This Year’s PEBA Owners’ Meetings May be the Most Significant Yet
Nate Manuel for American Baseball Perspective
Wednesday, January 30, 2013

Next month, team owners will be gathering in Asheville, NC for the PEBA Owners’ Meetings.  There is widespread speculation that this iteration of the yearly get-together will produce the most significant changes in the league’s short history.

Since its founding in late 2006, the PEBA has defied the expectations of critics who scoffed at the idea of a collection of teams based in non-traditional small-to-mid-market sports towns being able to pick up and run with the legacy of the fallen Major League Baseball.  Yet that is precisely what the upstart league (are we still able to label the PEBA “upstart”?) has accomplished.  Total revenue for the 24 PEBA teams in 2012 was a robust $2.22B.  That represents a 15% increase from total revenue in the league’s inaugural season.  In fact, the PEBA has realized revenue growth in each of its six years of existence.  True, broadcast revenue has increased by only 4% over that same period, but that’s largely due to being locked into a six-year national TV contract with cable broadcaster Versus, an arrangement that the league was forced into grudgingly accepting when the major networks displayed universal apathy to the idea of a MLB successor.  The PEBA’s new contract with NBC, which will have the Peacock Network airing “Baseball Night in America” broadcasts on Friday, Saturday and Sunday nights, plus increased local transmission fees being negotiated by teams that possess far more leverage than they did in 2006, will represent the first significant swelling of the league media revenue.  It’s a testament to how quickly the PEBA has rekindled the passion for America’s Pastime in the hearts of viewers nationwide.

Versus will continue to broadcast one game a week, plus the Sovereign League Division Series and Alliance Tournament.  Versus will also be broadcasting League of the Rising Sun games from Japan for the first time this year.  LRS games will be aired at midnight ET on Sundays throughout the season.  The cable network will also be televising the LRS All-Star Game and playoffs.

Rapid success has caused rapid reconsideration of business strategies.  While the league’s growth has been explosive, it has not necessarily been even.  Some clubs, such as Yuma and Reno, have had trouble growing their markets and keeping pace with their more financially successful peers.  This prompted the league to adopt revenue sharing in 2010.  The system, which redistributed $44M from top-earning clubs to those lagging behind last year, has been hailed as an instant success.  Without their league-leading $7.3M revenue sharing check, for instance, San Antonio may have had trouble making payroll.

The success of PEBA’s revenue sharing has given rise to calls for an expansion of the system, and that subject will be the highlight of next month’s meetings.  Owners will be considering three different proposals for alteration and/or expansion of revenue sharing.  A proposal by new Crystal Lake owner Larry Ellison that would see a three-tiered increase in the percentage of revenue distributed amongst teams, with the first bump slated for the end of the 2013 season, has garnered the most early support.

If the percentage of shared total revenue does in fact rise, it will almost certainly come at the expense of gate revenue sharing.  Owners of clubs that enjoy strong attendance have complained bitterly about being forced to surrender 20% of their gate with visiting teams.  Those protests increased in volume when revenue sharing was first adopted in 2010.  You can be sure that successful teams enjoying strong fan support, already displeased at their “double taxation”, will balk at the idea of increasing the base revenue sharing percentage without an elimination of gate revenue sharing.  Mid-market owners currently seem split over whether they would prefer increased overall revenue sharing or an extension of the current system that would keep gate revenue sharing in place.

Also to be discussed will be the new bonus slotting system for draftees.  Remembering how out of control escalation of bonuses contributed to the demise of MLB, PEBA owners had long resisted implementing bonuses for draftees.  The Players’ Union made it clear that they would strike over the issue, however.  Owners eventually capitulated and included a slotting system into the latest collective bargaining agreement with the Union that was signed last fall.  The system calls for baseline bonuses to be awarded to draftees based on their draft position, with no cap placed on maximum awards.  Now it will be up to owners to police themselves as they prepare for the first round of amateur draftee negotiations this June.  Ground rules for these negotiations will be laid out during the meetings.

In addition to these weighty issues, there will be a number of other topics covered in Asheville next month.  These include:

• Ticket prices: Strong fan interest is prompting some owners to propose a league-wide increase in ticket prices.  Not all owners appear confident that their market will bear such an increase, however.
• Personnel salaries: With the success the league has enjoyed, everyone is after a piece of the pie.  Coaches and umpires, who have seen their salaries remain stagnant while player salaries have escalated over the past six years, are demanding raises, and owners will be debating how to respond.
• Scouting budgets: Four years ago, owners agreed to place a cap of $10M on team scouting budgets as a cost-controlling policy.  Increased revenues have teams discussing raising that cap to $15M.
• Injury insurance: A plan put forth by Palm Springs owner Hopkins Reginald Bunner III, whose team experienced a crippling plague of injures last season, has championed a plan to form a league-wide captive insurance policy.  Teams would pay in a disproportionate sum at the start of each season (the sum to be based on relative payroll) and receive end-of-year disbursements depending on long-term injuries experienced during the season.
• Extended waiver trades: Currently, PEBA teams have one month after the passing of the trade deadline to make waiver deals, after which time trading is prohibited until the conclusion of the playoffs.  It has been proposed that teams be allowed to consummate waiver trades from the start of August through the playoffs.
• Transfer of Japanese nationals to the LRS: One of the less talked-about but more intriguing proposals that will be before the owners is the PEBA to LRS transfer system.  Not quite a reverse posting system, the PEBA to LRS transfer would allow PEBA teams to sell the contracts of Japanese players to LRS teams.  There would be restrictions to the system, however.  A Japanese player would have to pass through PEBA waivers first, and there would only be a window of one week to negotiate a contract transfer after the player passes waivers.  Recently signed players and players who have come to the PEBA through posting would not be eligible for transfer, either.