This week in “Last Week in BizBall“, Rob Manfred visits Harvard to discuss collective bargaining, White Sox owner Jerry Reinsdorf on MLB franchise values, update on the Cubs political battle over installation of advertising in the Wrigley Field bleachers, update on the future of the Portland Beavers franchise, will Bryce Harper command more money than Stephen Strasburg?, questions about Chuck Greenberg’s group financial ability to operate the Texas Rangers and ratings for MLB on Fox.
ROB MANFRED DISCUSSES COLLECTIVE BARGAINING
This doesn’t qualify as happening LWIB but I stumbled on to it only last week and it is too interesting not to mention. On March 26, Harvard Law School held a symposium titled “Labor Uncertainty in Sports: Operating in the Shadow of Upcoming Collective Bargaining Negotiations”. (HT Harvard Sports Analysis Collective) One of the speakers was Rob Manfred, Executive Vice President for Labor Relations, MLB. Mr. Manfred’s speech is available for viewing here. Mr. Manfred explains why a salary cap is not a good idea for MLB (in a nutshell, due to the gate driven model of MLB the disparities in local revenues are too great). He also explains how in lieu of a salary cap the Competitive Balance Tax and local revenue sharing have contributed to competitive balance in MLB. As an aside, he mentions that the Yankees revenue sharing payment last season was $140 million. Mr. Manfred asserts that competitive balance is the most important issue facing all the professional sports leagues and their players unions. He argues that without competitive balance the leagues become uninteresting to fans. It is on the issue of competitive balance that Mr. Manfred expresses his concerns about the current state of how “entry level talent” is acquired in MLB. He argues that large revenue franchises are increasingly gaining the upper hand in the Rule 4 draft (signability), the international free agent market and in acquiring veteran Japanese players via the “posting” system. Mr. Manfred discusses the importance of negotiating mandatory slotting and a worldwide draft with the MLBPA to address these problems. (the current CBA expires in Dec 11) Mr. Manfred notes that all of the “big 4” CBAs expire next year and that the respective leagues ability to work with new leadership at the NFLPA, MLBPA and NHLPA is an unknown of potentially vital importance. It is a good sign for fans of MLB that Mr. Manfred expresses much admiration and respect for MLBPA ED Michael Weiner. Mr. Manfred and Mr. Weiner worked “across the table” from one another during the 02 and 06 MLB CBA negotiations. Mr. Weiner concludes his speech by expressing his strongly held opposition to the Federal Government becoming involved in any of the “big 4” CBA negotiations next year. He fears that a work stoppage in one or more of the “big 4” will lead to public pressure on President Obama to become involved. He characterizes the Clinton administration’s intervention during the 94 MLB strike as a “disaster”. Mr. Manfred argues that the Federal Government is ineffective in helping to resolve labour disputes in professional sports because they don’t understand the complexities of the industry.
Unfortunately Mr. Manfred is not asked to address the opinions of some who argue that one of the real advantages to MLB of the CBT and local revenue sharing is that they also serve as a drag on player compensation. As well, his assertion that large revenue franchises have gained the upper hand in acquiring “entry level talent” could be challenged. Notable recent signings by small revenue teams of much sought international free agents include Aroldis Chapman (Reds), Adeiny Hechavarria (Jays) and Michael Ynoa (A’s). Many argue that MLB’s interest in a worldwide draft and mandatory slotting are a result of the escalating signing bonuses being paid to both international free agents and drafted amateurs, not competitive balance. Nonetheless the video is well worth viewing, providing some clear indications of what MLB’s priorities are in the upcoming CBA negotiations.
SELECT READ MORE TO SEE REINSDORF ON FRANCHISE VALUES, CUBS AND BLEACHER ADS, A PORTLAND BEAVERS UPDATE, BRYCE HARPER COULD BE VERY RICH, GREENBERG GROUP MIGHT NOT BE AS CAPITALIZED AS SOME THINK, AND MLB ON FOX RATINGS
JERRY REINSDORF ON FRANCHISE VALUES
Ed Sherman of Crain’s Chicago Business passed along some recent comments from long time White Sox owner Jerry Reinsdorf. On the subject of franchise values in professional sports Mr. Reinsdorf remarked;
It’s the greater fool theory. Eventually, you run out of greater fools. We haven’t reached that point yet. For a long time, franchise values went up across the board. Now what you’re seeing is value is depending more and more on market size. Smaller markets with lower revenues are not selling for as much as the bigger markets with higher revenues.
I think eventually, people are going to do something unheard of in sports when they go to buy a team: They’re going to look at net income.
The rule of thumb in baseball for the last few years is that a team is worth three times gross income without regard to what its net is. I’ve never been able to understand that. We’re in a different world as far as financing is concerned. I think more and more the profitability of a team is going to have an impact on the value.
