Baseball's Tragic Stalemate

ã2002 by Joe Mock, webmaster of BASEBALLPARKS.COM and author of Joe Mock’s Ballpark Guide

(NOTE to media:  You may quote from this if you identify me as Joe Mock, webmaster of BASEBALLPARKS.COM.  Please e-mail me at joe@baseballparks.com if your article appears in print or on the Internet, or if you have any questions.)

Since I do so many interviews about baseball, I’m often asked for my opinions on the sport’s labor troubles.  I felt it was time to put those thoughts into writing.  This was originally posted July 21st, and my updates (including a recap of how the stalemate was finally resolved on August 30) to the original commentary are in italics.

Update:  The players' union decided on August 16th to set a strike date of August 30.  And, indeed, it took until the 30th for the two sides to reach an agreement -- a matter of hours before the games that day would have been canceled.  That agreement will create a Collective Bargaining Agreement that will remain in effect until December 19, 2006.  At this point, the owners have ratified the agreement -- although not unanimously, as the Yankees voted against it (this could cause some legal headaches for Major League Baseball down the line, because George Steinbrenner might just file a lawsuit against MLB when the bill arrives for all of the revenue-sharing money the team will owe under the new agreement).  The players are expected to ratify it as well.

The Problem

The relationship between Major League Baseball owners and the players union is governed by a collective bargaining agreement, or CBA for short.  The last agreement ended after the 2001 postseason, but the two sides are essentially operating under those terms now.  Obviously, this temporary arrangement is not workable in the long run, so the owners and players are jockeying for position regarding a new CBA – some of the time holding unproductive “negotiations” (if you can call them that) on the non-core issues, but most of the time simply waging their own public-relations campaigns. 

The biggest problem?  You have to question just how badly either side wants to arrive at a reasonable, workable compromise.  So both sides continue the PR war, trying to paint their own position as the only one that makes any sense, all the while hurtling toward a stoppage in play.  

The owners don’t want a reasonable response from the players (although they’d be happy for them to completely cave in and agree to everything the owners want), because it wouldn't bother them to get the rest of the regular season and post-season completed, and then declare an “impasse.”  They would say that the players failed to respond to the owners’ proposals, and so there is no alternative but to view this as a stalemate.  This, in their view, would justify imposing all of the changes they want – and with the season over, the players wouldn’t be able to retaliate by striking.

The players, meanwhile, are spoiled.  I suppose when you’re overpaid and coddled in almost every respect (the name Allen Iverson comes to mind on this point), you become spoiled.  When your average salary increases by  4,600% in a quarter century, you become spoiled.  When your contracts are all guaranteed (does the name Albert Belle come to mind here?), unlike your brethren in the NFL, you become spoiled.  And when you soundly defeat the owners every time there is a work stoppage (do the names Marvin Miller and Donald Fehr come to mind here?), you become very spoiled.  They want no meaningful changes to the current system, so why compromise?  After all, they’ve maintained their incredible road to riches every time there’s been a strike or lock-out, so why should they give an inch?

And an impartial observer could easily conclude that the players are itching for a strike.  After all, they’ve been stockpiling a “strike fund” made up of millions of dollars from licensing revenue and the like – meaning the individual players will have plenty of money rolling in even without receiving any paychecks from their employers.  Is there a sense of urgency on the part of the players to find a solution to the labor situation?  Hardly.  Their lack of meaningful responses to the owners' proposals makes that abundantly clear.

So with two sides that don’t want to compromise, disaster awaits.

The Issues

Here are the key points of contention.  Remember, deep down the players essentially want to keep the status quo.

Local revenue sharing  -- The owners’ proposal calls for them to share a much larger percentage of “local” revenue, from the current 20% up to 50%.  This means that the megabucks that the Yankees make from their sweetheart TV deal would be shared with, say, the Royals, who make very little from their broadcast rights.  And, believe me, the players (who have stated that they don't want more than 22.5% to be shared) are thinking about the Yankees when they oppose such a large jump in the percentage to be shared.  After all, the pricing in the free-agent market is established each winter by – who else? – the Yankees, and if they have less money to spend, then the price of free agents could drop.  Well, such a result is way overdue, so I say share more of that revenue!  Yes, I know there’s a lot more league-wide money in the NFL’s TV contract, but such sharing has worked beautifully there (to the point where I wonder why NFL teams even need to charge for tickets, since there is so much other revenue flowing in!).

