REALITY STRIKES FANTASY BASEBALL.

Byline: Rich Hammond  Staff Writer

What started as a few guys getting together in a living room to fantasize about running their own team has grown into a multimillion-dollar industry with 10 million subscribers - and now Major League Baseball wants a bigger cut of the action.

The threat of much higher fees has sent ripples of panic across the fantasy baseball world, both among players and the companies that provide the service.

``I don't have many vices left and I really love fantasy baseball,'' said Phil Reed, 54, a longtime ESPN subscriber from Sherman Oaks. ``I'll pay more but not a lot more. Baseball belongs to the fans.''

For Reed and millions of others hooked on competing in fantasy sports leagues, there might be a temporary reprieve from higher fees.

Although it is not clear what other services will do, ESPN announced Wednesday afternoon that it will not increase prices from last season's $29.95 per-player charge even though it will pay MLB double its previous fee, now $500,000.

With completion of negotiations with MLB, ESPN spokesman Paul Melvin said the network's baseball fantasy Web site will be up and running today.

``It's a little later than usual,'' Melvin said, ``but it is still the game fans have enjoyed for years. We will not be raising the rates.''

Under the previous system, companies would obtain a license from the Major League Players Association for the use of names, logos and stats. The rules were quite loose. A big company might have paid $250,000 for a license, but many smaller companies often flew under the radar and paid nothing.

Now vendors with fewer than 5,000 subscribers will be required to pay $2 a player to receive a license. Companies with more than 5,000 subscribers would pay a flat fee of $500,000.

``I don't know how some of them are going to pay these huge licensing fees and not increase their prices,'' said Charlie Wiegert, co-founder of CDM Fantasy Sports, which has 35,000 customers and runs the fantasy game for USA Today.

Last month, Major League Baseball paid its players union $50 million over five years for the exclusive rights to the game's names, statistics and logos, raising fears that many vendors would be priced out of the game.

Jim Gallagher, senior vice president of communications for Major League Baseball.com, said the biggest mistake has been a lack of communication with fantasy customers.

``There will be more companies licensed than ever before, and combined they will offer more games than have ever been offered,'' Gallagher said, ``and there is not going to be a price increase as a result of this.''

One operator of a middle-size fantasy Web site, who wished to remain anonymous, said MLB is ``greedy, plain and simple'' and scoffed at Gallagher's suggestion that prices will not increase, since large companies such as Disney-owned ESPN are expected to pay MLB at least $500,000 for a license, or double the previous rate.

Pitchers and catchers began reporting this week to spring training in Florida and Arizona. Mid-February also is the time when most fantasy drafts are held.

But because MLB bought exclusive rights just last month, Internet outlets such as ESPN, CBS Sportsline and Yahoo have not made sites available until today. Operators of smaller sites don't even know whether they can afford the new rates. As a result, sign-ups have been delayed and sites have been slow to open with statistics so players could begin drafting their teams for the coming season.

``There is confusion in the marketplace right now,'' said Greg Ambrosius, president of the Fantasy Sports Trade Association. ``(MLB officials) are the only ones who know how things are going to change.''

Wiegert is one of many on the lower rung of the industry who are upset about what they see as a ``takeover'' by MLB. Baseball makes no secret of its intent to offer new games it thinks are more accessible and attractive to average fans rather than hard-core fantasy players.

``Millions of fans are intimidated by the idea of fantasy baseball,'' Gallagher said.

Now, a company such as Sportsline will have to offer many new, MLB-sanctioned games, under the theory that offering games that are less time consuming will draw the average fan into fantasy baseball.

``We're just not happy with the status quo when it comes to fantasy baseball,'' Gallagher said. ``Over the last 10 years, fantasy football has overtaken fantasy baseball and lapped us three or four times over. We purchased the rights because fantasy baseball has become stagnant and we want it to grow.

``Of course, we're a for-profit business, and we need to do this in an economical way. We're in the business of growing the sport, but we're still a business.''

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