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SBJ/June 8 - 14, 1998/No Topic Name
In MLB, it's pay not play to win
Published June 8, 1998
The phone in David Dombrowski's office is ringing again, chirping incessantly, as it seems it has been without pause for seven months.
"I have to take this," says Dombrowski, general manager of the flea market that doubles as home to baseball's defending champions. In an instant, he switches his focus to expunging Mike Piazza from the Florida Marlins' incredible shrinking payroll.
The encyclopedias say that vultures are quiet when they feed, that they circle and then swoop and then eat and then leave.
Not so in baseball. In baseball, they ring your phone first.
The Astros took Moises Alou's $5 million salary off the Marlins hands. They're in first place. The Padres took Kevin Brown. They're in first place.
The Yankees needed a second baseman and added Chuck Knoblauch from the impoverished Twins. They're bulletproof.
From his office at Pro Player Stadium, where the silence of departed fans echoes in the night, Dombrowski wonders out loud whether this is what's best for baseball's food chain fewer teams feeding, more fed upon, with the outcome as predictable as the vulture's eventual feast.
"The biggest question facing this game right now is, 'How important is competitive balance?'" said Dombrowski, who has lived on both sides of the economic street. "If competitive balance isn't important, well, then maybe everything is fine. But, if competitive balance is important, then some changes need to be made. Until we've answered that question, you can't gauge anything. That's the real key question."
It is a question for those who hold the rudder of baseball's future.
Revenue sharing, billed as the funnel that would narrow gaps between the sport's haves and have nots, has done little in its first two years to balance the playing field.
The evidence, as taken from salary data supplied by the Society of American Baseball Research, with adjustments made to project postseason entrants for 1994:
The team with the highest payroll has made the playoffs, or was on pace to make it, each of the last seven seasons. The team with the second highest payroll has made it, or was on pace, in six of the last seven seasons.
In the last three seasons, teams that ranked in the top four in payroll made the postseason 91.7 percent of the time. Seventy-nine percent of the teams that made the playoffs during that time ranked in the top 10 in payroll. Only 8.3 percent of those making the playoffs ranked in the bottom 10.
The median payroll in baseball, which flowed between $32 million and $33 million for the five seasons before revenue sharing began to kick in, jumped $7 million last year. Unfortunately for competitive balance, teams that made the playoffs last year spent $10 million more than those in the playoffs had in 1996. So the increase did not meet demand.
"Revenue sharing was a big step in the right direction," said Paul Beeston, the former Toronto Blue Jays president who now serves as Major League Baseball's chief operating officer (see Beeston profile, page 1). "But it isn't a panacea. The concept was a good one. But then the big clubs got even bigger.
"Here's what you've got. The big market teams are generating enough revenue now that the whole bar is raised. The ones in trouble are a little better off, but the gap has widened. So, our challenge is to close that gap. It's a Rubik's Cube. I'm not sure we've got an answer. But we've got to work toward generating one."
It needs to come soon.
Orioles aside, all indications are that baseball is on its way to another October payroll parade. As May closed, four of baseball's five highest paying clubs the Yankees, Braves, Indians and Rangers were on pace to win their divisions. The Mets, who were leading the NL wild card race, also fit into the top five after adding Mike Piazza to their tab. Boston, which ranked eighth in pay when the season opened, was on track toward the AL wild card bid.
At the end of May, 13 clubs had more wins than losses. All of them ranked in the top 16 in salary.
Already a predictor of success, salary is on its way to becoming a guarantor.
"Until 1993 and '94, you didn't find a serious correlation between payroll and performance," said Andrew Zimbalist, a Smith College economics professor who has emerged as the pre-eminent watcher of baseball's bottom line. "The big city teams weren't dominating. But you're seeing it now more and more.
"What will happen to long-term interest in baseball if this continues and dynasties reappear? Fans in New York and L.A. will be real happy, but that's not going to carry the day for the game as a whole. If you go through a few years more of imbalance, it's going to wear on the game. ...Competitive balance must be addressed."