But there are some intricacies within the owners’ proposal that aren’t often talked about.  They want some of this local-revenue money to be put in a “discretionary” fund that the Commissioner can allocate for items such as loans to teams or to help with building new ballparks.  Media accounts put that figure at $85 million a year.  Given Bud Selig’s track record, I say “no” to that.  Simply arrive at a formula to distribute the local revenue equitably, and stick with it.  I don’t want the Commissioner to have too much leeway with vast sums of money.

Update:  The final settlement calls for 34% of each team's net local revenue (minus ballpark expenses) to go into a "base" fund to be shared equally among all 30 teams.  From there it gets a lot more complicated.  It appears a "central fund" will be created from those teams who will have to pay more into the base fund than their one-thirtieth share of the payout.  This central fund will be used to make payments to the teams with lower local revenue than the average, and farther under the average, the more that team will collect from this fund.  This concept is phased in, with 60% implementation in 2003, 80% in 2004 and the full 100% in 2005 and 2006.  Also, a "Commissioner's Discretionary Fund" was approved, but with only $10 million in it, not the $85 million the owners had originally proposed.  The money for this will come directly from the central fund.  Who won on this overall issue?  Well, the owners got the increase in local-revenue sharing they wanted, but not nearly as much (or as soon) as they wanted, so the players successfully kept a lid on this. 

Luxury tax – Similarly, the owners have suggested a “tax” that would escalate to 50% on the portion of a team’s payroll that exceeds $98 million.  The money collected from this tax would be given to the teams on the bottom of the food chain.  For the same reasons that the players oppose greater sharing of local revenues, they strongly oppose this idea, too.  It smells just a little too much like a hard salary cap to them.  In my opinion, this kind of “soft” salary cap is the least that baseball should implement.  This way, if George Steinbrenner thinks he can afford some additional hefty salaries – even with the luxury tax – then he can do it.  And if the union gives in enough on the percentage of local revenue to be shared, then the owners should be willing to accept a “tax” that is less than 50%.  

Update:  After a hiatus of a couple of years, the concept of a luxury tax on high payrolls will be making a comeback under the new agreement.   First, you have to define "payroll."  It includes the following: salaries for all players on the team's 40-man roster (where the one-year average of multi-year contracts is used); employee benefits including pension; payroll taxes; spring-training costs; travel costs; All Star Game expenses;  post-season pay; and meal money.  A team's total payroll is then compared to that year's threshold ($117 million in 2003, $120.5 million in 2004, $128 million in 2005 and $136.5 million in 2006), and if it exceeds that threshold, they'll have to pay a percentage of the overage.  If it's the first time that team has exceeded the threshold, their tax is 17.5% if it happens in 2003, and 22.5% if it happens in 2004 or 2005.  If the first time a team exceeds the threshold is in 2006, then no tax is assessed.  If a team exceeds the threshold a second time before 2007, then their tax is 30%.  If it happens a third time or a fourth time before 2007, then their tax is 40%.  Interestingly, if no new CBA is negotiated for the 2007 season (meaning the terms of the old CBA remain in force), then there will be no luxury tax at all in 2007.  

Who won?  Well, while George Steinbrenner will be unhappy to have to pay out such huge sums of "tax," it is far, far less than what the owners had proposed.  But the owners got a luxury tax, and they desperately wanted one.  Clearly, though, large-market teams will be feeling a lot of pain at having to pay so much tax and so much in revenue sharing.

And one often-overlooked aspect of the new agreement is that teams will no longer receive "compensation" draft picks when they've lost one of their own free agents.  This might give teams more incentive to re-sign a free agent on their own team (since they'll receive no additional draft choices the following June if they lose him), and with the current club more involved in the bidding, salaries could be pushed higher.  Logic would suggest that fewer players would then be drafted, since there would no compensatory picks added into the mix.  Clearly, the players won on this side point, since this could increase salaries and reduce the size of the draft, which they wanted (see below).

The amateur draft – Right now, amateur players from the U.S., Canada and Puerto Rico are part of the annual draft in June.  However, players from elsewhere (read:  Latin America) essentially go to the highest bidder, since they are not included in the draft.  This has led to some huge signing bonuses for young, untested players.

