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Why We Should Blame The Owners, Not The Players


Thursday, Aug. 22, 2002

As every sports fan knows, another baseball strike may arrive as soon as August 30, the strike date set by the players' union. From the tenor of the conversation on Los Angeles' sports talk radio station (I'm an addict, I admit), the players have already lost the public relations battle.

Unfortunately for the players, the outcome of that battle is likely to determine the sport's winners and losers when an agreement is eventually (and inevitably) reached. And between the talk show hosts and the fans who call them, almost everyone is prepared to blame the players if the currently stalled negotiations descend into a full-fledged work stoppage.

As a political matter, this makes little sense to me. Why should the basically proletarian audience of talk radio demonize the millionaire players, many of whom came from humble origins, rather than the billionaire owners, most of whom did not? Do we choose scapegoats on the basis of celebrity rather than logic?

In any event, surely we have entered wonderland when the owners - a collection of avowedly free-market capitalists or their corporate equivalents - have succeeded in convincing a large segment of the public that they need protection from the very free market forces they ordinarily champion.

Why The Context of Labor-Management Negotiations In Baseball Is Unusual

Baseball labor negotiations present on odd twist on ordinary labor-management relations. Usually, a union wants a guaranteed salary and benefits structure to protect its membership against the otherwise unregulated cost-cutting efforts of management. In other words, unions usually use the process of collective bargaining to insulate labor from the rigors of free market competition.

But in baseball, by contrast, it is the players who want a freer market, while management (composed of the owners) seeks protection against the rigors of unregulated competition. And, more perversely still, the regulations the owners want are limits they seek to place on themselves, though they need the players' acquiescence to do it.

Baseball's History: The Antitrust Exemption and the "Reserve Clause"

Understanding all this requires a bit of historical background. Once upon a time not so long ago, baseball owners didn't have to worry about paying competitive salaries. In the old days, the team owners had the power to prevent players from selling their services to the highest bidder.

Today's Limited Free Agency System, and How It Works

In the mid-1970's, the players, through their union, finally succeeded in breaking the reserving system and initiating the system of limited free agency that exists today.

Not surprisingly, once players (generally speaking) obtained the right to sell their services competitively, salaries skyrocketed. Today, baseball players earn an average of something like $2.5 million a year.

Importantly, nobody forces the owners to pay these salaries. The major league minimum is a small fraction of the average. Rather, player salaries are simply the product of a marketplace in which owners desperate to build a team that is "a winner" compete for an incredibly small group of superstar players.

Is Texas Ranger shortstop Alex Rodriguez worth $25 million a year? Of course he is. How do I know? Because that's what the owner of the Rangers was willing to pay. And if he hadn't, one of the other owners would have.

Free Agency: A Good Thing, With Some Genuine Flaws

One need not be a devotee of Marx to conclude that, overall, the rise of free agency has been very much a good thing. Owners shouldn't be able to treat their players like chattel; and the players - the few in a million with pro talent - deserve a fair share of the revenue stream their talents create.

But free agency has also created serious problems for the game as a whole. And if they aren't addressed, baseball will continue to lose ground to the other major sports - and eventually both the players and the owners will be the poorer for it.

From the standpoint of the baseball fan, the old system had some obvious virtues. Because the owners exercised near total control over which players played for what teams, individual players, at least the very good ones, often stayed on the same team year after year - benefiting fans who liked to cheer for, and follow, the same players year after year.

Worse still, under the current system, a distressingly large number of teams, far more than a dozen, cannot afford to field competitive squads and, under the current structure, never will. In the major leagues, payroll size is a factor of local TV revenue - and teams in the smaller markets (such as the Kansas City Royals) simply can't hire even close to the same quality players as the big market teams (such as the Los Angeles Dodgers) can.

True, a few teams, like this season's highly successful Minnesota Twins, manage to defy this calculus temporarily. If a team gets really lucky with the development of young players (the Oakland A's have proven masters at talent development), they can compete for a few years.

