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New owners, old problems?
Turnover in MLB ownership since '94-'95 strike could mean tougher labor deal a year from now.
November 18, 2005: 1:09 PM EST
A weekly column by Chris Isidore, CNNMoney senior writer
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NEW YORK (CNNMoney.com) - It's pleasingly difficult to remember when Major League Baseball seemed to be in a perpetual state of labor war.

From 1972 through 1995, the owners and players union were unable to reach agreement on new labor contracts without some form or work stoppage -- making fans suffer through a series of five strikes and three lockouts during that period. The last one was by far the worst, wiping out the entire 1994 postseason.

But in August 2002, the string was broken when the two sides reached an agreement on the cusp of another player's strike. And twice since then, management and the players have agreed to changes in that contract to toughen the testing procedures for performance enhancing drugs, such as steroids.

But as baseball prepares for the expiration of the current labor deal at the end of the 2006 season, there is a hidden danger lurking in this respite from labor strife.

When the Washington Nationals finally get a new owner in the coming weeks or months, 17 of the 30 team owners will be new enough to the game to have never gone through a work stoppage. Seven of them will have assumed control of their teams since the 2002 labor deal.

There is a risk that the union concessions on drug testing, coupled with the complete rout of the National Hockey League Players Association after players in that sport were locked out for a full season, might encourage a owners to overreach at the bargaining table next time, taking a hard line that brings about yet another strike or lockout.

Baseball is now the only team sport without a salary cap to limit player salaries. But a cap has long been a goal of MLB negotiators and small market teams, and a bane to the union. It's tough to believe the owners have dropped their desire for the cap, just because teams are seeing more revenue and profits than ever before.

But it won't necessarily be the new owners leading the charge to push for a salary cap or other labor concessions that could improve their finances even more.

In fact if there is such a push it's likely to be led by one of the longest-serving owners, White Sox owner Jerry Reinsdorf, and former owner and current Commissioner Bud Selig, a long time ally of Reinsdorf.

"There's a real possibility that Selig and Reinsdorf could try to get a more hawkish coalition together. They might be feeling flush after the steroid agreement," said Maury Brown, publisher of BusinessofBaseball.com. Brown said Selig's ability to build a coalition is helped by the fact that he's taken a more active role than his predecessors in picking the 17 owners who have come to the game under his tenure.

Still Brown and some other experts say that things are going well enough financially now that not only will it be hard for ownership to push for labor concessions, many owners won't want to push for any demands that would risk a work stoppage.

"I don't think any of the owners, even the new owners, are naive enough to think they'll get a quantum leap forward like a salary cap," said Sal Galatioto, an investment banker with Galatioto Sports Partners, and a leading broker of team sales. "I think the NHL model was completely different. Almost every NHL team lost less money by not playing than they were losing by playing. You have some (baseball owners) that are militant or hard line. But I talk to a lot of these guys, and from what I'm hearing, they want to keep playing."

Galatioto said that if anything, the large number of new owners could put pressure on the management to settle more quickly to keep the good times flowing. Even reports of a possible strike can start to alienate fans and dig into ticket sales and television ratings.

Figures from Forbes, which does most detailed tracking of team valuation, shows that the average team price in transactions since the 1994-95 strike is $233 million, assuming a $400 million sales price for the Nationals. That's the case even though several low-revenue teams are included in that group. The average for the long-time owners is only $68 million.

"They're paying a lot more money for these teams. They have a lot more debt on these teams," said Galatioto. "They've got a vested interest in making sure there isn't another labor stoppage."

And if there isn't a push for a salary cap, then it'll be difficult to convince some of the big market teams to agree to toughen the method now used to limit player salaries, the so-call luxury tax on large team payrolls.

"It think there's going to be as much friction between the owners as between the owners and the players," he said.

But a fractured ownership group doesn't necessarily promise peace either. If union leadership, stung from recent concessions on drug testing, sees such splits, it might also try to take a harder line at the negotiating table.

Baseball is making enough money right now that everyone should be able to be happy when the next deal is struck. But if the sport has proved anything, it's that early season favorites have a way of disappointing at the end. It's way to soon to say recent labor peace will be able to repeat in the upcoming season.

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For more on the state of baseball economics click here.

For more on the business of sports, click here.  Top of page

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