Monthly Archives: December 2008

Yankees reloaded: Time to revisit a salary cap?

Everyone saw it coming. The Bronx Bombers, who need to fill their new palace in 2009 every night and get back into the playoffs, had to make a big splash. So they made three in signing C.C. Sabathia, A.J. Burnett, and M.C. Teixeira. Yes, we will now take our customary roles of railing against the Yanks and against the system. In these troubled economic times, it may feel a bit cathartic.

Way back in March 2006, when the economy was a wee bit healthier, I advocated for MLB to impose a salary cap. The twist would be that the cap talk shouldn’t be initiated by the owners, but rather the players’ union. I argued that the percentage of revenue the players received was inferior to that of the other three major sports, and that the players could be richer (on average) with a more equitably distributed system. Confirmation came last week, as it came out that MLB players as a whole received 52% of league revenues, compared to 59%, 57%, and 56.7% for NFL, NBA, and NHL players respectively.

Now I realize that the owners, whose laissez faire approach to baseball economics is practically out of the Ayn Rand playbook, have little interest in imposing new restrictions on their little confederacy. To show what those restrictions look like, here’s a comparison of the four leagues and their team payroll models:

MLB does better than the mighty NFL without a salary cap. The 52% figure fits neatly within a range of 51-54% throughout the current CBA. If they’re getting more out of their deal than the NFL, why would they want a cap? It may be that the only thing that could change their minds would be a sustained, massive drop in annual revenues. In such a scenario, the hardest hit teams would be the small market clubs. A sort of class warfare could ensue between the big and small market teams, but only if revenue sharing failed to shore up the have-nots’ balance sheets. To date there’s no evidence of such a problem. The only issue for the have-nots is their inability to compete, and as we’ve seen from the A’s, Twins, and this year’s Rays, they can compete for short periods if the franchises are run well. History has shown that a lack of competition isn’t enough to cause serious tension in the ranks.

Both the NFL and NHL are headed for labor strife, albeit in different ways. In May NFL owners voted to opt out of the current CBA early, creating a situation in which the teams would operate without a salary cap in 2010 and perhaps 2011 – with a lockout even more likely in 2011. There’s a good chance that if the NFL and NFLPA are unable to negotiate a new CBA, the hard cap seen in the NFL will be gone forever, to be replaced by something resembling either the NBA or MLB labor pacts. Four teams remain without new stadium deals, and small market teams like Cincinnati and Buffalo make $80 million less than their rich brethren in Dallas and Washington. Hockey, despite its post-lockout covenant, is facing a troubling economic future. Revenue growth, guaranteed contracts, and looming free agency have created a potentially toxic soup of unsustainable economic conditions. Some recent Sun Belt expansion teams are struggling to survive, bringing up talks of franchise relocation.

Hoops and hardball appear to be in good stead comparatively. David Stern has what he wants most in a post-Jordan era, the return of Lakers vs. Celtics – and don’t think he won’t pull strings to maintain the rivalry to its fullest. There’s a similar Sun Belt expansion problem to that seen in the NHL, but it won’t impact league health. Bud Selig had Bob DuPuy on the Marlins’ ballpark talks like a flea on a dog, and all the attention appears to have paid off. Only two teams lack a new or upgraded stadium deal. You can bet that if Fremont doesn’t pan out, Selig will send DuPuy out here to give the A’s predicament the same treatment as Miami. Despite this, Selig can look at his counterpart Roger Goodell and think, “The only cap baseball needs is the kind worn on a head.” For those of us looking for financial parity, that isn’t an encouraging sentiment.

So here’s the question for the day: If you could implement a salary cap in baseball, what would it look like? Feel free to be as brief or verbose as you like.

Mayor Wasserman steps in

In an effort to resolve the impasse between the A’s and the big box triumvirate of Costco, Lowe’s, and Kohl’s, Fremont Mayor Bob Wasserman spoke to the retailers last week. The A’s were not directly involved in the discussions. Via Matthew Artz in the Argus’s Tri City Beat blog:

Wasserman said he and ProLogis talked about a couple of proposals to put the stadium a little further from the stores, one idea would be to put it closer to Interstate 880, and the other further south from the stores, which, admittedly wouldn’t have the best freeway access.

