Current Labor Strife Doesn’t Mean a Strike Or Lockout Is Inevitable by Craig Edwards June 26, 2020 Throughout the last few months of hectic, sometimes nasty negotiations between the players and the owners to resume the 2020 season, one issue operating in the background was the expiration of the current Collective Bargaining Agreement at the end of next year. For those who watch, cover, and love baseball, losing the 2020 season would be sad, but understandable; there’s a global pandemic. To turn around 18 months later and lose all or part of the 2022 season because the players and owners can’t agree to a new CBA would be considerably less so. Still, while MLB and the MLBPA’s inability to agree to modify their March agreement in such a way as to provide mutual benefit (and more games) is frustrating, no deal today doesn’t mean no deal after 2021. The recent negotiations offer a preview into the tone, tenor, and general degree of trust (or lack thereof) both parties are likely to bring to the table as they work toward an agreement for 2022, but achieving a different result is possible because 2022 is going to be much different than both 1994 and 2020. There will be a lot of issues to resolve, as Dayn Perry laid out at CBS Sports in May and Andy Martino examined yesterday for SNY, and the process will be contentious. But the owners will also be looking to maximize profits after 2021 rather than minimize losses. And while the negotiations over the last month didn’t result in a new deal, they might actually prove to have been fruitful practice for the next time the two parties come to the table. 2022 Will Not Be Like 1994 While there is little doubt the owners will take a revenue hit in 2020 that could extend into 2021, revenues next year figure to be considerably higher than this year and should grow even more by 2022. (While we do need to reckon with the possibility that this pandemic doesn’t let up and no effective vaccine is discovered, this post will proceed on the assumption that our world will be edging closer to normalcy over the next 18 months.) Leading up to the strike, national television revenue accounted for around one-third of all MLB revenue; player salaries doubled from 1990 to 1993 due to a massive television contract with CBS. When that contract expired after the 1993 season, no suitors stepped up and MLB attempted a revenue-sharing agreement in preparation for a decrease in total league revenue of more than 10%. Even if teams project a huge hit to attendance two years from now and average something like 20,000 fans per game instead of the current 28,000, the hit to revenue compared to 2019 would be somewhere in the range of $700 million, or around 6.5% of league revenues. MLB has already negotiated raises to TV deals with FOX and TBS; if a similar agreement is reached with ESPN and we include the local long-term deals that have already been negotiated for the vast majority of teams, even a 30% hit in attendance from 2019 to 2022 would mean just a 3% loss of overall revenue from 2019 to 2022. If MLB loses just 15% or 20% in attendance, revenue won’t even take a hit from the record-revenue levels from a year ago. Unlike the period ahead of the 1994 strike, payrolls have not doubled over the last four years, instead remaining the same. With payrolls expected to decrease in 2021, there has not been a huge rise in costs like there was in the years heading into the strike. The business of baseball is on much better financial footing than it was in 1993, when the average ticket cost around $10 and the only teams with new stadiums were the Chicago White Sox and Baltimore Orioles. Ticket prices have risen at a rate twice that of inflation and that’s without even considering the revenue coming from luxury boxes in new stadiums across the sport. A fast rise in salaries coupled with a massive decrease in expected revenue fueled the conditions necessary for a strike. A lack of trust on the heels of the $280 million payout for collusion certainly helped cause a strained, untrusting relationship between the players and owners not so dissimilar from what we see today, but the economic conditions are considerably different. The owners will have much more of an incentive to put baseball on the field in 2022 than they did back in 1994, or 2020. Which leads to the present situation… 2022 Will Not Be Like 2020 One aspect of the recent spate of negotiations that I’ve had to remind myself of on multiple occasions is that the only reason those talks even happened was because the country is not as safe now as everyone hoped it would be when the parties’ original deal was reached. We should recall that even if there was considerable debate about what it meant in the months that followed, the players and owners did actually come to an agreement in late March, and one that reached consensus on thorny issues regarding pay and service time. Still, the mere presence of that agreement appears to have caused much of the consternation between the parties, with the owners trying to renegotiate its terms — first through the press, then with the players. With the benefit of hindsight, that agreement also short-circuited a second deal because its provisions served as a failsafe that made further negotiations difficult. The players used the March agreement to ensure they received pro-rated pay, while the owners used it to shorten the season. Improving on that deal given the two sides’ goals proved to be impossible, but in 2022, there will be no failsafe to rely on. If the players and owners don’t agree to a new CBA, there’s no baseball. That provides a great deal more incentive for the sides to get things done. Plus, in that negotiation, both sides will actually want a lot of baseball games, one of the major points of disagreement this year. With that front united, just like as it was in March, an agreement should be made easier. Ownership will almost certainly still try to curtail payroll spending, as these negotiations and the last several years of free agency have shown, but they will no longer worry about minimizing losses in a pandemic. Instead, they’ll be attempting to maximize their profits by putting baseball games on television and in front of fans at the ballpark. It’s a start. Lastly, 2020 served as important test run between two parties that, as it turned out, weren’t as familiar with each other as they may have thought. It seems the owners believed they could push the players around; their first three proposals indicated as much. The players’ unified front might have come as surprise. The owners kept bluffing, and the players called the owners’ bluff, which got them to agree to pay pro-rated salaries. The players then voted down the 60-game proposal and got a 60-game season anyway. The negotiations over the last month might have been a failure and a lost opportunity for the sport, but they also served to help the parties understand each other a little bit better, which might help down the line. We might still have a strike or lockout if the players and owners can’t reach a deal by the end of next season. This winter’s likely frigid free-agent market certainly isn’t going to make the players any happier about their relationship to ownership, and between issues like service time manipulation, minimum salaries, the competitive balance tax, and tanking, there will be a lot on the table. But if there is some hope that we’ll be able to avoid a labor stoppage, part of it comes from baseball having a considerably stronger financial footing than back in 1994. There is also considerably more incentive to play games, and that’s true when comparing this season to 2022 as well. There were reports of owners willing to let this season evaporate due to short-term losses, choosing money over the health of the sport. For better or worse, choosing money in 2022 will likely mean playing baseball games. In 1994 and 2020, the player and owner incentives to play weren’t aligned in the same way that they will be heading into 2022, and that provides some hope that a work stoppage can be avoided.