CUBS WIN A VICTORY IN BATTLE OVER WRIGLEY FIELD BLEACHER AD
Mike Colias reported for Crain’s Chicago Business that Cubs owner Tom Ricketts won the approval of the Commission on Chicago Landmarks to erect an illuminated, 60 foot high Toyota sign in the Wrigley Field left field bleachers. Toyota will reportedly pay the Cubs $2 million per year for the signage. However the political battle over the signage may not yet be over. Andrew M. Harris reported for Bloomberg;
While the panel approved a Toyota sign to go atop Wrigley Field’s left-field bleachers, local political tradition may put the brakes on the Cubs and the automaker’s plans. Chicago aldermen defer to each other on zoning matters, and Tom Tunney, who represents the city’s Wrigleyville community, opposes the nearly 60-foot tall advertisement.
“It is not in keeping with the character of the neighborhood,” Tunney told the landmarks commission. He urged the Cubs’ new owners, led by Incapital LLC chairman Thomas S. Ricketts, to “step back” and consider developing a master plan for ballpark signage rather than a piecemeal approach.
WHAT NEXT FOR THE PORTLAND BEAVERS FRANCHISE?
The Portland Beavers will move after this season. Remaining in Portland beyond this season is not an option because the Beavers ballpark (PGE Park) is being converted to a soccer only facility to accommodate an MLS franchise. Ballpark Digest provided an update on speculation concerning the near and long-term fortunes of the franchise. According to the report the Beavers franchise is for sale and there are two potential buyers. One is the Beavers parent club the San Diego Padres who are evidently interested in eventually locating the franchise in North County. (Last year the Biz of Baseball published a report on the trend of major league clubs acquiring minor league affiliates, it is here) The second potential buyer is reportedly an El Paso group. Both scenarios are dependent upon a new ballpark being constructed. In the short term, Ballpark Digest reports that the Beavers are likely bound for Tucson.
RECORD DOLLARS AHEAD FOR BRYCE HARPER?
Last year’s number one pick in the Rule 4 draft, Stephen Strasburg, commanded a record amount of money for an amateur player when he signed with the Washington Nationals. It may be déja vu all over again when the Nationals are expected to draft C Bryce Harper #1 overall next month. The Executive Editor of Baseball America, Jim Callis, wrote LWIB;
Stephen Strasburg set new standards for the highest bonus ($7.5 million) and largest guarantee (a $15.1 million major league contract) after Washington made him the top choice in 2009. Rest assured that the Boras Corp., which advises Harper and also represents Strasburg, will be looking to top those numbers.
Scouts considered Strasburg a better prospect than Harper, arguably the best ever in draft annals, and he'll require considerably less minor league seasoning. But Harper also possesses more leverage than Strasburg did.
Had he declined to sign with the Nationals, Strasburg would have re-entered the draft as a 22-year-old senior and could have only maintained, rather than boosted, his value. Harper could go back into the 2011 draft as an 18-year-old sophomore, and he could transfer to an NCAA Division I team and conquer better competition.
Look for Harper to sign minutes before the Aug. 16 deadline expires, somewhere between $10 million and $12 million.
If Mr. Callis is correct and Harper does receive a signing bonus in excess of Strasburg’s, expect more complaining over excessive “rookie compensation”. Mr. Callis’ comparison of the vastly different situations faced by Strasburg and Harper in determining when and if they should sign brought to mind this informative primer on the draft written by Darren Heitner of the Sports Agent Blog.
GREENBERG OWNERSHIP GROUP UNDER-CAPITALIZED?
Will the group led by Chuck Greenberg ever own the Texas Rangers? I won’t pretend to know but LWIB Tom Van Riper of Forbes speculated that if and when they do there are rumours concerning their financial ability to operate the franchise. “….Absent some additional financing, a Greenberg ownership could well turn the Rangers into a second-tier, low payroll club for several years, some think, as they securitize revenue streams like broadcast rights and concessions to raise cash.”
RATINGS FOR MLB ON FOX
The Sports Media Watch blog continues to monitor ratings for MLB on Fox. (The report is prior to the Yankees/Red Sox game this past Saturday)
As a regular season attraction, Major League Baseball appears to be edging closer to the NHL than the NBA.
Regional MLB action featuring Mets/Phillies drew a 1.4 final rating on FOX last Saturday, down 13% from coverage featuring Mets/Phillies last year (1.6) and down 30% from coverage featuring Yankees/Indians in '08 (2.0).
The 1.4 rating is the lowest of the season for baseball on FOX.
Three of the four MLB telecasts on FOX this season have drawn less than a 2.0 rating.
Dating back to May 2008, 32 of the last 50 regular season MLB telecasts on FOX (64%) have drawn less than a 2.0, with twelve drawing a 1.5 or lower (24%). During the same time period, 14 of 33 regular season NBA games on ABC have drawn less than a 2.0 (42%), with four drawing a 1.5 or lower (12%).
Pete Toms is senior writer for the Business of Sports Network, most notably, The Biz of Baseball. He looks forward to your comments and can be contacted through The Biz of Baseball.
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