Major League Baseball seems to be in a constant public fight about its popularity and importance in society. To some it is in decline, to others it is boring, and to those who point to attendance and revenue, the sport is vibrant and successful and contradicts the nonsense of those who believe baseball is dying. The sport can always do more to keep the game entertaining, but early signs this season indicate that baseball is still relevant and popular, as both attendance and television ratings are higher — the latter despite an overall decline in cable ratings. Increased ratings mean more people are watching the games but don’t provide any more revenue for the teams. When it comes to the lucrative local television deals, ratings do not drive revenue. Local television revenue is still tied to the health of the major cable companies like Comcast and Time Warner.

Before getting to baseball’s dependence on the health of major cable companies, here is a brief look at some early season numbers. The first month of the season has seen big increases in viewership for national games on Fox Sports 1 and MLB Network, including double the amount of viewers aged 18 to 34 watching game on Fox Sports 1. The Chicago Cubs have doubled their ratings after their increased commitment in the offseason as well as the arrival of Kris Bryant. The Kansas City Royals have done the same coming off their World Series appearance. The Houston Astros have seen an increase in viewership after finally resolving their local disputes, at least as far as getting their games on all the local cable packages. The Arizona Diamondbacks have seen their highest ratings in a decade while the games of the Cleveland Indians, Detroit Tigers, Kansas City Royals, St. Louis Cardinals, and San Diego Padres rank first in their broadcast territories among all shows. A recent article by Maury Brown at Forbes showed that baseball games beat playoff games from the NHL and NBA in many markets across the country.

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Last week was relatively eventful for two pending antitrust lawsuits against Major League Baseball. On Thursday, the district court issued an important decision in the Garber v. Office of the Commissioner of Baseball suit challenging several of MLB’s television broadcasting practices under the Sherman Antitrust Act. Then later that same day, MLB officially asked the district court to dismiss the Miranda v. Office of the Commissioner of Baseball case, a suit contending that MLB’s minor league pay practices violate federal antitrust law.

Let’s start with the Garber case. As both Wendy Thurm and I have previously discussed on several occasions, the Garber suit involves allegations that several of MLB’s television policies violate the Sherman Act. First, the plaintiffs contend that MLB and its regional sports network partners impose unreasonable blackout policies on fans, preventing individual RSNs from competing with one another in each team’s assigned geographic territory. Absent these anticompetitive restrictions, the plaintiffs allege, a Red Sox fan living in California would, for instance, have the option of subscribing to the New England Sports Network (NESN) to watch all of Boston’s game. The resulting competition would, in theory, drive down the cost of sports programming for all baseball fans.

Relatedly, the Garber plaintiffs also accuse MLB of violating antitrust law by selling only league-wide, pay-per-view subscription packages (MLB Extra Innings and MLB.tv), rather than allowing individual teams to offer their own competing out-of-market plans. This restriction on competition also allegedly increases the cost that out-of-market fans pay to watch baseball.

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Barry Bonds last played in a major league game in 2007. Eight years later, he is now reportedly preparing to file a grievance against Major League Baseball, contending that MLB and its teams improperly colluded to prematurely drive him from the game.

As you may recall, back in 2007 Bonds hit an impressive .276/.480/.565 during his age-43 season, all while setting MLB’s all-time career home run record by hitting his 756th career HR in August. And although Bonds was projected to post a .380 wOBA for the 2008 season, he nevertheless went unsigned that off-season, effectively ending his major league career. This despite the fact that he had even gone so far as to offer to play for the league minimum salary (set at the time at $390,000 per year).

These relatively suspicious circumstances caused many to speculate that MLB’s teams conspired together to drive Bonds from the game. Indeed, both Bonds’ agent (Jeff Borris) and the Major League Baseball Players Association expressed concern at the time that MLB clubs had jointly agreed not to sign Bonds, with the MLBPA announcing after the 2008 season that it had found evidence of improper collusion. Despite all of this, however, Bonds and the union ultimately decided at the time not to officially charge MLB’s franchises with collusion, instead reaching an agreement with MLB to postpone any grievance against the league until Bonds had resolved his then-pending criminal charges relating to his alleged perjury and obstruction of justice during the federal BALCO investigation.

Fast-forward to last month, when the Ninth Circuit Court of Appeals reversed Bonds’ criminal conviction for obstruction of justice. With Bonds’ criminal troubles now all but behind him – technically, prosecutors are still considering whether to file a long-shot, last-ditch appeal to the U.S. Supreme Court – he is now once again returning his attention to potentially filing a grievance against MLB. So does Bonds has any chance of winning a case against the league, and if so, what might he stand to gain from charging its teams with collusion?

