MLB Players Ought to Fight for a Payroll Floor
Free agency, as we know it — as major-league players know it — is under duress.
The current post is related to one I published yesterday on stresses facing the middle-tier player in free agency. But the issue is really larger and more fundamental in scope than that. A comment from an anonymous major-league GM — which appeared in a piece by Yahoo’s Jeff Passan — struck me:
Added a GM: “Teams are smarter. They know how terrible free agency is.”
Those are fighting words: “They know how terrible free agency is.” The union was built on free agency. Even a decade ago, free agency was seen by players as a panacea. Well over a billion dollars will be spent on free agents this winter.
At FanGraphs, we often write about and examine moves from the club’s perspective. When analyzing free-agent signings, trades, etc., we often praise or criticize those decisions from a team-based perspective because we ultimately are concerned with wins and losses, with the process of roster construction. We praise efficiency. We don’t write as often from the players’ perspective. Efficient spending, however, is not a friend of the player.
While MLB revenues keep breaking records, the players’ slice of the pie appears to be shrinking. While MLB players are enjoying record average salaries, their share of revenues has declined over the last 15 years. And with the lukewarm hot stove to begin the present free-agency period, there should perhaps be some concern from the MLBPA that this trend is only going to deepen.
While the stars will be paid, while J.D. Martinez and Yu Darvish will sign lucrative deals, while Bryce Harper is expected to sign a record contract next offseason in a historic free-agent class, player age is trending downward and teams have never more valued young, pre-arbitration talent.
Wrote Nathanial Grow for FanGraphs back in 2015:
Since the dawn of the free agency era in 1976, the MLBPA has relied on a simple but – for the most part – insanely effective strategy. By staunchly opposing a salary cap, the union ensured that owners would remain free to spend as much as they wanted on player salaries. And because a sufficient number of owners have always been willing to sign players to reckless contracts – gains that trickle down to the entire union membership through the salary arbitration process – players’ salaries rose exponentially throughout the 1980s, 1990s and 2000s. ….
At one point, the prospect of a salary cap was bad for players. But teams are operating differently now; they’re seeking efficiency. They’re often operating more rationally given the rules in place, with a better understanding of aging curves and performance value. (Though one could argue some teams have cost themselves modestly priced wins in preference for greater efficiency.) Free agency has largely been de-emphasized. In a perfect world, a team would have a roster full of homegrown, pre-arb stars. There is no mechanism in place forcing owners to spend. Grow found that players’ share of revenue had peaked at 56% in 2002 and declined to 38% in 2015.
Ironically, a cap (with a floor) system, against which the MLBPA has fought in the past (see: the 1994 strike), would perhaps now best serve players.
The other major North American pro sports have cap-and-floor systems that guarantee players a certain percentage of revenue, typically around 50%, when including benefits. What’s remarkable to this author is that, while baseball has a soft salary cap in the form of its luxury tax, while the industry has a mechanism to limit spending, there is no floor, no mechanism, to force spending on the lower-end of payrolls in a $10 billion industry where smaller-market teams enjoy revenue-sharing.
So what would a salary floor look like? I employed the NBA’s system as a model. Among major sports, the NBA is perhaps most similar to baseball in how it generates revenue, having both significant local and national media revenue streams, and a high volume of games. I used a similar approach while writing for the Pittsburgh Tribune-Review two years ago. In the NBA, the cap is set at 44.7% of revenue — or basketball-related income — divided by 30 clubs. The salary floor is 90% of the cap.
In baseball last season, using that 44.7% rate, the floor would have been $134 million in team payroll. A $195 million luxury tax is already in place
How many teams would sit below the floor according to Spotrac salary data? Last year, it would have been 11 of 30 clubs.
The five teams in red currently occupy a space above the $195 million luxury tax, according to Spotrac. USA Today reported that six teams were above the tax in 2017 after adding in benefits and total 40-man roster costs. The teams in yellow are below the hypothetical floor. Those clubs below the floor would have combined for $386 million less spending in 2017 than is such a floor existed. In the NBA, any such deficit in salary goes back to the players.
(The Spotrac figures do not include player benefits, amateur bonuses, and minor-league costs. This is just a study of MLB payroll. But the $10.5 billion revenue figure from MLB does not include all baseball-related revenue, including MLBAM revenues.)
