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SBJ/January 14 - 20, 2002/Opinion
Critique of baseball finances lacks balance
Published January 14, 2002
Over the past several years, a number of officials in the commissioner's office (including me) have received communications from Professor Andrew Zimbalist proclaiming his neutrality as an observer of the economics of professional sports, specifically Major League Baseball.
Unfortunately, it appears that every four weeks or so Zimbalist produces a column for SportsBusiness Journal that retreats to the platitudes he embraced during his tenure as a paid consultant to two professional sports unions, including the Major League Baseball Players Association.
Zimbalist begins his most recent column ["MLB by the numbers, but who's buying?", Dec. 24] with a quotation from Donald Fehr, which goes without attribution. If Zimbalist is indeed neutral, one must question his decision to begin a commentary about baseball economics with a quote from the executive director of the MLBPA and the man who initially retained the professor's consulting services.
Big bids for purchase of Boston
Red Sox dont point to shared
prosperity for all teams.
Zimbalist proceeds to regurgitate a litany of arguments espoused by the players association to undermine the credibility of baseball's financial information which, by the way, has little to do with the real issue of collective bargaining: restoring competitive balance. He asserts that baseball must be healthy because certain former owners submitted bids in excess of $600 million for the Boston Red Sox despite the fact the club lost money on operations in 2001.
Zimbalist selectively ignores or chooses to dismiss the following issues in making his assertion:
Interest in the Boston Red Sox — not just one of the marquee teams in baseball, but one of the most storied franchises in all of professional sports — has no bearing whatsoever on the plight of such franchises as the Minnesota Twins, Montreal Expos, Tampa Bay Devil Rays, Kansas City Royals and others.
The Red Sox operating results for the period 1996 though 2000 (as disclosed in the Blue Ribbon Panel Report) were much more positive than those for 2001.
The Red Sox sale involved substantial assets other than the franchise, including the ballpark and associated real estate and 80 percent of the New England Sports Network (NESN).
As to NESN, Zimbalist asserts that 80 percent of that entity should be assigned a value of $140 million in evaluating the bids, yet he offers no justification for that figure. Anyone with a fundamental knowledge of sports broadcasting knows that it is ludicrous to assume that one could even purchase a controlling interest in a premier regional sports network such as NESN, which has an ongoing relationship with the Red Sox as well as with the Boston Bruins and other prime local professional and amateur sports properties and events, for $140 million.
Zimbalist's use of this value is inconsistent with his recognition later in his commentary of the value associated with the synergies generated by common ownership of a club and a broadcasting entity.
Without cause, Zimbalist asserts there is "bloating" in Major League Baseball's central offices based on a $6 million variation between the central revenue received and the central fund distributions actually made to the clubs. As an initial matter, more than $2 million per club is attributable to the contribution to the Major League Baseball Players Benefit Plan, which provides pension and health and welfare benefits to the players. Also included are substantial investments in baseball's Internet business as well as moneys withheld to deal with the uncertainties surrounding baseball's current labor situation.
There is no "bloating" in the central offices. In fact, in terms of head count, Major League Baseball has, by far, the smallest central office operation among the three major professional sports, more than 30 percent less than the NBA and NFL.
Although Zimbalist is incorrect and misleading in many ways, he does get a fundamental point correct when he writes: "Any serious examination of the game's economics begins with individual franchise financial statements (each around 15 pages in length). After that, one would want to look at payroll forms and financial ledgers detailing certain transactions." Because Zimbalist has not had access to such detailed information in more than a decade, all of his comments about the economics of baseball are merely uninformed speculation.
Zimbalist closes his thinly veiled partisan attack by allowing that the "point is not to deny that many baseball teams might be losing money" nor "is it to argue that baseball does not have economic woes." In fact, he states, "Both are true."
He must, therefore, be only quibbling about the extent of the losses or woes.
Had he truly wished to address the real reasons why meaningful changes need to be negotiated in the industry's collective-bargaining agreement, he would have more closely followed the text of Commissioner Bud Selig's comments before the House Judiciary Committee. The commissioner pointed out that currently too few clubs can objectively offer their fans a real "hope and faith" for competing year in and year out for a championship.
The professor should argue in behalf of the commissioner's appeal to make the game more competitive, entertaining and affordable for fans, rather than focus on the individual numbers, about which he has no direct knowledge. The commissioner has never suggested that fans feel sorry for the financial plight of owners, rather that they be concerned that the current plight of clubs greatly affects the product on the field.
The professor's comments should be treated as transparently as they were presented. His opinions are those of the players association and nothing more and are intended to move the debate away from the issue of competitive balance.
I would hope in the future that when SportsBusiness Journal publishes columns from so-called experts, it practices full disclosure and informs its readers of Zimbalist's history as a former paid consultant to the players association.
Rob Manfred is executive vice president, labor for Major League Baseball.