Thursday, April 29, 2004
Squeeze Play
On the off chance that your copy of the April 2004 CFO Magazine got lost in the mail, here's a link to its cover story, a discussion of baseball economics by the ironically-named Tim Reason.
According to Mr. Reason, "even all of [MLB's harshest critics] agree that the sport's economic model is a mess." Oh? In the course of lamenting the MLBPA's power, he claims:
The union's control extends further than outright collusion. The current collective-bargaining agreement (CBA) between the players and MLB spells out rules for just about every aspect of baseball finance and its accounting, from obvious salary-cap substitutes like luxury taxes to more-subtle "fiscal responsibility" initiatives such as team debt limits.
Somehow he misses the fact that every single one of those rules was adopted at the insistence of the owners, not the players. The players didn't ask for a salary cap, a luxury tax or team debt limits. The players didn't demand a revenue-sharing formula that encourages clubs to find ways to shift revenues to related companies. All of these rules exist to prevent the owners from cheating one another or "competing unfairly" with one another, not to benefit the players.
Reason quotes Andrew Zimbalist to the effect that the owners' reported losses are irrelevant to their larger strategy. He then gets Jonathan Mariner, MLB's CFO, to call Zimbalist a "hack economist who's never had a job in sports," and to insist that teams can't hide revenue in the manner described by Zimbalist. Then he talks to Ray Schaetzle, former EVP-finance of the New Jersey Nets, who says, "Ask baseball CFOs about related-party transactions and see if they don't turn pale."
Appropriately for a magazine targeted to financial officers, Reason laments that owners often make the number-crunchers' job more difficult by placing a higher value on winning than on making money. He notes, "investors in professional sports are far less—if at all—concerned about financial payback than corporate investors." But if that's the case, if the owners themselves are willing to live with their losses, why should anyone else care how much money MLB claims to be losing?
|
On the off chance that your copy of the April 2004 CFO Magazine got lost in the mail, here's a link to its cover story, a discussion of baseball economics by the ironically-named Tim Reason.
According to Mr. Reason, "even all of [MLB's harshest critics] agree that the sport's economic model is a mess." Oh? In the course of lamenting the MLBPA's power, he claims:
The union's control extends further than outright collusion. The current collective-bargaining agreement (CBA) between the players and MLB spells out rules for just about every aspect of baseball finance and its accounting, from obvious salary-cap substitutes like luxury taxes to more-subtle "fiscal responsibility" initiatives such as team debt limits.
Somehow he misses the fact that every single one of those rules was adopted at the insistence of the owners, not the players. The players didn't ask for a salary cap, a luxury tax or team debt limits. The players didn't demand a revenue-sharing formula that encourages clubs to find ways to shift revenues to related companies. All of these rules exist to prevent the owners from cheating one another or "competing unfairly" with one another, not to benefit the players.
Reason quotes Andrew Zimbalist to the effect that the owners' reported losses are irrelevant to their larger strategy. He then gets Jonathan Mariner, MLB's CFO, to call Zimbalist a "hack economist who's never had a job in sports," and to insist that teams can't hide revenue in the manner described by Zimbalist. Then he talks to Ray Schaetzle, former EVP-finance of the New Jersey Nets, who says, "Ask baseball CFOs about related-party transactions and see if they don't turn pale."
Appropriately for a magazine targeted to financial officers, Reason laments that owners often make the number-crunchers' job more difficult by placing a higher value on winning than on making money. He notes, "investors in professional sports are far less—if at all—concerned about financial payback than corporate investors." But if that's the case, if the owners themselves are willing to live with their losses, why should anyone else care how much money MLB claims to be losing?
|
