After Years of Profits, MLB Owners Ask Players to Subsidize Potential Losses
Six months ago, few people likely loved the status quo more than MLB Commissioner Rob Manfred and the group of owners who employ him. Having just completed the third year of a five-year Collective Bargaining Agreement with the players, baseball revenues continued to soar, with estimated profits during those years totaling $3.57 billion even before accounting for the $2 billion windfall from the BAMTech sale to Disney. Players saw their share of revenues shrink over those three years due to stagnant payrolls, and hoped for an opportunity to negotiate a better deal after the 2021 season. After years of huge profits under the current CBA, MLB owners are faced with the threat of potential losses, and according to reports from Evan Drellich, Ken Rosenthal, and Joel Sherman, the owners appear set to ask the players to subsidize those losses.
According to Rosenthal’s report, MLB wants to introduce revenue sharing for 2020 only:
Because games, at least initially, will be played without fans, the players would be asked to accept a further reduction in pay, most likely by agreeing to a set percentage of revenues for this season only.
The idea behind such a plan, from the league’s perspective, would be to protect the players and owners against the economic uncertainty created by the virus.
The players agreed in March to prorate their salaries in a shortened season. Those salaries cover the regular season only, while postseason shares are based upon gate receipts. If the players agreed to a set percentage of revenue, they also would share any additional national TV money generated during the postseason.
According to Bob Nightengale, the MLB is proposing to share 48% of revenue with the players. Before even getting into the very thorny issue of what constitutes the revenue that might be shared, it is worth noting that the owners on the whole might break even or potentially profit if they stick to the deal agreed to in March, and pay players on a pro-rated basis. As I wrote last month when the owners’ wishes to renegotiate became public:
Rob Manfred has indicated 40% of revenues are home stadium-related, in line with Forbes’ figure of around $4 billion. As to how that $4 billion figure might be made up, we already have the players discounting their salaries. If, for example, 100 games are played, players are giving up more than $1.6 billion in salaries. As mentioned above, players made amateur spending concessions that come close to $400 million this year. Expenses will likely go down if games are played in empty ballparks or at neutral sites (one estimate was by as much as 40%), and if teams can save even 25% of their expenses, that might mean another $1 billion dollars. Factoring in 2019 team profits of $1.5 billion per Forbes, and the league as a whole might end up turning a profit if they can keep all of their television revenue.
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In a half-season scenario, if teams lost nearly all of their stadium revenue, and every other revenue and expense stream (including player payroll) were cut in half, there’s an argument that the owners might lose about $50 million per team this season. While that’s still about $2 billion shy of the profits they’ve made over the previous three seasons ($4 billion including BAMTech money), it’s a significant loss. Of course, the vast majority of those non-stadium revenues will not be cut in half. MLB is still in a very good position with its television partners, and even getting 75% of non-stadium revenue would allow the league to break even without renegotiating the deal it previously agreed to with the players. And that’s before we even get to teams taking lower annual local rights fees in exchange for ownership stakes in regional sports networks, which might send another half-billion dollars or more to teams annually. Those profits aren’t included in the revenue sharing among teams, and similar issues will make revenue sharing with players incredibly difficult to determine.
And even if we were to assume that by playing half a season without fans MLB is going to operate at a loss paying the players half their salaries, and then further decide that players should share a greater part of the burden of potential losses in the form of revenue sharing despite not having received any of the benefits of increasing profitability the last three years, what constitutes revenue in this scenario? Calculating revenues in a normal year is hard; calculating them this year will be near-impossible. We can talk about the under-market local TV deals of the Red Sox, Mets, Yankees, and Cubs, which siphon off baseball revenue in the form of network ownership, as a potential sticking point but even more difficult is determining revenue on national and local television deals and sponsorships.
If a team or the league agrees to take a discounted amount for a television deal or local sponsorship in order to make more money in future years, would such a deal require player approval? After all, the team or the league would be actively negotiating away money that might go to the players this year, but wouldn’t in future seasons when revenue sharing wasn’t in effect. The league and teams have longstanding relationships with their television partners and sponsors and they want to keep each other happy and provide each other with the biggest possible return on those relationships. The players are uniquely disadvantaged when trying to determine revenue due to these relationships and the potential for moving money around to the advantage of the parties already engaged in the deal. Involving the players will only lead to more acrimony and bigger headaches down the line.
In Rosenthal’s piece a league official indicated, “they will spend more on player salaries than they would earn in revenue for every incremental regular-season game played without fans.” The statement lacks specificity to the point of being meaningless spin in a PR war owners are trying to wage against the players. Does that count revenues from the postseason? Does it account for national TV money at all, or other revenue generated by the MLB central office? Are profits from local television networks included? What about payments received prior to the commencement of the season? And how do those incremental losses compare to not having a season at all?
If MLB on the whole is breaking even or something close to it, that means some teams are going to end up much better off in 2020 while others will probably lose money. That’s a departure from recent seasons, when nearly every team was turning a profit. It seems possible that proposing revenue sharing with the players is a way to keep more teams profitable and avoid uncomfortable inter-owner conflicts about how to split up revenue in a tough 2020 season. But it’s not the players’ job to help owners avoid discomfort among themselves. The players agreed to take a paycut back in March based on the number of games that will actually be played. The owners are now asking for further reductions in pay not because the business of baseball is about to go under, but because they might have to take a small loss after receiving more than $5 billion in profits over the last few years. The players are fully within their rights to be upset with the owners’ attempts to renegotiate a deal just weeks after it was agreed to, particularly when the players are the ones risking their health and the health of their families. As Andrew Miller told Jesse Rogers:
“We understand that this year isn’t going to be as financially rewarding for the ownership groups [but] there is higher risk this season,” Miller said. “If it’s not safe to bring fans into games, you’re still asking us to play, there’s certainly a risk there. … Travel is limited to essential, and we’re traveling, that means there is risk involved.”
…“The way our sport works is we are not tied to revenue in any way,” Miller said. “If the owners hit a home run and make more money, we don’t go back and ask for more on our end. Ultimately this isn’t about money. We need to find a way to safely get our players on the field in a safe manner and control that. I would hope this [finances] doesn’t turn into anything regarding that stuff.”
