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At the New York Times this week, Kevin Draper wrote about the television ratings that are way down for many of the sports playing during the coronavirus pandemic. The short version of the conclusion reached within is that there is little reason to panic just yet because it’s unclear exactly why Americans aren’t watching sports on TV like they usually do, and that’s a reasonable take. However, maybe there is a reason to be on alert when it comes to how Major League Baseball will inevitably react to lower ratings and what that could mean going forward for their massive television contracts.
Back in the 1980s, MLB signed a split television contract with two major networks, ABC and NBC, that would run between 1984 and 1989 and cover weekly national broadcasts and the World Series. The deal was a massive victory for MLB at the time, as they initially valued the entirety of what they were offering over five years at $900 million, but then managed to convince ABC and NBC to each take half by stretching the deal to six years, and in turn ended up pulling in $1.125 billion in 1983 dollars. Today, that’s the equivalent of a little under $3 billion.
The networks also thought they were getting a massive victory, the kind of thing their executives could point to and say, “I did that,” and have it be a feather in their cap as they moved up the ranks and negotiated their new salaries and the like. Instead, ratings plummeted for sports nearly across the board in the 80s: it eventually cost NBC more than they made back from MLB to broadcast games, as the annual payments they sent MLB increased each year, and new partner ABC was taking losses from the start, losses they didn’t recover by broadcasting the “jewel” events like World Series.
The networks’ complaints made it back to Major League Baseball and then-commissioner Peter Ueberroth, who relayed the information back to the team owners he worked for. The expectation was that the television money would go down after the contract ended in 1989. What the teams were going to do to prepare for this inevitability was now the question. Ueberroth was a businessman, first and foremost, and he felt it was his job to rein in the spending of the league’s owners. Telling him that all the money they were now enjoying was going to dry up was his way of getting them on board to collude against the players by secretly refusing to sign any free agents, forcing market costs down as offers trickled in and players became desperate enough to re-sign with their original clubs for far less than they were supposed to be worth.
Per John Helyar’s Lords of the Realm, near the end of 1985:
“As the CEO, I have to know what your policies are, [Ueberroth] said. “I’m going to go around the room, and you have to tell me if you’re going to be signing free agents.”
One after another, most said they wouldn’t. Ueberroth interrupted at one point and turned to the lawyers—Lou Hoynes, still baseball’s all-purpose counsel; Barry Rona, the new PRC director; and Jim Garner, the American League counsel. “Stop this discussion if at any point it smacks of collusion,” he said.”
They did not, and he continued to hector the owners. They needed to act like intelligent businessmen. Did they have a free agent policy? Didn’t they care about losing money? They’d put the whole industry in jeopardy. The networks wouldn’t keep carrying them. NBC and ABC were losing money on baseball; they’d shown him the books. Next contract the TV money would go down.
“You, singular, are responsible for your own downfall, and if you are so dumb that you are paying all kinds of money to players that aren’t playing so you’re losing money and you don’t have money to pay players that are playing, please don’t throw stones at anybody,” he said. “It’s your fault, Mr. So and So, don’t rant and rave. Nobody is forcing you to do anything. It is your own stupidity.”
“Look, you are intelligent businessmen or you wouldn’t be where you are today. Let us try to operate in a businesslike way before we, as a sport, are bankrupt.”
MLB apparently needed better lawyers, since the MLB Players Association won multiple grievances for collusion in the years following this dressing down. This conversation was the followup to the previous attempt by Ueberroth to get the owners — and their general managers — to stop handing out long-term contracts and start to think of baseball as a business:
“Let’s say I sat each of you down in front of a red button and a black button,” he said at one early meeting. “Push the red button and you’d win the World Series but lose $10 million. Push the black button and you would make $4 million and finish somewhere in the middle.”
He paused to look around. “The problem is, most of you would push the red one.”
Ueberroth chided them for checking their business sense at the door. “You are so damned dumb.”
It’s also worth pointing out that the contract MLB got after 1989 more than doubled the annual rate the league pulled in from its television contract, as it got CBS involved in a bidding war with NBC and ABC, following NBC spending over $400 million on the 1992 Barcelona Olympics to keep CBS from getting it. CBS, pockets full of cash they didn’t spend like they wanted to, offered over $1 billion for exclusive rights to just four years of MLB games. So much for the end of the era of television revenues that spurred collusion on.
What does all of this have to do with the present? The current collective bargaining agreement expires just over one year from now, in December of 2021. MLB execs and owners were whining about spending gone wild and the need for more responsible fiscal behavior even before coronavirus reached North America’s shores. Now, they’re dealing with fallen revenues and falling ratings: the major TV contracts aren’t up anytime soon, but they weren’t up anytime soon in the 80s, either: Ueberroth convinced the owners to start colluding four years before the contract they were all so concerned about was ending.
Television money is one reason MLB is such a major moneymaker despite declining popularity and a fan base where the average age is closer to retirement and death than they are the coveted 18-34 demographic, and why they didn’t care about attendance all that much anymore until they could use it as leverage in compensation talks with the PA regarding the shortened 2020 campaign. If there is even a hint that the money from television could go down, MLB is going to clamp down and fight the union even harder than they already planned to, and we were already planning for a potential lockout rather than a new CBA and 2022 season.
Basically, if you think MLB’s behavior is poor and anti-labor when the money is guaranteed to keep pouring in, you should wait and see what happens when they legitimately believe that their revenue streams are in danger. History doesn’t necessarily have to repeat itself, especially when the owners have mostly turned over, but if anything, MLB has become more cutthroat and hyperfocused on efficiency and best business practices since Peter Ueberroth first tried to drill all of that into the league’s heads. So, it’s worth keeping these falling ratings in mind: there is little chance the league won’t use it as an excuse, just like they’ll be taking the coronavirus into account for as long as it favors their own pockets.