No one likes to talk about baseball as a business. Heck, I don’t like to talk about it, and I’m what passes for an expert in the subject around here. It’s tedious, the creeping financialization of everything in life. Baseball should be the crack of the bat and the glint of sunglasses as an outfielder charges across the grass towards a smashed line drive, not an accounting ledger filled with contracts and receipts. But inevitably Major League Baseball, which often gets shortened to “baseball” as though it embodies the entire sport, is about profit, which means it’s about money.

There’s a storm brewing on that front. As Travis Sawchik deftly reported over at The Score, the old way of doing business is standing on wobbly legs. Local TV deals make up a sizable portion of the league’s overall revenue. That makes perfect sense – baseball is a regional game, and its biggest draw, from an entertainment standpoint, is the sheer size of its inventory. Teams play 162 games a year, all through the hardest times to fill programming – the dog days of summer, Saturday evenings, national holidays, you name it. Sportico estimated that teams were paid roughly $2.25 billion for local broadcast rights in 2023. Read the rest of this entry »

Earlier this year, Diamond Sports Group declared bankruptcy. That dry corporate action, precipitated by a huge debt burden, is starting to have real world consequences. This Tuesday, DSG missed a payment to the San Diego Padres, as Alden Gonzalez first reported for ESPN. That terminated the contract between Bally Sports (a Diamond subsidiary) and the Padres. By Wednesday, the Padres were off of Bally and broadcasting their own games via Major League Baseball.

That’s a pretty big escalation in what until now felt like a slow-moving situation. In fact, in bankruptcy court, Rob Manfred testified that the league received less than one day’s notice of this missed payment. “[They told us] less than 24 hours before they were going to go off the air that they were going to stop broadcasting Padres games,” he said. (Diamond’s lawyers have contested that timeline.) That led to the Padres terminating their contract with Bally Sports, naturally enough, and to MLB stepping in to broadcast games.

It’s no accident that the league was ready to wade into daily game production. They hired Billy Chambers, formerly a Fox Sports and Diamond Sports executive, as executive vice president of Local Media earlier this year. Hiring a regional sports network executive is a pretty good way to start building your own regional sports capabilities, and the league appears to have moved quickly here. Read the rest of this entry »

At this point in the offseason, the micro-level events that will shape the 2023 baseball season have almost all been settled. Aside from the odd trade, teams have largely set their rosters. Injuries, unexpected performances, and trades will start to affect individual fortunes when games begin, but we’re at a local lull.

But there’s big news afoot for the game in a macro sense. Diamond Sports Group, the company that owns Bally Sports Network and thus the rights to 14 teams’ local broadcasts (plus minority stakes in two team-owned broadcasts)*, is careening towards bankruptcy. Per Bloomberg, the actual bankruptcy declaration is merely a formality: the firm will reportedly skip an interest payment due in February, triggering a restructuring that will wipe out the firm’s existing equity and convert all but the most senior debt into equity stakes in the new company, leaving its current creditors in charge.

That’s a shocking turn of events for a media group that sold for more than $10 billion in 2019. Heck, it’s a shocking turn of events for a company that made more than $2 billion in revenues in the first nine months of 2022, and more than $3 billion in 2021. It might also affect long-term cashflows for every team in the league; after all, local broadcast rights are a key piece of the revenue pie, and broadcast rights have exploded along with MLB revenues in the past decade.

How could this have happened? Which teams will be impacted, and what will that impact be? How will the league adapt to the new media landscape brought on by this bankruptcy and any subsequent dominos that fall as a result? I don’t have the answer to all of those questions, but I’ll walk through each in turn before speculating about what might happen next. Read the rest of this entry »

Major League Baseball’s 26-year run of labor peace is officially over. As anticipated, MLB and the MLBPA were unable to reach terms on a new CBA ahead of last night’s 11:59 p.m. deadline. Shortly thereafter, MLB Commissioner Rob Manfred announced that the league had locked out the players:

Read a letter from the Commissioner: https://t.co/P4gRGSlfsu pic.twitter.com/zI40uGLTni

— MLB (@MLB) December 2, 2021

For its part, the MLBPA issued a statement in response:

Statement from the Major League Baseball Players Association: pic.twitter.com/34uIGf762W

— MLBPA Communications (@MLBPA_News) December 2, 2021

Read the rest of this entry »

With Major League Baseball’s current collective bargaining agreement (CBA) set to expire at 11:59 p.m. Eastern tonight, the owners and the Major League Baseball Players Association (MLBPA) are currently meeting in Dallas to exchange various proposals in an attempt to reach a deal. Unfortunately, media reports suggest that no new agreement is imminent, meaning that the sport is facing the very real possibility that it will experience its first work stoppage since the infamous players’ strike of 1994-95.