The owners are trying to make the return of baseball about money. They want the reward without the risk because that’s what they’ve grown accustomed to after years of incredible revenue and increasing profits. The players negotiated a deal with the understanding that if it wasn’t safe to play, they wouldn’t have to. For MLB to try to use the fact that it is currently unsafe for fans to attend games as a reason for players to subsidize their potential losses reflects poorly on the owners and the Commissioner. After negotiating a CBA that turned out to be a huge win for the owners, the players knew they would have to wait five years for another crack at the bargaining table. The owners waited five weeks before crying poor.
For the most part, the players want to play. The fans want to watch. The owners are getting in the way with a shortsighted attempt to squeeze a little more money out of the players, a stance that could potentially damage the long-term health of our sport and their business.
Craig Edwards can be found on twitter @craigjedwards.
Nailed it.
This was a great article. I was just thinking about the problem in a vacuum but when you step back it becomes
clearer that the owners should accept a loss. I mean, if there is no season at all I imagine that will be a huge loss. It would be for players, too, but they wouldn’t have to risk their health. What do the owners get out of a lost season?
Agree completely. I want to quickly point out something that makes me upset on this whole thing.
The MLBPA negotiators should be immediately fired for simply being awful at their job. To make a deal with the MLB without both parties first understanding the underlying assumptions to that deal is beyond belief to me for people who get paid high six figures to do this. Both sides are to blame but in MLB’s mind, there were no concrete assumptions agreed to and I haven’t really heard a union rep definitively claim that both parties took into account the possibility of no fans.
I had high school assignments where the first slide was listing underlying assumptions to the premise of your problem/argument. While I think MLB is pulling bs tactics to save money, you can’t excuse the gross incompetence of MLBPA negotiators for setting the table for the outrage that’s occurring now by not understanding basic tenets of compromise and conflict resolution.
Thinking about posting the link to this article in the Athletic’s comment section as I argue with people who think the players need to quit complaining and get out there, but doesn’t really seem like anything will convince them…
some people are just sheep and that will never change.
Yeah I’ve been turned off by The Athletic because, at least from the Cubs stuff I read, it’s a constant ballwahing of teams
The Athletic is great for football (Murrican varietal and world footy), but the baseball coverage is Not Great, Bob!
/Cubs and Cardinals fans agreeing on something
//shudders violently
The Athletic has pretty decent Reds coverage, though.
The White Sox guy, Fegan, is good as well.
Yeah, Fegan has become one of my favorite baseball writers.
What’s ballwahing?
It’s what Trumpers do when they protest quarantine
and heil Trump simultaneously.
Yay lets bring politics in to this. Fun.
Players should not even consider a revenue sharing arrangement. It will be too difficult to determine what revenues should be included in the pie. They should, however, entertain reasonable offers from the owners, who do face significant losses. Whether that’s a small pay cut (maybe 5-10%) or a larger deferral (perhaps 30% payable over the subsequent 2-3 years), the MLBPA should at least consider a concession if the owners can prove the financial hardship. Ultimately, the players have to be practical, so, unless they are willing to take a more long-term legal or labor stance that threatens the 2021 season as well, it makes more sense for them to play than the owners. After all, the owners will lose less money by not playing AND it’s unlikely that their EV will be eroded over the long-term. The players, however, will never be able to get this season back. Losing one year for a player could be a major financial setback.
bingo..great point….thats the problem right now the mlbpa is handed an audit every year from the MLB and the mlb accountants pull the wool over the mlbpa eyes. What they due is legal, but the way the mlb accounting is bucketed and distribution of costs/allocation methods of the player benefits only benefit MLB. One sided.
Do you honestly think MLB put the true cost of insurance in their, or the sticker price likely 40% higher, thats one example.
The MLBPA just takes the audit, and says well here’s the audit fellas, they passed…looks good to me. lol If they only knew.
What makes you think missing a whole season wouldn’t affect franchise valuations? Viewership and attendance are already declining, and I definitely foresee TV revenues taking a significant hit as soon regional networks won’t be able to afford the contracts MLB owners have become accustomed to
this isn’t some tech bubble or aol….this is baseball. not going anywhere. valuations stay the same.
I’m pretty sure valuations on everything change regularly.
Yes and in this case always up. We are a bread and circus society, those valuations aren’t coming down until the sport is clearly toast
nm
You could argue television money in baseball is certainly a bubble. Deals have been growing larger (though the peak has now passed) while cable subscribers have been dropping. Sure baseball fans may make up a larger portion of the remaining subscribers which can partially validate the size of the deals but cable isn’t making a comeback and there is nowhere to go but down.
Can online streaming revenues replace some of the cable revenue? Sure, but there’s no concrete evidence it will be a 1 for 1 replacement as it remains to be seen how large streaming deals may be as individual teams sell their streaming rights to the likes of Amazon and Google.
Great article. Absolutely ridiculous. The CBA and whole premise of the union is a 50/50 split of the MLB revenues as both groups need each other. Players are currently being squeezed…… even prior to the Covid 19- tensions were high already as its currently more like a 60/40 owner to player split. Owner squeezing the players keeps getting worse with each passing year. To top it all off its really unbelievable the owners are planning to ask the players to take another pay cut. Unprecedented.
Frankly the players have more leverage than ever, and they need to use this time wisely. They should demand to fix the arb system or strike remaining this year and next. Pre-arbitration should go away completely. No player should have to wait until theyre 30 years old to become a Free agent. Their also needs to be a salary floor to go along with the soft cap….and it should be floating/tied to mlb revenue from prior year to fix the 50/50 once and for all. The whole reason the split is 60/40 currently is because more and more owners are being greedy as their teams aren’t even trying to compete. Tank job. Its sad.
Owners dont have to agree to open the ballparks and they could just cancel the season and hardly pay the players anything except for the initial payment agreed upon and thats plenty of leverage. For many owners it might be a better move than losing money. Yankees might be fine but teams like the Pirates and Devil Rays and Brewers it could really hurt them. Wait until next offseason when all these players start getting non tendered. Revenues will be down for 2-3 more years. Big free agent contracts for the foreseeable future are done. Until fans can get back in stadium everyone will be taking a hit.
owners have debt payments to make (case in point: Wilpons have 1.1 billion in debt spread across SNY and the Mets, Ricketts have 400 odd million on the cubs). They can’t service that debt without revenue from baseball, or without making some offloading other assets.