The “closer to 880″ option may be the simplest since it involves land the A’s already own, particularly the 8-acre concrete plant next to the freeway. Then they’d have to redesign the village and residential areas to work with the new ballpark site. Integration of the village and the ballpark wouldn’t be as good because the ballpark can’t face west, which would be the best direction to have the ballpark face into the village as it does in the original plan.

Pushing the ballpark to the southern edge of the project area is likely a nonstarter for environmental reasons. The combination of light, noise, and a heavy supply of congealed nacho cheese sauce don’t make for a healthy environment for all of the critters in the wetland preserve next door.

MLB Network

Are you looking for little baseball fix? If so, tune to Comcast Digital channel 412 or DirecTV channel 213. MLB Network is now broadcasting there in preparation for its official launch on New Year’s Day. The programming is all pre-recorded, including season retrospectives for the most part.

I heard a while back that MLB worked out a deal to be carried on basic cable, but it appears that MLB Network will stay on 412 with the three sports networks (NBA TV, NFL Network, NHL Network) as part of the digital sports tier. DirecTV will carry HD broadcasts, while no Comcast appears to be a no go for now. MLBN is scheduled to broadcast Thursday night games and the World Baseball Classic.

Oakland’s Poor Working Conditions

We’ve Lew Wolff and Steve Schott grouse about the age and condition of the Coliseum. The Furcal chase, however, may be the first time we’ve heard about someone actually complain about it. Ken Rosenthal wrote last night:

Upon learning that free-agent shortstop Rafael Furcal was deciding between the Dodgers and Braves, one prominent agent expressed sympathy for A’s general manager Billy Beane and assistant GM David Forst, saying that they face an uphill fight trying to attract free agents to Oakland.

Furcal ended up choosing the Dodgers on Wednesday.

The A’s rarely are major players in free agency, but the agent said that the poor working conditions and occasionally unruly crowd behavior at McAfee Coliseum are turnoffs for his clients.

“Many players are uncertain about the atmosphere,” the agent said. “They’re not as comfortable going to work there or having their families attend games there on a regular basis.”

In 2012, the A’s are scheduled to move into Cisco Field, which will be located approximately 20 miles south of McAfee in Fremont, Calif.

“That will help them recruit players,” the agent said. “Billy and David are as good as anyone in the business. The new park will level the playing field for them and allow them to excel.”

It’s terribly unfair that one or two incidents many years back, and perhaps Raider fans’ reputations, have given the Coliseum a bad rep. Of course, it could be said that when free agents tour the area, they might go through a sequence of events that doesn’t really help matters:

  • Fly into SFO or OAK
  • Check into either Parc 55, Sir Francis Drake, or Four Seasons
  • Have dinner/entertainment in SF
  • Next morning, drive to Oakland
  • Take tour of Coliseum
  • Have lunch either on site or in downtown/JLS
  • Head east to Danville/Blackhawk to look at homes
  • Meet other players who live there if possible
  • Wrap up

The only items that don’t match the others are the “drive to Oakland” and “tour of Coliseum.” When everything else looks pretty good by comparison, it’s easy for those two to look not-so-good. It’s probably less of a problem for young players. We’ve known of a few young players who’ve taken BART daily to the Coliseum. When you’re a 32-year-old, injury prone player with a family looking for your last contract, it’s a different story.

To be fair, Citizens Bank Park (and previously the Vet) is in the middle of a parking lot in South Philly. The Phils don’t have trouble attracting free agents.

In the end, it’s one more issue that Lew Wolff and Bud Selig can use as rationale for moving.

Oracle Arena lags behind HP Pavilion

Robert Gammon, who co-wrote the “Fremont Athletics” cover story in the East Bay Express two years ago, just finished a scathing analysis of Oracle Arena. It’s been well known for some time that HP Pavilion gets more events, but on the surface it would appear that the two venues are otherwise on par. Gammon dug into an audit showing the ways Oracle Arena underperformed: non-aggressive management by SMG, less promoter-friendly labor terms, and ticket surcharges.

According to the audit, which was requested by the Golden State Warriors and completed last month, Oracle Arena has averaged just 99 events a year over the past three years, including 43 basketball games annually. By contrast, HP Pavilion drew 169 events last year alone, including San Jose Sharks hockey games. According to Pollstar, a concert industry publication, HP Pavilion ranked sixth in the world in 2007 among indoor arenas with 666,587 concert tickets sold. Oracle Arena ranked thirtieth, selling just about half as many tickets — 343,584 — even though it’s slightly larger.

