Earlier in the week, there seemed to be a growing sense of optimism regarding a potential deal between the players and team owners to get the baseball season started. MLB’s initial proposal may have been met with near-universal criticism, but the MLBPA’s response of a 114-game schedule, while obviously proposing significantly more games, left considerable room for negotiation. Just a day later, Jeff Passan reported that the owners were considering responding with a 50-game schedule played at the pro-rated salaries agreed to in March. The two sides were still far apart, but the players seemed willing to compromise on the playoff structure and deferrals, with the owners giving up a renegotiation of pro-rated pay; everyone seemed well on their way to somewhere in the neighborhood of a half-season’s worth of games.

Sadly, the owners never made such an offer. Indeed, they have since rejected the union’s proposal, reportedly with no intention of countering per Ken Rosenthal, who broke the news. The step back from ownership makes it difficult to determine where the parties stand on a potential 2020 season. While MLB didn’t formally propose a 50-game season, it’s apparently still a consideration for the league, as well as a negotiating tactic to get the player’s to play more games for less money per game. As Rosenthal and Evan Drellich noted in their piece on the subject for The Athletic:

Though the language in the March agreement between the parties is subject to interpretation, [MLB] believes the wording enables commissioner Rob Manfred to determine the length of the season as long as the league pays the players the prorated salaries outlined by the deal.

According to the agreement, it is up to MLB to propose season length:

using best efforts to play as many games as possible, while taking into account player safety and health, rescheduling needs, competitive considerations, stadium availability, and the economic feasibility of various alternatives.

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Last week, MLB proposed that major league players take a $1 billion pay cut beyond the pro-rated salaries they’d already agreed to under their March deal. Last Tuesday’s proposal was not met positively by most players, and they had pretty good reasons to be upset. Now the MLBPA has responded to MLB’s proposal, with Jeff Passan first reporting the details followed quickly by Evan Drellich and Jared Diamond. The focus of the union’s response centers around more games, which would take regular season play into October, but it also includes potential salaries deferrals and expanded playoffs for this season and next.

On it’s face, this proposal might not look much of a step forward to getting baseball back in 2020. After all, the MLB proposal asked for a billion dollars in cuts to player pay; adding 32 games to the schedule and increasing player pay by nearly 40% means an extra billion dollars for the players. A source told Jon Heyman the deal was a “non-starter” for owners. But while the deal might not be looked upon favorably by ownership, there are several aspects of it that invite negotiation.

At least publicly, there seems to be a fundamental disagreement between the players and owners regarding whether regular season games make money for baseball’s owners without the presence of fans. In MLB’s presentation to players from last month, their claims of a $640,000 loss per game missed huge chunks of revenue that need to be included to arrive at a more realistic revenue figure. When I ran the calculations based on MLB’s own numbers, I found that MLB generally would make, after accounting for pro-rated salaries, about $170,000 per game. Those numbers actually edge slightly higher the more games are played due to MLB’s inclusion of some fixed costs, like buyouts. Even by these conservative numbers, which come directly from MLB and leave out considerable baseball-related revenue as well as marketing opportunities (or losses), that means that in 32 more games, owners make another $974 million while paying the players another $840 million or so, netting MLB another $134 million overall. While MLB’s public posture is that regular season games cost money, former MLBPA lawyer Gene Orza theorized in an Evan Drellich and Ken Rosenthal piece that Rob Manfred and the owners want more games just like the players do, but it is a better negotiating tactic to have the players ask for those games. So while more games might be something that the players have a strong desire for in order to make more money, it appears to be mutually beneficial, though certainly some teams will end up better off than others. Read the rest of this entry »

On Tuesday, MLB delivered its first economic proposal concerning player pay to the MLBPA since the two sides reached an agreement in March. There were reports that owners had previously agreed to propose a 50/50 split of revenue for what looks to be an abbreviated season played to empty ballparks, but after that potential offer leaked, it was never formally proposed due to the negative public response from the union. MLB’s actual proposal, which includes a paycut for all players from the prior pro-rated agreement in March, was particularly harsh to those making the most money, as the proposed cuts were on a sliding scale with the highest-paid players taking the deepest reductions. Jay Jaffe laid out yesterday why the proposal wasn’t likely to fly with the players, a sense confirmed by Max Scherzer last night:

After discussing the latest developments with the rest of the players, there’s no reason to engage with MLB in any further compensation reductions. We have previously negotiated a pay cut in the version of pro rated salaries, and there’s no justification to accept a 2nd pay cut based on the current information the union has received. I’m glad to hear other players voicing the same viewpoint and believe MLB’s economic strategy would completely change if all documentation were to become public information.

Jeff Passan and Jesse Rogers first reported the proposed salary breakdowns at ESPN:

The formula the league offered, for example, would take a player scheduled to make the league minimum ($563,500), give him a prorated number based on 82 games ($285,228) and take a 10% cut from that figure, leaving him with a $256,706 salary.

