Sports Business: Baseball
Baseball Teams: And Then There Were 28...
Is a smaller league the answer to baseball's economic woes?
Major League Baseball owners have a record of manana meetings--putting off today's business until tomorrow. So few eyelids opened when the Lords of the Diamond left a meeting in Cooperstown, N.Y., last month after voting overwhelmingly to table an important matter: long-pending sales of franchises in Oakland, Calif., and Kansas City, Mo.
This time, though, baseball owners may be just warming up for one of their most daring plays: eliminating two--or as many as four--franchises. In an era when most leagues are plotting further expansion, baseball is talking seriously about shrinkage.
"The game of baseball is alive and well, but the business of baseball is in fairly desperate straits," warns San Diego Padres President Larry Lucchino, who calls eliminating some franchises "a very appropriate subject of debate." Thomas O. Hicks, who bought the Texas Rangers last year, says that "over half, certainly" of the 30 team owners are genuinely interested in downsizing."REALITY." Just raising the issue can send shock waves and stir conjecture about hidden agendas. Is it an opening salvo in negotiations with the Major League Players' Assn.? A call to communities to build ballparks for endangered teams? "I don't think it's a message--it's reality. Baseball is having problems, and what baseball can't do is stick its head in the sand," says Hicks.
At the top of the hit list are the Oakland A's and the Montreal Expos, small-city franchises that draw puny crowds. A second tier includes the Kansas City Royals and Minnesota Twins. But they seem less vulnerable. Even if contraction happens, one owner says, "it won't be more severe than two teams."
The proposal is under consideration by a blue-ribbon task force appointed by Commissioner Allan H. "Bud" Selig to study the economic health of baseball. The panel, which includes former Federal Reserve Chairman Paul Volcker and columnist George F. Will, is expected to issue a report next year.
Lowering the number of franchises from the present 30 would be a radical step. In baseball, even relocation is taboo--no team has moved since 1971, when the Senators skipped out of Washington for Arlington, Tex. But baseball owners are restless for solutions to their economic woes. In consolidation, owners at both ends of the revenue scale see a financial boon. Having fewer teams means larger slices of revenues for the 28 franchises that would remain. Owners of large-market teams also see relief from a dreaded obligation: revenue-sharing. Baseball's richest franchises now subsidize the poorest. Zapping small-market also-rans rubs out "the neediest and most demanding of the revenue-sharing payees," notes Lucchino.
Downsizing has its perils. "There are some people who would view it as a defeat for baseball to be leaving some markets," acknowledges Peter Magowan of the San Francisco Giants. And there's the cost of buying out departing teams. Before MLB took the air out of the proposed sale of the A's, team owners Steve Schott and Ken Hofmann had a deal to sell the franchise for $122.4 million. In a consolidation scenario, owners of the remaining teams might be called on to pay market price. "That way the [outgoing] owners wouldn't be getting a raw deal financially," says the Padres' Lucchino.
Eliminating franchises has one other flaw, note critics. It doesn't work to solve baseball's underlying problem: the wide, and widening, gap in the amounts teams collect in local revenues. Consolidation would be "absolutely disastrous," says Smith College economics professor Andrew Zimbalist, who has been a consultant to the baseball players union. "It's not a long-term solution, not a fan-friendly solution, and isn't an economically efficient solution from the standpoint of the game's public relations."
Behind the closed doors of baseball's task force, downsizing has been a topic for months, however. The buzz reached Oakland, but few took it seriously. City officials and local business leaders attended MLB meetings in Cooperstown last month confident the team would change hands. They left ashen-faced. Selig explained the delay saying owners needed to hear the task force recommendations before deciding on the sale.WARINESS. "If they're saying our community isn't good enough to be part of the program, say it, man to man, eye to eye. But don't string us along," says Robert C. Bobb, Oakland's city manager. "There's all kinds of conversations with respect to lawsuits and congressional hearings. In the end, if they decide to take this step, it will be very difficult to turn it around."
There's a wariness in other smaller cities, too. On Nov. 2 in St. Paul, Minn., voters will decide whether to approve a sales-tax hike to fund a ballpark for the Twins. Balloting won't be affected by the discussion of downsizing, predicts Mayor Norm Coleman. But he says the city has already been bruised by years of talk that the team might be moved unless a new park is built. "When you get people's ire up like that, that's the death knell of public support," he adds.
Consolidation isn't about bully tactics, insist some owners. It's about taking care of business. "The media, the players association--they tell us to start at home and solve our problems," says Lucchino. "This is one way to do it."
If there was any question that there is a problem, evidence could be found in Oakland three days after the Cooperstown meeting. Barely 6,500 fans showed up to watch the A's play on a Sunday afternoon--even though the plucky team was in a surprising fight for a spot in the playoffs.By Mark Hyman