Baseball is different from the NFL and NBA because it develops its own players. Major League Baseball contended back in the spring of 2016 that, when including amateur bonuses and spending on its minor-league system, players’ share of revenue has remained steady. MLB released financial data to the Associated Press in the spring of 2016 as evidence. MLB claimed that the players’ share was still above 50% and holding steady.
Of course, since that time, the international system has been overhauled, restricting signing bonuses. Not only is the middle-class of player being squeezed, the unrepresented player — the amateur player entering the game — has seen his earning and negotiating power greatly diminished.
Scott Boras said during the 2015 offseason that revenues had dropped to 43% when including MLBAM revenue — about a 10-point difference from MLB’s numbers. Boras knows how efficiently teams are being run, as he has developed a practice in recent years of doing an end-around of front offices and appealing directly to ownership.
Disputes between millionaires and billionaires typically don’t engender much sympathy from the public at large, but when it involves a public institution, like Major League Baseball, it should have our attention, because there is perhaps a growing threat to labor peace.
A Cleveland native, FanGraphs writer Travis Sawchik is the author of the New York Times bestselling book, Big Data Baseball. He also contributes to The Athletic Cleveland, and has written for the Pittsburgh Tribune-Review, among other outlets. Follow him on Twitter @Travis_Sawchik.
What, other than inertia, is preventing arb and pre-arb players from forming their own union?
Job security?
They’re part of the bargaining unit. There’s no substantive reason/legal grounds to reclassify them out since they perform the same job functions.
Collectively the pre-arb players probably have enough votes to disband the union, and start a new one with less bias in favor of older players. However, the fear is being blackballed if their attempt failed, or even succeeds. One way to coopt a union is management infiltrates it with guys on their payroll undertable. You cant even trust union members then and so people are afraid to stand up knowing what they say will be reported. MLBPA has all the signs of being coopted
If they are that organized to disband the union (which is highly unlikely…more on that in a sec) they can probably also take it over.
I also find it unlikely that Curtis Granderson and Carlos Villaneuva and the player reps and the paid staff like Tony Clark are management plants, although you never know. The Teamsters were famous for selling out their members back in the day (didn’t really happen with other unions often).
The more likely explanation is that the players with enough cachet to make it to the top of the union (executive board/player reps/others) are guys who have put in their time and are no longer pre-arb/arb. Guys who are newer don’t have the connections or status to get elected, and they are also less likely to run because they’ve been there less and are less invested. Sothe guys who are making the calls are guys whose interests are different than those at with shorter tenures. They just don’t see it as a problem anymore…they’ve forgotten, or attention wandered off somewhere else, etc.
It’s also possible that the MLBPA has tried to broach shorter service time to MLB and been shot down, but more than likely it’s just lack of imagination, settling for incremental improvements within the structure (relatively small raises to the service-time contract) rather than radically changing it.
MLBPA isn’t co-opted, they just selected a former player (Tony Clark) as the union president for the first time instead of an experienced labor lawyer (Fehr, Miller) and so they are getting curbstomped by Manfred.
Their problem is as simple as changing their leadership.
Is that chart missing the Dodgers?
Your chart is missing the Dodgers.
There was some user error on my part in chart creation. New chart has been posted! Sorry about that.
I think the law of unintended consequences should strongly be considered here. A salary floor is basically a minimum wage imposed on team salaries. In the general economy minimum wages cause issues such as wage compression and the pricing out of the market of inexperienced young workers (especially those with criminal histories or other maladies). Perhaps a lighter touch sich as making the minimum 2 standard deviation below the average team salary would be a place to start.
horrible analogy. To try to salvage yours, it would be as if the minimum wage stays the same, but each employer is required to pay more money total for the same 40 jobs. So who is being priced out here?
So if the employer were to be forced to pay more for all 40 the likely beneficiaries will be the the already highly paid players because the are the least risky interns of projected performance. There is less volatility in there performance. Teams will not play mid-low tier players more because they are a team’s main source of surplus value. This is why the NBA has max contracts that cap how much the very best players are payed. They now if they didn’t have it middle and non-draft low tier players would get squeezed.
arbitration and pre-arb salaries are set. If you increase the amount a team must spend, guess what! Free agents make more money.
