Examining the Economics of MLB’s Latest Proposal to the Players
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%
On top of salary, there’s also roughly $200 million in proposed playoff bonuses that would mostly go to the more highly-compensated players. To figure out exactly how the compensation might work out, I consulted our payroll pages at RosterResource. In an 82-game season, the nearly 500 players scheduled to make more than $1 million in a full 2020 season would take in around $900 million, that compared to the $3.9 billion they were originally slated to receive if a full season had been played. Around 300 more players were set to make Opening Day rosters making roughly the league minimum salary, with another couple hundred expected to play during the season at the same rate. Those players were to receive around $130 million under MLB’s plan as opposed to $145 million under the March agreement. Expected buyouts and bonuses add another couple hundred million, making the pre-playoff player payroll under MLB’s proposal around $1.25 billion or around $1.45 billion with playoff bonuses.
According to MLB’s own projections, players were set to receive $2.36 billion under the pro-rated plan. As a result, this plan involves a pay cut for the players amounting to over $900 million, a reduction of nearly 40% compared the March agreement or a 67% cut compared to full-season salaries. The plan is slightly different than the 50/50 proposal floated a few weeks ago, but monetarily, the new plan shows few differences. Let’s look at the different plans compared to the March agreement with and without playoffs:
| 82-game Season | Pro-Rated Pay | 50/50 Split | New MLB Plan |
|---|---|---|---|
| No Playoffs | $2.36 B | $1.04 B | $1.25 B |
| With Playoffs | $2.36 B | $1.44 B | $1.45 B |
The owners waited two full weeks after approving the 50/50 split proposal to come up with an alternative only to give the players a renegotiated pay plan that is just as bad financially. It’s possible the owners believed they could drive a wedge between the union’s members by asking the highest-paid players to take the biggest cuts. The table below shows how the proposed pay cuts break down based on pre-pandemic 2020 salary information:
| Original Salary | Players | Pro-Rated 82 G | New MLB Plan | Plan % of Pro-Rated |
|---|---|---|---|---|
| At Least $20 M | 48 | $13 M | $4.5 M | 34.9% |
| $10 M – $20 M | 96 | $7.1 M | $3.1 M | 43.0% |
| $5 M – $10 M | 110 | $3.6 M | $1.9 M | 51.6% |
| $3 M – $5 M | 87 | $1.9 M | $1.1 M | 58.5% |
| $2 M – $3 M | 61 | $1.2 M | $776 K | 63.2% |
| $1 M – $2 M | 72 | $696 K | $511 K | 73.4% |
| MLB Minimum | 516 | $285 K | $257 K | 90.0% |
We can see the top 5% of players salary-wise are taking the biggest hit while the players further down the pay scale still see a pay cut from the March agreement, though one that is less significant than the group at the top. When we look at the total amounts given up by group, we see the same effects:
| Original Salary | Players | $ Cut from Pro Rata | Total % of Cut |
|---|---|---|---|
| At Least $20 M | 48 | $406.5 M | 36.6% |
| $10 M – $20 M | 96 | $388.6 M | 35.0% |
| $5 M – $10 M | 110 | $191.8 M | 17.3% |
| $3 M – $5 M | 87 | $69.2 M | 6.2% |
| $2 M – $3 M | 61 | $27.5 M | 2.5% |
| $1 M – $2 M | 72 | $13.3 M | 1.2% |
| MLB Minimum | 516 | $14.3 M | 1.3% |
These numbers don’t include the $200 million in potential playoff bonuses, but they gives us a general idea of which players would be giving up the most money. We see the vast majority of players accounting for only about 5% of the pay cut from the March agreement. Perhaps the plan was to cause discord between the higher-salaried players and those making a million or less, but there’s further reason to think that plan might not work beyond that.
In the March agreement, MLB agreed to advance players $170 million. In the event that the season was played, that advance would count toward players’ season salaries. If no season took place, the money was for the players to keep. Established players who had reached arbitration were to receive around $287,000 in April and May regardless of salary level. Younger players like Juan Soto were to receive around $60,000 for the first two months. An established player expected to earn $1 million this year would receive roughly $416,000 under MLB’s current plan. To play an 82-game season, that player would receive just $129,000 more than he already received compared to not having a season at all.
