ST. LOUIS – So long as baseball’s revenue continues to grow at the astronomical rate the sport’s seers claim, the new collective-bargaining agreement announced Tuesday will make the poor richer and the rich a lot richer.
Though Major League Baseball and the MLB Players Association said the changes from the previous contract were small, some of the new rules in the record five-year deal could have significant effects on the game’s competitive balance.
The starkest change came in the distribution of money from large-market teams to those in small markets. There are two components to what is widely known as revenue sharing: the Central Fund (of which each team gets an equal slice, around $33 million) and the dispersal of net revenues.
Every team will contribute 31 percent of its net local revenues – money made through local television contracts and other entities – to a pool that then gets redistributed to small-market teams with poor revenue streams. In the past, large-market teams paid 40 percent while small-market teams paid 48 percent.
Because of how the previous contract was written, some of the small-market teams found there was a point at which they could stop spending money and still profit, taking advantage of the revenue-sharing system. What the flat tax expects to do is give each team incentive to drive its local revenues, knowing that a smaller percentage will come from other teams.
The largest markets, however, stand to benefit most from the rule change, so long as revenues continue to grow as baseball expects. Say, for example, the New York Yankees make $300 million locally next season, while the Minnesota Twins make $125 million. Previously, the Yankees would have paid $120 million to the pot and the Twins $60 million. Now, the Yankees would owe $93 million and the Twins $38.8 million, a decrease of $27 million for New York and $21.2 million for Minnesota. Should New York or Boston or Los Angeles’ revenues grow appreciably, those teams would benefit the most from the new contract.
For what it’s worth, the language in the contract, officials said, includes revisions to the mandates that small-market teams spend all their revenue-sharing money “to improve on-field performance.” How strenuously it will be enforced – teams flouting that rule angered the large-market owners and led to the large change in percentage of net local revenue contributed – still is unclear. The point: George Steinbrenner shouldn’t give his money to a small-market owner just to see him pocket it.
Other portions of the deal aim to help the problems of small-market teams, plus address the drug-testing program, the luxury tax and the All-Star Game deciding home-field advantage in the World Series:
Teams that cannot sign their first- or second-round draft picks will receive the same pick in the next year’s draft, and to give the teams even more leverage, they set the deadline for signing picks to Aug. 15. So if Kansas City cannot sign the No. 1 pick next season, it will get the second overall selection in 2008. Accordingly, if two other teams in the 2007 draft's top 10 do not sign their picks, the team supposed to be picking 11th in 2008 actually would choose 14th (after the original 10 and the three new picks). The extra picks roll over only one season. The Aug. 15 deadline puts pressure on draft choices to accept offers quickly and, both sides hope, will end the trend of higher-priced choices dropping to large-market teams because of signability issues.
Draft-pick compensation for free-agent signing remains, though with a few tweaks. Signing Type A players – the best in the class – who were offered arbitration still will cost a first-round pick. Signing Type B players – the next step down – will not cost a draft pick; instead, the team that lost the player will receive a sandwich pick between the first and second rounds. Compensation for low-level Type C players was eliminated.
There will be no changes to baseball’s performance-enhancing drug program, which caught one player in major-league testing this season – and he was in the minor leagues at the time. Both sides agreed to explore human growth hormone testing if and when a urine test became available and said they’d talk about the possibility of blood tests if one for hGH were developed.
One quick note on the wildly misunderstood luxury tax. The money baseball collects is not redistributed to the smaller-market teams. It is used for what baseball calls its industry-growth fund. Luxury-tax thresholds, applied to teams' player payrolls, were increased to $148 million for 2007, $155 million for 2008, $162 million for 2009, $170 million for 2010 and $178 million for 2011. First-time offenders pay 22.5 percent, then 30 percent for the second time and 40 percent for the third. The Yankees and Red Sox, both multiple-time offenders, likely face another 40-percent hit next season.
With the elimination of dates for free-agent signings, Roger Clemens can take his fancy time throughout the offseason knowing that if he wants to sign with Houston, he doesn’t have to wait until May 15.
Also gone: The ability to demand a trade if dealt in the middle of a multiyear contract. Previously, players traded in such situations were allowed to force another deal, with teams running the risk of losing the player to free agency were a trade not completed. Sometimes it was a leverage ploy to renegotiate the contract, though with so much money floating around, the union is banking on the lucrative nature of free-agent deals compensating for the potential inconvenience of a trade.
The minimum player salary next season will be $380,000, then $390,000 in 2008, then $400,000 in 2009. Even poor baseball players are rich.
Players now receive an extra year before their exposure to the Rule 5 draft. Eligible players are ones not on the 40-man roster who have spent four years in an organization since signing or five years since being drafted. Not good for organization-buried players who simply will have to wait another year for a shot. Famous Rule 5 draftees: Florida’s Dan Uggla and Minnesota’s Johan Santana.
Clubhouses close to reporters an hour before the start of each game instead of 45 minutes. This became a collectively bargained issue because of players’ complaints about too much access for reporters, who contend that the 3½ hours of pregame face time with the players has made baseball writing the richest of all sports. With the new precedent set, journalists fear what other access limitations will be imposed or bargained in the future.
No team will be contracted during the agreement, which is a no-brainer. Even though a moribund franchise like the Florida Marlins can be driven to the ground, baseball has enough faith in its system to keep the Marlins alive (long enough, perhaps, to move them to Las Vegas?)
World Series home-field advantage will go to the winner of the All-Star Game. Which goes to show that even after 18 months of negotiations, they still couldn’t get everything right.