At a time when it should be capitalizing on the momentum by securing new sponsors and reaffirming its contracts with others, the league is facing yet another potential nightmare as it heads into labor negotiations with the Major League Baseball Player's Association.
Baseball's labor contract with players expired Nov. 7. The last time that happened, it resulted in a 232-day work stoppage and cancellation of the 1994 World Series.
Marketers are leery. Fans are wary. And the prospect of another protracted labor negotiation is scary.
"Don't get me wrong, we love being involved in baseball," said a senior VP-marketing with one of baseball's 22 corporate sponsors and one of the few people willing to talk-even with anonymity-for this story. "But how many times can one league shoot itself in the foot?"
Tom Fox, Gatorade's VP-sports and events marketing, agreed. Gatorade, part of PepsiCo's stable, gets much of its visibility in the dugout with cups and product. He said no decision has been made on what it would do if there were a strike or lockout, but Gatorade announced the week of Oct. 22 it renewed its corporate sponsorship with baseball for five more years.
"By most business models or financial models, baseball is broken," Mr. Fox said.
Last week, MLB owners voted overwhelmingly to eliminate two teams. Ostensibly, it was done for financial reasons: The five small-market teams identified by baseball as contraction candidates-the Montreal Expos, Minnesota Twins, Florida Marlins, Tampa Bay Devil Rays and Oakland Athletics-are all struggling; the $2.5 billion TV contract could then be split 28 ways instead of 30.
But the player's association offered little hope of an amicable settlement when union head Donald Fehr said last week "this is the worst manner in which to begin the process" of negotiations.
So now the possible contraction of two teams has thrown a curveball into what could be another contentious round of labor negotiations over revenue sharing and salary caps.
"The [contraction] announcement is what it is," said Tim Brosnan, MLB exec VP-business. "What unfortunately got glossed over is we're going to conduct labor business as usual. Right now, the off season is going to continue like any off season."
Mr. Brosnan added he was already holding strategic meetings with corporate sponsors for the 2002 season, and did address the impending labor negotiations with those who asked.
Some sponsors chose not to address the issue. PepsiCo's Pepsi-Cola Co. is currently renegotiating its contract with baseball and the player's union, and declined to comment. Spokespersons for MasterCard International (which renewed its sponsorship last month for five years) and Kraft Foods (whose Post cereals and Nabisco brands Oreo cookies and Ritz crackers are sponsors) were among those that declined to comment.
Jim Andrews, VP of Chicago-based IEG Sponsorship Report, said baseball's corporate partners pay on average $4 million-to-$5 million yearly for sponsorships. The 2001 season brought the league at least $100 million in ad revenue.
Lou D'Ermilio, a spokesman for News Corp.'s Fox, which carries a national game of the week and baseball's postseason, said "this could all be a moot point before we hit the street again selling baseball."
Said a spokesman for Walt Disney Co.'s ESPN, which shares TV rights with Fox: "We're taking a pass [on commenting]. We're hoping cooler heads will prevail."
Major League Baseball Commissioner Allan H. "Bud" Selig forbid team personnel to speak about the labor negotiations. Mr. Selig said last week no plans existed to impose a lockout on the players or implement a signing freeze. But more than three months remain before players go back to work, and no team will likely sign any of the available free agents until it is determined which two franchises are eliminated.
"Baseball isn't doing anything right now except talking, which means we're not doing anything," said an ad agency executive whose clients have often tied in with MLB. "But the longer the negotiations play out and how they play out is going to have an effect on any campaign."
Not to mention the pocketbook. Marketers and agencies are careful to make sure clauses are written into their contracts regarding any shortened season, a la 1994.
"Oh, you can bet the house on that," said the aforementioned senior VP-marketing. "Would you pay for seven months' worth of a product and get only five months back?"
Contributing: Hillary Chura