Below is a table that includes potential playoff money for players, showing how much of their potential salary they have already received and consequently, how much they keep if there’s no season:
| Original Salary | Players | Pro-Rated | MLB Plan w/ Playoffs | Advance | % Pay Already Received |
|---|---|---|---|---|---|
| At Least $20 M | 48 | $13 M | $6.0 M | $287 K | 4.7% |
| $10 M – $20 M | 96 | $7.1 M | $3.8 M | $287 K | 7.6% |
| $5 M – $10 M | 110 | $3.6 M | $2.2 M | $287 K | 13.0% |
| $3 M – $5 M | 87 | $1.9 M | $1.2 M | $287 K | 23.9% |
| $2 M – $3 M | 61 | $1.2 M | $857 K | $287 K | 33.5% |
| $1 M – $2 M | 72 | $696 K | $544 K | $287 K | 52.8% |
| MLB Minimum | 516 | $285 K | $262 K | $60 K | 22.9% |
Well over half the players have already received more than 20% of MLB’s proposed pay and for a significant number of players, that figure is at 50% or more. While a few hundred thousand dollars isn’t nothing, when factoring in the health risks and the money already received, the plan isn’t as beneficial to younger players as it might seem. MLB came up with a plan designed to upset the game’s biggest, highest paid stars while also failing to provide significant incentive for the younger players to break ranks. MLB has asked the players to shoulder a billion dollar pay cut on top of the $2 billion cut already taken in the March agreement, but it hasn’t provided justification beyond talking points for doing so. Max Scherzer and the players seem upset and they appear unified. The owners had two weeks to come up with a decent proposal, and instead they made an offer that only takes the parties further apart.
Craig Edwards can be found on twitter @craigjedwards.
So what happens if guys like Snell indeed refuse to play? What if say Pete Alonso refuses to play for a relative pittance compared to what he should expect to get in free agency, eventually? What if Trout refuses to play?
Or say Trout says I will play for the $6mil or whatever he’d get under this plan, but he wants the rest of his 82 game prorated salary be donated to charity efforts? How do the owners respond to that?
This deal is DOA. I expect a lockout at this point.
Re: your Trout hypothetical, the MLBPA is the exclusive bargaining agent for MLB players, so he couldn’t go into business for himself in that way.
Yeah I could totally see guys like Trout and Harper saying, “nah, see you in 2021.”
What happens if a player who refuses to play and is signed to a high-priced, long -term contract that a team would like to get out of (like Miggy’s 30mm per over the next few years)? Could the team claim it’s a breach of the contract and void it?
Lots of possibilities there.
It all depends on the specific contract.
I suspect a contract with a personal services component (Pujols?) would hold up.
Others might end up on the ineligible list, like hold outs.
Or yes, cancelled for non-compliance.
Lots of billable hours for lawyers ahead.
The March agreement was for service time cfedit equal to 2019…
…if there is even a short season.
The owners most likely argue that no season, no credit.
@fjtorres
Could this be an indication that the owners may have (somewhat) intentionally proposed such a lopsided deal? In a “Hey, if we can’t get this, we feel better off with no season in order to argue no season = no credit” kind of way?
“The owners had two weeks to come up with a decent proposal, and instead they made an offer that only takes the parties further apart.”
So, which is most likely:
1. The owners misjudged how unified the players are and chose a negotiating tactic that backfired.
2. This will be a successful tactic by virtue of creating divisions between the players, swaying public opinion, and/or running down the clock, we’re just not seeing it yet.
3. The owners know exactly what they’re doing and don’t really want to play baseball in 2020.
My money is on 2, with 3 as a dark horse. The owners had two weeks, and they have a history of being a step ahead of the players on this stuff.
I’d also entertain
4. The owners are not doing a good job.
I know we expect them to make optimal choices for their incentives, but the histories I’ve read make it clear that ownership often makes selfish, sabotaging decisions.
I’m going to go with this one, but to be fair it’s not mutually exclusive with (1).
I don’t know what they were thinking, but I legitimately do not think this gets them closer to any of the goals excepting (3).
MLBPA said they disagreed with principle of salaries being determined by revenue…a de facto salary cap. Every CBA the players say no to a salary cap, and then the owners craft a convoluted system that more or less gets the numbers where they want them without a salary cap. The players then accept. This is no different except it benefits younger players instead of the CBA that benefits elite free agents.