I think Michael is saying that the star free agents would just make even more in this scenario, with the middle class of free agents still getting squeezed out. Just give Yu Darvish an extra $10-20 mil instead of also signing Andrew Cashner.
fair point. That seems like an allocative efficiency problem that the union could then address.
Thank you for clarifying me. The salary floor “more likely than not” would not help middle tier free agents but rather upper tier free agents.
In the end, I think it’ll just increase the $/WAR value which is fairly constant among players of different talent. While this won’t increase equality between the players, the extra money won’t go solely to the top.
I disagree. If there was a floor, teams that are under it at the moment will have to be the ones that pay for those middle class free agents. Instead of there being multiple teams that are just tanking for years and years like the Astros did, they would be forced to spend on the middle class free agents to reach the floor. The teams that get the star free agents are likely significantly ahead of the floor, and would proceed as usual.
“Free agents make more money.” Exactly. And since they already make utterly ridiculous sums of money, why should anyone care?
1. Many free agents don’t get paid much
2. Those that do don’t get paid anything ridiculous, it’s the market value for what they bring in
3. I for one want to see more money given to the players than the billionaire owners
Why impose a floor, and not just work for better/higher/more rational compensation for early-career players? The irrationality of these ultra-low caps on the pay for players not yet allowed to be free agents is what makes “spending efficiency” a worthwhile goal for front offices — so why not just make them spend a more reasonable amount on those players? Why is the free-agency contract bonanza seemingly the one thing the MLBPA cares about protecting?
pre-FA salary depression is a tool for competitive balance.
Even if we all agreed that was sensible (and I personally agree young players shouldn’t be forced into 6 years allegiance at pay below the value they bring), it’s not going to happen. The union is run for the benefit of established players. Any increase in salary for young guys is going to come at the expense of older guys, all of whom were forced to endure the current system and view it their right to now get paid.
Not going to happen. It’s like when people talk about shortening the season or reducing the number of teams that make the playoffs. You might find it an interesting conversation but it’s 100% totally pointless because it’s simply not going to happen.
Right, as opposed to the extreme likelihood that this blog post will be acted upon immediately by the MLBPA, since it’s obviously far more consequential and less “pointless.”
You will perhaps note the final question I asked in the comment to which you’re responding. Do you have an answer to that besides “that’s the way it is” or “100% not gonna happen” or some similar emptily bluff assertion?
It’s right there in my response – MLBPA cares about the free-agency bonanza because most of it’s membership benefits most from that. Most of its’ membership is either past the arbitration years or is shortly approaching free agency and wants to cash in on it. Those players do not benefit from protecting the rights of the pre-FA players.
It’s the same reason the exact same thing happened in the NBA in the 90’s. Veteran players didn’t like rookies getting monster deals without proving themselves and agreed to a slotting system for draft salaries.
I agree with Anon.
The NFL also had a similar change in its 2011 CBA. Prior to that CBA, it was common for the first few picks in the first round of the NFL draft to enter the league as among the highest-paid players at their respective positions. That CBA put much tighter limits on the total compensation in rookie contracts.
As a demonstration of the difference, Sam Bradford as the top overall pick in 2010 signed a 6-year, $78 million contract with $50 million in guaranteed money. Cam Newton, as the top overall pick in the 2011 draft (subject to the new CBA), signed a 4-year, fully-guaranteed $22 million contract.
Why do we try to add more rules to a system already ruined by way too many rules? I’m sure the players’ union has something to do with it, but this abstruse system of ‘oh we only have to pay you this much, until this age, then you get sort-of-free-market pay, unless you were from another country, oh and also unless we sent you to the minors before this date on that year, and you have played this many games…’ system is totally defeating. Every single player should be a free agent all the time. 18 years old and you want to sign him to a 5 year deal and he wants to sign? Go for it. One year? Go for it. Just like any normal contract in business. Why so damn complicated!?
competitive balance and incentives to develop players
Competitive balance can still exist by limiting total team payrolls. Incentives to develop players will either become a part of the contracts (long, early contracts to players with promise, or third-party trainer contracts or something). The free market will always develop a solution. In this case, the solution is under-the-table payouts to young players in order to sign them, corrupting the system.
I’m not saying there aren’t other mechanisms for competitive balance. I’m just giving proferred reasons. Don’t know why it’s getting downvoted.