While it is certainly possible that tonight’s deadline could pass without triggering a labor stoppage — indeed, the two sides can elect to continue to negotiate with the existing CBA governing the sport in the interim — MLB commissioner Rob Manfred seemed to suggest prior to Thanksgiving that the owners will lock out the players if no agreement is reached this evening.

Consequently, this post explores the various options available to the MLBPA should the owners implement a lockout at midnight tonight as anticipated. Along the way, I will borrow from a similar post I wrote back in 2016 during the last CBA negotiations. While that labor-stoppage primer ultimately proved to be unnecessary, barring a miraculous turn of events in the coming hours, it would appear that fans are unlikely to be so lucky this time around. (Meanwhile, for anyone looking to understand the basis for the current dispute between the owners and players, this preview from a couple weeks ago may prove helpful.)

First, some basic legal background. A lockout is a legally sanctioned tool in which management (in this case, team owners) announces that it will refuse to allow its unionized employees (presently, the players) to work until an ongoing labor dispute is resolved. This means that the players will not be paid, or allowed to report to work, until a new CBA has been agreed to. In the interim, there will be no major-league free-agent signings, trades, or games played. A lockout is thus the ownership equivalent of a strike by the players. Read the rest of this entry »

Following the completion of the World Series last week, all eyes in the baseball world will now turn to the sport’s next major showdown: the negotiation of a new collective bargaining agreement between the owners and the Major League Baseball Players Association. MLB’s existing CBA is set to expire at 11:59 p.m. EST on Wednesday, December 1, a deadline that many anticipate could trigger the sport’s first work stoppage since 1994. Indeed, while a strike or lockout is by no means guaranteed at this point, the possibility certainly appears more likely than it has at any point in the last two decades.

This post will provide an overview of the upcoming collective bargaining negotiations, briefly summarizing how the parties got to this point, what are likely to be the major issues to be hammered out in a new CBA, and what baseball fans can expect in the coming weeks (and, perhaps, months).

How We Got Here

In many respects, the seeds of the present discontent between the players and owners were sown during the negotiation of the sport’s last several CBAs, and perhaps most notably the soon-to-expire 2016 agreement. Although there was ample reason to believe that MLB’s financial model was moving in an unfavorable direction for the players, the union has been perceived by many as having failed to sufficiently prioritize the pursuit of significant economic modifications from the owners in 2016 (a claim that at least some in the union would dispute). Instead, to many, the MLBPA appeared to focus more on quality-of-life issues in the 2016 agreement, such as more humane travel schedules and clubhouse perks like private chefs. Read the rest of this entry »

Jarred Kelenic is right, or at the very least, he’s not wrong. There’s no reason not to take the recent claims of the Mariners outfielder and his representative, Brody Scoffield, at face value. Their story — that Kelenic was offered a pre-debut extension and that when he declined to sign it, the club refused to call him up in 2020 for service time reasons — is totally believable, and is backed up by Kevin Mather’s now infamous remarks over Zoom to the Bellevue Breakfast Rotary Club; Mather, the club’s President and CEO at the time of his remarks, resigned last week. The proposed extension, which Mather described as a “long-term deal, six-year deal for substantial money with options to go farther,” speaks both to Kelenic’s immense talent as well as the Mariners’ desire to lock him up on team-friendly terms.

Jerry Dipoto, who addressed the situation last Tuesday, is right, or at the very least, he might not be wrong. Dipoto said what one normally would about a highly-ranked prospect who is generating hype but isn’t on the roster yet. (Here it worth remembering that GMs operate within the budget strictures ownership set for them. That’s not to say Dipoto has no agency, and owners look for GMs who are willing to let this type of fiscal responsibility take precedence over winning baseball games. But in reality, ownership should be on the hook to a far greater degree than the front office in the eyes of fans.) Kelenic has only played 21 games above A-ball. He hit a very solid .253/.315/.542 in those 21 games, as a teenager mind you, and was actually remarkably unlucky, as evidenced by his exceptionally light .246 BABIP. Still, a little more seasoning in Triple-A, as Dipoto suggests, might be beneficial. Kelenic’s approach could use some tightening and his strength gains have come with some of his twitch going backwards, which is starting to hinder him defensively.