Be a real shame if the Wilpons were forced to sell… Real shame indeed.
“reaaaaaalllllllllll shame. shame shame shame……. shame. Just too bad, they’re gonna have to take just enough to cover the debt. And Jeff is going to have to sit in stocks outside the stadium for two weeks after the sale”- Steve Cohen, probably
Steve Cohen is a bigger crook then the Wilsons of course. Smarter, but a bigger criminal.
If owners are in such a fiscally precarious position, maybe they should cut back on avocado toast and learn how to code.
If there’s no baseball, then sportswriters are going to need to learn to code.
They probably cant make those payments with no fans in the stands even with baseball playing. Mets can barely make those payments and payroll with fans in the stand. Mets going into bankruptcy might be their best course of action. There might be several bidders for the team thinking they could get team at a discount
I feel like at least a plurality of MLB owners are privately rooting for a Mets bankruptcy.
ETA: And 90% of Mets fans.
Several teams have gone this path. Thats what the texas rangers did. Bankruptcy
The secret thing about rich people is almost none of them got rich risking their own money. Access to easy credit isn’t the downfall of regular people, it’s truly the opiate of the upper classes.
yeah they should learn to code.
There are a bunch of recent papers on fee farming from subprime borrowers, but I think the same thing happens with really rich people, with much less frequent absolute downside until stuff like COVID happens.
This is actually a really good point that hasn’t been talked about enough. There are ownership groups that need to generate revenue to maintain ownership.
Not only do the Ricketts have debt from the sale but they have also been funding development projects that I’m sure have raised further debt which was pointed to as a reason the team did not spend more on free agency.
Owners don’t have to agree to open ballparks?
You mean the ballparks taxpayers paid to build?
The players bring immense talent and a lifetime of hard work to hone their skills, what precisely do the owners bring to the table?
Nobody ever said the deals governments cut to build ballparks for teams are good for the tax payers. Probably every single one of them are bad for taxpayers. Im not for one side or the other and ultimately want baseball to be played but owners and MLB do have leverage but not even starting play and there are plenty of teams that would probably pick that route and might be more economically feasible to them. The below language was in the March agreement between MLB and MLBPA.
“MLB and the union will discuss the economic feasibility of playing games at neutral sites or without fans. “
What I wouldn’t give to see Manfred sit down for an interview with Craig Edwards
it wouldn’t be any good…..it would be on MLB network and the questions would have to be pre-approved. MLB network is the mouthpiece for the owners/commissioner office.
I’ve been advocating for years the players should start their own network and not one player should give interviews on the MLB network but only for the MLBPA network. That revenue would be taken out of MLB and go straight to the players pockets via the MLBPA network. MLBPA doesn’t have the brain power though…thats the problem they’ve got tony clark and his buddies. The MLBPA should have an army of the best attorneys in mahatten on payroll right now.
You really think there’d be a market for a network that basically only offered MLB player interviews and maybe a highlights show or two (but no games?).
I’m enough of a baseball fanatic that I’m on FG a month and a half into a lost season and I’m pretty sure I’d never, ever watch that. Athlete interviews aren’t that interesting.
yes….huge market. Would be full accesss. behind the scenes hitting cages etc. At the same time taking away all player access from the mlb network and it would devalue mlb network and steal a portion of hte mlb networks market share. That portion would got to MLBPA network which in turn goes straight to the pockets of the players. right now players don’t see any of that money so its def a win win for the players.
On a side note the MLBAM deal will go down as the worst deal in hisotry of all sports. Unbeliveable the puppet manfred let that one go through.
You literally need approval to broadcast any of that stuff; approval from MLB or your team. Tim Anderson had to get approval from the White Sox to film at ST.
You have quite literally no idea how licensing and ownership works.
you have no idea how a union works
Another issue is Tony Clark. Hes a yes man and their lap dog. He doesn’t represent the players. Hes more worried about not making any owners mad and pleasing the commissioner so he can keep his job, more so than actually representing the players. If he was doing his job correctly he would be the most hated man by the front offices on the planet……its actually the opposite they love him because he does what they want. This is really telling what kind of job hes doing for the players.
The fact that he only works with what is proposed from MLB is major red flag……as the owners set the storyline every single time with Tony and give the MLBPA the framework from the get go. Not good.
Serious legal question that was raised in the comments to another article – does the MLBPA even have the power to renegotiate pay for individual players? Not so much the prorated pay – the uniform player contract already provided for players not being paid if baseball were canceled. But if I’m a player under contact for $10M for a full season (so $5M for the half season), and MLBPA agrees to this proposal, am I in violation of my contract if I refuse to play for the reduced amount? I’d certainly call my attorney before reporting to camp.
great point. I would as well.
Yes, a union can negotiate on its members’ behalf. That’s the point of a union. But if you don’t want to play for that collectively bargained amount, nobody is going to force you to. You always have the option of just not playing (though of course you won’t get paid).
Players can sue the union for misrepresentation. They can sue the union for negligence. They would probably need to go through preliminary steps beyond what a normal litigant would need (e.g. mediation, arbitration, NLRB), but unions can be challenged.
Players could vote to Decertify the union. That would eliminate the union’s ability to act as the sole representative.
Also – the wealthiest players could decide it is not worth the inconvenience and risk to play at such a reduced rate with the isolation plan. And if the MLBPA turns on them, it could spur widespread discord. MLBPA probably does not want a civil war in its ranks going in to the 2021 negotiations.
I still believe the 2020 season is in serious jeopardy, and that both MLB and MLBPA might decide they are better off losing the entire season than litigating this mess.
Yes, sure, if members are unhappy with how the union represents them there are steps they can take (though those steps are not particularly likely to succeed). I was just responding to the initial question about whether the union can negotiate on behalf of players who are under contract, and the answer is yes, they can.
