In 1971 Cubs rookie pitcher Bill Bonham, after failing to retire any of the four Cardinals he faced in his first major league appearance, said, "I guess I was due for a bad outing." In 1982 the Cardinals' Kelly Paris, after scoring the winning run in his first major league game, said, "I'd have to say, looking back, this is the high point of my career." Keeping one's perspective is important in baseball.
Two years ago Commissioner Bud Selig appointed a Blue Ribbon Panel to put baseball's economic condition in perspective. The panel studied the increasing revenue disparities among the teams and the impact of them on competitive balance. Recently the four independent members (Richard Levin, president of Yale; Paul Volcker, former chairman of the Federal Reserve Board; former senator George Mitchell, and this columnist) issued their report. All four had begun with varying degrees of skepticism about the severity of baseball's problems. They ended, their skepticism dispelled, recommending substantial changes commensurate with the game's worsening competitive-balance problem. Concerning which:
In the five seasons since the 1994 strike, there have been 158 postseason games, all of them won by teams in the top two payroll quartiles. All World Series games have been won by teams in the top quartile. Last year the Yankees' payroll surpassed the sum of the five lowest-payroll clubs. Between 1995 and 1999, the average payroll in the top revenue quartile increased $28 million; the average payroll in the bottom quartile increased only $4 million. On opening day the $15.7 million salary of the highest-paid player (the Dodgers' Kevin Brown) was almost as big as the Minnesota Twins' payroll.
Payroll disparities reflect revenue disparities. The Yankees' local revenues were $11 million higher than the combined local revenues of six teams. Since 1995 local revenues have increased an average of $54 million for top-quartile teams, $8 million for bottom-quartile teams. Between 1995 and 1999 the ratio between the highest and lowest teams' local revenues has soared from 5.5:1 to 14.7:1. The Yankees, whose $112 million payroll is larger than the combined payrolls of the five lowest-payroll teams, receive more local broadcasting revenues than the five American League central teams (White Sox, Indians, Tigers, Royals, Twins) combined.
Some say baseball can solve its problems by simply increasing total revenues. They misunderstand the perverse dynamic of baseball's prosperity. Under the game's current economic arrangements, prosperity--gross revenues almost doubled between 1995 and 1999--exacerbates competitive imbalance. In 1995 top-quartile teams spent about twice as much as bottom-quartile teams on players; in 1999 they spent about three times as much.
Some say that the appreciation of franchise values confirms baseball's economic health. But of the 13 teams sold in the past 20 years, the appreciation of five was considerably less than their cumulative operating losses. The appreciation of four represented only a modest return--less than the normal rate for invested capital. The substantial appreciation of the four other teams was caused by actual or planned new ballparks.
Competitive balance will exist when every well-run team has a regularly recurring reasonable hope of reaching postseason play. The panel's recommended path to this involves recognizing that "local revenues" is a misnomer. This is so because no revenues result exclusively from the sale of a local product: it takes two teams to have game. A sports league is a mechanism for producing the rough equality necessary for interesting competition. The panel believes baseball's mechanism should include, among other things: The sharing of at least 40 percent, and perhaps 50 percent, of all so-called local revenues. A 50 percent tax on payrolls above $84 million. And unequal distribution of a "commissioner's pool" of central funds to poorer teams, but only to those that reach a payroll minimum of $40 million.
Recently in the NFL the ratio of the highest seven payrolls to the lowest seven has been less than 1.5:1. In the NBA the comparable figure is 1.75:1. The panel's plan would produce a ratio between the average payrolls of the top- and bottom-quartile teams of approximately 2:1. Today's ratio is more than 3.5:1.
Some of the panel's recommendations require the players' consent. However, the players will note that the payroll ceiling is porous (a 50 percent tax will not fully deter spending by the richest teams) but the floor is firm: no club could tell its fans it has chosen to forgo an infusion of central funds rather than increase its payroll to $40 million. As a result, under the panel's recommendations there would be a redistribution of payroll spending, but perhaps no net reduction in spending on players. Most players probably would be in a better financial and competitive position.
A team may fleetingly defy baseball's grim paradigm, competing well with a small payroll. The Reds did last year. The White Sox are doing so now. Nevertheless, most players know in March that they have no realistic hope of playing in October. And the players should understand that the alternative to reformed economic rules is not the status quo: there is growing support among owners for contraction--closing two weak teams.
Baseball has a history of chronic losers. But the sport used to have the country's undivided attention from April to October. Today, when the first NFL preseason game comes just six weeks after the last NBA championship game, competition for sports fans' attention and dollars is intense.
"I'm not tired," said a struggling pitcher when his manager, Casey Stengel, reached the mound. "Well, I'm tired of you," said Stengel, who could be succinct. Fans are tired of competitive imbalance. Owners and players say they are, too. Fortunately, baseball is not Bangladesh. It can get well by deciding to get well--by sensibly allocating its growing resources of revenue and talent. The owners especially should understand that their response to the panel's recommendations will determine, for a long time, the credibility of their chronic complaints about baseball's condition.