In order to keep down the signing price of these Latin players, the owners want them included in the draft.  The players union seems inclined to agree … but don’t get the idea that this issue is now resolved and that the two sides can move on to thornier subjects.

First, there is great disagreement on the number of rounds this “worldwide” draft would contain.  The owners want lots of rounds (the most recent proposal calls for 38) and the players want fewer (16).  What does it matter, you ask?  When a player is undrafted, he can sign with the team that offers him the most money.  With more rounds in the draft, there will be fewer “undrafted free agents” out there.

While both sides seem to agree that, for the first time, clubs could be permitted to trade draft picks, they disagree on whether teams should be allowed to trade the negotiating rights to an already-drafted player.  The players say yes, while the owners say there should be restrictions on when this can be done.

The players also don’t like the idea of individual teams operating the baseball “academies” in Latin America through which many talented youngsters are discovered and developed.  Instead, they think MLB should run these academies.  Evidently, the players fear that the teams might not be willing to spend the money to operate a sufficient number of these camps, or that the teams could "hide" prospects at their own camps, which would prevent the players from going to the highest bidder.  The owners responded by saying that they are willing to establish a set number of camps, and if the teams themselves didn’t want to operate that many, MLB would find other entities to run additional ones.

I say the players have already given in quite a bit by agreeing to a worldwide draft, so the owners should go along with operating the academies and placing no restrictions on the trading of negotiation rights.  Also, the number of rounds in the draft should be a compromise between the numbers the two sides are sticking to … so let’s make it 25 rounds.

Update:  on this issue, after an incredible amount of negotiating, the two sides decided to punt.  No sweeping changes to the old draft system are in the new agreement, although both sides agreed that a committee would establish new rules that would probably create a world-wide draft, perhaps as soon as 2003.

Drug testing – Most people realize that part of baseball’s image problem is that fans don’t know if players are abusing substances – legal and illegal.  Other sports ban steroids, so why can’t baseball?  Other employers test their workers for illegal drugs, so why can’t baseball?  Indeed, the owners' proposal called for random testing of players three times a year.  Give in on this one, players.  You look stupid for challenging it.  Update:  finally, on August 7th, the players union presented their counterproposal, whereby players would be tested only for steroids, not for illegal narcotics.  On the surface, the players made themselves look good, but when you look at the specifics of their proposal (which falls far, far short of what NBA and NFL players have to submit to, and contains no penalties for players failing the test), it's so weak it's laughable.  The owners want more-frequent testing, and they want the tests to look for cocaine, marijuana and the supplement called androstenedione -- but you know what?  The owners ended up accepting the players' shell-game counterproposal in order to get the financial concessions they were seeking.  

The final agreement calls for all players to be randomly tested for steroids (only) in 2003, but this is only to calculate the total percentage of guilty players, not to identify them.  If this "survey" shows more than 5% of players tested positive, then mandatory testing will take place the next two seasons, with guilty players being forced to undergo a treatment program.  Keep in mind that drugs which mask steroids are plentiful, so only stupid, careless steroid users would ever get caught -- and then only if it's during a year when "mandatory" not "survey" testing is taking place.  And no testing for illegal narcotics will ever take place under the new agreement.

The Boston Globe's Charles Pierce put it perfectly in an editorial appearing in many papers around the country on August 11.  Pierce pointed out that baseball "has spent so much time concocting problems that (it) is again unprepared when confronted with a real one" -- i.e., steroid use.  This true tragedy is being buried behind the economic issues, so that the "terms 'anabolic steroids' and 'revenue sharing' seem grotesquely synonymous."  What a shame. 

So it's the players who won on this issue, since they can tell the world "we agreed to steroid testing," but in reality there are very few teeth in the agreement.

Contraction – The owners feel they have the unilateral right to reduce the number of teams if they want to.  The players are bright enough to realize that fewer teams equals fewer jobs, so – naturally – they oppose contraction in any form.  I think that baseball is a business, and if a business needs to close a factory or lay off some workers in order to avoid declaring bankruptcy, then they should do it.  Prune off the weak sisters, and what’s left will be stronger.  If South Florida and the Tampa area can’t bring in enough fans to permit the business to break even, then close them down.  And don’t give me that “well, the fans would come out if the team won more often” argument either.  A market with true fans can show decent attendance figures even when the team is losing.  As a fan, I know that I bought tickets whether my Orioles were having a winning year or a losing year, whether Cal was nearing a milestone or not. 