We both agree Tony Clark has fans up and down MLB front offices but it’s not for the reasoning you describe.
Tony Clark is not attempting to please the owners to keep his job, it’s not their call. Tony Clark represents MLB players and under his watch the union has focused on enriching veteran players (note: it hasn’t worked). If anything he is a puppet for MLB vets as opposed to the visionary or even just strategic leader required for the job.
Instead of careful, well thought out policy proposals that can address the root cause of the issue, Clark just seems to take what the players want, present it to ownership, and is willing to accept concessions on the player side as long as it only appears to impact prospects or young players on the surface.
What he failed to take into account is that sacrificing the pay and rights of prospects and young players makes them more attractive to teams because they can put up similar production to vets at a fraction of the cost. You can cycle through 10 minor league guy and still be paying less than the free market cost of some middling vets.
If the union instead fought for players to be paid closer to their actual value earlier in their careers you no longer have to worry as much financially about the 32 year old vet hitting free agency for the first time after making league minimum or close to it for 6 or 7 years.
As it currently stands cheap young talent essentially subsidizes a team’s ability to bring in expensive proven talent. If you make the young talent more expensive, the gap between the largest salaries and smallest salaries would shrink and proven veteran talent would be in higher demand. This is ultimately the solution to Clark’s problem (getting vets more money) he apparently just chooses to ignore it.
Ahh, back to “Capitalists are EEE-VILLLL!!!, those poor oppressed repressed proletarian players!” Wait, I thought normalcy was supposed to feel better than this?
I actually suspect the site’s enthusiastic marriage of baseball with Bernie-Brodom may have kept its financial head above water. Clannish-ness does lead to greater enthusiasm among the thus-fewer members, so they each pitch in more. However heartfelt, this stroking may now also be good business practice. So I’ll go away now.
I know I shouldn’t respond to this. But I can’t help myself. Every player in the league has signed a contract promising them $X for the service of playing baseball. Wanting the owners to honor contracts they were happy to sign is not anti-capitalist. Quite the opposite.
And almost nothing about MLB resembles a free market.
The owners can be fairly subjected to much criticism, but “honor contracts” is not one of them. They have not failed to honor contracts. No one disputes that the force majeure clause came into play, and that moving forward required a negotiation specific to the circumstances. Their arguments may be short-sighted, and self-preservationist for the sake of their current cash flow at the expense of the long-term health of the sport, but it’s not a question of breaking a contract.
I actually think Fangraphs is good unlike the nonsense that is out there on HardballTalk and Baseball Prospectus. I think Craig brings up some valid points here, and isn’t being as nonsensical as people who hate baseball like Baer and Calcaterra. However if it gets back to a commie site like when that awful attorney who wrote garbage was here, I can just stop subscribing.
Are you blowing the “commie” dog-whistle because you disagreed with Sheryl’s legally reasoned opinions, or because you just didn’t understand a word she said?
Enquiring minds want to know.
No, we don’t!
you mean the lawyer who wrote a first amendment analysis without using the term “actual malice.” I’ve seen better analysis from toddlers at dinner time. Nearly every article she provided would be an exhibit in an ineffective counsel suit.
Every time someone brings up her writing, someone else needs to push back, because she was wrong on the facts and the law NEARLY EVERY TIME. 99.9% of the lines of arguments fell out of the legal mainstream and current understanding of the law. Starting at the conclusion then arguing your way to it by bending everything around it, including case law, is example zero of bad legal analysis.
To fit this in peoples’ statistical worldview, her positions were equivalent to Pual Manafort’s position on the rockies. Sure, they could win 94 games. But that outcome would only happen in one world out of like 10 thousand. It’s just extremely unlikely, and most experts would disagree, most of them pretty strongly.
Same with how she thought case law applied and where most people stood on contracts. You might find a judge and everything might break the way she thought it would, but it would very much be an edge outcome. People need to realize those positions are unorthodox, and not held by, well, most people.
Yeah she was…not good. But “commie”?
Right, that’s ridiculous. Communism is a word that means something, and it’s not…. that.
Legally reasoned? Pretty much all of her posts we’re torn to shreds.
Would you like a shovel to dig yourself a bigger hole?
Ahh yes, these crazy socialist players, demanding that (checks notes) … the owners honor mutually negotiated, arms-length contracts between sophisticated parties instead of agreeing to (checks notes again just to be really damn sure) a revenue sharing agreement among 30 businesses that are supposed to be in competition with each other. Some real Marxist stuff.
Here’s that attention you ordered, bootlicker
You are astonishingly stupid.
Instead of going away, how about never show up in the first place.
Can I buy some drugs from you?
Dont see a problem with what the owners are doing. They know MLBPA has incompetent leadership and they are exploiting them. Smart move imo. We really just need baseball back. 100% support the owners.
Hang on, you fully support a group who have a legally enshrined monopoly? And you criticized fangraphs for being communist.
i dont think that is what happened here Phil. I do hate commie trash writers. However Craig is one of the reasons I subscribe as he is quite excellent at writing.
You…don’t know what a “commie” is, do you?
Yes it’s synonymous with obamagate and I don’t need to tell you what that is.
Being an owner of anything means accepting risk, not just reaping rewards. Owners of major North American sports teams have made money so easily for so long that they seem to have forgotten that.
And such a low level of risk.
If you own an EPL team, you might get relegated – which will massively decrease your income. I do worry about a lot of teams below the EPL, many of whom have existed for generations, going bust. One has already this year, Bury and another, Bolton came very close (both former FA cup winners, so they have a lot of history). And that was before anyone had heard of Covid-19. You are also competing against people like the owners of Machester City who don’t care about making a profit, they just want to win.
In MLB, you have a bad season, you get rewarded by getting first dibs on the young talent. And if your revenues and attendance go down, you can always threaten to move city, so that the tax payers build you a nice new stadium.
Keep supporting those owners who couldn’t care less about you
Players and owners agreed to the contracts. Thats what the players should get paid….its on the owners if the contract was bad. If it was the opposite and the players had bad contracts do you think the owners would budge and help them reaching out an olive branch? hell no. Tough luck is what they would tell the players if shoe was on other foot.
