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SBJ/May 22 - 28, 2006/This Weeks News
MLB: Clubs using revenue sharing to get better
Published May 22, 2006
FROM THE MLB OWNERS MEETINGS
MLB management, preparing for a potential battle this summer with the players’ union over revenue-sharing provisions, has completed an internal study it believes makes a strong case that revenue-sharing recipients are using that money to improve their clubs.
Baseball already monitors revenue-sharing proceeds on a year-to-year basis, but the latest effort tracked the entire cycle of the current collective-bargaining agreement, signed in 2002 and set to expire this year. The results, presented to owners and MLB’s executive committee last week, found many regular recipients jumping sharply in Baseball America’s annual ranking of MLB clubs’ farm systems.
The Florida Marlins, a frequent and large recipient of revenue-sharing money, jumped from No. 14 in last year’s rankings to No. 3 this year, in large part due to an offseason fire sale of top major league talent. The Arizona Diamondbacks, owners of the 13th best farm system last year and the game’s second worst in 2001, now have the top-graded system. The Milwaukee Brewers, ranked last in 2001, now are No. 5 and ranked No. 1 two years ago, with prospects such as Richie Weeks and Prince Fielder now making an impact at the major league level.
The Kansas City Royals, one of key targets for revenue-sharing skeptics given their three 100-loss seasons in the current CBA cycle, have not made a similar ascent, with its minor-league system remaining in baseball’s bottom third for four of the last five years.
Baseball America is widely recognized as the industry leader in independently monitoring minor league talent.
No revenue-sharing recipient makes a dollar-for-dollar investment into their major league payroll. Rather, the CBA calls for “each club to use its revenue-sharing receipts in an effort to improve its performance on the field,” a notion management believes can manifest itself in minor league investment, debt reduction, new ballparks and several other similar initiatives.
MLB’s findings also indicated that the league’s 16 recipients of revenue sharing from 2003-05 outspent their total intake of central fund and revenue-sharing money on major league payroll and player development by a total of $1.6 billion.
“We’re gratified the smaller markets have made real strides. The Baseball America rankings of farm systems suggests parity is being built from the ground up,” said MLB President Bob DuPuy.
Whether the union, which has also seen the findings, buys into that notion remains to be seen. Union chief Donald Fehr has been cautious at best in his public comments regarding revenue sharing, but has said the issue requires serious examination.
Management will be seeking alterations to the current revenue-sharing system, now pegged at 34 percent of locally generated net revenue, but it has not delineated its specific goals. Several small-market clubs want to push the percentage significantly higher.
“There are inequities in the system that need to be addressed,” DuPuy said.
TV talks continue: MLB last week approved three-year extensions to its out-of-market TV contracts with DirecTV, Dish Network and In Demand, each of which carries the sport’s MLB Extra Innings package. Efforts to land a network TV contract, however, remain on an uncertain course. Fox’s six-year, $2.6 billion contract expires after this season, and the network refuses to sign a deal that would repeat the $225 million in write-downs experienced from its baseball coverage since 2000.
“We are not prepared to sign a deal that loses money and we are prepared to walk away,” said News Corp. President Peter Chernin.
MLB officials branded such downbeat talk — mirrored recently by NBC — as simple posturing. “We still have significant interest from two, maybe three, networks,” said a senior MLB executive. “They are just trying to warn people off through public comment.”
Lerners approved: As expected, MLB owners unanimously approved the $450 million sale of the league-owned Washington Nationals to a group led by Maryland developer Ted Lerner. MLB had owned the Montreal Expos-turned-Nationals since early 2002, and the vote brought a deeply satisfying end for MLB Commissioner Bud Selig.
“Thankfully, nobody has to ask me anymore about what’s going to happen to Washington. By the end, I was giving myself lectures,” Selig said of the deeply protracted process to move the club, sign a stadium deal and pick the new owner.