70 less events per year? That’s astounding. It’s not location, as concert promoters don’t care where a venue is as long as it’s large enough, equipped enough, cheap enough, and populated (market-wise) enough. Worse, those lost events are a drag on the Warriors, whose lease includes $7.4 million in premium seat revenue every year. Compare that to the Sharks/SVS+E, who are projected to pay $4.4 million to San Jose in 2008-09, and that figure is offset in part by the vastly higher number of events staged at the Pavilion. Gammon notes that the W’s may be looking to throw SMG out and manage the arena themselves, thereby adopting the Sharks’ business model.

The irony here is that Oracle Arena has a more fiscally responsible deal for the public than its Coliseum sibling. It requires more pledged money from its main tenant and a user fee (ticket tax/surcharge). Frustratingly, the annual debt was not being serviced properly thanks to the W’s not paying their share initially and the lack of a naming rights sponsor until a couple of years ago. The Coliseum Authority chose to chip away at the debt by letting SMG manage the Arena (and the stadium as well), yet they waited several years until Oracle came along in search of what they felt would be the most lucrative naming rights deal.

Contrast that with HP Pavilion, which was roundly criticized at its inception for a sweetheart deal given to the Sharks and arena management by the City of San Jose. Original Sharks owner (and now minority partner) George Gund put $37 million of his family’s money into the design of the then-San Jose Arena to add premium features and to prevent it from turning into a white elephant such as Miami Arena. The Sharks got the lion’s share of revenues from the arena and took care of all of the costs. The arena management firm later became SVS+E, which was spurred on to be very aggressive in seeking out concerts and other events. The cost of doing business there became significantly reduced, and the City was not saddled with massive annual subsidies as a result. There’s an ongoing joke here that even though the San Jose Arena initiative passed 53% to 47%, you can’t find anyone that doesn’t support the arena now.

The lesson here appears to be that in order to have a successful public-private partnership, it’s best to have a clear vision laid out from the beginning that incentivizes the private half to achieve, even overachieve. In San Jose that’s exactly what occurred, and both public and private halves are all the better for it. In Oakland it’s been a mess that’s taken a decade to become somewhat palatable, yet Oracle Arena is still struggling compared its more efficient rival to the south.

Arena League drops 2009 season

Despite San Jose SaberCat owner John Fry’s efforts, the AFL is canceling the 2009 season. League officials believe the AFL can return in 2010 with a new business model. AFL’s minor league, af2, will continue play in 2009 in large part because it has a different business model.

Two things jump out with regard to the AFL’s (temporary?) setback. Attendance growth has been rather flat, topping out at about 13,000 fans per game regardless of a team’s relative success. Fry had been wrestling with this even though the SaberCats won three championships in the last six years. Instability among the expansion franchises has also hurt the league. Take a look at this chart to see how unstable it is. Although the league was not dependent on big markets to stabilize itself, it couldn’t have helped that the best run, most resilient teams were in mid-sized markets (Tampa, Orlando, Phoenix, San Jose). Teams in other small and mid-markets such as New Orleans and Nashville came and went twice. Numerous franchises failed to last an entire decade.

Another factor may have been the demise of the AFL’s relationship with NBC. The two embarked on a revenue sharing agreement in 2003, but a large slump in ratings pushed NBC to end it. AFL then went to ESPN, which bought a small stake in the league along with a five-year broadcasting deal, but even that couldn’t save them. The league has turned to ever increasing expansion franchise fees ($20 million recently) as cash infusions, but that in general is a poor way to run a league as it only temporarily takes care of fundamentally poor cash flow situations.

It’s time for AFL to cull the herd. Sixteen teams currently populate the league, it could easily be cut to twelve or fourteen depending on each franchise’s financial stability. Some teams were brought in simply to fill open dates in new arenas. If they really wanted to be more bold, they’d encourage more play between the big AFL and the little af2. Rules in place now prevent a real farm system, but it wouldn’t be bad if teams from the two leagues played each other. They could even go to a relegation format, in which the best team from af2 moved up for a year to play with the big boys. This goes against af2′s mission of player development, but honestly things need to be shaken up. They’ll have to trim travel costs and perhaps reformat the league to streamline operations further.

Hopefully, AFL will take the year to make the necessary changes and store cash reserves in order to emerge healthy for 2010. It will require a change of scope and a more conservative business model to be solid in the long run.