I see you have a lot of comments here – maybe you should have posted a couple less and instead used that time to read the actual Uniform Player Contract before talking about the “contracts”. It’s an attachment to the CBA, which is easily found with an online search.
Here is a section of said Uniform Player Contract:
“Governmental Regulation–National Emergency
11. This contract is subject to federal or state legislation, regulations,
executive or other official orders or other governmental action, now or
hereafter in effect respecting military, naval, air or other governmental
service, which may directly or indirectly affect the Player, Club or the
League and subject also to the right of the Commissioner to suspend
the operation of this contract during any national emergency”
Believe me, i know a lot more about this than you do. A lot. For you to even think about educating me on something so elementary as this is comical.
I am thrilled with, and am thoroughly enjoying, the KBO right now. Several reasons, but a big one is that I know nothing about the ownership group or the financial structure, or the players or the team histories. I am a child, enthralled with sport, unencumbered by its complications.
Contrast that with nearly every American sports league, which, for me, are tainted by greed and avarice and a constant stench caused by seepage of our political divisiveness into our sports.
This article, and several of the caustic comments, remind me that no institution remains unaffected by our churlish political mindsets, that no behavior is universally shunned, that everything has become a negotiation in which the parties involved are bound not by community standards or individual self-interest, but rather the narrow constraints of party affiliation, and all the zero-sum destructiveness attached to such tribal animosity.
Sigh. And apologies. This got away from me, my own politics seeps into view. Levees constrain only so much abundance.
I agree that knowing more about the business of MLB has not increased my enjoyment, and that it’s kind of nice to just watch baseball for baseball’s sake.
But virtually the only thing I know about the KBO is that the teams bear the names of their corporate owners, presumably for advertising purposes. This is the literal equivalent of the Seattle team being named the Microsoft Mariners. So if you’re looking for a baseball experience that is pure as the driven snow, I have bad news for you.
Give it a little time, we’ll catch up
Good breakdown of the numbers, provides some clarity as to what the Owners true ask it. I’d blame the MLBPA for not anticipating that the language in the previous agreement wouldn’t be honored, but if you look at it fairly, in hindsight, there should have been no reason for the Owners not anticipating reduced or completely curtailed attendance, and, accordingly, the Players assumptions about what they thought they agreed to for significant concessions by them are reasonable.
With that as a background, either as a product of the Owners bad faith, or just a difference of opinion, how would the players have any confidence the Owners were being straight with Revenue Sharing splits? How would they account for staged payments, for refunds paid to ticket-holders for games already lost, for below-market contracts, and even “collusion” between the Owners and their advertisers and TV contracts.
It’s easy for us to blame the players for not accepting what is offered so we can just watch the games, but there are basic issues of equity here. These are people with a limited window to earn money, asked to take less, with more risk. The argument “I’d play the game for free” is a specious one–if we could do what the players can do, we’d want to be paid as well.
“I’d blame the MLBPA for not anticipating that the language in the previous agreement wouldn’t be honored”
That’s a highly debatable point, because the section about salaries has a reference – not as clear as it could be – to conditions that include “The Office of the Commissioner and Players Association will discuss in good faith the economic feasibility of playing games in the absence of spectators or at appropriate substitute neutral sites.”
Jeff Passan – per a May 12 article at ESPN – says that he asked 4 unaffiliated (and unnamed) labor lawyers about it, and 2 sided with the MLB interpretation, 1 sided with the MLBPA interpretation, and 1 said it was a toss-up.
Great article, but yikes this comment section is a warzone
I don’t think there is any legitimate ownership rebuttal to the Andrew Miller quote. The players are being asked to play under exceptional circumstances and they already agreed to a reduction in pay proportional to the reduction in their labor output (games played) due to those exceptional circumstances. Anything beyond that is on the owners–the ones who assume the risk, and until today have accrued the closely-held rewards–as the capital as opposed to labor. The players’ only incentive to give further would be if they feared that MLB couldn’t survive these losses and was going to go away, but they know ownership can absorb losses (or, at least, could, if they hadn’t taken profits as dividends and instead kept a rainy day fund like individuals are always lectured to do), and so why should they give an inch?
That’s before even getting into Miller’s entirely reasonable point that, if anything, players deserve additional “hazard pay” for playing and traveling under these crazy circumstances, , as opposed to an additional reduction.
The class of people who own things instead of work justify their profits by saying they incur financial risk. But when things go south, they immediately stick their hands out and demand the risk be shouldered by their paid help. Public risk, private profits. Great gig if you can get it.
Players can say, sure we will take 48%, not just this year, but from now on.
That’s the only way they should agree to a deal like this. Give us a percentage of the gross every year. You want us to accept some of your risk? Make us partners and let us participate in the reward.
The problem with that, as Craig points out, is it can be very difficult to pin down exactly what the revenues and expenses are, especially when so many teams own part or all of their broadcast networks and can write themselves sweetheart deals that avoid the current revenue sharing deal.
Agree. I would only agree to 50/50, maybe consider a 49/51. Also would agree to what is being included in that 50/50% line by line. Scrutinize it. Would also need to udnerstand how each line is being calculated down to the T, expenses and all. I would need to go through and see what is bucketed and where on accounting. No stone unturned. Are the benefits the actual costs, or the sticker price, i would need to know everything.
That’s kinda my thinking. I think its their best leverage point.
IMO the challenge is that MLB is a regional sport, funded by regional revenues. This makes ownership agreeing on revenue sharing numbers tricky and its almost predicated on a hard cap and floor. With wealthy franchises agreeing to devalue their assets.
It may be we do without MLB baseball this year (many on this site are in favor of that…) and the owners come out with a minor league product. That would be the best for them from a profitability/risk standpoint, but would absolutely poison the watering hole for the next CBA.
If not the players, the public will when officials hand teams free money, land, and tax breaks after all of this. Not so deep down I think we all know it will be both. The MLB and NFL owners especially just have an insane grip on this country
If we put aside the fact that this should be a nonstarter to the players for what this article describes, I can’t get over two things…
1.) This idea of everyone trying to figure out/agree on what constitutes revenue.
