Most Fans Won’t Notice, but Moves Could Have Impact On and Off Field
Nate Manuel for American Baseball Perspective
Saturday, February 9, 2013

The PEBA Owners’ Meetings concluded yesterday, and while the average fan is more focused on tomorrow’s voluntary spring training reporting date for pitchers and catchers, some key agreements made during the Meetings could have important ramifications.

The biggest news to come out of Asheville, NC was the adoption of Crystal Lake owner Larry Ellison’s updated revenue sharing system.  Under Ellison’s plan, sharing of gate revenue will be eliminated (teams had shared 20% of their gate with the visiting club).  Meanwhile, the percentage of total revenue shared between clubs – previously set at 17% – will increase each year from 2013 through 2015.  The first increase, slated for the end of the upcoming season, will see the revenue sharing percentage increased to 21%.  That figure will increase in 2014 to 26% and finally settle at 31% in 2015.

Financial books of PEBA teams are closed to the public, but Wells Fargo financial analyst Brian Jacobsen, speaking with ABP, suggested that the increase could result in a significant amount of money exchanging hands between the very highest and lowest-earning clubs.  “Many teams fall into a middle ground of profit or loss, and these teams won’t be strongly impacted by the change.  At the poles, though, we could see as much as a tripling of revenue sharing checks and bills.

“Bear in mind that some of these will be “phantom” gains and losses,” continued Jacobsen.  “PEBA and LRS teams are only allowed to keep a fixed amount of cash on hand, with the overflow placed into team-specific accounts in each league’s Central Improvement Fund.  Similarly, each league insures teams against deficits beyond a certain threshold.  Many of the top earners will be exceeding the league-mandated cash cap and would have lost that spillover to the CIF anyway.  Greater redistribution of revenue will likely have a greater impact on CIF capitalization than on the bottom line of top-earning teams.”

Speaking of the league cash cap, owners have agreed upon the first increase to the cap since the league’s inception.  PEBA teams will now be able to keep up to $27.5M on hand, up from $25M.  LRS teams will be allowed to keep up to $22M on hand, up from $20M.  Each league will insure teams against deficits of greater than $27.5M and $22M, respectively.

The other big story to come out of the Meetings is the setting of expected slotting bonuses for amateur draftees.  Both the PEBA and LRS will be adopting a draftee bonus system for the first time in 2013.  The specifics of the system were not publicly announced, but the league did announce the recommended slot bonus for the PEBA and LRS first overall pick.  The PEBA will be recommending a bonus of $4M for the first amateur to go off the board, while the LRS will be recommending a bonus of $1.1M for their #1 selection.

What remains to be seen is how closely teams will adhere to the league’s slotting recommendations.  It’s all fine and good to plan out hard-and-fast bonuses for each draft slot, but agents surely won’t be governed by the league’s slotting plans when they lay out their clients’ bonus demands, and it only takes one team to break from the league’s recommendations to start a stampede.  The inability of MLB teams to adhere to draft bonus slotting recommendations played a role in the eventual insolvency of that league.  It remains to be seen how hard agents will push their bonus demands and how closely teams will adhere to the league’s bonus guidelines.

Some additional news and notes to come out of the Grand Bohemian this week:

• Owners have agreed to increase salaries of umpires and league personnel by an undisclosed percentage.  The change will take effect immediately.  Umpires had threatened to strike if their salary increase demands were not met before the start of the regular season.
• Beginning this year, PEBA teams will be allowed to allocate up to $15M towards scouting expenses, while LRS teams will be able to spend up to $10M.  These figures represent a $5M increase of the scouting budget cap for both leagues.
• A system that allows for contracts of Japanese-born players to be transferred from PEBA to LRS teams was approved.  Players must first pass through PEBA waivers before becoming eligible for transfer.  Once a player has cleared waivers, there will be a three-day window for LRS teams to negotiate a transfer fee with the PEBA team that controls the player’s contract.  Transferred players will arrive in the LRS with their PEBA contracts intact and must be placed on the active and secondary roster of their new club.
• The league has implemented a ban on social media usage by players, personnel and those in the employ of the PEBA/LRS during a period beginning one hour before the start and ending 30 minutes after the conclusion of a day’s games.  Official league and team social media accounts are excluded from this ban, as are league-approved news sources like ABP and LRSTradeRumors.com.  The social media frenzy surrounding the recent incarceration of Aurora Borealis radio co-host George Crocker likely played a part in this move.

Finally, the Owners’ Meetings news that most fans were most likely to be interested in was the possibility of increased ticket prices.  It’s known that owners planned to share gate receipt figures and market research in an effort to determine whether to jointly nudge up the cost of entry into games.  If an agreement was reached, however, no word of it escaped to the press.

The league’s increasing popularity and new broadcast contract with NBC has emboldened some owners, prodding them to consider capitalizing on their increased leverage.  Not everyone agrees that a move to increase ticket prices would be a wise one, however, including Wells Fargo’s Jacobson.  “The PEBA has experienced rapid growth in the midst of tough economic times precisely because it has remained a cost-effective entertainment option.  Families on a budget can’t attend a NFL, NHL or NBA game lightly, but they can afford a night out at a PEBA ballpark.  Low ticket prices have insulated the PEBA from tightening belts.  Tamper too much with that winning formula and you risk losing the edge that has been the catalyst for the wild growth the league has enjoyed.”