BASEBALL / ROSS NEWHAN : Gravy Train Might Be Grinding to Halt

Are the oft-stated fears of baseball owners that the next national television contracts will provide significantly less revenue justified?

Apparently so.

During meetings in Toronto this week, ESPN executives officially notified members of the major league television committee that it will not pick up the 1994 and 1995 option years at the figures specified in the current contract. That agreement took effect in 1990 and will expire at the end of the 1993 season, as will baseball’s contract with CBS.

Baseball will receive $401 million from those two contracts next season, about $15.4 million a club.

Tom Werner, owner of the San Diego Padres and chairman of baseball’s TV committee, was asked Friday about the next cable and network contracts.

“In the current marketplace, with baseball’s ratings down, TV in general not as robust and many more options for advertisers, I expect our revenues to drop considerably,” he said. “The gravy train in that regard is over.”

CBS executives have estimated pretax losses from baseball of about $500 million over the length of their four-year, $1.06-billion contract. Their regular-season Nielsen ratings in 1992 were 3.4, compared to 5.1 in 1989, the last year of baseball’s six-year deal with NBC.

ESPN’s losses are also expected to be about half of its $390-million baseball investment. Its ratings have fallen from 2.1 in 1990 to 1.5 this year. Its four-year contract provided for a fifth option year in 1994 at $120 million and a sixth at $130 million.

In waiving its option rights before an Oct. 31 deadline, ESPN will pay a buyout fee of $13 million, or $500,000 per club--the new Florida Marlins and Colorado Rockies will not share in any of the national TV income until 1994--and attempt to renegotiate.

“Baseball has rounded out our service and enhanced our programming to no small degree,” ESPN spokesman Chris La Placa said. “But our ratings are not as high as anticipated and we continue to incur major financial losses. We want baseball back, but at more reasonable terms.”

Sources close to the situation say ESPN has already proposed cutting its weekly schedule from six games to four and paying about $50 million to $60 million per year for those rights, or about 34% less than they are paying now.

The option decision came as no surprise to baseball, considering the ratings and advertising losses and the nature of the recession, said Bill Giles, president and CEO of the Philadelphia Phillies and a member of the TV committee. But it does not reflect an absence of baseball interest within the TV industry, Giles said.

“There’s no question that all three networks want baseball and that ESPN wants baseball,” he said. “The question is how much they’ll pay for it. The one good part of the ESPN decision is that we now have a chance to talk with other cable networks, like Turner and USA, and see what’s out there.”

In trying to compensate for the expected drop-off from the $1.45-billion bonanza from CBS and ESPN and spark new interest for the cable and over-the-air networks, the TV committee will consider several approaches, among them:

--Interleague play.

--Dividing the two divisions in each league into three conferences to create a wild-card playoff round.

“This year’s races convinced me that we need to create more interest in more cities,” Giles said. “We still have a great product, but it probably could be packaged better.”

There are problems, however:

--An additional playoff round would force the networks to sell more advertising when they are having problems selling the time they have.

--It would require a reduction of the regular-season schedule, reducing local broadcast revenue and putting the stress back on the national package to offset it.

--And any change in scheduling and format would require approval of the players’ union when the owners might be calling for a reopening of the collective bargaining negotiations and planning for a 1993 lockout.

The probability of reduced TV revenue would seem to strengthen the owners’ interest in overhauling the compensation system to slow the escalation of salaries, but no decision has been made on whether they will exercise their right to reopen talks in December or wait until the bargaining agreement actually expires after the 1993 season.

A prolonged lockout next year would threaten the $401 million at stake in the final year of the CBS and ESPN contracts and undercut the debut of the Rockies and Marlins.

Richard Ravitch, president of the owners’ Player Relations Committee, is meeting with small groups of owners in an attempt to create consensus on a reopening and lockout.

It’s a complicated subject that directly affects the TV negotiations.

“Most owners do not want a lockout, but that’s not to say we couldn’t reopen (the bargaining talks) and have a full year to try to work out an agreement (with the union),” Angel co-owner Jackie Autry said Friday.

“We have to find a way to get rid of arbitration because of its impact on free-agent and other signings. Its original intent (as a method of contract compromise) just isn’t valid anymore.”

Autry also said she expected the next TV contracts to provide about $5 million less per club, maybe more than $5 million considering two new clubs will share in the package.

“We know what the environment is (TV ratings for the World Series are down 12%) and that the current arrangement will be difficult to replicate,” Deputy Commissioner Steve Greenberg said in Toronto the other day. “But it’s too early in the game to predict who will score last or what the score will be.”