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In the next round of negotiations between the players’ union (MLBPA) and the owners, the union’s aim will be to close the growing gap between player salaries and owner revenues. Player salaries a decade ago represented 50% or more of revenue, but that percentage has fallen under 40% as salaries have not kept pace with revenue. The players have several options to try and increase salaries, but the simplest and perhaps most effective route is to significantly increase the minimum salary.

The players separate themselves into classes based on service time, prioritizing the money in free agency upon reaching six years of service time above all else. A tier below the free agents are those with at least three years of service time who are eligible for salary arbitration and generally receive between 40-80% of free agency salaries on one-year contracts. A step below the arbitration eligible-players are active Major League Baseball players with under three years of service time (except for the top 22% of players with between two and three years of service time who are also eligible for arbitration). The MLB players not eligible for arbitration have their salary set by their team, usually very close to MLB minimum which is currently $507,500 and has slowly increased in the past decade. In the tiers below active players, there are players on the 40-man roster in the minor leagues who receive union protection and a minimum minor-league salary, and then there are the rest of the minor leaguers who are not in the union and had many potential protections and salary bonuses bargained away by the players’ union.

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Player salaries keep increasing, but at a pace much slower than total Major League Baseball revenue. There is little the players can do about the gap right now, but when the current Collective Bargaining Agreement expires in 2016, the Major League Baseball Players’ Association will have the opportunity to gain a greater share of revenues in the future. The players have a lot of options: increased minimum salaries, earlier free agency, earlier arbitration, and removal of the luxury tax are all monetary changes that would transfer more money from owners to players and have little to no effect on the play on the field. Two other options, a universal designated hitter and a 26th roster spot, would affect the play on the field, but would not provide the players with significant gains off the field.

As Nathaniel Grow wrote recently, the MLBPA has a problem. In his piece, Grow discussed the growing chasm between player salaries and MLB revenues.

After peaking at a little more than 56% in 2002, today MLB player salaries account for less than 40% of league revenues, a decline of nearly 33% in just 12 years. As a result, player payroll today accounts for just over 38% of MLB’s total revenues, a figure that just ten years ago would have been unimaginably low.

Grow’s piece included the following chart (Payroll data from Cot’s Contracts and USA Today; MLB league revenue data from The Biz of Baseball):

Owners are pocketing more and more money from revenues and have thus far refused to share their increased wealth. The owners and players last shared a roughly fifty-fifty split of revenues in 2005. Since that time, players have received less than one-third of all additional revenue.
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When reports emerged in January that the Yankees were intending to contest the home run milestone bonus agreement the team entered with Alex Rodriguez back in 2007, it was unclear whether or not the matter would ever actually come to a head. Following a season-long suspension for performance enhancing drug use, no one knew for sure whether Rodriguez would even make the Yankees’ opening day roster, let alone be given enough playing time to hit the six home runs necessary to tie Willie Mays at 660 (triggering the first of five potential $6 million milestone bonuses under the 2007 agreement).

Rodriguez, of course, did make the team and ended up hitting his 660th career home run on Friday evening in Boston. As a result, attention has once again focused on whether the Yankees have any realistic hope of escaping the milestone bonus agreement.

As I noted back in January, because the bonus agreement has never been released publicly, it is difficult to fully assess the Yankees’ chances of escaping the $6 million payment. However, while there is still much that we don’t know about the contract, recent developments have shed some additional light on the legal arguments the Yankees will likely rely on when attempting to avoiding paying Rodriguez under the agreement.

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A few weeks ago I took a look at Major League Baseball players’ declining share of overall league revenues, noting that the players have gone from receiving just over 56% of MLB’s revenues in 2002 to around 38% today. That post went on to identify a variety of factors that have converged to reduce the percentage of league revenues going to the players, including increased revenue sharing, MLB’s growing television revenues, and more efficient front office decision-making.

One factor that I touched upon briefly in my prior post, but that probably merited a more extended discussion, is MLB’s luxury tax. As I explained the last time around, the luxury tax has helped dampen many of the larger market franchises’ willingness to spend on payroll, as teams will now incur a fine ranging from 17.5% to 50% – depending on how many years in a row the club has exceeded the luxury tax threshold – for every dollar they spend on player salaries over $189 million per year.

