Fans win in new baseball labor deal
New agreement between players and owners should help the sport grow and could end the threat of future strikes.
NEW YORK (CNNMoney.com) -- The just concluded World Series may not have been as thrilling as previous Fall Classics. But despite that, baseball fans actually have more reasons to be excited about the sport than they've been in decades.
That's because the tentative labor agreement announced last week between Major League Baseball and its players association is more than a relatively friendly deal between billionaires and millionaires about how to split the increasing dollars in the sport.
It's a sign that both sides, perhaps for the first time, understand what needs to be done to help the sport keep growing in popularity.
Of course, it may seem a stretch to suggest fans should be overjoyed by a labor deal. There's a reason that the satirical Web site The Onion ran the following headline last week: "World Series Overshadowed By Thrilling New MLB Labor Agreement."
But because of this deal, fans may never again see another Major League game cancelled due to a strike or management lockout.
Perhaps for the first time since baseball's first strike in 1972, players and owners are truly working together.
There are a couple of reasons for this. And first and foremost is a little-noticed change in the way teams agreed to share revenue with one another.
Encouraging, instead of discouraging, growth
In the past few labor agreements, teams had to put a share of their ticket sales and local broadcast deals into a pool to be split with the other teams. What that did was reduce teams' incentive to go out and spend money that might be needed to improve the team's popularity, and hence, its revenue.
Now, according to Rob Manfred, the owners' chief labor negotiator, teams that generate better revenue growth than the rest of the league will get to keep all of that additional money - the most powerful incentive possible to bring fans, and their dollars, into the game.
And the deal will penalize a team that tries to make money simply by cutting expenses as much as possible, and let their own revenues lag while they cashed big revenue sharing checks.
Baseball is also increasing the amount of money for low revenue teams from the national revenue pool, money it gets from broadcasters such as the ESPN unit of Walt Disney (Charts), the Fox unit of News Corp. (Charts), the TBS network, which like CNNMoney.com is owned by Time Warner (Charts), and XM Satellite Radio (Charts), as well as from MLB.com and its licensed merchandise sales.
MLB Advance Media, the sports' online operation, has seen the fastest revenue growth. According to league sources, now that the labor deal has been reached, there is an increased chance that baseball could sell a stake in its online unit to the public.
And online growth could be critical for baseball. The sport could end up with a much more level financial playing field in the future because of online's growing contribution to the overall revenue pool.
Smith College economics professor Andrew Zimbalist, who advised players during past labor negotiations and helped advise the owners this time out, said it's too easy to say the big revenue clubs won with this deal, or that the small revenue clubs lost.
"You'd find that some teams are a little better off, some are a little worse off," said Zimbalist. "Basically what happened is they're shifting incentives. Now it's equally valuable to every owner to improve their team and increase revenue. In that regard it's good for whole league."
Zimbalist said that's one of the reasons he believes the deal will get overwhelming support from owners of both large and small revenue teams, and was agreed to by players.
In fact, the players deserve a lot of credit. The players association seemed to understand well before the owners did that what's good for the owners is good for them as well.
The best way to increase players' salaries is if the whole sport, and not just a handful of teams, is financially healthy. And if salaries keep increasing, that makes strikes more unlikely in the future.
The fact that there's little chance of a work stoppage between now and when the new deal ends after the 2011 season is also a good sign.
During baseball's past labor struggles, the players association could count on a battle-tested group of players who had been through previous strikes to help create the kind of solidarity among its members that many other unions would kill for. That won't be the case five years from now.
As of the end of last season, there were only 87 players left on current rosters who were around during the strike of 1994-95. Only a fraction of those players will still be playing when the new deal expires.
"It's hard to say never," said Maury Brown, editor of BizofBaseball.com, about the chances of a strike with the game's new economic structure as spelled out in this new deal, "But this certainly puts things in place for both sides."