The Breaking Point : One in Three Franchises Is Losing Money; Something Has to Give

A decade-long spending spree by professional sports has boosted player salaries 400%, creating a generation of millionaire athletes who will keep on getting paychecks well into the 21st Century.

The result: One in three teams is already losing money. And with television threatening to stop bankrolling the industry, sports executives are scrambling to cut costs and find new sources of revenue.

The most conservative count shows that 43 of 112 big league franchises lost money in 1984: 7 in baseball, 10 in the National Basketball Assn., 7 in the National Hockey League, 5 in the National Football League and all 14 in the United States Football League.

In each case, the biggest single reason is salaries, which have risen, in some cases, to twice as much as income since 1975. Even lawyer-agent Bob Woolf, who has negotiated more than 2,000 contracts for athletes and includes Larry Bird and Doug Flutie among his richer clients, says that can’t continue.

“It’s probably reached as high as it can go,” Woolf said. “But that’s pretty high. There’s just so much money available. Nobody’s all that foolhardy anymore.”

With the money pressures have come other problems.

Baseball players struck for the second time in four years after arguing for months over the owners’ claim that they lost an average of $1.1 million in 1984.

The NFL has endured a summer of holdouts by veterans and rookies trying to keep pace with escalating salaries of the last few years.

After abandoning its spring-summer experiment, the USFL has suspended operations until the fall of 1986 and is trying desperately to regroup after losing $150 million over three years, $60 million of it in 1985.

Teams in every league also are liable for millions of dollars in deferred payments to players long after they retire. In baseball alone, according to major league sources, 102 current and former players will receive money in 1996 or beyond, under existing contracts. Ten of them will still be getting paid in 2011 or beyond. One of them, Rick Reuschel of the Pittsburgh Pirates, will receive deferred payments in the year 2030, when he’s 81 years old.

Commissioner Peter Ueberroth said some teams’ obligations are more than the franchise’s value.

“It’s about to the point where it’s totally out of control,” said Gene Klein, former owner of the NFL San Diego Chargers. “Unless the owners get their act together, there’s going to be some serious economic dislocation.”

One of baseball’s biggest losers, the Pittsburgh Pirates, is up for sale, but the Galbreath family says it can’t find a buyer at the $40 million asking price to keep the team in Pittsburgh.

More than a team is at stake. If the Pirates move, the city will be hurt.

When the NFL’s Colts sneaked out of Baltimore in the middle of the night and moved to Indianapolis early last year, Baltimore lost close to $40 million in income. New York City lost $35 million when another NFL team, the New York Jets, moved to New Jersey.

In the last decade, the average player salary for the four major sports has jumped almost 400%, not counting the first half of this year. In some sports, the increase is more than 700%.

The million-dollar-a-year player is almost commonplace. There were 56 at last count, and more on the way.

“I don’t think that anybody in the game today knew what the baseball salaries would be when he started,” said the St. Louis Cardinals’ Ozzie Smith, who signed a contract for $2 million a year this season. “If they had, there’d be a lot more guys playing baseball.”

Smith is one of the best fielding shortstops in baseball history but had only a .238 batting average through 1984. That, critics say, is an indication of how much salaries are spiraling out of control.

His fellow players, though, disagree.

“In his particular case, he was in a good bargaining position,” Cal Ripken Jr., the Baltimore Oriole shortstop, said. “His contract was up. He received, I guess, what the market would give him. There must have been a substantial reason behind it, or they wouldn’t have done it.

“Besides the fact that he’s a good player, St. Louis lost a couple of free agents and had to keep their commitment to the fans. They paid him, and kept him. A lot of people pay to see him play. I would, because he’s a spectacular player.”

Indeed, former baseball commissioner Bowie Kuhn said fans are “not turned off to the game itself, to their team,” but the evidence is that they are turned off by what they perceive as a business-first, sports-second attitude among athletes and owners alike.