Forcing small market teams to reach a salary floor and drastically overpay for players just so they hit the floor won’t be good for competitive balance either. Not that underpaying young players or forcing them into 7 years of service in the name of competitive balance is a good thing to begin with.
Charlie Finley suggested 50 years ago that every player should be a free agent and went a step further and said every player should be a free agent every single year. No multi-year contracts.
Both your idea and Finley’s idea have the same chance of actually happening – zero.
I’m trying to wrap my head around what you’re proposing, and the short answer (I think) is that you want the current version of free agency for all players. That’s not at all like “normal contracts in business” which can be terminated at will, include noncompete clauses (or, for that matter, the reserve clause), salaries that can come in exactly at minimum wage, working hours at the whim of the company, etc. Not to mention endless lawsuits over collusion when MLB inevitably imposes cost controls and the union (or sets of players, if the union doesn’t exist) sue.
I think that we can all agree that the six years of team control and lousy minor league conditions are a bad deal for the player, and they would be a lot better if they got turned loose early. Same with the draft and international signing bonuses. And everything would be way simpler too, and would probably lead to a less distorted market where players under team control get way less than everyone else. But there are good things the players get out of the CBA too. Ultimately, major league baseball players get a much, much better deal than any of us in “normal” business contracts.
Spotrac’s inclusion of Montero’s $14M on the Jays payroll is probably an error. That would partly account for why they didn’t appear on that USA Today report for teams over the luxury tax threshold, but show up in red in that chart.
Actually, it might be the $16.45M they listed for Melvin Upton Jr., who Cot’s Contracts lists them as owing $1M only. Montero looks to be prorated at $6,961,773.
http://www.spotrac.com/mlb/toronto-blue-jays/payroll/2017/
https://docs.google.com/spreadsheets/d/1yWSNPHx65_se_zS7qGR-i1VUBkBvNU7sXBHmyXHmE4s/edit#gid=0
Fair point, but I think that even that pro-rated amount is too high for Montero. It was reported at the time that the Cubs covered most of his remaining salary (and that does matter for the luxury tax calculation) – http://m.bluejays.mlb.com/news/article/240224190/cubs-trade-miguel-montero-to-blue-jays/
I always go to Cot’s rather that Spotrac for payroll info, because when they differ I’ve found Cot’s to be the more accurate of the two. Cot’s also has a separate luxury tax calculation tab that’s very useful given the differences between cash payroll and the luxury tax calculation (contract AAV and player benefits being the two potentially big ones).
The USA Today article not only has the Blue Jays under the luxury tax and the Giants under, but also has the Cubs over the luxury tax.
The MLBPA really should fight for a Payroll floor. But they would have to give up some concessions to get it, like a Salary Cap. The MLPA has said many times they would never agreed to a salary cap, but I think it is the only concession they could offer that would make the Owners conceded on a floor.
Yes, though an issue seems to be that the luxury tax, or at least $40 million over the luxury tax, is more and more turning into a de facto salary cap with the changes in the new CBA.
Teams over the luxury tax line now don’t just pay money on the overage, but they are also treated worse in the qualifying offer system. They also have a surtax on spending above $20 million over the luxury tax line and then a heavier surtax on spending $40 million over the line. They also their first draft pick drop 10 spots if they’re $40 million over the line.
Brilliant article, Sawchick. I’m sure MLB players are furiously texting each other right now about how they read on Fangraphs that they should try to get more money.
More question begging, tbh.
There’s no evidence here that MLB players are getting an unfair or disproportionately-smaller cut of the sports’ revenues as compared to other major sports. They’re apparently getting more, in fact, which is supported by Tony Clark’s quote, and he is informed of MLB’s actual revenue numbers.
I guess the “evidence” is Boras’ quote, but the context for Boras’ comment is his inclusion of MLBAM gross “revenue,” whereas MLB (and the MLBPA) use MLBAM’s net revenue.
The article fails to provide any argument for why the players should be entitled to a cut of MLBAM’s gross revenues. Indeed, I’d be interested to hear why players should get a cut of gross revenues (not net revenues) for HBO Now or the NHL’s streaming product, which have nothing to do with the “baseball” product the players produce. Simply because MLB owners own (part of) MLBAM? Heck, do we even know that Boras’ quote only considered MLB owners’ portion of MLBAM’s gross revenues, or should the players also get Disney’s portion of MLBAM’s gross revenues too? What capital did the players risk in creating MLBAM, again? Pretty big omission here.