Addendum, If the owners had to choose between no season and paying players a prorated salary to prayers without fans in seats and with fans having a pinch on disposable income for merchandise…..the obvious answer is number 3 as there is no incentive for them to have a season under those conditions (Caveat: I do not believe owners, in general, are benevolent beings that support baseball for baseball sake even if it means losing money). My guess is that players end up around 57% of whatever falls under “baseball revenue” considering they’ve been between 50-57% for decades (per Passan with MLBPA confirming it to him[low end may be slightly higher than 50%]).
I think it’s #3, all the way. If the owners really want games played, they wouldn’t be bellyaching about how much money they would lose for every game being played. I believe they’re just cranking up the PR machine, so they can place the blame on the players for not having a season they have no intention of playing.
A lockdown would be very damaging to the brand. Especially with the NBA and MLS expected to play. MLB is losing a lot of young fans and is dropping in popularity.
Both the owners and the players need the season to start and start by July 4th. MLPA should counter with 100% prorated salary to players under $1MM and ask the higher salaries to take one for the team, perhaps at 60% maximum cut instead of 80% proposed for Trout, cole, etc.
Only some owners can afford door 3, is the thing
@dukewinslow
That’s a good point. From my position of curious naivety, do such owners have more sway (whether in actual force or just in internal chest thumping with other owners) in the collective Owners?
I favor (3).
4). This is a step in the owners trying to get a bailout or subsidy from the Federal Gov’t. I could see them leveraging Trump’s stated desire to get sports going again as a way to get the gov’t to subsidize some of their losses.
Not saying I like it, but, reality sucks sometimes.
I’m kind of double-dipping in two sub-threads on this, but how about the likelihood of them hedging their bets? If, for example, they really want Option 2, but are very willing to take 3 over the March deal.
Pretty nuts that the owners would ask for a 40% pay cut off the agreed upon salaries that were already reduced by half, and not share any of the financial numbers required to justify it. The players probably still wouldn’t take the deal even if the owner’s losses due to no fans were 40%, but given how dishonest owners have been in the past and present, not seeing their books makes this deal a complete non-starter.
It’s not nuts if that’s how much revenue is down; if games are played in front of empty stadiums, that’s a huge slice of the revenue pie gone. If revenue is down 70%, asking players to take a 40% pay cut seems reasonable.
The problem is, of course, that the lack of transparency means the players have no way of knowing if that is in fact what’s being asked for.
It’s a bad offer by the owners, and that’s coming from someone who’s been very understanding of the actual business situation they are in. And it was a horrible miscalculation to try to divide the Union on payroll lines… even if it “works” in these negotiation, it’s poison in the well for the next CBA.
I wish agents (who are completely self-interested and conflicted) would stop trying to inflame the situation, and I was glad to see Trevor Bauer tell Scott Boras to STFU.
But again, the lead blame here has to go to the MLBPA for agreeing to a deal in March that included the “fans in the seats” language. Either you didn’t know what you signed, or you didn’t clarify a key term, but you failed at a basic element of negotiating an agreement – understand what you sign, and make sure that all specified terms are clear and agreeable. No matter what anyone thinks of the owners, we’re here right now (i.e. at this specific point in the negotiations) because the MLBPA explicitly left this door open and is now crying it shouldn’t be. The clause is in there; if it’s ambiguous, and adverse to your interest, then you had better have made sure you understood what you signed.
I’m really impressed by individual player responses and really disappointed in the union. But the owners have to be feeling financial heat soon.
For the most part, owners are very rich. They may well have current cash flow problems due to the lock-down and virus, but in the ordinary course of events, they can afford a lot of losses. I would not count on them feeling any financial heat.
If I trusted the owner’s claim that they’d be losing money to play games under a pro-rated pay agreement, then I’d have a lot more sympathy for their position. But while I find it likely that they will lose money this year no matter what they do, I find it very unlikely that they’ll lose more from playing games than from letting stadiums sit empty (which is what I think of when you tell me that you’ll be losing money to play games).
