Baseball Tunes in for the Future : Television: Owners are expected to approve contract setting up partnership with networks that will generate lower revenue.

A six-year agreement that puts baseball in the advertising and sales business as a partner of NBC and ABC is expected to be approved by the owners during a conference call Friday.

Unlike the four-year, $1.06-billion contract with CBS, which expires after the World Series and has brought baseball an average of $265 million a year, there is no rights fee in the ABC-NBC deal, and baseball’s yearly revenue from the over-the-air contract could be reduced by 50%.

The road to approval has been marked by internal bickering and name calling, but in a take-it-or-leave-it economic environment, most owners and club officials say the innovative proposal is neither an act of desperation nor a measure of waning popularity.

“Businesses are always going to be confronted by changing market conditions,” said Stan Kasten, president of the Atlanta Braves. “I think it would have been an act of desperation if we had dug our heels in the sand and attempted to take the conventional approach again, rather than being creative and trying to maximize our revenue possibility.”

Dodger President Peter O’Malley said baseball’s TV committee could have done a better job of explaining the proposal to alleviate confusion that was created among fans, media and the clubs, but he added:

“It may take time (to reap the full benefit of the partnership’s potential), but if you believe in the product, as I do, I think it’s an intelligent approach to the current market.”

Perhaps, but the 28 clubs have hardly been unified on the issue.

The New York Yankees and Mets, along with the Toronto Blue Jays, attempted a big-market coup of sorts by encouraging CBS to make an 11th-hour bid to retain the baseball package. They were concerned that prime-time game-of-the week telecasts, proposed in the NBC-ABC deal, would cost them significant income from the loss of local baseball telecasts.

The CBS bid was delivered by a basically uninvited Neal Pilson, president of the network’s sports division, at an owners meeting in Chicago two weeks ago, angering the TV committee of Bill Giles, president of the Philadelphia Phillies; Tom Werner, chairman of the San Diego Padres, and Eddie Einhorn, vice chairman of the Chicago White Sox. The bid was dismissed.

Giles, who estimated the Phillies will lose $500,000 in local TV revenue if the partnership is adopted, said the CBS bid was strictly a grandstand play.

“CBS had its chance,” he said.

In addition to potential friction between some of the big- and small-market clubs, sources say there were suggestions by some clubs that Werner and Einhorn, who have built careers in TV production, had conflicts of interest in directing the new proposal toward ABC and NBC because of their ties to those networks.

Neither has been accused directly, but suspicions have heated up many recent conversations among the owners, according to sources who said that the proposed partnership has also sparked:

--Concern among the clubs over how they prepare a yearly budget when they don’t know what their TV income will be and the belief that the considerable revenue loss underscores the need for a new compensation system.

--Criticism from Congress and others that the ABC-NBC proposal is a step toward pay-per-view, which baseball has denied, but which is known to be an ongoing subject of conversation within the industry.

--Renewed concern from the players’ union that it wasn’t consulted about parts of the plan that require union approval.

“It’s another example of the owners’ belief that they have the unilateral right to do anything they want, with no regard for our opinion,” Don Fehr, the union’s executive director, said.

The concept calls for another playoff tier in 1994 and is likely to incorporate realignment in 1995 and expansion soon after that, all of which requires union approval.

But it was not until the proposal was announced that Fehr was invited to an explanatory meeting with the owners’ chief labor negotiator, Richard Ravitch, and John Harrington, Boston Red Sox president and format committee chairman. At the meeting, Fehr reportedly asked Ravitch why he hadn’t told him about the TV package.

Responded Ravitch: “How could I tell you when I hadn’t been told about it myself?”

The owners are eventually expected to get union approval for a new playoff tier because it means another payday for the players, but the partnership with NBC and ABC flies, they say, even if the extra playoff round doesn’t.

“That’s optional,” O’Malley said of expanded playoffs and three divisions.

“My own view is that we need to take more time with that part of it. I’m not against change. In fact, I’m for it, but only after intelligent planning and research. I don’t think we really know how the fans feel about it.”

At best, baseball expects to start the NBC-ABC partnership by clearing about $140 million a year.

A new contract with ESPN, still being negotiated, will lift that annual revenue to about $200 million. The 28 clubs will share between $7 million and $8 million a year, compared to the average of $15.2 million that 26 clubs have shared under the current contracts with CBS and ESPN.

CBS, whose regular-season Nielsen ratings fell from 5.1 in 1989 to 3.4 last year, estimates pre-tax losses of $500 million on its TV package. ESPN has estimated it will lose about half of its $390-million investment. The cable ratings fell from 2.1 in 1990 to 1.5 last year. ESPN notified baseball in October that it would not pick up a 1994 option at $120 million or a 1995 option at $130 million.