But those are nitpicks, not deficiencies that should have kept him out of Seattle. Evan White proves the case. White isn’t nearly as talented as Kelenic, but he signed a pre-debut deal and was instantly the Opening Day first baseman in 2020. His bat wasn’t ready, as evidenced by a miserable 66 wRC+ to go with an ugly 41.6% strikeout rate, yet he was there. Was White the Mariners’ best option? Maybe. But did the fact that he signed the sort of big league deal that Kelenic turned down drive the decision to have him with the major league team while Kelenic futzed around at the team’s alternate site in Tacoma? No question. Read the rest of this entry »

I was exposed to many aspects of front office operations during my eight years with the Astros, but one thing I never touched was arbitration.

I consider it one of my greatest career achievements.

With hearings and rulings in the news, I’m reminded of how much everyone hates the damn thing. Teams hate it, players hate it, agents hate it, and maybe that’s actually proof it works in its own way, but the most frustrating aspect is that nobody really understands the logic behind the rulings themselves. In private conversations, some executives have suggested to me that one “might as well flip a coin.” An agent called the entire process “archaic.” Another team executive called it a “colossal waste of time.” Contacts from both sides relayed stories of being quite sure that they had won or lost after the hearing, only to end up with the opposite ruling from the three-person panel. Both sides have stories of waiting for results, dreading them when the last two cases have been in their side’s favor because they fear the next result being a simple make-up call.

The whole thing seems rather, well, arbitrary.

Adding to the frustration is the cost of the hearing itself, in terms of time, money, or both. Many teams utilize outside counsel to handle the hearing process, while others keep it in-house, assigning a group of people within baseball operations to spend weeks of manpower on the process. They travel to Arizona or Florida, staying up until all hours of the night preparing their PowerPoint deck and going on several late-night runs to Kinko’s. They do it because they have to, but does all that work have any effect on one’s chances of winning or losing the hearing? I never saw any direct evidence that it did. Read the rest of this entry »

Earlier this week, Ken Rosenthal reported that owners are unlikely to pursue expansion plans in the near future. At first, that sounds strange. Why would owners who are experiencing a cash crunch turn down a quick cash infusion, reportedly nearly $70 million per team? As it turns out, the math is straightforward. Let’s talk about perpetual cash flows, debt equivalence, and other fun stuff like that.

Per Rosenthal’s reporting, owners would stand to make an aggregate $2 billion from expansion fees, or $1 billion per new team. Split 30 ways, that amounts to $66.7 million per team, which would go a long way for clubs who are acting phenomenally cash-light. In exchange, however, they’d give up a small share of a lucrative enterprise that makes owning a baseball team a cash cow.

Again per Rosenthal, the league projected to make $2.4 billion in central revenue in 2020 before the pandemic laughed in the face of advance planning. Central revenue is everything generated by MLB rather than by individual teams — national TV contracts, national sponsorships, streaming revenue, consumer product sales, and assorted other line items, with TV contracts comprising the lion’s share of the money.

That works out to $80 million per team, and adding two teams to the mix would dilute teams’ share of the pie. With 32 teams, each team would only get $75 million in central revenue per year. That might not sound like much — $5 million over time weighed against $67 million in cold hard cash right now — but big enterprises like baseball teams don’t need to act to maximize their liquidity. They instead seek to maximize net present value, which is a financially stylized way to consider the value today of money you might receive in the distant future.

This is going to get annoyingly math-y, but I’ll try to keep it in somewhat relatable terms, so bear with me. Say your friend offers you the choice of $100 today or $200 in a year. Presumably, you’d prefer the $200 — it’s twice as much money! Things get trickier, however, if it’s a choice between $100 today or $110 in a year, or between $100 today and $200 in 20 years. Read the rest of this entry »

In 2014, Major League Baseball roughly doubled its national television money in deals with ESPN, FOX, and TBS that expire at the end of this season. Over the last few years, new agreements with FOX and TBS created a nearly 50% increase in annual rights fees, totaling nearly $9 billion dollars from 2022 through ’28. Understandably, the general expectation was that MLB’s new contract with ESPN would follow suit with a similar jump, securing roughly $2 billion per year in national television money alone. But the league’s dreams have been dashed: As Andrew Marchand and Joel Sherman of the New York Post reported last month, ESPN’s rights deal will be smaller than its previous agreement, with Ken Rosenthal of The Athletic adding last week that the total package will be $3.85 billion for the next seven years  — a substantial drop from the $5.6 billion over eight years that the Worldwide Leader forked over last time.

