MLB Owners' Greed Exposed Amidst Latest Forbes Team Valuations
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It’s hard not to picture Major League Baseball owners and Commissioner Bud Selig as mob bosses right now.
Ah yes, I can see it now: an image of them standing around in expensive suits and speaking in hushed voices about how much money is in their hands…and what plots they can hatch to make sure it stays in their hands.
Their latest plot is of the sinister variety, and it became clear this week just how sinister it really is.
Last week, Adam Rubin of ESPNNewYork.com reported that MLB owners are "moving toward" eliminating pension plans for all non-uniformed personnel. These would be front-office executives, trainers, minor league staff and scouts, some of whom make less than $40,000 a year.
In other words, exactly the kind of people who need pension plans when retirement comes.
MLB executive vice president Rob Manfred cautioned that the issue is more about allowing clubs greater flexibility in regard to non-uniformed personnel pension plans, but he acknowledged (i.e. hinted very strongly) that creating this flexibility would mean doing away with the overall mandate for a defined pension plan. Conceivably, clubs could abuse the newfound freedom.
A vote is scheduled to take place in early May. It was supposed to be kept a secret, but, well, the secret got out and the response was about what you'd expect. Any time there's a situation that involves rich people planning to spurn less rich people, uninvolved people are liable to RABBLE! RABBLE! RABBLE!
The word Hardball Talk's Craig Calcaterra used was "shameful." Mike Axisa of CBSSports.com preferred "disgraceful." Same difference, but the one word they and everyone else could agree on was this one:
Pretty much, and now the situation has gotten even more damning for the owners. We had a general idea of how much cash they were rolling in before. Now we have a much more specific idea, and it makes them look all the more greedy.
Forbes released its annual valuations of all 30 of MLB's clubs on Wednesday. The data reveals that the average value of an MLB ballclub these days is $744 million. That represents a 23 percent raise over the average value of an MLB ballclub this time last year, a monumental leap for a one-year transition.
One-hundred percent accurate? Most likely not. My understanding is that the Forbes valuations are well-educated guesses, so they have to be taken for what they're worth.
But reflective of the times? Absolutely.
Mike Ozanian's breakdown of the numbers reveals that MLB's clubs were actually less profitable in 2012 than they have been in the past, but the league itself is doing quite well these days thanks largely to its national television contracts, its digital ventures and its investment portfolio.
The league has new TV deals with ESPN, FOX and Turner Sports that will go into effect in 2014 and pump over $12 billion into the league over a span of eight years. MLB Advanced Media, baseball's digital arm that includes products like MLB.TV, generated about $650 million in revenue last year. The league took the $450 million it made from the sale of the Washington Nationals and invested it, and now each team has investments worth $40 and $45 million.
We're talking about money that all clubs get to share in, and it adds up to a lot. The profits for individual clubs may not be there, but the money sure is.
Maury Brown of BizofBaseball.com reported in December that MLB revenues reached $7.5 billion in 2012, so we already knew before Forbes report came out just how well baseball was doing on the business end. Now we have the complete picture, which shows that baseball is doing so well because of remarkably savvy business dealings. This is an institution that knows how to hoard money.
To this end, the thought that MLB's clubs could vote to eliminate pension plans for non-uniformed personnel fits. Doing so would impact the bottom line in a way that would be agreeable to the owners, and that's what matters to them.
But squeezing the little guys so the bottom line is impacted favorably? That's low. That's the line.
Not all of MLB's owners are in favor of the idea, mind you. Chicago White Sox owner Jerry Reinsdorf supposedly chastised his fellow owners when the topic came up last year, and conversation over the topic got "heated" at the most recent owners meeting.
Nonetheless, Rubin reported that the majority of MLB's owners are in favor of ditching the pension plans. Some of them might have it in mind to continue to issue pensions after the overall mandate is done away with, but there are surely some that wouldn't be so noble. If no pension plan were to be just as acceptable as a more practical pension plan, then no pension plan it would be.
It's not hard to guess where the owners who are in favor of eliminating the pension plans are coming from. Rubin wrote that it was a small-market owner who proposed the idea in in the first place, and you have to figure that most (if not all) of the small-market owners are on board with the idea now.
As the Forbes data can show, the small-market clubs have relatively little revenue to work with. On a surface level, that revenue would be put to better uses in other areas, such as team payroll.
The data can also show, however, that the majority of the 10 least valuable teams in MLB accumulated a fair amount of operating income last year. Seven topped $10 million. Of those, four topped $20 million.
Whether we're talking small- or big-market owners, it's also hard to see the movement against the pension plans as a preemptive act. MLB's owners shouldn't fear a financial return to earth in the near future, as Brown noted in his report of the league's 2012 revenue that business should only keep getting better.
In a couple years, the league's revenue could cross the $9 billion plateau, which would be remarkable seeing as how the league's revenue was still below $7 billion as recently as 2009. Assuming that happens, there will be even more money available to go toward pensions for non-uniformed personnel.
Thus, the most logical explanation is the same one that first came to mind when Rubin's report hit the waves: greed. The owners are moving towards eliminating the pension plans because it would be agreeable for them, and they're also doing it simply because they can.
Will you be outraged if MLB's owners vote to eliminate pension plans for non-uniformed personnel?
If there's a bright side, it's that there's now a measure of hope for those who stand to be hurt if the pension pans are eliminated. By itself, Rubin's report created public pressure for the owners to do the right thing and keep the pension plans in place. Now that the Forbes numbers are out, the public pressure on the vote should intensify.
Any owner out there who's for the elimination of the pension plans has something to think about. If the pension plans are eliminated, there will be backlash. Some owners could take that as a cue to change their stance on the matter.
Here's hoping. Major League Baseball owners are less tyrannical now than they were in the old days, when they had things like the reserve clause that allowed them to treat even the players like mere subjects. If the pension plans are cut, however, it's going to feel like a return to the bad old days.
This is a time of great prosperity in Major League Baseball. It's not asking a lot of the owners for them to share the wealth.
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