ESPN had been doing six games a week. It will probably do three a week under the new arrangement.

The ABC-NBC package calls for baseball and each of the two networks to contribute $16 million annually for production and marketing.

The financial risk for the networks is minimal. The only guarantee for baseball is that it’s a gamble.

However, Jackie Autry, executive vice president of the Angels and the wife of owner Gene Autry, said that at a time when the economy is down and the networks are “taking a licking” on all sports packages carrying a large rights fee, the in-house concept is a “wave of the future.”

“We’ll take a 50% reduction in the short term, but the upside possibilities are tremendous,” she said. “If the economy improves, there’s no way a straight (network) contract can compare to the potential benefits in a creative package of this type.”

Instead of that comforting guarantee from CBS, baseball will have to depend on advertising revenue generated by its own sales staff.

However, the NBC-ABC proposal gives both sides an escape route after the second and fourth years if certain projections aren’t met. Baseball receives 85% of the first $140 million of commercial air time, splits the next $30 million with ABC and NBC and keeps 80% of all additional revenue.

The NBA recently entered into a similar partnership with NBC, but received a rights fee of $750 million.

“We’re not happy that there’s no guarantee or upfront payment, but it’s not totally unexpected,” one baseball official said. “It’s a disappointment, but we view it more as a reflection of the economy than a statement on baseball’s status.

“The fact is, there was an alternative offer, but this had the greater potential. A lot of clubs are already selling their own ad time and are very successful at it.”

Any arrangement was going to pale by comparison to the $1.06-billion CBS contract. Giles called it an aberration.

“CBS spent way too much (to buy the baseball package), didn’t sell it well and caused a lot of financial problems in baseball by putting the clubs into a situation where they thought they would have that revenue forever,” Giles said.

“We hit a ratings bottom with CBS in the last year or two, but we have the opportunity with this partnership to get it back to where it was in a relatively short time. The key to me is that we now have a partnership with the networks committed to selling baseball.”

Said Bud Selig, owner of the Milwaukee Brewers and chairman of baseball’s ruling executive council: “It’s no secret that CBS had an abysmal experience with us, and that we’re in a changing economic environment in which we can’t be encumbered by what we’ve done in the past. There’s definitely a risk with this, but it was the best response to where we were. It gives us a vehicle to confront our problems and get our (Nielson) numbers back to where they were. With our own company and our own sales force, it will be what we make of it.”

Some of what they are making of it doesn’t seem to make sense, if fan and media reaction is a gauge.

ABC and NBC won’t begin their weekly telecasts until after the All-Star game and will do only 12 games in all. The tradition of the Saturday Game of the Week is gone. There will be an increase in night games in the postseason despite the lip service that baseball has given about young viewers being kept up late. No game during the proposed opening round of the playoffs will be shown in its entirety. The games will start at the same time, with the telecasts skipping from highlight to highlight. The league championship series games will start 90 minutes apart, with each shown in its entirety only on a regional basis.

Dick Ebersol, president of NBC Sports, said the postseason plans are simply a reflection of the falling ratings, which “hopefully can be corrected through ‘regionalization.’ ”

However, sources said that because of fans’ negative response to regional games, that concept might be modified to show more postseason games in their entirety. It’s an area that ABC and NBC are willing to reconsider, said a source.

An act of desperation?

Maybe not, but the new plan seems to be something of a self-fulfilling prophecy for the owners.

With their national TV income cut in half, they say they have come face to face with the predictions of the last few years, underscoring the need for a compensation system based on a salary cap and designated a percentage of revenue for salaries.

There is some speculation that, with significantly less TV income to lose, the owners will lock out the players next season to support the bid for a new system.

“We’re already used to spending money we don’t have, but with the expectation that there would be more down the line,” said Kasten, the Brave president. “Now we’re faced with the reality that there may not be more, and we’re obviously going to have to cut back. All of us feel there is need for changes (in the system). That’s not new. It’s just more of a priority now.”

Perhaps, but it is believed that a major confrontation between the big- and small-market clubs is brewing on the issue of enhanced revenue-sharing among the clubs. If the clubs can’t agree to share more, they can’t expect the union to agree to a cap and/or modifications in arbitration and the salary system.

The union is leery of the owners’ financial claims, has suspicions that the proposed TV deal is another attempt to convince the players that baseball faces an uncertain future and opposes any partnership in which the players are not a full partner with a voice in how revenue is created. The union wariness was compounded by the owners’ failure to consult it on the new TV deal.

“As I’ve said many times, if revenue falls and is not made up anywhere else, then I would expect the market and salaries to adjust automatically,” said Fehr. “You don’t need a new system. You don’t have to make somebody else pay for it.”