The scale goes down as salaries go up, with every dollar:

• $563,501 to $1 million paid at 72.5%
• $1,000,001 to $5 million paid at 50%
• $5,000,001 to $10 million paid at 40%
• $10,000,001 to $20 million paid at 30%
• $20,000,001 and up paid at 20%

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Last week, MLB presented documents to the player’s union regarding the financial implications of playing the 2020 season without fans. In an exclusive report, the Associated Press has revealed a considerable amount of the contents of those disclosures. The main takeaways are in the title — “MLB projects $640K per game loss with no fans” — and the third paragraph, which reads:

Teams say the proposed method of salvaging a season delayed by the coronavirus pandemic would still cause a $4 billion loss and would give major league players 89% of revenue.

That $4 billion figure was echoed by Commissioner Rob Manfred on CNN on Friday, except that he indicated in that interview those would be the losses if no season is played. Given that these documents are an attempt to convince the MLPBA to take less money and to put public opinion on the side of the owners against the players, it is fair to take these figures with a bit of a grain of salt. Let’s try to work through the numbers and answer some of the questions raised by the information in the presentation as reported in the AP piece.

First, the big question.

Are the owners going to lose $4 billion?

No. At least, they won’t if games are played. There’s a graph in the AP piece that shows team-by-team losses from an 82-game schedule played with no fans in the stands. The losses range from $312 million for the Yankees down to $84 million for the Tigers. The total losses come to around $4.4 billion, an average of $147 million per team and a median of $135 million. But this figure is misleading as it does not include MLB’s estimate of central revenues, which amount to $1.35 billion. Even taking MLB at its word, the losses immediately move down to $3 billion.

And depending on how revenues and costs are interpreted, the losses might be considerably lighter. First, there’s the issue of amateur spending. In the March agreement, the players agreed to let the owners defer about $425 million in spending to future years, but that $425 million is still included in the loss figure for this year. Read the rest of this entry »

While many have moved on to a potential renegotiated deal between the players and owners to get the season underway, MLB’s decision to stage a five-round amateur draft shouldn’t get lost in the shuffle. On Friday, Jeff Passan and Kiley McDaniel broke the news that this year’s June draft will last just five rounds. The news wasn’t a total surprise given that when the players and owners negotiated back in March, the sides agreed that the draft would be at least five rounds, but would be considerably shortened. However, given the relatively low present and future cost of having even five more rounds, it’s something of a surprise that the owners refused to put down the half a million dollars per team in 2020, with a quarter million dollars more in bonuses payable in 2021 and 2022.

The agreement in March specified that the draft would stick to 2019 slot amounts, saving owners a little over $8 million from what was in the CBA. In addition, teams would have to pay just $100,000 of player’s bonuses now, with the rest of the payments split between 2021 and 2022. In 2020, that means owners will spend around $15 million in signing bonuses, a $300 million reduction from a year ago. Coupled with the delayed international signing date, the owners are seeing $400 million in 2020 savings, with roughly $80 million of those savings permanent. Last year, teams spent $50 million more than their allotted amount on bonuses for players after the 10th round, which won’t happen this year. There’s also $30 million allotted for rounds six through 10, which also won’t happen this year. According to Passan, that decision didn’t sit well with front offices:

There remains a significant divide within the team side on the draft. A majority of front offices were pushing for a longer draft, recognizing the value reaped even in later rounds can be immense. Pushback to keep the draft as short as possible from some owners was strong.

— Jeff Passan (@JeffPassan) May 8, 2020

Given the $100,000 limit on bonuses to be paid this year, owners opted not to spend half a million per team right now and $1 million spread over the next three years to prevent 150 talented amateurs from turning pro. Teams can sign players after the draft, but undrafted free agents are limited to $20,000 bonuses. The types of players drafted before the 10th round are not the types who agree to $20,000 bonuses unless teams are shifting around money to give other players larger bonuses. The players who would have received decent bonuses in these rounds are now going to stay in school for another year or in the case of high school players, go to college or junior college in the hopes of being drafted in future years. There’s an argument to be made that all of these players will eventually get drafted, so it doesn’t make much of a difference for teams. That argument is not strong. Read the rest of this entry »

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.

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At the end of last year, it looked like the Wilpon family might sell the New York Mets to Steven Cohen for around $2.5 billion. The proposed sale was an unusual one. It did not include SNY, the Mets’ regional sports network, which is owned by the Wilpons; the Wilpons were also set to maintain some degree of control of the team for years after the sale. In what didn’t come as much of a surprise given the deal’s unusual nature, things fell apart and the Mets are once again looking for new owners. Enter Alex Rodriguez and Jennifer Lopez.