2.) I keep going to back to – I think it was on Deadspin (RIP) – when a bunch of emails about the Ricketts’ purchase of the Cubs were released. A family that could have easily paid cash for the team took out a loan and then transferred that debt to the organization. So the Cubs owe a ton of money… for buying the Cubs… even though the Cubs don’t own the Cubs; the Ricketts own the Cubs**. What this means is that the Cubs organization will never not be in the red. This allows them to untie profit from revenue and pay the organization first, to pay down (what should be the Ricketts’) debt. The organization can always cry poor, no matter how much money they take in, because that debt is so large. So the idea of profit sharing seems laughable when an organization is set up to argue it’s not making any profit even in normal times. Like, all teams cry poor no matter what. If the players do accept some revenue sharing, and then if the season makes a TON more money than is expected, the organizations aren’t going to turn around and say they were profitable, and that’s by design.
(**I use the Cubs as the example because that’s what I read about, but I have no reason to doubt that every single major league team is also set up in this exact way.)
They are really good at stuff like that. The profit gets collected by not-the-team-but-owned-by-the-same-people, while the team is not very profitable.
TV contracts are the same. In the cable era, traditionally the team sells the rights to the channel, the channel makes money off advertising and selling the rights to the cable provider (carriage fees), and the cable provider makes money by charging customers. So look at the other team in Chicago. The channel (NBC Sports Network-Chicago) is owned by the White Sox, Bulls, Blackhawks, and Comcast (the dominant cable company in Chicago). So the White Sox are selling the rights to the games to themselves, and the Comcast is paying the carriage fees to themselves. Depending on how the CBA and MLB revenue sharing plans read, the White Sox can pay themselves a low rate and keep the advertising revenue since NBCSN-C would then have low expenses. Or they can pay themselves a lot and get no revenue as partners in NBCSN-C. They can rewrite these contracts any time the equation changes. If that isn’t complicated enough, the White Sox and Bulls are owned by the same people, so they can play one league against another and make sure the money goes in the right direction to avoid overhead. So, for instance, if MLB counted regional TV rights as revenue but the NBA did not, NBCSN-C could pay the White Sox a pittance for rights but pay the Bulls a fortune. This is probably the simplest way that teams massage the books. The NFL is probably even better at it with the Cowboys creating a theme park of a practice facility who’s revenues are not subject to league revenue sharing.
The specifics of the Cubs’ transaction structure were driven by tax minimization for the seller (Tribune company). I would be shocked if anyone at Deadspin did a half-decent job of analyzing the underlying issues.
You’re correct about the transaction structure being set up to minimize the taxes for the seller, but wrong that Deadspin didn’t bring it up.
Even still, the financial mechanics of how the team was sold doesn’t really have anything to do with the financial mechanisms of how the team was bought and is currently set up. The Ricketts could easily have paid cash or carry the debt themselves. That has nothing to do with the seller.
Agreed.
It looks like a labor war might happen sooner than expected. The MLBPA has already called the proposal a salary cap and accused the owners of bad faith. At this point, we might be lucky to have (MLB) baseball in 2021, much less 2020.
Let it happen now. We’re already at culture war, and the virus prevents games from being played. The players should walk. Maybe make another league. We pay to see the players.
No baseball is until there’s a vaccine. This isn’t difficult.
The business naivete of the people suggesting that the players walk away and start another league never ceases to amaze me.
No sense of the huge start-up costs involved, the brand value of team names that have existed for very long periods of time (over 100 years in some cases), and just how long it would take for such a league to approach revenue paying stars what they make in MLB. (Hint – I would put a lot of money on it taking longer than the playing career of anyone currently in the majors.)
Oh, and by the way, it would be tremendously interesting to see just how it would get setting up this league when setting the salary of every player on the team means an internecine fight between the players over who gets paid what.
Craig so mad right now hahahhahahahahahahhahaha
Craig tears will be delicious when baseball returns
It seems like every leader at every level is competing to take advantage of the most people and pocket the most profit. We should never be surprised at this when we the citizens are as focussed on money as well. Awareness of it doesn’t change anything…greed is killing our livelihood!
They’ve done it for so long that they refuse to figure out how to stop.
I’m probably off base and on wrong thread, but any tie in to this 1/2 schedule and expanded playoffs? 81 games instead of 100 or so allows owners to pay 1/2 salary, yet potentially reaping benefits of more playoff games IF things have cooled off by then. I would think that consolidating travel and playing more reg season games before moving to a new season would be safer than alternating sites for 14 teams in a convoluted playoff tree. Would the players want more reg season games? Or is this a ploy for the owners to put it on players to ask for more games?
Players have an opportunity to lean on owners for more. It’s owners’ own fault they’re levered up to their eyeballs and can’t make debt service payments. They shouldn’t have bought things they can’t afford. The players should ABSOLUTELY take ownership to the cleaners.
Thank you. The greed and disregard for people’s health and safety coming from the owners, several businesses, governors, even the federal government, is appalling.
MLB is echoing other “culture of death” organizations where profits are the almighty and people worth little.
I don’t know. This all seems a little tone deaf to me. 30 million people have lost their jobs, and more to come. There will be significant suffering that goes along with it. Tens of thousands of people have died. And millionaires are arguing with billionaires about what sacrifices each are going to make. They need to get to the negotiating table and work it out – QUIETLY. I wonder if they are thinking at all about the rest of us?
The other thing – why do people seem to have such a problem with the folks who risk their capital making profits and protecting those profits? Capital risk and the profits that go along with that are what find the paychecks of those not willing (or able) to risk their own capital, and also fund those government programs that people are so fond of (not making a political statement here about those programs, just a reminder that one needs the other).
The players have managed to approach the 50% revenue sharing mark (assuming we actually know the revenue) without capitulating to a salary cap; they have guaranteed contracts, and they take no Capital risk. People here keep saying the players have gotten screwed, I just don’t see that. I do wonder if the minor leaguers could do better, but that is a discussion for a different time.
I don’t think the players have or are getting screwed, but they owe the owners zero favors, and have zero reason to think the owners are behaving in good faith.