“Fans are getting turned off by the sports page becoming the sports business page,” said Tex Schramm, president of the NFL’s Dallas Cowboys.

The New York Yankees’ Dave Winfield, baseball’s first $2 million man, replied when asked if his relationship with owner George Steinbrenner had warmed up: “Warmed up? It’s just a business relationship.”

The fans have little identity with the owners, too.

Calvin Griffith, who sold baseball’s Minnesota Twins last year, was one of the last owners whose income comes solely from the sport. The Mara family, which owns the New York Giants, and the descendants of George Halas, who own the Chicago Bears, are among the few in the NFL. For the most part, owners are more in the vein of the Yankees’ Steinbrenner, whose principal business is ship building; the San Francisco 49ers’ Edward J. DeBartolo Jr., who is in real estate, and the NHL Washington Capitals’ Abe Pollin, who has a construction business.

“The fans perceive a lot of foolishness in the money being paid, but I don’t think it’s turned to deep resentment,” Kuhn said. “But they do say the players aren’t as loyal to them, so they’re not as loyal to the players.”

Many fans also say they are being priced out.

Since 1975, the average ticket price has gone from $5.38 to $12 in the NBA, from $7.09 to $14 in the NHL, from $8 to $15 in the NFL and from $3.45 to $6.21 in major league baseball. When parking, food and other concessions are added in, taking a family of four to a game can cost more than $100.

Attendance is up in all sports, but more and more seats are filled these days by corporate guests, the cost of whose tickets is written off as a tax deduction for business entertainment--a tax deduction the Reagan Administration wants to abolish.

Television is changing, too. Ratings are down, advertisers are balking at record prices for commercials, and the networks are vowing to slow their spending on sports.

“Sports can’t look out there today and expect enormous increases in revenues,” said Kuhn, who helped negotiate a $1.1 billion network TV contract for baseball.

“That was a super-big contract,” he said. “We’re not going to see those enormous gains in the future. And I mean in all sports. Attendance can go up, but not enormously. Ticket prices can increase, but not enormously. So there’s only a limited amount of new revenue coming in.”

“We are a business,” said Arthur Watson, president of NBC Sports. “We have to make a profit. . . . So you’re seeing change, concern. That’s why everyone’s suddenly a doomsday prophet. Sports is a major staple of broadcasting. But we’re not going to bid exaggerated prices.”

We won’t see another major jump like the baseball and football contracts of the early ‘80s, he predicted. “I can’t predict whether they’ll remain the same, decrease or increase slightly. But in each case the increase was substantial, and you won’t see that again,” Watson said.

It was that massive infusion of television money that fueled the sports money boom in the first place. The squeeze can be traced to the way sports spent it.

Klein, who headed a group that paid $10 million for the Chargers in 1966 and sold them for $60 million last year, cited NFL owners as an example.

“They might be bright businessmen elsewhere, but in this business they have no economic sense,” he said. “And if you want to remain competitive, you have to pay what they’re paying, you have to follow suit.

“Everybody’s trying to build a winner, no matter how much it costs. So what you end up with is one winner, 27 losers and everybody slowly going broke.”

Next: The Green Age. TICKET PRICES In the past decade, avaerage ticket prices for major league sports have increased 97%

1985 1975 Baseball $6.21 $3.45 Basketball $12.00 $5.38 Hockey $14.00 $7.09 Football $15.00 $8.00

Associated Press graphic BIG SPENDERS Major league baseball and the NFL show average team payrolls, operating expenses and revenue from 1975 to 1984.

Football 1975 1984 % change Team payroll 3.1 13.6 +339 Operating expenses 6.5 22.5 +246 Operating Revenue 7.4 25 +238 Baseball 1975 1984 % change Team payroll 1.4 9.2 +557 Operating Expenses 6.9 25.1 +264 Operating Revenue 6.8 24 +253 Averaged in millions of dollars Associated Press graphic