If they have cash flow problems (and it is likely that some of them do), they should be suggesting deferred money, that they’re asking for cuts with questionable numbers does not inspire trust in their goodwill.
Uh, the stadiums will sit empty with games, that’s the owners’ point. The players will share the 50% revenue hit from a 50% schedule, but they are not sharing the 40% reduction from no fans in the stands. Craig’s note of a 67% pay reduction does seem to align with the 70% revenue reduction MLB will suffer with an abbreviated schedule with no audience. However, MLB is not giving MLBPA any of the money that Owners save by not paying gameday stadium expenses such as ushers, food preparers, ticket takers, beer vendors, etc. I think that may be a mistake since most baseball journalists are pro-MLBPA instead of neutral observers and will use this as a sign of bad faith. They were going to bash the Owners anyway, but this might have helped.
Lots of businesses have “right-sized” their staff-costs to fit with Covid and post-Covid demand. Fangraphs stopped HardballTimes and reduced its staff. Fangraphs readers (and writers) seem to have an especially emotional stake in MLBPA constantly fighting the Owners. The comments section rarely attempts to break down the numbers and instead offers angry, normative opinions. Strange for an audience that prides itself on being “data-driven.” This for a workplace where the average salary is $4.6M/year.
Yeah, so I’m definitely “data-driven” since I come to Fangraphs. My data is showing exactly this many fucks are given about billionaires losing money:
There’s no actual, verifiable proof that the 70% figure you are touting is even accurate. We’re essentially expected to take the owners at their word on these figures, which is hard to do when the owners are already – legally, even – able to shield a portion of their revenues from both revenue sharing with other teams and with the players.
“The ownership shares (of cable networks) are incredibly important when it comes to revenue-sharing because any money gained as an owner of a network is shielded from revenue-sharing, as are the figures that MLB has provided when calculating the players’ share of revenue.
https://blogs.fangraphs.com/estimated-tv-revenues-for-all-30-mlb-teams/
These RSNs actually provide an avenue to shield an even greater share of local revenues were they to shift some of those local revenues to their RSN.
It’s fine to attempt to break down the numbers, but when you don’t even attempt to acknowledge the lack of credibility in those numbers your arguments and snark also lose credibility.
You talk about ‘right-sizing staff costs’ but even with reduced staff many businesses are likely still losing money, the idea is they might be able to stay afloat by losing less money than if they were to just stay shuttered.
This is the same calculation the MLB is thinking about, it just appears outwardly that the owners want to guarantee themselves profit or else they’ll just eat the losses associated with having no season. That’s a fine stance to take, but it doesn’t look great when you have been consistently turning profits for decades while at the same time franchise valuations continue cruise upward.
This was an opportunity to offer an olive branch and they decided to play hard ball.
You have a propensity to call people out for lacking data in their arguments, but are unwilling to acknowledge credibility gaps in your own data and logic.
Also your pro-ownership take is just so weird. Maybe you feel they are being unfairly criticized but history would suggest otherwise and if we’re being real here, what’s the actual point?
I assume that you aren’t contesting that 50% of revenue this year will be lost to a half-schedule, so are you contesting that 40% of MLB revenues result from live attendance including tickets and food and parking concessions? Craig hasn’t contested this number so why should I be suspicious about it? [I’m assuming you know 70% = 1 – (60%)(%50).]
Forbes estimates local TV revenue for all teams and compiles that into the $10.5B MLB-wide revenue that most baseball journalists use when writing about the economics of the league. If none of the numbers are credible, why is Craig wasting his time writing about it? And he’s written many articles, what a waste of all of our times for commenting on them. And why did MLBPA agree to the 2016 CBA or to any past CBA even when MLBPA’s own economists agree with MLB’s numbers? Maybe we should all just say “Owners Bad” and “Tony Clark stupid” three times weekly and call it a day. That seems to be the approach of many commenters here.
I admire the owners and why not? They’ve grown revenues tremendously, attendance is at all-time highs, player salaries are at all-time highs, they created a new technology in MLBAM, they source talent worldwide. Fantastic business, they deserve a lot of credit.
People bring their general views about labor, capitalism, etc. into the conversation. It shouldn’t be hard to see either side’s argument:
Players: Any claim of losses from ownership should be viewed skeptically. They have every incentive to lie without being forced into transparency and could be leveraging a crisis to gain the financial upper hand. I’m upholding my end of the bargain by playing games and it’s ownership’s obligation to deal with finances.