Because the owners have no risk in any normal situation! It’s a monopoly guaranteed by Congress and partially funded by state and local governments. Baseball isn’t the free market.
Plus, the owners and players already agreed to pro-rate player salaries for the number of games played. Why should the players accept less than that pro rated amount? Their labor output is the same whether there are fans or not. Also, it’s more dangerous to play now. If anything, the players should get hazard play.
I think you make a fair point about the monopoly status of the sport. But I don’t think it is zero risk For the individual owner under normal circumstances – but you are right, risk is reduced. It still requires big capital outlays and any investor would require a return on that capital, or the capital will go elsewhere.
And I don’t begrudge the players ability to collectively bargain for as much as they can get. I do think sometimes they underestimate their power in that process – they are the talent after all. But I also think a guy like Tony Clark recognizes that for the players to do well long term baseball needs to be healthy so he looks for win-win scenarios.
Right – easy profits protected only by a high barrier to entry is evidence of a rotten system.
docgooden85 nails it. The higher barrier to entry from the capital requirements isn’t a “risk” per se. It’s even further evidence that the market isn’t free.
In a lot of ways, MLB owners exhibit rent seeking behavior. They are using the distribution of funds from and protection of federal, state and local governments to earn returns. MLB owners don’t contribute to higher productivity, innovation or anything else that matters in the real economy. They are completely fungible for the most part.
What about the last CBA was a win-win? There is legitimately zero evidence that Clark is savvy enough to even identify a win-win scenario, let alone negotiate it or that he has any understanding of what scenarios benefit players in the long-term.
And there isn’t really risk. Even if an owner is bankrupt (can’t make their debt payments) they are likely to come out ahead on the investment due to valuation growth. To date team valuations have been shown to be recession proof. Generating profit on revenues is just icing on the cake for the owners, the real return comes from ever increasing valuations.
Owners are able to get huge capital outlays to fund purchases because team valuations are so low risk that if an owner can’t fund the debt it doesn’t really matter to the investor since they will get their money when the team sells. The only real risks relate to scenarios involving the collapse of the league, dramatic reductions in fan interest, and other factors that could have long-term impacts on league or team health.
Why do you (and others) think any owner of a baseball team is risking anything? Owning a baseball team is just a fun hobby for these people. COVID19 is the first time they’ve ever assumed risk related to their teams, and they can’t handle it.
Actually for owners it’s more like an easy, nearly risk free opportunity to turn that shiny billion dollar coin under the sofa cushion into a $2..5 billion dollar coin while providing some entertainment value along the way.
“The other thing – why do people seem to have such a problem with the folks who risk their capital making profits and protecting those profits?”
An alternative point would be to ask: why do some of us work hard to defend predatory business practices of billionaires who, in many cases across the past few decades, have taken taxpayer money to build and renovate vehicles of venture capital (stadia), often justified by economic impact analyses full of dubious claims and projections that often don’t pan out as promised
I see so much opposition to taxpayer-financed stadiums… and I understand it… but it really is picking a point in isolation and out of context. For the last 20+ years, state and local governments across the country have handed out all kinds of public dollars to all kinds of businesses. Look no further than Amazon’s failed attempt at a second HQ in New York… this is happening on a daily basis across the country, where those who can promise jobs (whether created or retained, i.e. not moved to another jurisdiction) get bags of cash and incentives from governments. I don’t like it, and there’s plenty of economic research that shows how poor of an investment this is. But it’s an incentive that is made to TONS of businesses beyond the 120 or so major sports franchises. And because states and municipalities are actively campaigning to hand out those bags of cash, I don’t fault sports owners one bit for grabbing it.
The issue is with the perverse incentives model, not the folks who take it, and it’s a problem far, FAR bigger than pro sports, though it’s often pro sports stadiums that make the front page of the paper when the dollars are handed out. The order of magnitude is so much bigger in pro sports because of how large the employee payroll is in absolute dollars (i.e. the players salaries) and how much of that gets taxed in the team’s state, regardless of the player’s actual state of residence. (States make a LOT of money on the personal income tax levied on athletes who play their home games in that state, because most states tax the athletes based on a ratio of where the games are played or the number of days work is performed in the state.)
I don’t disagree with much of what you wrote, but I think it’s worth pointing out that eight MLB teams were bought for less than one hundred million dollars. Even after adjusting for inflation, it’s like, really egregious to both secure this rate of return *and* get public support for it. Then again, maybe I shouldn’t be so surprised, as free money unless you’re a notch above poor is SOP in these parts.
Good points Tim L. This site has so much negativity towards those who invest capital and take risks. Hopefully we get baseball soon, so the arguments can be about players and teams instead of finances and unions.
There is no risk in owning a MLB franchise! Valuations are recession proof and they earn profits every year all while enjoying monopoly status (from Congress) and receiving hand-outs from state and local governments. Where is the risk in that?
I’m all for rewarding businesses that actually take risks and innovate. MLB franchises are not that, like at all.
If I’m the MLBPA, I don’t respond to this request at all for at least a week. Let them wonder.
And then I come back and tell them that starting in the 2021 season, minimum salary for pre-arb players is doubled permanently.
If this is so important and the owners are this freaked out about it, they better be willing to give up something in return.
Great point. we will take 50/50 for forever (by installing a salary floor and soft cap tied to revenue 50/50 revenue). No pre arb system. Minimum salary is increased. We will do that deal. Other than that, no deal. Tony needs to play hard ball and quit trying to please these owners, they are not on his side and don’t give a flip about him, they are using him. He just doesn’t realize it. Their goal is make the most money possible, and the only way to do that is to squeeze it from the players portion.
While we are at it, no team should have control of a minor leaguer for 7 years. Need to have free agency in the minors.
The owners goal should be to grow the brand of MLB and its future, its not as evidenced by the MLBAM deal to disney.
Should is an important word in that sentence because owners clearly do not care beyond short to medium term profit maximization.
“MLB and the union will discuss the economic feasibility of playing games at neutral sites or without fans. ” This is the statement in the first paragraph of the March agreement between MLB and MLBPA!