Because most clubs will only raise their payroll when they anticipate that each additional dollar spent on player salary will generate more than that in added revenue, the luxury tax provides a natural disincentive for most teams to cross the payroll threshold. Now, rather believe that an extra dollar in payroll will generate at least $1.01 in added revenue, teams must instead anticipate that any increased salary obligations above $189 million will generate anywhere from $1.18 to as much as $1.51 per dollar in new revenue in order to justify the expenditure. As a result, the luxury tax has caused most of MLB’s largest market franchises – the teams that the Major League Baseball Players Association has historically relied on to help drive the free agent market – to become more financially prudent in recent years.

But even this basic account doesn’t fully reflect the impact that the luxury tax has had on the players’ declining share of league revenues, as changes to the luxury tax structure since 2002 have increased the penalties for teams exceeding the payroll threshold, while also significantly lowering the threshold as a share of the average MLB team’s revenues.

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For the first time in four decades, the U.S. Supreme Court will have an opportunity to reconsider baseball’s notorious exemption from antitrust law. On Wednesday, the city of San Jose, California filed an appeal with the nation’s highest court, asking it to overturn professional baseball’s nearly century-old immunity from the Sherman Antitrust Act.

The appeal is the latest step in the litigation surrounding the Oakland A’s proposed move to San Jose. Back in 2013, the city sued Major League Baseball claiming that the league’s failure to approve the A’s relocation violated federal antitrust law. The district court dismissed the lawsuit later that same year, concluding that baseball’s exemption shielded MLB’s relocation decisions from antitrust scrutiny. That decision was upheld earlier this year by the Ninth Circuit Court of Appeals.

While these lower courts were constrained by a series of Supreme Court precedents exempting baseball from the Sherman Act, the Supreme Court itself is not bound to follow the prior rulings. So San Jose is asking the Court to seize this opportunity to overturn baseball’s highly controversial antitrust immunity. Like any appeal to the U.S. Supreme Court, however, the odds that the Court will agree to take San Jose’s appeal are rather slim.

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After an arbitrator ruled ten days ago that Josh Hamilton had not violated his drug treatment program following an alleged drug relapse, it looked like the Angels would be forced to pay him the rest of the roughly $83 million he is owed over the last three years of his contract. Now, however, it appears that the Angels are determined to do whatever they can to try to escape from the rest of Hamilton’s contract.

Before the Angels’ home opener on Friday evening, the team’s owner, Arte Moreno, spoke with the media. As one might expect, the discussion eventually turned to Hamilton, with a reporter asking Moreno whether the Angels would welcome Hamilton back to the team when he had recovered from his shoulder injury. Somewhat surprisingly, Moreno responded, “I will not say that.”

Instead, Moreno suggested that the team was exploring the possibility of cancelling the rest of Hamilton’s contract. As Moreno explained to reporters, “We have a contract with Hamilton and that contract has specific language, that he signed and that was approved, that said he could not drink or use drugs.”

The Major League Baseball Players Association quickly responded to Moreno’s comments on Friday evening:

“The MLBPA emphatically denies Los Angeles Angels owner Arte Moreno’s assertions from earlier today that the Angels had requested and received the approval of the Union to insert language into Josh Hamilton’s contract that would supersede the provisions of the Joint Drug Agreement and/or the Basic Agreement. To the contrary, the collectively bargained provisions of the JDA and the Basic Agreement supersede all other player contract provisions and explicitly prevent Clubs from exactly the type of action Mr. Moreno alluded to in his press comments today.”

So who is right? And what are the odds that the Angels could terminate the rest of Hamilton’s contract?

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The owners of several rooftop businesses overlooking Wrigley Field are down to their last strike in a lawsuit challenging the Chicago Cubs’ on-going renovation of the 100-year-old stadium. As previously detailed here and here, the rooftop owners filed suit in January asking a federal court to block the Cubs from constructing two new proposed scoreboards, structures that the rooftops claim were intended to block their views into the stadium.

Last month, Judge Virginia Kendall denied the rooftop owners’ request for a temporary restraining order (TRO) preventing the Cubs from erecting the scoreboards. As I explained at the time, although the judge was unwilling to issue a TRO – an emergency order that would have blocked the Cubs from building the scoreboards for only a few weeks – she left open the possibility of granting the rooftops a preliminary injunction in the case (a more permanent order that would have forbid construction of the video boards throughout the entire course of the litigation).

The rooftop owners’ hopes were dashed once again on Thursday, however, when Judge Kendall refused to preliminarily enjoin the Cubs from constructing the scoreboards. Kendall’s opinion (available here) was a resounding victory for the team, with the judge concluding that the Cubs were likely to prevail on both the rooftops’ antitrust and breach of contract claims. As a result, the Wrigley renovations will be permitted to continue unabated.

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