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Baseball aims to share wealth, health

THE BALTIMORE SUN

For a sport that traditionally governed its clubs with an every-man-for-himself philosophy, Major League Baseball has become practically collectivist.

The collective bargaining agreement ratified last week by club owners will require the teams to share more revenue among themselves than ever before, an average of nearly $260 million annually over the next four years.

Expanding on innovations in the last labor deal, baseball has become No. 2 in shared revenue among America's four major- league sports. Only the NFL - which is as close to a socialist state as exists this side of Cuba - swaps more cash.

Baseball hopes its share-the-wealth program, along with a tax on the big-spending clubs, a draft for foreign players and other measures in the new collective bargaining agreement, will reduce a yawning gap that has some of its teams earning three times more money than their poorest rivals.

But is it enough? Will the economic remodeling prop up weaker franchises and keep fans engaged? Will it make baseball more like the NFL, where a cellar dweller one season can be a champion the next?

"It will help us stabilize the situation. It will give more franchises the opportunity to build teams that are competitive. That's the ultimate goal: to make every team competitive," said Orioles owner Peter Angelos, one of five bargainers for management. "I believe we have made a substantial step in that direction."

Critics note that the tax will actually raise less money than previously and that the increase in revenue sharing falls short of what baseball said it needed to level its playing fields.

Moreover, research by Moag & Co., a Baltimore-based investment firm specializing in sports, shows that the new terms, had they been in place last year, would have narrowed the income gap between the richest and poorest teams. But the economic divide still would have been wider than that of pro basketball, football or hockey.

Fay Vincent, who was ousted as baseball commissioner in 1992, said the new pact will have the desired effect only if it forces teams to spend less on superstars. He doubts it will.

"My sense is it is not the answer, but it is a good thing they are trying," Vincent said.

Baseball is trying to break habits developed over many years. Before the 1995 labor contract, teams shared only a fraction of their income. Fees paid by national television networks and income from official baseball merchandise were divided evenly. But, unlike income in the NFL, that represented only a sliver of baseball's pie.

The real money was home grown: ticket sales and local TV and radio rights. None of that broadcast money was shared, and only a pittance of the gate collected by the home team was shared with the opponent.

Starting with the settlement that ended the 1994-1995 strike, the owners and players agreed on a formula in which each team would contribute 20 percent of its local income to be distributed among the clubs.

Under the new agreement, the contribution will grow to 34 percent next season. That, and other means of redistributing money, will result in an average of $258 million shared annually, up from $169 million last season, according to estimates by Major League Baseball.

Had the deal been in place last year, the Yankees would have paid $47.6 million to help their less-wealthy rivals, instead of $26.5 million. The Montreal Expos would have received $36.9 million instead of the $28.5 million they got, according to the Moag & Co. analysis, which used figures released by the league.

That's not enough for a Mike Piazza. But it is enough for a few Marty Cordovas.

The Orioles would have paid $7.8 million, or $1 million more than they did.

Moreover, the sport has altered the so-called luxury tax that it imposes on the payrolls of free-spending teams. Under the 1995 agreement, the five teams with the highest payrolls paid about a third of the amount by which their payrolls exceeded that of the sixth highest-paying team.

The new agreement sets specific thresholds, $117 million in the first year rising to $136 million in 2006, and tax rates that vary according to how many years a team exceeds the mark. The money raised will be diverted to baseball's benefits plan, industry promotion and the development of foreign players.

Fewer teams will be affected - only three at current levels - and the amount collected probably will be less. But baseball's leaders say the thresholds will prove a better deterrent to big spenders than the rolling average, especially if the thresholds can be held firm or eventually reduced.

The strategy is twofold: limit how much wealthy teams pay for players and boost the ability of poorer teams to hire talent. If effective, baseball's bounty - its revenues have tripled since 1994, to $3.6 billion a year - will be more evenly spread among the 30 clubs.

"Clearly, baseball is healthy economically. There may be a few teams, however, that are having problems," said Paul Staudohar, a business professor at California State University who has studied the economics of sports.