I’ll never forget how tiny the crowd was in Montreal the night Tony Gwynn had his 3,000th hit.  What an embarrassment!  And I don’t care if a whopping 18,000 fans showed up for an Expos game recently.  The fans there were warned year after year that their team would go bye-bye if attendance didn’t pick up, and it didn’t.  And I will again use the word “embarrassment” to describe Montreal’s attendance.  Most nights, the minor league team in the city where I live outdraws the Expos, and my conclusion is that Montreal doesn’t deserve a Major League franchise.  So close it down.

I am opposed, though, to crippling an already hurting industry by offering to pay the outlandish sums that Bud was waving at the owners last year when he was seeing how much interest there was in contraction.  Gee, who wouldn’t want to receive twice (or more) what he paid for his business?  No, contract the teams, but not with $200-million-plus buy-outs for the owners.  They should feel fortunate to get back what they paid for the teams.  After all, they failed to make money, and any business owner who runs his enterprise poorly doesn’t deserve to profit from its demise.

All of this might be moot, since an arbiter will be ruling soon on whether the owners even have the right to contract franchises without the players’ consent.  I say give the owners that right, but by the same token, it’s probably time for that anti-trust exemption to be thrown out the window, too.  The other pro sports don’t have such an exemption, and they have thrived.  

Update:  the final agreement prevents MLB from contracting any teams through 2006.  Since the players were dead-set against contraction, they clearly won on this issue.

Debt – The  owners want to enforce an old rule that places a ceiling on the amount of debt any one franchise can carry.  That ceiling is 40% of a team's asset value.  Of course, there’s nothing to stop an owner from refusing to have such high expenses that they have to borrow huge sums of money, but why let facts get in the way of the owners’ argument?  Anyway, the long-ignored rule doesn’t technically include the money tied up in deferred salaries (all the rage now), and, predictably, the players say that the owners can’t unilaterally enforce this – to include deferred salaries – without negotiating it into the collective bargaining agreement.  Why should the union care?  Here's why:  if the teams can’t borrow more and more money, no matter how fiscally stupid it is for them to do so, they might not offer free agents so many millions of dollars. 

I think both sides look clueless here.  First, the owners spent ignorantly, thereby making their own problem.  Second, there’s no good reason for the players union to oppose the enforcement of such a rule.  So put the rule in the new CBA and let’s move on.

Update:  of course, the specifics agreed to are much more complicated than the original proposal from the owners.  The final agreement places a team's debt ceiling at ten times its earnings (or 15 times its earnings if it has moved into a new ballpark in the last 10 years).  Earnings are defined as "earnings before interest, depreciation, taxes and amortization."  Teams have a three-year grace period before these new limits will be imposed.  One would have to say that the players were successful in watering down what MLB wanted to do.

Payroll -- The owners are willing to impose a rule that all MLB teams must spend at least $45 million a year on payroll, and that the minimum Major League salary increase from $200,000 to $285,000, with cost-of-living increases being applied in future years.  Predictably, that's not acceptable to the players, who want the minimum salary to jump all the way to $300,000, with $25,000 annual increases in future years.  The union hasn't commented on the payroll-minimum issue, but since they oppose salary caps, it is believed that they don't want there to be a minimum payroll.  Anyway, I think the owners' proposal is more than fair.  

Update:  the players win again, as the owners agreed to a $300,000 (yes, that's a three with five zeroes after it) minimum salary, and no minimum payroll for teams.

Competitive Balance – Frankly, this is the one I care the least about, but it is the hook on which the owners want to hang their hat.  This is the issue that the owners say creates the need to address all of the other topics.  How often have you heard Bud or an owner say, “It’s just not right that on opening day, the majority of the teams in baseball already know that they don’t have a chance of playing in the World Series”?  I say, “so what?!”  And besides, I’m not convinced that competitiveness is really something the owners lose sleep over.  It just sounds like a good reason to change the basic economics of the game. 

