Thanks to Ueberroth, Owners Are Cashing In

Rewind the clock four years, and Commissioner Peter Ueberroth is standing in the ballroom of a Houston hotel to announce grim news: Hot dogs will be cold. Beer will be watery. Baseball is going broke.

He says 21 of 26 teams are losing money, and the industry is in such trouble that some financially strapped owners have been unable to find buyers. Network television’s pot of gold is almost used up, increases in ticket prices can’t make up the difference without driving families away and player salaries are escalating out of sight.

Baseball, Ueberroth said, is in trouble, and his evaluation is so gloomy that had foreclosure papers been served on the Pittsburgh Pirates and Cleveland Indians, no one would have blinked.

Four years later, it’s the winter of a different era, and this week’s announcement of a new $1 billion network television contract is only one example of that. Next month, there will be the signing of a 180-game cable package for between $75 million and $100 million, and all of a sudden, baseball appears to be a blue-chip investment.

A week earlier, in winter meetings dominated by a rush of million-dollar free-agent signings and the most expensive franchise sale in history, Ueberroth had revealed another surprising bit of information.

Four years after he stopped just short of predicting some teams might fold, Ueberroth revealed that almost every team was making money or breaking even. And the 1987 fiscal year shows a net profit of $21.3 million--the industry’s first since 1973.

What happened? How could a picture that once appeared so bleak now appear so bright? Four years after the Mariners, Pirates and Indians couldn’t find buyers, a former owner of the Baltimore Orioles, Jerold C. Hoffberger, bid $70 million for a club he sold for $12 million a decade earlier. George Steinbrenner, who bought the New York Yankees for $10 million in 1973, probably could get $200 million today.

Some club executives privately say the game was never as bad off as Ueberroth said. Even so, the admission that a profit now exists ranks alongside the Los Angeles Dodgers’ World Series victory over the Oakland Athletics as the biggest upset of the season.

“Even they can’t figure out a way to say they’re losing money, and they’re the best in the world at it,” said Donald Fehr, executive director of the Major League Players Association.

This week, as baseball executives began to break down what the new television contract would mean to their club tills, no one was willing to say that profits would be automatic--not a week after a blue-collar free-agent pitcher named Andy Hawkins received a three-year, $3.6-million contract from the Yankees.

“The thing about a contract like that is that it affects all the rest of us,” Minnesota Twins vice president Andy MacPhail said. “You have to digest it all.”

General Manager John Schuerholz of the Kansas City Royals accepted the good news with reservations: “The only thing I can say is that it seems no matter how much we take in, we find a way to spend it. Whether it’s player salaries or signing free agents, we always do it. I don’t think it’s going to be any windfall because we’ll always think of new ways to spend money.”

Still, it should be easier, and as Ueberroth prepares to leave office, his legacy surely will be in the area of finances. He was the first commissioner to bring corporate marketing to baseball, and since its inception in 1986, revenues have increased from $8.4 million to $9.7 million to $13.7 million. Fans may say purity was lost when the Arby’s RBI Award and the USA Today all-star ballots became staples of the game, but club owners are happy to have the checks.

Ueberroth also is the first commissioner to take licensing revenues seriously. Walk outside a stadium before a World Series game, and you’re likely to see off-duty police looking for vendors selling black-market team products. What was once free enterprise is now a licensed enterprise, and licensing revenues have soared from $100 million in 1983 to $650 million in 1988.

Those checks may be nice little bonuses for the New York Yankees and Los Angeles Dodgers, but to the Mariners and Indians, they may be the difference between making money and losing it.

“They’ve done a tremendous job creating new sources of income,” Indians President Hank Peters said. “It certainly helps the smaller markets, and that added revenue every year gives you something to fall back on.”

The new television deal will do more than that. Each of the 26 teams will receive about $9.6 million from NBC and ABC in 1989, but when the CBS and cable contracts kick in in 1990, those revenues could soar to about $14 million per team--enough to cover almost every payroll.

The most dramatic impact will be in the smaller markets. Teams such as the Yankees, Red Sox and Dodgers have lucrative local television contracts. The Yankees’ new deal with the Madison Square Garden network will pay them about $41.7 million annually for 12 years beginning in 1991, and other teams are sure to angle for similar deals.

But in cities such as Milwaukee, where revenues from radio and television total only about $3 million per season, the effect of the new contract should be dramatic.

“The thing about the network money that’s so nice is that it’s distributed evenly among the 26 teams,” Brewers owner Bud Selig said. “When you’re in a market like ours, there’s a ceiling on how much you can make from your local rights, but you still have to pay the same salaries.”

Indeed, Steinbrenner handed out $6.1 million in contracts to pitchers Dave LaPoint and Hawkins. Other teams that could afford them argued they weren’t worth that much, but for a dozen teams, they couldn’t even think of paying that kind of talent that kind of money. The new television contract just gave them another $5 million or so to work with.

“Certainly, it’s going to make it easier for us to do business,” Philadelphia Phillies owner Bill Giles said. “But everything will depend on the how the new labor agreement comes out. Those are going to be very difficult negotiations. The union is out to escalate salaries as much as they can, and we’re trying to keep them in line.”

Teams are quick to point out that average salaries have continued to rise as well, from $52,300 in 1976 to $429,640 in 1988, but Fehr said the rise in salaries the last three years hasn’t been as dramatic as the rise in revenues.

“The changed stance in free agency means we’ll clearly have a different atmosphere,” Fehr said, “and that will be even more true if the market is open again next winter.”

As the person who made the 1984 Los Angeles Olympics profitable, Ueberroth would like to be remembered as the one who returned financial sanity to baseball. The new television contract will be part of that legacy, as will the corporate and licensing monies. However, his losses still may outnumber his gains when damage awards are made in the three collusion cases, the first of which is due next year.