Owners: We’re paying 50% salaries and suffering a 70% loss in revenue. COVID may force cancellation of the higher earning playoffs. It’s better to eat the losses we have than risk far more. We’re not going to have our private financial information leaked to the public.
Cutting the regular season in half would not automatically cut revenues in half because a non-trivial piece of the revenues comes from the playoffs.
Craig consistently pushes back on the numbers publicly stated by the MLB.
https://blogs.fangraphs.com/parsing-mlbs-claim-of-a-4-billion-loss/
He writes about it because it’s all we have, but he also caveats where appropriate. This specific piece doesn’t even dive into the lost revenue figures from the MLB so there’s not point in him mentioning it.
Maybe we both continue to just see what we want to see but you consistently put forth arguments based on your own viewpoint not hard facts just like all the commentators you keep referring to.
And sure the owners have been growing revenues (and taking an increasing share of those revenues) over the years. But they also have their weaknesses and they are beginning to show. Cable money is not going to be stupid money much longer and the growth of the game is going to rely on young and future fans who are simply not engaging with the sport as previous generations have due largely to decisions made by MLB and ownership.
Agree with your comment on baseball journalists being biased. If the season is cancelled I will cancel my subscription to Fangraphs.
While most of the owners are on paper wealthy, even the smartest funds get caught with liquidity shortfalls. These are not the brightest bulbs in the drawer, generally speaking. Would you be surprised if owners were comparatively over levered because they basically counted in infinitely inflated cash flows and were susceptible to even minor hiccups? Because that’s what happened with the McCourts, and hicks and Gillette (or with Elliott at AC Milan).This is a systemic crisis. Forget the marginal guys like the Marlins and the Mets, even folks who have been playing it relatively safe might be having some uncomfortable conversations.
I’m pretty sure this is correct. The amount of debt a lot of these teams are under is extraordinary. We’ve had a lot of conversations about how the price of teams has gone way up and so too has the amount of debt that teams are saddled with after the transaction. This makes some owners pretty vulnerable. It’s maybe not even most of them–but enough that they’re desperate.
The other thing that I think is worth noting here is that I don’t think even the super-rich are going to stomach losing money like this when they don’t even get a season out of it. We’ve seen how averse many owners are to eating money to trade expensive veterans, even though it would help competitiveness. This is a bit like that but on a much grander scale.
I think it’s about even more than losing money. I think it’s about at least a couple franchises realizing that losses at a certain level could put their debts out of covenants and lead to counterparties calling loans (taking collateral) or imposing strict contractual penalties and charges on the borrowers.
Lest anyone think I am being hyperbolic, note that Net Debt/EBITDA is one of the simplest and most common covenant terms in overall corporate credit issuance. If net debt doesn’t change but EBITDA shrinks dramatically, the ratio changes significantly. In public debt markets, this ratio is a key component in the “rating” assigned to a bond by the ratings agencies. It stands to reason that it is often a key component of many non-public debts as well.
FYI, I just did calculations on the debt, I believe from numbers taken before all this went down. There are 11 teams with more than $200M in debt. Some of them look like they’re coming from new stadiums, like the Rangers and (I think) the Twins. A lot of them are coming from teams that recently changed hands like the Marlins and Royals. I think the Dodgers still have debt from doing a debt-fueled purchase way back when. Not sure what’s going on with the rest of them.
Mets have at a minimum 400 odd million debt on the team, probably 700 on SNY. These are commingled, in all but legal fact. NTM Wilpons with another 7-800 debt in other projects. 100 million here, hundred million there pretty soon you’ll be talking about real money. Sports teams are the visible part of the coming gotterdammerung in HNW wealth management. So much leverage for so many truly stupid people.
Teams that expect steady revenues will be more willing to spend money while those who anticipated something like a pandemic will be frugal. There will be a lot of front offices who get a reminder of risk mitigation this summer. Expect 25 Marlins for the next few winters.
