IT'S BASEBALL'S TURN TO BEDEVIL MARKETERS

By Published on .

Most Popular
Open up the sports page these days and the headlines might well make you think you've turned to the business section by mistake:

"Major League Baseball players accuse team owners of antitrust violations as labor talks break down"; "National Basketball Association players sue to suspend college draft as labor talks heat up"; "Federal Trade Commission investigates the Professional Golfers' Association Tour amid charges of unfair business practices."

Such headlines signal upheaval in everything from sports marketing to professional sports franchises to the U.S. Congress, which finds itself increasingly pressed to take action.

The situation is most pressing for Major League Baseball, where players vote today on a strike.

Team owners are asking players to make significant concessions. They include creating a salary cap, ending salary arbitration and splitting all revenues 50-50. The current split favors players, 58-42.

In exchange, the owners will allow a more lenient free agency policy and will promise that average player income won't drop below the current $1.2 million level.

But players say the new split will give them less money and that the salary cap, elimination of arbitration and continued existence of stringent free agency rules constitute unfair trade practices.

In fact, the players are taking their case to the Minor League Baseball Caucus, consisting of 59 U.S. senators and representatives. The players are wooing sympathetic lawmakers to consider legislation that will repeal MLB's 70-year-old antitrust exemption-the only pro sports league to have one.

The House Judiciary Committee voted down such a repeal earlier this year, but the Senate might consider it later this year.

With owners arguing that their plan will keep the business healthy, but players insisting that such an arrangement is unfair, a strike seems certain. And August would be a tender time for sponsors, especially Anheuser-Busch, Coca-Cola Co. and Gillette Co., all planning major MLB-theme promotions for that period.

If there's a strike, sports marketing agencies like Clarion Performance Properties, Greenwich, Conn., want to be prepared. Clarion executives are going to the All-Star Game July 12 to meet with clients, including Gillette and Reebok International, about contingency plans.

A player strike would have an impact on both local and national levels, said Charles Cuttone, managing editor of Baseball Business Journal. "Broadcast sponsors of the Baseball Network [MLB's broadcast and sponsorship arm] will have to be given make-goods, and local sponsors will have to be given refunds. That will hurt the owners-and the players know it."

Experts believe that for the sake of MLB's continued existence, the players will eventually have to concede and settle for a contract similar to the one the NBA crafted more than a decade ago.

"The NBA made the players partners in the league, instituting revenue sharing. But in exchange, the league took over player marketing and put in place a stringent drug policy and a salary cap-and the league prospered. I think baseball needs to do that," Mr. Cuttone said.

Ironically, NBA players believe they don't need such a contract anymore. They want to abolish the salary cap and the NBA draft, citing similar antitrust concerns as MLB players. They also want a bigger chunk of revenues; they currently get 53%.

The FTC is in a position to set a precedent on the antitrust issue in pro sports. For the past four years, it has been investigating allegations of unfair competitive practices against the PGA Tour. At issue is whether the tour's strict regulation of where and when its players can compete constitutes an unfair monopoly.

The investigation follows recent antitrust controversies involving the U.S. Golf Association, which sets playing rules and product standards for the industry.

Bullet Golf Co. and Karsten Corp. sued the group, citing antitrust laws, when it ruled that clubs marketed by the two companies didn't conform to game rules. The Bullet case is still in litigation; the Karsten case was settled.

In this article: