A Called Strike Looms

By Charles P. Alexander

Not so long ago, baseball was always played on real grass in the open air, and a strike was something a batter had three of before he was out. But at the artificial-turfed, fiber-glass-roofed Metrodome in Minneapolis, the site of this year's Major League All-Star game, the talk last week was about a different sort of strike. The outcome of the contest, a dull 6-1 romp by the National League' was overshadowed by the previous day's announcement that the players intend to walk off the diamonds on Aug. 6 unless they can resolve their differences with club owners over salaries and pension benefits. At issue is the owners' contention that the business of baseball, despite the continuing popularity of the national pastime, has become a big-league money loser.

Baseball faces the same problems that have tormented most professional team sports in recent years: surging players' salaries, contract hassles, shaky finances, sudden ownership changes and heightened economic competition between clubs and leagues. Only about seven of the 21 teams in the National Hockey League are making money. The National Basketball Association has bounced back from its huge losses of the early 1980s, but eight of the league's 23 teams are still in the red. Even the mighty National Football League has been under a bit of pressure from its pesky new competitor, the United States Football League. Concludes Paul Mooney, president of the Boston Bruins hockey team: "Sports teams, by and large, are not bonanzas."

Babe Ruth, who made $80,000 a year in his prime, would be stunned by what baseball players earn today. Since 1976 the average salary in the major leagues has jumped from $44,000 to $360,000 SPORTS ILLUSTRATED estimates that at least 36 players will make $1 million or more this year. Mike Schmidt, the Philadelphia Phillies' slugging first baseman, tops the list with $2.13 million. Salaries in other sports are also reaching the stratosphere. Doug Flutie, the quarterback for the New Jersey Generals of the U.S.F.L., has a five-year contract reported to be worth $7 million. Basketball experts expect that the New York Knicks will pay Center Patrick Ewing, this year's No.1 draft choice in the N.B.A., at least $1.2 million a year.

Baseball owners say that player salaries are pushing the sport to the brink of financial ruin. By their tabulation, the 26 major-league teams lost $43 million in 1984 and could have a deficit of about $100 million in 1988. Nonsense, say the players, who accuse owners of using legal but oddball accounting methods to create paper losses. New owners, in particular, mark down profits for tax purposes by taking depreciation allowances that are supposed to account for the declining value of their players. In addition, the clubs often count long-term deferred compensation to players as a current expense. George Steinbrenner, owner of the New York Yankees, admits that only a small portion of his team's $9 million 1984 deficit was an actual cash loss.

The controversy over baseball's finances led Commissioner Peter Ueberroth to persuade owners to open up their books in April to outside scrutiny. In addition, the teams hired George Sorter, a New York University accounting professor, to review their figures. Sorter concluded that the owners had somewhat overstated their losses, partly because the depreciation charges, he said, are not true operating expenses. As a result, Sorter put baseball's loss last year at $27 million, rather than the $43 million claimed by the clubs. Still, he said, "There's no question that baseball is a losing industry."

Meanwhile, the players recruited an expert of their own: Roger Noll, a Stanford economics professor. In a report issued last week, Noll asserted that baseball as a whole is profitable, though he did not give a precise figure. "There's a hell of a lot of money in baseball, plenty for everybody," he said. Noll pointed out that baseball profits are often buried in the books of other businesses controlled by the owners. For example, fans of the St. Louis Cardinals, owned by Anheuser-Busch, paid $2.5 million last year at concessions and for parking at the team's games. Yet only $21,000 of this revenue shows up in the Cardinals' profit-loss statement. The rest went to the Civic Center Corp., which also happens to be owned by Anheuser-Busch. Noll conceded that teams in Seattle, San Francisco, Oakland, Cleveland and Pittsburgh are in serious financial trouble.

Owners want to impose a cap on salaries similar to one adopted by the N.B.A. in 1983. The basketball players, recognizing that their teams were in financial danger, agreed that the league's payroll should be limited to 53% of its revenues. The average baseball team now spends 47% on salaries for players and coaches, up from 26% in 1976, and the owners would like to keep that figure from rising. Another issue is the current agreement that the teams will put one-third of their television revenues into the players' pension fund. Because of a new television contract, the annual pension contribution is supposed to jump from $15.5 million to $60 million, and the owners say they cannot afford it.

The turning point for baseball came in 1975, when an arbitrator struck down the major leagues' reserve clause, which barred players from jumping from team to team. That decision sparked free-agent bidding wars and spawned a new class of free-spending owners who would pay any price to win. Long gone are the days of baseball executives such as Branch Rickey of the Cardinals and the Brooklyn Dodgers and Connie Mack of the Philadelphia Athletics, who kept close watch on payrolls and expected to make a profit. Calvin Griffith, who sold the Minnesota Twins in 1984, was perhaps the last owner for whom baseball was a livelihood rather than a hobby or an investment.

The new owners are a breed apart. Marge Schott, whose wealth is built on a big Cincinnati Buick dealership and other businesses inherited from her husband, bought the Cincinnati Reds last year. Tom Monaghan, owner of the Domino's Pizza chain, purchased the Detroit Tigers in late 1983 and cheered them on to a 1984 World Series victory. The Yankees' Steinbrenner is a flamboyant tycoon who made his fortune in shipbuilding, but he bristles at the charge that he is just having a good time. "I'm not in baseball for fun or ego," he says. "This is a business and I operate it like one."

Unlike major league baseball, the N.F.L. has kept its teams financially sound by adopting a share-the-wealth strategy. The teams split all the league's gate receipts and television income. That discourages clubs from trying to outbid one another for players because any added revenues that a new star generated would have to be shared. "The N.F.L. is the nation's healthiest sporting enterprise," brags Commissioner Pete Rozelle. Its profits amounted to $77 million last year.

The U.S.F.L., which was formed in 1983 on the novel premise that action-starved gridiron fans would flock to see football in spring and summer, attempted to upset that arrangement. Led by New York Developer Donald Trump and other multimillionaires, the new league initially tossed around seven-figure salaries to lure players away from the N.F.L. As a result, the average N.F.L. salary has risen 58%, to $163,000, in the past two years. The N.F.L. Management Council warns that if paychecks keep rising at the present pace, the league could lose $87 million in 1986.

The U.S.F.L., however, may not survive that long. Pounded by poor attendance and low TV ratings, the league has lost more than $150 million in three years, and the number of teams has dwindled from 18 to an expected twelve next season. The league hopes to stir fan interest by playing in the fall next year. Says U.S.F.L. Commissioner Harry Usher: "Those preparing our obituary are a bit premature."

Perhaps the most quixotic quest of all is the faltering effort to establish soccer as a popular American sport. The Major Indoor Soccer League is still limping along with twelve teams, but the North American Soccer League, which played outdoors, disbanded this year. Even so, Peter Bridgwater, majority owner of the N.A.S.L.'s San Jose Earthquakes, is keeping his club together and hopes that a new league will start up. Explains Earthquakes Executive Fred Guzman: "It's a civic matter, like popping for a modern art museum. I mean, what's the satisfaction of owning a string of coin-operated Laundromats?"

True enough, but it is difficult for an industry to exist when some of the owners are in it for fun and games and do not worry too much about making a profit. Admits Corey Busch, executive vice president of the ailing San Francisco Giants: "There's a breaking point coming. Baseball has to be run more as a business." The danger is that the executive boys of summer, with their checkbook recruiting and creative accounting, will make it impossible for professional sports to operate in the black. --By Charles P. Alexander. Reported by Thomas McCarroll/New York, with other bureaus

With reporting by Reported by Thomas McCarroll/New York, with other bureaus