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Here are the negotiations essentials

By Times staff writers
© St. Petersburg Times
published August 11, 2002

Baseball's owners and players just can't seem to play nice. After months of on-and-off talks and a week of extensive negotiations, the game could be on the brink of another work stoppage, one that could have devastating repercussions. Player representatives are meeting Monday and could set a date for a strike. While there has been agreement on several minor matters, the primary issues of increased revenue sharing and the implemention a luxury tax are unresolved as owners seek concessions from the players to restrain spending. Here is a quick look at the situation:

Q: What are they talking about?

A: Basically, money. Wrapping their argument under the banner of increased competitive balance, the owners (or at least most of them) want to increase the amount of revenue shared among teams and implement a "luxury tax" on the highest payrolls, essentially creating a deterrent, if not a restraint on salaries. The players don't really want to change anything with a system that has generated an average salary of $2.4-million, but are especially wary of any device that creates a drag on salaries by discouraging the high-revenue teams from spending.

Q: Why is this so important right now?

A: The last agreement expired after the World Series, but it has taken until now for there to be substantive progress on a new one. The owners promised to not lock out the players during the season, but that wasn't likely to happen anyway. Players are concerned owners will lock them out in the offseason and implement a new system, so they have to act now when they have the leverage. That's why the players have been talking about setting a strike date, and are likely to do so Monday at a meeting in Chicago.

Q: Why would they strike, and when would they do it?

A: The players see a strike as their only weapon, knowing that while they have drawn most of their salaries during the season, the owners make most of their money from postseason television revenues (not to mention large late-season crowds). They reportedly have discussed several dates, including Friday, Sept. 16 and Sept. 29. By setting an early date, they add a sense of urgency to the talks. By picking a later date, they allow more time for negotiations (which might not be a good thing) but make it more likely the postseason would be affected. There also is some thought they don't want to be on strike during the Sept. 11 anniversary events. The reason they like the 16th of the month? They get paid on the 15th.

Q: So, are they going to go on strike?

A: That's the $3.5-billion question, based on the game's annual revenues. Both sides say they don't want a work stoppage, that they realize the damage it could cause to the game, how it could alienate fans and sponsors beyond repair. But that doesn't mean it won't happen, especially if the players believe the owners are just trying to make it appear they are bargaining in good faith but scheming to declare an impasse and implement their preferred system in the offseason, then perhaps lock the players out, too. Plus, the history isn't good: in the past eight negotiations there have been eight stoppages.

Q: Haven't there been some reports of progress?

A:Yes. They have agreed on several minor issues, such as raising the minimum salary and making changes in the amateur draft. The players made a major concession by agreeing to a series of tests for illegal steroids, though the owners were seeking to test for other performance-enhancing drugs as well as recreational drugs. But the major issues of revenue sharing and a luxury tax remain.

Q: What is the holdup on revenue sharing?

A: National revenues, such as TV money from Fox and ESPN, are shared. But in baseball it is the local revenues (particularly TV rights fees) that can make a big difference. For example, the Yankees generated local revenues of $217.8-million in 2001 while the Rays had a below-average $62.3-million and the Expos a woeful $9.8-million. Under the system, 20 percent of local revenues are shared, with high-revenue teams contributing to low-revenue teams. The owners propose sharing 50 percent of revenues with the money redistributed evenly to all teams. The players proposed sharing 22.5 percent but giving more of the money to the less lucrative teams. According to various estimates, the owners plan would shift about $298-million, the players plan about $228-million, leaving the sides about $70-million apart -- and a reasonable compromise theoretically in sight.

Q: Where do local revenues come from and why do the Yankees have so much more?

A: Ticket and concession money, sponsorships and TV and radio rights make up the bulk of local revenues. Teams in larger markets often generate larger rights fees for television and sponsorships, creating a wide disparity. New ballparks generally boost ticket, concession and sponsorship sales.

Q: How would increased revenue sharing affect the players? And why do they have a say in what the owners do with their money?

A: Simply, the big-market teams, which tend to sign higher-priced players, would have less money to spend and the smaller-market teams would have more. Revenue sharing is subject to negotiation because it impacts salaries. And the players want assurances the teams receiving the redistributed money will spend it on payroll. A $45-million minimum payroll has been discussed.

Q: What's a luxury tax?

A: Basically it is a penalty a team would pay for exceeding a set payroll level. The owners propose a 50 percent tax on the amount of payroll that exceeds $98-million. So if a team had a payroll of $118-million, exceeding the limit by $20-million, it would pay an additional $10-million in "tax." The idea is to make the big-market teams reluctant to spend excessively -- since they can't seem to police themselves. Naturally, the players don't like the concept, fearing it would be a de facto salary cap. They are concerned players will make less money because fewer large-market teams would be interested in signing them. There also could be a trickle-down effect because salaries are often set based on what similar players make. When the Yankees signed injury-plagued outfielder Rondell White to a two-year, $10-million contract, other players used that contract as a benchmark in arbitration and negotiations.

Q: Where would the tax money go?

A: Most likely into a commissioner's discretionary fund that could be used to prop up struggling teams or help teams get stadiums built.

Q: What role does contraction play in this?

A: Some believe commissioner Bud Selig's plan to eliminate teams is merely a negotiating ploy, that if he can scare the players into thinking 50 major-league jobs will be eliminated they might make some concessions. Selig insists he wants to eliminate teams for the health of the game. Some say Selig is claiming that certain teams are having severe financial problems and could face bankruptcy for the same reason, to create the appearance of financial doom and gloom under the current system.

Q: What else could be a factor?

A: Certainly the Fox network wants the season, especially the postseason, to be played, especially because it agreed to pay the owners the full amount of money this season whether there is a work stoppage or not. (Fox gets credit toward future payments if there is a work stoppage.) There is some thought the banks that finance most of the teams will push the owners to cut some kind of deal to make sure they keep getting their interest payments. If the negotiations stall, the owners could have an edge with the National Labor Relations Board because there is not only a Republican administration, but a former major-league owner, George W. Bush, in the White House.

Q: Why does it seem the owners and players don't trust one another?

A: The baseball labor battle has been going on for decades. Owners have contended from the beginning that salaries were out of control. In 1881, Chicago White Stockings owner Albert Spalding said: "Professional baseball is on the wane. Salaries must come down or the interest of the public must be increased in some way. If one or the other does not happen, bankruptcy stares every team in the face." Until the 1970s, players were bound to their teams by the "reserve clause," which essentially allowed teams to renew their contracts as long as they wanted with minimal increases in pay. That's why players such as Mickey Mantle or Bob Feller never became free agents. When union leader Marvin Miller organized the players in the 1970s, they began to win rights such as free agency and learned that sticking together was the key in the labor battle. They have developed into the strongest of the player unions. Acknowledging they had the advantages in the reserve-clause days, owners believe the tables now have tilted too far in the players direction. Owners claim most teams are losing money and that only high-revenue teams have a chance to be competitive.


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