Bad Rug Bud and the Contraction Faction

Amid the most exciting (and most watched) World Series in a decade, Major League Baseball Commissioner Bud Selig spent most of his time undermining his product’s signature event. Selig announced that baseball’s owners had come up with a plan to eliminate two of its least financially viable teams, effective for the 2002 season. On Tuesday, the owners ratified Bud’s contraction plan, though they wouldn’t reveal for which two teams the bell has tolled. The Montreal Expos and the Minnesota Twins are the two leading candidates, with the two Flordia expansion teams, the Florida Marlins and the Tampa Bay Devil Rays, also in danger. Under the plan, the rest of the teams would buy out the two teams–at a very generous price–and the players would be dispersed, probably via a reverse-order draft.

There’s an easy way to tell when Bud Selig is lying: his lips move. Bad Rug Bud has the negative charisma of either a flatulent leper or a used car salesman, which is what he was in his prior occupation before he became owner of the Milwaukee Brewers. He’s the man who killed the World Series seven years ago, and he’s poised to perpetrate the most harmful scam in Major League history. If he and his fellow owners succeed, they will have brought a bigger disgrace to baseball than the Black Sox scandal.

Contraction is a ham-fisted ploy by Bad Rug Bud & Co. to fire the opening shots in the latest showdown between the owners and the Major League Baseball Players Association. The Collective Bargaining Agreement expired at midnight on Wednesday, and the owners seem to feel that coming to the table having already voted to contract, they will be able to–at the very least–extract major concessions out of the players in exchange for “preserving” major league jobs via roster expansion.

When Bad Rug Bud says that the markets they’re contracting are those that aren’t economically viable, what he means is that the teams in those markets have been unable to extort money from taxpayers to build publicly financed stadiums. This is why Minnesota, a team with the richest owner in baseball, a team with a metro population of 3 million, is not “economically viable,” while Bud’s own Brewers, with a metro population of 1.7 million but a shiny new ballpark, are. Don’t think Bud himself doesn’t have something to gain by the disappearance of another team in his geographic region, either.

Let’s back up a bit. Selig and the other owners have long claimed that three-fourths (or more) of all major league teams are losing money. A so-called Blue Ribbon Panel–commissioned by MLB and including such luminaries as former Federal Reserve Chairman Paul Volcker, former Senator George Mitchell, and political columnist George Will–reported last year that only three teams–the Yankees, Indians, and Rockies, showed an operating profit for the period of 1995-1999.

Can you say “bullshit,” boys and girls? This is an outright lie fueled by public inaccountability and accounting trickery. The finances of major league teams are not fully disclosed to the public; figures are leaked only for PR purposes, and often strongly at odds with outside economic experts’ estimates. In the case of the Blue-Ribbon Panel, the numbers came from the owners themselves, not from any independent audits.

Corporate ownership of teams allows profits in one area to be repositioned as debt through creative accounting. As MLB’s current president, Paul Beeston put it a couple years ago, “Under generally acccepted acocunting principles, I can turn a $4 million profit into a $2 million loss, and I can get every national accounting firm to agree with me.” Other completely legal accounting shenanigans take place as well. For example, media-owned teams play less-than-market value for the services of their partners. The Tribune Company owns both the Chicago Cubs and cable TV station WGN, which broadcasts the Cubs. WGN underpays the Cubs for broadcast rights “by $20 million or more” according to economist Andrew Zimbalist, the most prominent critic of MLB’s financial chicanery. This allows the Cubs to report lower revenues. Another example is the St. Louis Cardinals. When they were owned by the brewing company Anheuser-Busch, all of the concessions for beer sales at the ballpark (Busch Stadium) went to the parent company, not the ballclub.

Don’t get me wrong, baseball does have its share of financial ills. The revenue disparity between the richest and pooerest teams needs to be addressed. But contraction has very little chance of solving the financial woes. Between the high cost of buying out teams and the legal fees which will arise from the broken contracts, cheaper and more efficient solutions have to be found.