Scott Boris said it. That means it can’t possibly be true.
I don’t understand why Boras gets all the hate for being really good at his job: representing the players we love to watch.
It goes so far that people would rather money go into the owner’s pockets instead of the players. Again, only 1 of those two groups do I care to watch in any setting.
MLB ownership has shown itself very adept at a Hollywood accounting, based on the Forbes valuations + actual team sale prices, versus what MLB owners say their teams are worth.
Tony Clark is a pathetic excuse for a union representative. It’s a huge shame to read what Marvin Miller went through to get protections for players, only to see MLB and ownership separate the groups so divisively.
I’m always on the players’ union side. They’re who I watch, who I care about. They’re also orders of magnitude (generally) less wealthy than owners.
Baseball fans need to understand that players making more money does not impact ticket prices. Those are set by general economic environments and demand for games.
Does anyone here really want to see the owners pocketing more money, instead of the players?
Scott Boras is disliked for many reasons- see the $70,000 ‘loan’ he gave to 16 year old Dominican prospect Edward Salcedo.
Almost no one is saying, ‘no salary floor, give more money to the owners,’ instead nearly everyone is saying – don’t carry Boras’ water for him by lobbying for artificial restraints that steer even more money towards the mediocre veterans he represents- instead, tackle the real and inhumane employment issues that are hurting the real lower class in pro baseball. End 6-years of cost control, reform arbitration, end the 40 man roster limit, expand MLBPA voting rights and representation, etc.- i.e. help those who are oppressed by this rigged system, the exact opposite of how you are interpreting the comments.
The disdain showed towards Tony Clark- based purely on ignorance of the actual revenue splits and taking Boras’ word for it, while praising Boras- sets your ‘sticking up for the little guy’ argument of course.
Btw I think owners have a right to make some profit since they are investing a lot of money, but what is not ok is pocketing revenue sharing.
Apologists of those owners often argue with capitalism but revenue sharing is actually pretty socialist, you are not really making profit if you bank subsidies.
So making profit just based on revenue sharing is not good entrepreneurship but it is getting welfare and doing nothing even though you don’t need it.
I’m ok with going low payroll for 2-3 years in a rebuild but then please spend arcording to your revenue again.
Increase MLB minimum by >1,000%
Ban billionaires.
Downvote all you want, America, you know I’m right.
To put that to numbers, league min would go to something like $5-10M. I’d rather put that cash towards MiLB salaries myself. But yes, the billionaire class is due for a reckoning.
I came to Fangraphs for intelligent baseball discussion, but instead it appears that I stumbled upon a cell of revolutionary Communists.
Actually most people that complain about Billionaires are relatively well off, as you get wealthier/richer you get more and more envious of people that have more money than you do; hence the saying you can’t buy happiness and the general correlation with extremely poor people in developing countries being much happier than the upper-middle/upper classes in first world countries.
The premise of the entire article is socialist in nature, so not sure why you’re surprised.
What loaded political term would you use for a system that exclusively owns players’ right to work for longer than the average career lasts?
“Of course, since that time, the international system has been overhauled, restricting signing bonuses. Spending caps have also been put in place for the draft.”
Fair point about the new international amateur pools. The spending caps in the draft, however, go back to 2012 so they were picked up in the last several years discussed in that AP article.
Rather than negotiating for a salary floor, why don’t players just negotiate for earlier access to free agency. For example, changing service time requirements from 6 to 5 years, reducing the number of arbitration years from 3 to 2 seems advantageous for all parties. Players get to free agency earlier, teams get to sign players at or near their peak, resulting in more competition for player’s talent and thus higher free agent dollars to players.
I agree, but this wouldn’t be beneficial to the small market teams at all. They rely on having extra years of control.
Then add arbitration earlier–costs would rise, but control would stay the sane.
See Anon’s excellent comments on this point above: that benefits future union members, and some of the younger pre-free agency union members who would get to be free agents sooner, but it does nothing for the older union members.
This idea likely would result in higher total team payrolls over time. Some key words, there, however are “total” and “over time”.