DEAD ON. Though you wouldn’t know it from MLB’s propaganda arm, Manfred’s personal Pravda, MLB Radio. if the union had any PR sense — they do not — they would boycott the network. why provide player content to a league-owned network that is being increasingly weaponized against them? just tune in at 7 am for Steve Phillips’ daily drivel, talking points straight from Park Avenue.
Bingo….thats what the average fan doesn’t realize and probably most on this site! I wrote above that i’ve been a huge huge advocate of the players starting their own network the MLBPA network.
The MLB network has huge conflict of interest here as they are with the owners and commissioners office……anytime there is a disagreement of any sorts between the owners and the players they run straight to mlb network propaganda bs channel and slander the players side in the public trying to create the narrative.
Players need their own network, would also put a ton of money in their pockets while also for the first time in history help control the public narrative to represent their side so they are not always having to respond to owner fed propaganda.
In this type of situation, the reality is that Everyone should be taking additional cuts.
I work for an MLB team, on the “business side,” not the “baseball side.” I make a five-figure salary near median for the city I live in. If the season happens with no fans, my team stands to lose 9-figures in revenue. My bosses, who are compensated well, have all accepted pay cuts in order to keep the rest of us employed. I don’t know how long my job (and those of my colleagues) are going to last if we don’t get fans in the park. Yes, there’s still a lot of revenue that comes from TV and media, but substantial portions of the “corporate partnership” deals that everyone assumes bring all the money are tied into assets that have no value without people in the stadium. You may see 8-10 clients on billboards on TV, but there are another 100 or so in smaller places in the ballpark.
If the MLB doesn’t reach a deal with the players that involves a proportionate reduction in salary, I fear that many of us are going to be laid off, and that the league will find a way to “evolve” its operations so that many of those jobs don’t return. You can say what you want about the billionaire owners, but the teams are not avatars of those owners — they are businesses with budgets. And businesses don’t take a $100 million+ hits to their top lines without corresponding cuts somewhere.
I just wish that when people wax poetic about “billionaires vs. millionaires,” they realize that all the people they’re talking about are going to be rich no matter what happens. There are hundreds of us average people, however, whose livelihoods hang in the balance.
Not intending to be adversarial, and I understand basic economics. Is it your feeling and that of your coworkers that the players must take additional cuts in order that many of you can keep your jobs? Are we talking about dollar for dollar? Save $1.5M on a player, save 15 managerial jobs?
I’m not suggesting anything specific, I’m just saying that the general consensus among the public is that the millionaires need to win because they’re “poorer” than the billionaires. But they’ll all be rich no matter who wins. There are a whole lot of thousandaires who stand to lose a whole lot more (proportionately), and none of them have a seat at the table, because they don’t have a union.
I understand the historic dynamic between the MLBPA and the MLB, and that the MLBPA needs to do what it can to advance their interests. But I just want to implore the general public that “the team” isn’t just the owner writing checks from an unlimited pile of gold — it’s a business full of mostly regular people working hard to make baseball happen. That’s all.
I tried to edit the above but took too long:
I’m not suggesting anything specific, I’m just saying that the general consensus among the public is that the millionaires need to win because they’re “poorer” than the billionaires. But who they’d be “winning against” isn’t just billionaires, and they’ll all be rich no matter who wins. There are a whole lot of thousandaires who stand to lose a whole lot more (proportionately), and none of them have a seat at the table, because they don’t have a union.
I understand the historic dynamic between the MLBPA and the MLB, and that the MLBPA needs to do what it can to advance their interests. But it rubs me the wrong way when a guy like Trevor Bauer, who has made tens of millions of dollars working for like five years, acts like it’s a complete non-starter to consider his pay reflect the fact that his entire industry is going to lose something like HALF its revenue this year. How can that at least not be a reasonable premise? This is a historic economic disaster affecting everyone on Earth. And yeah, admittedly, it’s hard not to think stuff like — if him and the rest of his team took even a 5% pay cut it could pay for the entire front office to stay at work the rest of the calendar year (not that it necessarily WOULD, of course).
And don’t get me wrong, I think Trevor Bauer deserves his millions, and I deserve my thousands. Tons of people can do my job, very few can do his. But IF we’re talking about being reasonable and fighting against greed here, which is where I think most fans are landing — I just want to implore the general public that “the team” isn’t just the owner writing checks from an unlimited pile of gold — it’s a business full of mostly regular people working hard to make baseball happen. That’s all.
Except the players have already agreed to concessions on pay and have no incentive to accept the first offer thrown their way. It’s all posturing right now, both sides were always going to come out and strongly oppose the other. The non-starter isn’t even going to be money for some players. There could very well be players, even stars, who just flat out say no this isn’t worth the risk to me and mine.
I get that feeling as though your job is in the balance is anxiety inducing, I’ve been there recently myself and millions of other Americans are going through it as we speak. But owners are also asking players to bear significant risk to their personal health as well as the health of their families. Other companies would get raked over the coals asking this of their workers but MLB gets a pass because we’re all desperate for entertainment. I feel bad every time I see the UPS, FedEx, and USPS workers just thinking about all the crap we’re ordering to distract ourselves and how it’s forcing these individuals to risk their own health without additional compensation for bearing that risk (not to mention all the front line healthcare workers who deserve a hell of a lot more than a flyover).
And while teams may be run on tight operational budgets, most, if not all, owners could afford to subsidize that budget by reaching into that caymen account and paying your salary given the unusual circumstances. At a certain point they will just choose not to and that’s not on the players.
Noticed that Blake Snell is not willing to consider any reduction in pay and would rather stay home than take a 50-50 revenue split. Certainly that is his right, but does not bode well for agreement between players and owners. https://www.espn.com/mlb/story/_/id/29174318/rays-ace-blake-snell-says-refuses-play-reduced-salary
Well said
Great insights, Eminor3rd. Appreciate the perspective and rational explanation of a complex situation.
Players have already agreed to a pay cut. Hopefully you work for a team where the owner has stepped up to help pay salaries. Because last i can tell the players are the ones that have stepped up to pay the salaries for majority of the teams. They’ve been much more helpful than the owners in which some of them we’ve heard nothing but crickets from. Players have pitched in much more so than the owners have.