Anyway, stop and think for a moment.  Does Ernie’s Computer Store in the Smithtown Shopping Center enter a year with a chance to make more revenue than IBM?  No, but does that mean that the employees at both IBM and Ernie’s should go on strike?  And think about baseball’s so-called glory years.  Every single year, the majority of the teams entered the season having very little chance of dethroning the Yankees or the dominant team of the time – and they knew it!  Part of the mystique of that era was that there was a dominant team like the Yankees.  Hey, ratings are higher and the NBA is better off when the Lakers are in the Finals than Sacramento.  Love ‘em or hate ‘em, baseball is better off when there are dynasty teams like the Yankees playing on TV and in the postseason.  So I am far less worried about how “competitive” the teams are on the field than on how much is being wasted on over-paid, under-performing players.

Hey, two teams targeted for contraction, the Twins and Expos, have played very well this year, with the Twins even running away with their division.  So, Bud, get rid of that tired old stump speech that says that small-market teams can’t compete.

Update:  Did the new agreement help competitive balance?  Well, nowhere does it specify that all of this new revenue that will be flowing to poorer teams has to be spent on player salaries.  So if the small-market teams spend it all on reducing debt and on other expenses, how will that help them buy better players?

What Shouldn’t Happen

In my opinion, the players should not strike.  My feeling about this has less to do with establishing a bargaining position than with having a profession to return to once the work stoppage is over.  I bet you’re familiar with the recent polls that show that an overwhelming majority of baseball fans say that their interest in the sport will plummet if there is another stoppage of play.

Since MLB doesn’t seem to care whether youngsters develop a love of the game or not (why else do all post-season games seem to end at midnight, and tickets are priced so that Dad can’t afford to bring his family to games?), it’s safe to say that the sport’s fan base is not made up of people too young to remember the 1994 strike.  Fans are tired of millionaire players failing to get along with billionaire owners.  Another strike will be far more devastating to the viability of the game than the one in 1994.  Frankly, these fans will not come back in sufficient numbers to come close to generating the $3.6 billion of revenue the sport rakes in now.  That means less for the owners and less for the players … something both sides should think about.

Update:  When it comes right down to it, the players' decision to set a strike date really did force both sides to bring a great sense of urgency to the table.  Lacking a strike date of August 30, no one thinks a deal would've been reached by August 30!  Make no mistake, though, a large percentage of baseball fans did not like being dragged through this uncertainty yet again, thereby reducing the sport's popularity even more. 

What Should Happen

Bud must go. 

Plain and simple.  Whether you like him (and I think only 30 human beings – the owners of the 30 Major League teams – do) or not, you have to admit that the sport is in very bad shape, and it has happened on his watch.  We need an independent commissioner, one not beholden to either the players or (especially) the owners.

I give Paul White, Senior Writer at Baseball Weekly, a lot of credit.  He was the first to publicly call for Selig to resign as Commissioner last year.  Others have joined the chorus, and with good reason.  Despite his loud protestations to the contrary, Selig clearly does not have the best interests of the game at heart.  No, he has only one thing in his heart:  the best interests of the owners.  It is obvious that he has difficulty distinguishing between the two, but there is a big difference.

But we have “Bud Lite” as the Commish because of the owners.  And just exactly how intelligent is this crew of millionaires?  Well, consider this: at a time when baseball is having unprecedented money, labor and PR problems – not to mention immediately following Bud’s embarrassingly inaccurate testimony in front of Congress – the other owners gave Selig a contract extension until 2006!  That’s right, the sport is falling apart under his guidance, and he’s given the supreme vote of confidence by his constituency.  And I call the other owners “his constituency” because the players and most certainly the fans are not the ones he cares about at all.

You want irrefutable proof?  When the Yankees essentially “bought” Raul Mondesi from Toronto (oh, yeah, I forgot.  The Yanks threw a marginal Double-A reliever in the deal), the transaction had to be approved by the Commissioners office because of the way Mondesi’s remaining salary was being handled.  A Commissioner who truly wants what is best for the game would have prevented this salary dumping from taking place.  Did he keep these two owners from doing what they wanted?  I think you know the answer.

Update:  Again, in the 8/11 editorial by Charles Pierce, the author makes a brilliant conclusion.  By testifying in Congress and saying in countless interviews that baseball's problems have wrecked the competitive balance in the game, Selig hammered the point home that the only way a team can have a successful season is to reach the World Series -- which most teams have little chance of doing (Bud forgot to check his hypothesis with the Twins, I guess).  Anyway, Pierce points out that Selig is saying the regular season is a sham, that a "good June is meaningless without a successful October."  He goes on to say that Bud "demonstrates a gnawing unease that the problem is not that baseball necessarily is economically unsound, but that it's culturally anachronistic.  More easily than anyone would have expected, he gives away the summertime."  Just another reason that we need a new commissioner. 