But contraction is far from a done deal just because the owners have voted. Suffice it to say that in the coming months, this is going to get capital-U Ugly, uglier than Bad Rug Bud himself. The owners are going to get hit on this from all sides:

1) For starters, there’s the small matter of the players’ union, the MLBPA, which trounces the owners every time the two sides go to battle. The owners seem to think, as one post on Baseball Primer put it, that “fans will blame the players for any lock-out/strike, no matter how transparent the owners’ positions are, and that will be enough to prevail.” The MLBPA, the strongest and most successful union in the history of organized labor, always hires the better lawyers and economists, cuts through the transparent bullshit perpetrated by the owners, and has the law firmly on their side. The owners always end up caving in because they’re making too much money to put up with a work stoppage for very long.

2) Members of Congress will undoubtedly threaten to repeal baseball’s anti-trust exemption. Baseball, unique to all sports, holds an anti-trust exemption which dates back to 1922; it basically allows baseball to be run as a monopoly. Because of it, franchise owners cannot sue for restraint of trade when the league won’t allow them to move into a more profitable market. Moving a struggling team like the Expos to the D.C. area would make much more sense than folding them, but MLB actually putting them there means that no future team would be able to blackmail their taxpayers into the Field of Sceams scenario (“Unless you build it, they will go”). Threats to end the anti-trust exemption rear their head whenever the owners get too far out of line, and they’re clearly out of line here. As soon as someone threatens a congressional hearing– which would include opening teams’ financial records to the public–to end the exemption, Bud’s boys are probably going to start losing interest. Note that no franchise shift has occurred since the last version of the Washington Senators left D.C. for Texas.

3) The municipalities of the doomed teams will be able to sue for breach of contract on stadium leases.

4) The public is fed up with the the transparent bullshit of baseball owners and wants to hear none of this battle between billionaires during a time of economic hardship and national crisis.

For what it’s worth, I do believe Bud and the other owners will lose this battle, and lose it badly. They’re about to be stomped like a narc at a biker rally. The MLBPA outsmarts the owners every single time. Congress doesn’t exactly have smarts on its side, but it does have serious power to make the owners lives miserable. When politiicans and lawyers are the good guys, you know this isn’t going to be pretty. But when even the half-witted brother of the current President can see what’s wrong with Bud’s plan, you know the owners are grasping at straws.

I could go on, but instead I’ve compiled a reading list of some eloquent and informative voices regarding contraction and the finances of major league baseball. This is a complicated issue, and it certainly helps to read several differrent sources to gain a handle on things. My recommendations:

• The Washington Post’s Thomas Boswell has written the best piece, for my money, on the topic. A longtime proponent of a D.C. franchise, Boswell points out the owners’ flawed logic when it comes to contraction vs. relocation.

• Baseball Prospectus’s Keith Law, writing for ESPN. See also BP’s Gary Huckaby and Joe Sheehan.

• ESPN’s Rob Neyer explores the possible consequences of expanding major league rosters, while Jim Caple calls this “ownership’s most despicable act in sports history.”

• An early criticism of the Blue Ribbon Panel, when its findings were made public last summer.

• Economist Andrew Zimbalist’s essay on competitive imbalance and revenue disparity is required reading to understand where Bud is coming from on the general financial state of the game. This PDF file requires Adobe Acrobat Reader to view.

Forbes Magazine’s Annual Baseball Franchise Valuations. Note that the Mets are the second most valuable franchise by virtue of being located in the largest media market. If another team desired to relocate to that market and increase its revenues (while presumably decreasing those of the two existing New York teams), they would be prevented from doing so by the anti-trust exemption.

A piece in the Minneapolis-St. Paul Star Tribune explores what Bud Selig himself has to gain by the Twins’ contraction. Selig is a partial owner of the Milwaukee Brewers; his share of the team is in a blind trust while he’s commissioner. His daughter, Wendy Selig-Prieb operates the team. Milwaukee is a smaller market than Minnesota, in the same general geographic region, but the Brewers recently received a new park, so by Bud’s logic, the Brewers are more financially viable than the Twins. And they could certainly benefit with a larger market… say, one that included Minnesota, perhaps. You can see where this is going. Can you say “conflict of interest”?

*Sigh* It’s going to be a long winter…

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