Last year, the Yankees, with a $50 million local TV deal, brought in $242 million before deductions for revenue sharing, according to Moag & Co. The Expos generated one-seventh as much: $34 million. Even after the revenue-sharing then in effect, the earnings of the Expos still represented only 29 percent of the Yankees.

The impact is obvious on the field. The Yankees last season boasted some of the sport's priciest talent, and paid them $128 million, including benefits. They made it to the World Series, again, losing to Arizona. The Expos spent $43 million on their roster and watched the World Series on TV.

Had the new contract been in effect, the income of the Expos would have equalled 36 percent of the Yankees'.

By contrast, the parity-conscious NFL evenly divides the proceeds of regular-season and postseason television broadcasts - all of which appear on network TV - as well as about 40 percent of clubs' ticket sales. Its lowest-earning team last year, the Arizona Cardinals, generated more than half the revenue of its highest earner, the Washington Redskins, according to an analysis of Forbes Magazine revenue estimates.

At the opposite end of the spectrum are basketball and hockey. Each NBA and NHL team keeps all the money it makes selling tickets, beer, local game broadcasts and sponsorships. The only income they share is from network television and official merchandise.

The result is a disparity in income almost as great as in baseball. Last year, the poorest NBA team, the Memphis Grizzlies, earned just 37 percent of the revenue generated by the top-earning Los Angeles Lakers. The NHL's bottom-dwelling Phoenix Coyotes earned just 38 percent of the income of the richest franchise, the New York Rangers.

Baseball team owners and the union also agreed to establish a draft for foreign players, in which last-place teams will select first, and to establish common scouting facilities in the Dominican Republic. This should diminish the advantage wealthy teams have in signing non-native talent.

Washington State University economist Rodney Fort testified before Congress last year that baseball is the most competitively unbalanced of the big four sports in terms of wins and losses. But, contrary to conventional wisdom, the matchups have become slightly more even over the past 40 years. The fact that the public has a different perception is likely because modern fans are less patient with losers than their predecessors, he said.

The concept of a luxury tax and enhanced revenue sharing should bring more parity to the playing field. But the terms in the latest contract are probably insufficient to have the desired impact, said Fort, co-author of Hard Ball: the Abuse of Power in Pro Team Sports.

Retired baseball manager Jim Leyland, who made a name for himself squeezing success from small markets, said the game still turns on skillful scouting and managing. But better sharing of revenue should help.

"I definitely think it is a positive adjustment for small-market teams," said Leyland, who guided the Pittsburgh Pirates to National League East titles from 1990 to 1992 and managed the Florida Marlins to the 1997 world title. He now scouts for the St. Louis Cardinals.

"But it is not a cure-all," he said.

Sun staff writer Peter Schmuck contributed to this article.

Cost of sharing

Under baseball's new revenue-sharing deal, half the teams would pay more into the pool than under the previous plan. In the list below, numbers in parentheses indicate how much each team would have paid in 2001 under the new terms; numbers without parentheses indicate how much each team would have received (in millions of dollars):

Team....Rev. shar. ....Increase

N.Y. (AL)...(47.589)...21.049

Seattle...(32.755)...13.964

Boston...(26.165)...9.727

N.Y. (NL)...(26.189)...10.520

Cleveland...(20.319)...7.065

Atlanta...(15.015)...4.368

L.A....(12.794)...3.687

Texas...(11.033)...2.289

St. Louis...(10.077)...1.848

Baltimore...(7.845)...1.038

Chi. (NL)...(7.808)...1.240

San Fran....(7.733)...1.425

Colorado...(7.526)...1.497

Houston...(5.465)...280

Arizona...(5.628)...1.196

Chi. (AL)...1.125...5.326

Milw....3.937...2.193

Pitt....5.075...3.293

Detroit...7.342...2.215

San Diego...13.001...4.333

Anaheim...13.257...3.663

Toronto...16.434...6.604

Oakland...16.559...6.039

Phila....16.794...5.042

T. Bay...18.145...5.761

Cincin....20.147...6.743

K.C....23.227...7.230

Florida...25.362...6.801

Minn....26.626...7.557

Montreal...36.906...8.389

Sources: MLB, Moag & Co.

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