I definitely believe the odds are higher than some owners will lose more from playing games than from letting stadiums sit empty. This is because of their force majeure clauses in other areas. For example, teams that don’t own their own stadiums may not have to pay rent if there is no season (see: Oakland). I appreciate the skepticism as to how much the owners will actually “lose” if games are played, but their expenses shrink DRAMATICALLY if there is no season and it’s not just payroll that is affected. The second the season starts, the owners have a whole bunch of expenses on the books that don’t exist if there isn’t a season.
Part of the issue is that around half the teams don’t know what their local/RSN TV revenue will be. After the owners reach a deal with the players, they have to turn around and renegotiate the TV rights. The RSN’s will claim that half the season should equal half the TV revenue. The owners will likely claim that they should be paid a premium since MLB regular season games are in, arguably, higher demand, and the cancellation of April-June games takes some of the lower-rated portions of the season off the table. That is to say, pennant runs, etc. have higher viewership, better ad-sales, etc. And the RSN’s are going to argue that corporate marketing budgets have shrunk, so the ads are worth less to sell, so the RSN’s can pay less for the air-rights, etc.
Well, I’m pretty sure that some owners will lose more money by playing games instead of sitting empty, and I’m pretty sure a lot of owners won’t (and will definitely lose if no games are played). It all comes down to the the breakdown of what proportion of revenue specific teams get from the gate.
Shout out to you sir! I’ve been saying this for weeks. I think the owners are being greedy, but the hatred, animosity, and tension in this ordeal is largely attributed to incompetent union negotiators.
A $900M pay cut for 2020, spread out over 30 teams, paid out over 10 years, is $3M per year per team (plus interest).
If MLBPA’s counter-proposal, and the certain MLB counter-counter-proposal, doesn’t include deferred money, it’s as if neither side is even trying.
If I’m reading this right, that $900M is what’s left for the 500 best paid players out of $3.9M, not what the cut is.
I think it just so happens to be both:
“In an 82-game season, the nearly 500 players scheduled to make more than $1 million in a full 2020 season would take in around $900 million, that compared to the $3.9 billion they were originally slated to receive if a full season had been played.”
and
“According to MLB’s own projections, players were set to receive $2.36 billion under the pro-rated plan. As a result, this plan involves a pay cut for the players amounting to over $900 million, a reduction of nearly 40% compared the March agreement or a 67% cut compared to full-season salaries.”
Deferred money seems to be a no-brainer if/when a compromise is reached. The cashflow situation for owners is a legitimate concern, but asking the players to subsidize the long-term resale value of MLB franchises via a massive pay cut is taking things a step too far.
In a world with so many “temporarily inconvenienced millionaires,” it is surprising that the owners would think the younger, lower-paid players would try to screw over the higher-paid players. When they look at those players, they see their own aspirations. And in this case those aspirations are actually reasonable.
MLB said they would suffer a $4B loss (although they had no verifiable numbers to base that on, and you can be fairly sure it includes a lot of non-cash items). If they get $3B from the players, and we assume the $4B is partly air, what the owners are asking the players do is make the owners whole. On its face, absurd.
A common complaint of American Capitalism these days is that the owners of businesses want to privatize profits and socialize losses, while claiming that they take risks as owners. That certainly seems to apply to the 30 MLB owners.
In what way are they trying to socialize their losses? The players are employees. Telling your employees they need to take a pay cut to keep the business open is not socializing losses. The employees are under no obligation to go along. There is no public bailing anyone out.
Again, MLB owners face a 40% reduction in revenues from fan attendance and want the players to share in that. An 82 game schedule means revenues drop from $10.5B (2019 revenues) to $5.25B. If they get no attendance revenues, then MLB revenues drop to $3.15B. If players take no hit on the 40% attendance revenue reduction, then they get 50% of $4.7B (their take in 2019) or $2.35B. Thus, Owner revenues net of Player Payroll drops from $5.8B ($10.5B – $4.7B) to $0.8B ($3.15B – $2.35B), so a $5B drop.
Owners are asking for players to drop from $2.35B to $1.45B, so Owners would instead suffer “only” a $4.1B drop. These are public numbers and include some of Craig’s above, so hopefully that’s “verifiable” enough for you.
Maybe partial attendance at games could help. Disney Shanghai started at 25% capacity a week ago and I believe ramps up to 50% in a couple weeks and then to 70% a couple weeks after that, if there are no outbreaks. Disney World is going to do the same shortly. Maybe MLB could do 25% capacity at parks.