He also didn't come out of the 11th-hour negotiations looking like a hero, even though an agreement was reached.  Those familiar with the negotiations say that the other members of the owners' team made the difference, not Bud.

It has never been more obvious that baseball needs a powerful, independent Commissioner.  We have seen what happens when one of the owners ends up running the sport.  We need someone with no ties to either the players union or owners, someone who will objectively think about what is best for the game of baseball.  What a concept!  Bob Costas comes to mind.  Even former President Carter has offered his services as a mediator.  Hey, the game needs outside help, so take him up on it!

What else should happen?  Sorry for the mixed metaphor, but the simple answer is that the players should wake up and smell that the goose that lays the golden eggs is almost deceased.  Sure, they’ve won all of the key battles with the owners in the past (and laughed all the way to the bank while embarrassing their employers), but in so doing, they have been turning up the heat on the goose’s oven.  Give in on a lot of these key issues, players, or wake up in horror one morning to find that your strike has extinguished America's desire to attend baseball games.  And with your goose fully cooked, you'll have to get real jobs.

And does this mean the owners are blameless?  Not on your life.  They are the ones who foolishly drove up the price of all ballplayers.  Can you even fathom how much money is $2.38 million?  I can’t.  Yet, that’s the average salary of a Major Leaguer today.  The owners did this to themselves, and by not caring whether the “dollars in” were going to cover the “dollars out,” they’ve dug quite a deep hole.  They continued to push ticket prices to stratospheric levels (which left largely the rich and corporate buyers to purchase those tickets, and these aren’t the folks who will stick with the sport through thick and thin), and borrowed more and more, all the while being less and less intelligent.  Simply put, they’ve run their businesses horribly.

So there’s plenty of blame on both sides.  But the next move is the union’s, and if they blow it by failing to give in – or even worse, if they go out on strike – we all lose.

The Tragedy Of It All

You know, the 2002 All Star Game was a tragedy, but not because the contest failed to produce a winner or because we all were still feeling the incredible pain of losing Jack Buck, Darryl Kile and Ted Williams.  What was tragic is that it displayed what could be, but probably won’t be.  The incredible pre-game show, which highlighted the greatest moments of the greatest sport ever conceived, provided conclusive proof that baseball is indeed wonderful.  The highs and the lows.  The records being broken.  The against-all-odds players and teams.  Truly, baseball is our National Pastime. 

Watching these exhilarating highlights made me happy for only a brief moment.  That happiness almost immediately turned to profound sadness and regret.  Why?  Because despite its popularity, its stars and its accomplishments – all of which could be repeated over and over in the future – baseball is trying to kill itself.  This suicide attempt is the result of incredibly poor leadership and even more incredible greed.  It doesn’t have to be this way.  All of the money in the world is there (well, $3.5 billion of it).  There has to be a way to make it work.  But don’t forget that it needs to work for the fan, too – not just the millionaire players and billionaire owners.

Don’t allow the owners to prop up one of their own as the head of the sport.  Don’t pay unfathomable sums to players.  Lower ticket prices and start post-season games earlier so that the sport will attract new – and especially younger – fans.  And don’t have a work stoppage that will undoubtedly bring irreparable harm to the sport.

In other words, owners and players, don’t kill this game.  Unfortunately, you both look poised to do just that.

Update:  so the strike was averted -- barely.  Does that mean that the owners and players can skip down the sidewalk together, arm in arm, like nothing bad happened?  Hardly.  The frustration and uncertainty, coupled with the knowledge that the two warring sides had so much difficulty on agreeing how to share $3.5 billion of revenue, certainly made the average sports fan more bitter about baseball.  One thing is for sure, if the two sides hadn't blinked, and if the players had gone out on strike, then the game would have suffered irreparable harm.  I'm glad the two sides came to their senses and realized that the average baseball fan was on the verge of not being a baseball fan any more.

Please feel free to e-mail me at joe@baseballparks.com with your comments or questions.


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