A decrease in rights fees to the tune of $150 million per year is going to raise alarm bells about the state of MLB, ESPN, and cable television on the whole. But while the decrease is cause for concern — and there are certainly some broader issues at work outside the sport — MLB still finds itself in relatively good position. To start, ESPN, FOX, and TBS will combine to pay MLB an average of $1.81 billion over seven years starting in 2022, an increase of 17% over the previous deal (and a growth in total value despite those earlier agreements being a year longer and a year from being over).

Even better for MLB, it still has rights to sell, with or without expanded playoffs. As reported by both the Post and The Athletic, the ESPN deal cuts in half the number of regular-season games broadcast by the network, essentially keeping Sunday Night Baseball and a few other marquee games as well as the Home Run Derby but ditching the majority of the weeknight games. If we assume ESPN keeps 40% of the TV rights from the previous deal and that there’s 40% more value in airing Sunday Night Baseball plus a little extra compared to the 50 or so Monday and Wednesday night games that are being let go, then the network will see a similar increase in cost as FOX and TBS.

The problem for MLB is that while those Monday and Wednesday night games do have some value, it likely won’t be as much as the $300 million or so ESPN was paying annually for them. As the Sports Business Journal has reported, FOX wasn’t interested in MLB’s asking price, and TBS (which will air a Tuesday night game starting in 2022) doesn’t want more mid-week games. To sell these games, MLB will need to lower its asking price with FOX, seek another traditional outlet like NBC or CBS (both of which have cable sports networks), or explore a streaming route like Netflix, Amazon, YouTube TV, or Hulu. Whether the league will have to settle for a fraction of ESPN’s prior price or get something close to it (or even increase it) remains to be determined.

Without accounting for those rights or potential increases due to expanded playoffs, here’s what the national television money for MLB looks like for the past 20 years as well as through the end of the 2028 season. Note that DAZN’s three-year, $300 million contract was included for 2019 only with the assumption that no payments were made last year or in 2021, which might or might not happen. All long-term deals assume a 4% annual increase over the life of the contracts.

While it is isn’t likely to happen, if no deal for more weeknight games materializes, MLB could see a drop of over $100 million from 2021 to ’22. The good news for the league is that after that, it will move closer to the same financial trajectory it has been on for the past few decades: Once the smaller package of games is sold, the last section of the graph will move up and present a more continuous increase. It will likely move even higher if MLB gets its way with expanded playoffs.

ESPN, meanwhile, isn’t likely to see much in the way of revenue reduction as a result of this change: The network has a huge roster of live sports and is maintaining its already significant investment in baseball. ESPN could possibly devote more resources to MLS, whose rights deal expires in 2022, at a considerably lesser cost than MLB and still keep similar hours of live sports on air in the summer. The ESPN/MLB relationship is still a strong one, and the league still owns a 15% share of Disney-owned BAMTech, with ESPN’s corporate overlord purchasing 75% of the tech company for more than $2.5 billion in 2016 and ’17.

In his piece, Rosenthal also notes that the Marlins and Brewers still do not have rights fees locally for 2021. That pair of teams is already at the very bottom when it comes to local television revenue, and it will be interesting to see if they re-up with Sinclair Broadcast Group, which controls both RSNs. They might not have many other options anyway. MLB could step in, given that it has the capabilities and experience to run an RSN and was interested in buying them when they were up for sale a few years ago. Liberty Media could be interested in starting up some RSNs before potentially launching their own network with Atlanta. The most likely scenario, though, is a continuation with Sinclair and an increase in rights fees that doesn’t significantly change the fortunes of the two franchises. Nor will it alter baseball’s RSN landscape as a whole: A vast majority of franchises already have long-term deals and stakes in the networks that broadcast them. Cord-cutting, increases in streaming, and hardball tactics from Sinclair that increase blackouts on those services threaten the future of the game in the long-term, but in the immediate future, Sinclair is projecting nearly a billion dollars in revenues above expenses on their RSNs despite the pandemic.

The ESPN contract doesn’t look great on its face, but it isn’t as bad as it appears. MLB will still see an increase of its rights fees in these next sets of deals, and the league has some inventory it can sell in its mid-week games. Nationally, MLB is now also insulated from a collapse in rights fees for nearly a decade. And while there are some areas of concern locally, most of the league looks to be in very good shape for the next decade. The sport still faces questions about long-term growth, particularly when it comes to attracting new fans in a more segmented video marketplace, but this lessened ESPN deal shouldn’t be of great concern for the sport.