Thanks Shalesh for trying to put the financial impact to both players and owners into perspective. While I don’t agree with the owner proposal, it is helpful to try to understand the overall financial impact of this shortened season. And often the writers and commenters tend to immediately side with players over owners. It doesn’t help when agents like Boras, who make $118 million per year, fuel the flames with rhetoric. Your high level estimate indicates that owner revenues are projected to decline by $7.3 billion this year($10.5 billion to $3.2 billion). And under the March agreement, player salaries are projected to decline by $2.35 billion. It also seems that player salaries were originally projected to be 44% of total revenues, but under March agreement player salaries would be 75% of total revenues. There are no easy answers for either side, but hopefully a reasonable compromise can be reached to allow for baseball this year.
I think it’s worth noting that this proposal would theoretically benefit certain owners way more than others. In particular, the Angels, who have been making a lot of noise about how much money they are going to lose.
This has basically no effect on teams like the Marlins, although I’m sure they wouldn’t mind saving that money either.
It would likely help any of the big market teams who had mega-bucks contracts. It you were the Angels, wouldn’t you like a half season of Trout for $6M? How much excess value would be there? And wouldn’t it be great to pay Albert only about $4M. Same with the Yankees. If they happen to make the playoffs, $6M for Cole for a half season looks good, as does paying Stanton a lot less while he’s healed on his own dime. Washington with Max and Strasburg. Houston with Greinke and Verlander?
Player greed will keep this season from happening, especially considering that the richest players are going to be the ones railing against it, while the lower half of the salary scale would likely be fine with the plan.
The bottom half got a lot more from the partial payment already made, which comes out of their pro-rated pay for any remainder of the season. They may not be willing to undercut the guys who are where they want to be in five years for a few tens of thousands of dollars.
Nor are the rich players being unreasonable to wanting to be paid at least a reasonable share of what they signed a contract for.
By their own very probably fake numbers, the owners would be getting 30% of their normal revenue on the season (not counting the postseason which can be expected to be near full revenue), but they are asking some players to play for LESS than 20% of their normal pay. Crap on that. The rich players ought to be willing to take a hit for the poorer players, but guess who’s even richer than the rich players if we’re playing “but they need it more” games with money here?
The owners are trying to split the union. Never let a crisis go to waste, eh management?
I suspect that the owners did not expect the players would take this offer. Many negotiations start with a low-ball offer meant to lower the expectations of the other side. I think both sides have an interest in playing games this year and we will see some progress, although if they start playing chicken with each other, well, things could fall apart.
Essentially, the owners are offering close to full pro-rated pay to pre-arbitration plsyers while looking to squeeze the top salary free agents the Union most wants to help.
So yes, it’s a clear challenge to union solidarity guaranteed to:
– shut down the season (high probability)
– cause public union dissention (low probability)
– cause private grumbling by younger payers (moderate probability)
I wouldn’t assume the owners are bumbling this, rather they are pressing the union with their past track record of throwing the younger players under the bus to protect peak earners. They are daring them to cancel the season to preserve the salaries of the top earners.
It is a common negotiating target to come in low to draw out a counter-offer.
I would not expect the owners to keep on bidding against themselves by making offer after bigger offer waiting for union agreement. Instead, they’ll sit and wait, now.
It’s up to the union to offer up a counter offer, which may very well be lower than the owners can (privately) stomach, or shut down the season. Which is most likely what the owners really want.
If the union refuses to play, the owners may then try to void the march service time agreement.
Which would be more valuable than the money they’re (apparently?) trying to save.
I know a lot of you will take sides in this disaster, probably more players than owners. But for me, as a fan who is expected to fork over a lot of $ to support millionaires and billionaires play a game, the league couldn’t look much worse. Especially when you consider how many jobs have been lost and the wreckage of the economy right now….I’m disgusted with how both sides are handling this situation. They already had a fan problem, and it’s going to get worse if they don’t figure this out.
You can down vote that all you want, you know it’s true. The majority of people here had/have jobs that are infinitely more important to life than baseball, but yet I’m expected to feel sorry or take sides with millionaires and billionaires. Sorry, not my fight. They can either figure themselves out and salvage the season, or everyone can lose loads of money and future earnings because of the fanbase you lost, just as you did in 1994.
