse in their ranks.

So it's time for the gamesmanship and the public relations gambits to stop. It's time to set aside the history of distrust and to focus on the major issues. Here's what those issues are, and here's SI's plan for a compromise that would resolve them:

Revenue sharing and luxury tax. While arguing the merits of revenue sharing and a luxury tax and crunching the corresponding numbers, the owners and players should actually be negotiating only one number -- the total amount of money to be transferred from the richer teams to the poorer teams. That's the nut of this crisis. The two sides should then work backward by debating how to arrive at that number through contributions from revenues, a luxury tax and the commissioner's discretionary fund (a pot derived largely from TV and licensing revenues and doled out as the commissioner sees fit).

Based on the owners' three-pronged proposal -- sharing 50% of local revenues ($253 million), a 50% tax on payrolls above $50 million ($80 million) and an $85 million contribution by the players to the commissioner's fund -- the total shared revenue, or magic number, would be $418 million. The players' current offer -- 22.5% of local revenues ($188 million), no counterproposal on a luxury tax ($0) and a $40 million contribution to the commissioner's fund -- would redistribute $228 million. Take the midpoint between the two plans, and you have the basis of a settlement: $323 million.

Obviously, each side would have to make concessions to reach the $323 million magic number. For instance, if the players insist on no luxury tax, then the owners should get their 50% revenue-sharing plan while cutting the commissioner's discretionary fund to $70 million. Or the owners could drop their revenue-sharing percentage and increase the fund money to arrive at the same number.

Thus far owners have insisted on a tax, claiming that revenue sharing without a "compression mechanism" at the top would be inflationary. If they don't budge on that, they would have to accept the players' 22.5% revenue-sharing plan with $55 million going to the commissioner's discretionary fund. However, the players are on record in favor of the tax concept and in 1995 proposed a 25% tax on payrolls above $50 million. Our solution (see chart below) includes middle-ground compromises on revenue sharing and the commissioner's fund, with a luxury tax plan like the one the players proposed in '94.

A Modest Proposal
The money to be transferred from the richer teams to the poorer clubs would come from three sources: revenue sharing, a luxury tax and the commissioner's discretionary fund. Here's a breakdown of how much money is currently shared from those sources, how much the players and owners have offered to transfer and how SI proposes to bridge the gaps. (All figures are in millions and based on 2002 Opening Day payrolls.)
	Revenue Sharing	Luxury Tax	Commisioner's Fund	Total Shared
Current Setup	$167	$0	$0	$167
Players' Proposal	$188	$0	$40	$228
Owners' Proposal	$253	$80	$85	$418
Si's Proposal	$220.5	$40	$62.5	$323

After the magic number is agreed upon, and the two sides compromise on where the money will come from, the last step will be to determine how to divide the shared revenue. The owners believe it should be split equally among the 30 teams in what's called the straight pool concept. The players want a split pool, from which more money is funneled to the seven or eight lowest-revenue clubs. The solution is a hybrid plan in which 80% of the revenue is shared equally and the remainder is divided among those clubs with revenues below the industry average.

Contraction. The talent pool isn't shallow enough to warrant eliminating teams, and under a deal that redistributes $323 million, plus additional changes to the game that would improve competitive balance, contraction is unnecessary.

Steroid testing. When players sign on to play major league baseball, they place themselves in a public trust. Think of baseball as a publicly traded company and the fans as stockholders. Fans must have full confidence that the talent and outcome are untainted; otherwise we're talking about pro wrestling. That's why we have rules prohibiting players from betting on baseball. And that's why steroid testing is needed.

This should be a no-brainer. The fans want testing. The owners want it. The clear majority of the players want it, according to a recent USA Today poll. Now it's up to the union's board to make it happen.

An independent agency should administer and monitor the testing, which should be random and year-round, as it is for the NFL and IOC, because the off-season is a popular time for bulking up with performance enhancers.

The first year of testing should be used for administrative purposes only. That is, players who test positive should not be disciplined, other than to be steered toward an educational employee assistance program. In subsequent years positive results would bring suspensions, with the severity of those suspensions consistent with the frequency of the offense.

Amateur draft. Both sides agree that players from outside the U.S. should be included in the pool for the June draft, thus preventing deep-pocketed teams from cornering the market on Japanese free agents, Cuban defectors and the like. The owners want the draft to be 38 rounds, the players want 16. Call it 27 and move on.

Seven years ago the players agreed to the concepts of increased revenue sharing and a luxury tax, which were put in place for only the 1997, '98 and '99 seasons. Both prescriptions might have had the desired effect, but the dosages were inadequate, and they did virtually nothing to narrow the widening gap between the richest clubs and the poorest. Salaries weren't curbed; the average has more than doubled since the last strike, in '94. Players took home 56% of the revenues last season, up from 38% in '90 and 21% in '75, the last year before free agency.

Now both sides agree that the revenue-sharing formula must be more potent. The common ground is easy to see, but getting there requires something as rare to the labor landscape as rain is to the desert. It requires a spirit of cooperation.

Issue date: August 5, 2002

Achieving labor peace is only the first step. Click here to read the other 14 ways Sports Illustrated says baseball can get back on track.

 

Related information

Multimedia

Visit Video Plus for the latest audio and video