Eventually, though, as soon as the home-grown stars achieve enough seniority to declare themselves free agents, they almost always depart for the big money offered by the large market teams (as Oakland's Jason Giambi did last year when he signed with the Yankees). Within a few years, even the best managed small market teams start to drift downward in the standings.

Thanks to this disparity of talent, many teams are essentially out of contention on the season's opening day - and that leads to lots of empty stadiums and a general decline in interest in the sport. Baseball has already lost out to football as the nation's most popular sport. If it fails to address the problem of competitive imbalance, that decline is sure to continue.

Whose Fault Would A Players' Walkout This Year Really Be?

So what does this mean for the ongoing labor talks, and the question of whose fault it will be if the players walk out on a season that still holds the prospect of high drama deep into October?

As widely reported, the talks are stalled over two issues. The first is revenue sharing - a device to even the playing field between rich teams and poor teams. The second is a luxury tax - a penalty on extra large payrolls designed to keep the richest teams from spending too extravagantly.

The players' union has expressed some flexibility on the issue of revenue sharing, but rejects any meaningful luxury tax. And at least to this outsider, that seems about right - as I'll explain below.

Anyone who is set to blame the players, moreover, must explain why, to the contrary, they believe these positions are all wrong. Just because the players technically cause the strike by walking out, does not mean they should be faulted for it.

Revenue sharing is a system for redistributing wealth. Under the revenue sharing plan, every team pays a fixed percentage of its TV revenue into a common pool which is then divided into equal shares. As a result, TV money from the big market teams gets transferred to the small market teams.

In all likelihood, increased revenue sharing (there is already some) is likely to hurt one group of players - the superstars who command astronomic salaries under the current system. If the players agree to let the league transfer more TV money from the richer teams to the poorer teams, then the payrolls of the richer teams will likely decrease, which means they will have less money available to pay superstars ever higher salaries.

Still, revenue sharing is probably in the best interest of the players group as a whole. First, revenue sharing, in and of itself, does not reduce the overall pool of money available for player salaries. As long as the small market teams agree to use their revenue sharing money for player salaries (as they should), then the redistribution of wealth among the owners ought to have relatively little if any impact on how much baseball players collectively earn.

Even more important, revenue sharing is essential for baseball to prosper as a sport. The current competitive disparity is eroding the fan base. If that trend continues, revenues - and ultimately salaries - will inevitably decline.

The Luxury Tax: Unnecessary and Even Harmful, If Revenue Sharing Works Well

The proposed luxury tax, however, is a horse of a different color. It works this way: the tax is imposed on every dollar of payroll above a certain number, say $110 million total. For every dollar a team exceeds the limit, it has to pay a percentage (the owners have suggested 50%) to the league - which then can use the money in its discretion.

If the union and the owners reach the right formula for revenue sharing, the luxury tax becomes little more than a mechanism for holding down salaries by sharply inhibiting the spending of the richer teams. In other words, while revenue sharing redistributes the pool of money available for player salaries, the luxury tax also seeks to limit the growth of that pool of money. That's not good for the group of players as a whole - and so it is no surprise the union opposes it.

Why the Union's Current Position Is A Reasonable One

The union has already agreed to a luxury tax at the super-high end of the payroll scale - as a check on some unidentified runaway owner bent on buying a championship regardless of the team's actual balance sheet. Why on earth should we expect the union to do more?

And so, as for this fan, if the players walk out, I'll still think it's more the owners' fault than the players' - even if my radio tells me otherwise.

It may be a rerun of Norma Rae, but generally speaking, shouldn't workers get paid what the market or their collective might, as expressed through the union, can get them? I doubt any of the executives in the owner's boxes at the stadium would accept any other principle for themselves.

Edward Lazarus writes about, practices, and teaches law in Los Angeles. A former federal prosecutor, he is the author of two books - most recently, Closed Chambers: The Rise, Fall, and Future of the Modern Supreme Court.

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