Please don’t tell me that I know your opinion to be true.
You are 100% right–ignore the downvotes; a lot of dense people on here.
With a vaccine being unlikely… Is there any reason to think MLB ballparks will be open at full capacity next year?
Nearly every report is focused on whether they can agree to a plan for 2020. But they should consider the likelihood ballpark revenue is severely reduced in 2021 also.
What reason do we have to think it will be safe for 30,000 people to squeeze into ballparks in April 2021?
If it is unsafe now, what do you think will be different in 10 months?
TV.
25-50% capacity.
162 games.
Will owners try to avoid paying full salaries if stadium capacity is (e.g.) 25%?
I assume they will try.
If so, the stalemate might last longer than 2020.
Considering that some states are allowing them to open with 25% capacity already, I think it’s unlikely many will be holding out that much in April 2021.
The tougher question how much of that capacity will be filled.
Do you believe this will all be over by next spring, in terms of widely attended gatherings?
I don’t mean that rhetorically. I hope it is over. And maybe it will.
But COVID is flaring up wildly in Brazil, India, Russia, South Korea, several middle eastern countries, and a new wave in China. It could absolutely be bad enough that WAGs cannot be allowed next spring.
My fear is that MLB and MLBPA are discussing this as a 1 year issue. But I don’t see why the revenue problem will be gone by spring 2021.
If MLB cannot fill ballparks next year, they will need a longer-term labor agreement.
Take reported numbers with a grain of salt.
Reporting in all those countries is spotty and the trsts themselves unreliable. A lot of the newer “outbreaks” are just belated testing.
The thing has been all over for months and they’re just getting around to start testing in many places.
On top of that, different places use different guidelines, especially on casualties; some places count anybody that dies during the pandemic, others everybody who had the virus, regardless of condition and others tally them as anything but COVID.
It all depends on who benefits politically.
Which is which is easy to guess but only if you factor in local politics.
And finally, the reports don’t distinguish between active cases, asymptomatics, and mild cases, and rarely the recovered.
The unknowns far outnumber the known, so fear has its way.
Imo the owners need to open the books permanently for the public for players to accept this pay cut? I think in that case players would accept because they would have more leverage in public discussions.
Part of the reason that it should be perfectly rational for owners to take (possibly significant) losses this season is pretty simple: If they don’t play, their asset is worth a lot less in the future. Nobody says you have to turn a profit every year in business. For them, this is a necessary investment to keep their industry alive. It’s not surprising they want to reduce their risk all the way to zero, but the players have some leverage here because it’s almost certain that it’s better for owners to play and lose money than not play (and still lose money).
You make a good point. The same can be said for MLBPA which is why a deal is in their mutual interests. The depreciation of assets (owners) and future contracts (players) will be exacerbated by fans realizing they made this decision during a pandemic, when the American people could have especially used a diversion.
I wish players would have the sense and self-restraint to keep their mouths shut.
They need to work through their union to avoid the negative PR they are generating.
I love baseball. I have always enjoyed this website’s analysis of baseball statistics. Such analysis has gone a long way in the last few years to undermine the rampant media idolatry of individual baseball “stars”. It also has helped me as a fan set aside my own subjective biases about individual players to better understand who really has been playing well for my favorite team and who has not.
Articles like this one make me suspect that some of the people who write for the site feel guilty about the role analytics has played in keeping multiple mediocre older players from obtaining massive long term guaranteed contracts which they almost never wind up playing well enough to justify.
The owners tell the players to “negotiate” while the books are hidden (and pay no attention to that man behind the curtain”) — the owners make an offer that sucks and then blames the players for being greedy. What else is new since the 1800s??
That’s one take. Most sports franchises are privately held and thus require different (less) accounting disclosures. The reality is if books were open the same MLBPA side arguments would be made, along with criticism of how teams invest/spend their money. No business person wants that- or individual for that matter.
Most top line revenue tickets, concessions, regional TV deals, and the national TV deals are known. But the accounting/tax treatment is complicated. It’s a popular narrative for the MLBPA but I don’t know if it helps gain resolution?
Shut it down and bring them all back for a normal 2021