It hasn't always been this way. In 1991, only one of baseball's four division winners, the Blue Jays, ranked in the top 10 in payroll. And they ranked ninth at $29.7 million. The other three teams in the playoffs, the Twins, Pirates and Braves, all had player costs between $20 million and $25 million.
The game's economics were dominated by the middle class, with 13 clubs spending between $20 million and $30 million. Oakland, with a $39 million payroll, didn't make the postseason.
Before that, the gap was even slimmer. Boston and Oakland both were in the top five in payroll in 1990 when they made the playoffs. But neither Pittsburgh nor Cincinnati, the NL's two representatives that year, ranked in the top 15 in salary. The spread between the Reds, who ranked 18th, and Red Sox, who were second: about $7 million. This season, that same $7 million is the difference between the two highest paying teams, the Orioles and Yankees. The gap between the second-ranked payroll and the 18th, which belongs to the White Sox: $27 million.
Inflation had a hand in the escalation. But not as much as other factors, Zimbalist and others within baseball agree.
Expansion has played a prominent role, with the dilution of the talent base an addition of 100 big leaguers in the last five years widening the gap between the game's elite players and its rank-and-file. Top players impact the game more now and are easier to pick out, so when George Steinbrenner throws his dart, he's more likely to hit the board.
The increased cost of signing amateurs, both at home and abroad, also has worked to forge the link between spending and success.
"We had $2 million to spend on our entire draft last year," said Astros general manager Gerry Hunsicker. "It doesn't take a math major to figure out that once you've spent $1 million to sign your first pick, it doesn't leave much for anyone else."
The growth of arbitration awards figures in, too. When the Expos were cutting salary in the early '90s, they typically were holding on to players until they were in their fifth year one season short of free agency. Now, a club might trade a player after his third year, when he becomes eligible for arbitration, for fear that his salary might jump from $500,000 to $4 million creating in effect a new class of free agents.
"There's more opportunity to acquire players now," Dombrowski said, "if you're in position to pay the salaries."
Revenue sharing and the luxury tax, in tandem, were meant to put more clubs in a position to spend and to reduce the tendency for a handful to spend exorbitantly.
Thus far, they've created more resentment than significant parity.
Some clubs that are receiving money, like the Expos and Pirates, have elected to keep their payroll about $30 million short of the major league median rather than applying the transfer payment to salaries. That's brought on complaints from a segment of owners who believe the game's new welfare system is being abused by the bottom-feeders. Orioles owner Peter Angelos, for one, has said he'd like to see the leagues control how teams spend the payments, or set up a superfund to help finance new stadiums in troubled markets.
There's also growing sentiment that those who are floundering should move.
"Our industry has made a step forward with [revenue sharing], but I don't think any of us are pleased with the thought of putting money into a black hole," said Colorado Rockies owner Jerry McMorris, who as one of the game's top revenue producers expects to contribute nearly $10 million to the pool this season.
Those who have used the money to bolster payroll, like the Twins and Royals, have found that operating in the $30 million range, as they can thanks to revenue sharing, still hasn't made them competitive. The current plan calls for the transfer of at least $70 million from large producers to small when revenue sharing is implemented in full after the 2000 season.
"That sum, while it sounds impressive, is too small to even make a dent [in competitive imbalance]," Zimbalist said.
That realization has those who run baseball left with a perilous problem. Getting the payers to pay more will take a stick that even Beeston, who is both popular and respected among the owners, may not have in his bag. Any attempt to corral spending could lead to a labor war that the sport would not survive.
Somewhere outside of those two obvious, but likely unreachable, remedies, baseball must find a way to narrow its caverns.
Faced with that dilemma, Beeston likes to point to an unrelated bit of advice he once got from Rusty Rose, who is in the process of selling the Texas Rangers.
"I look at it as the Rusty Rose pie theory," Beeston said. "He told me that in his first 20 years of business, he was out fighting for the biggest piece of a small pie. But then he realized that what he was after was a small piece of a bigger pie, and that that would be bigger and better for everybody."