As reported by Scott Soshnick in Variety, Rodriguez and Lopez have sought help from JPMorgan Chase to raise funds to purchase the team. The piece notes that A-Rod and J-Lo have a combined net worth of around $700 million, which is obviously well short of what is needed to meet a potential purchase price over $2 billion. While that gap might appear insurmountable, an A-Rod/J-Lo owned Mets team isn’t as far-fetched as it may seem. First, consider that any purchase of this type is going to be financed with a considerable amount of debt. As Tom Ley wrote in his analysis of the Cubs’ previous sale — in the Ricketts’ initial plans to purchase the Cubs, there was talk of financing as much as $750 million of a potential $1.15 billion deal, though in the end, they paid $845 million and financed $450 million — teams are bought with significant amounts of financing:

Ted Lerner purchased the Nationals for $450 million in 2006, and the “Debt Primer Presentation” GSP sent to the Ricketts includes the details of that sale as a case study for how a highly leveraged purchase can work. Lerner took on the maximum amount of debt—$360 million—in order to purchase the team. Jim Crane bought the Houston Astros for $615 million in 2011, reportedly by taking on $300 million in debt; the Dodgers ownership group assumed $412 million in debt when they purchased the team in 2012.

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The end of March featured a bit of relatively good news on the baseball front, as MLB and the MLBPA agreed on a deal that appeared to address issues like service time and player compensation during this unusual season, allowing for a smooth path forward once and if it is safe to begin play. (Amateur players, who saw the rounds of the June draft dramatically reduced, got a far less good bargain.) The deal looked to be a good compromise from both sides, seemingly ensuring that labor questions would not get in the way of an abbreviated season. However, recent reports, which keyed off comments from Mets owner Fred Wilpon to New York governor Andrew Cuomo, indicate that the peace is not quite as secure as was once thought.

As initially reported, the deal seemed fairly straightforward. The players would receive a salary advance of $170 million that would not need to be paid back in the event of a cancelled season. In addition, the players were to receive service time consistent with what they had accrued in 2019 if no season was played. The players and owners agreed that player salaries would be pro-rated to the number of games played, with service time calculated in the same fashion. The owners received a guarantee that players would not sue for their 2020 salaries. The owners were also given the ability to defer more than a quarter of a billion dollars of draft and international bonuses to future years while the reduction in rounds would eliminate between $50 million and $100 million from the draft pool entirely. Read the rest of this entry »

What this winter’s free agent market ends up looking like — and how lucrative it proves to be for players — is unsurprisingly very much in flux. The 2020 season is still in flux, and how it plays out, or if it ends up being played at all, will have a significant affect on the offseason. If there’s no season, we know that players will still receive service time, making guys like Mookie Betts, James Paxton, and J.T. Realmuto free agents. Players will receive raises in arbitration. For competitive balance tax purposes, no season would mean no tax payments. The Red Sox would still need to stay under the $210 million tax threshold in order to reset their tax amount, though with 2021 being the final season of the current CBA between the players and owners, the ramifications of such a move are very much unknown and could end up being completely nullified by a new deal.

Ifsome version of the season does get played, there might be slightly fewer questions, but the winter will still bring about considerable uncertainty. With that in mind, and the season still a ways off, let’s take a moment to see how team payrolls are shaping up this offseason. For the graph below, I looked at competitive balance tax payrolls, which take the average annual value of contracts and include around $15 million in benefits, with a few million for 40-man players not on the active roster, as well as expected minimum salaries players. I estimated arbitration-eligible players by giving them a 50% raise over 2020 figures and for the most part, I declined club options. The only options shown as exercised below are for Adam Eaton, Starling Marte, Anthony Rizzo, and Kolten Wong. All others are presumed declined. All figures are from our RosterResource Payroll pages. If rosters remain the same with a season played in 2020, this is what we might see as payroll heading into free agency.

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In the four years since I last attempted to determine major league teams’ local television revenue, much has changed in the Regional Sports Network landscape. Four years ago, FOX was the dominant player, owning a majority of the channels, with NBC and AT&T having their own shares as well. Last year, Sinclair completed the purchase of FOX’s RSNs, bought into the Yankees’ YES Network, and partnered with the Cubs to help create them their own network. That big FOX RSN purchase came at a price half that of the initial estimates; Sinclair also attempted to purchase the AT&T RSNs up for auction before AT&T determined the potential selling price was too low.

In addition to the network ownership changes, seven of the 30 teams’ contracts have been up for renewal, with substantial changes to what we previously knew about the broadcast situations of the Braves, Nationals, and Rockies. As was the case four years ago, these numbers are estimates and do not include money from ownership stakes in networks. For the former, I’ll go into a little more detail where I had to speculate the most. For the latter, I’ll illustrate how an ownership share can be incredibly important. For all long-term deals, I assumed a 4% annual increase across the length of the contract. And while much is uncertain regarding this season and its duration, the estimates here are for a full, standard season (2019), both for ease of comparison and their utility in the future.

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