In fact, this idea would likely depress the future earnings of older players who are already in or very close to free agency. The underlying math/economics are that the marginal cost of WAR in free agency – estimated to be on the order of $8 to $9 million per WAR – is higher precisely because the number of free agents are limited by service time rules. We can easily see this reality by thinking through the math of this cost per WAR in free agency. A true talent .500 team is about 33 WAR (48 wins calculated to be replacement level plus 33 gives us 81 wins). At free agency prices for all players, the payroll for such a .500 team would be approximately $260 to $300 million.
Of course teams don’t spend that much to field a .500 team, because the average cost of WAR across all players is much lower due to the lower cost of minimum salary players, arbitration year players, and the related phenomenon of pre-free agency extensions at a cost per WAR less than free agency.
So, what we’d expect to see, even if total payroll rises – increasing average cost per WAR – is that the marginal cost per WAR in free agency would drop due to more similarity between these two “pre-FA” and “post-FA” markets. So that could be good for players over time, and could even be good for all current MLB players, but still bad for current MLB players who have already taken their lumps of low-salary years and now are reaping the personal benefit of the high dollars per WAR available in supply-constrained free agency.
The Union lost its intellectual energy and allowed itself to be distracted by smaller things that somewhat depressed top end salaries for a handful of players. They should be taking note of the strip-down and tank routines, as well and the artificially depressed salaries for younger players. If MLB isn’t willing to do a floor, then maybe revenue sharing should be changed. The point should be competitive balance–not subsidizing ownership profits if the team is unwilling to spend on improving.
This is the true legacy of the “steroid era”: a wedge to split the players union.
Why would the owners want this if it increases the percentage of revenue that the players will get?
Salaries in an arrangement like MLB is always going to be somewhat out of whack. In a normal competitive business situation, a good portion of the MLB baseball teams would have gone bankrupt and/or merged with other teams. That’s not beneficial to the league’s health and it does no good if the Yankees are a baseball monopoly but have no one to play. At best, you would end up with a model like professional wrestling or perhaps the Harlem Globetrotters.
If this was a true free market situation, the salary problem would probably resolve itself. Businesses make business decisions and would pay players more or less what they are worth. However, such a free market league would probably be too dynamic to be stable. Nobody wants half the league to drop out every other year. The National League tried that in the 1900s and it was not pleasant.
So we get to play this game of putting in a “fix” that breaks something else, followed by putting in another “fix,” and so forth and so on forever as we ponder the futility of perfection.
I think there is a middle ground with salary structure and what it would do to the league. The league might not be worse off if the 4 worst teams folded for example. There are probably a few too many teams and there are some cities that just don’t support baseball that well. I don’t think these billionaire owners should keep getting subsidies every year. And I am tired of listening to billionaire owners cry about their small market and why they deserve more money. As if they didn’t know the market when they bought the team.
“The league might not be worse off if the 4 worst teams folded for example.”
That could have some logic to it, but that’s hardly an idea that the players’ union would support. That means 100 fewer jobs – really a bit more than 100 including call-ups who fill in for injured players.
And that many fewer jobs certainly isn’t going to help out the lower tier of veteran free agents.
It’s a fair point, and massive, ongoing competitive imbalances eventually can mean that even the large-market teams aren’t maximizing revenue as well as they could in a more balanced league.
I think people may not always intuitively grasp this point precisely because North American professional leagues have over time devised various methods that they use to try to ensure that competitive balance doesn’t get out of hand over time. As one example from years back (the 1940’s), the Cleveland Browns so dominated the old All-American Football Conference, with so many blow-out wins, that eventually even their own home attendance suffered because there wasn’t enough sense of competition. Perhaps the best current analogy would be college football and college basketball, where tune-up games against weak competition are clearly filler on the schedule and the competitive match-ups are what drive ratings and revenue.
Since there is more revenue potential in larger markets, I’d argue that a pretty logical professional sports league set-up from a business/economics standpoint is for the league to allow big-market teams to have some advantages – but not too many – and therefore drive higher revenue. A players’ union, in turn, wants a salary structure that allows them collectively to capture a share of this extra revenue as the trade-off for agreeing to some restrictions on player movement and compensation that help support competitive balance for lower-revenue teams. Given that union members at any given time are current players, it’s not an accident that the latter restrictions generally fall particularly hard on younger players, a fair chunk of whom are future younger players not yet in the union (as Anon discusses very well above).
The players are already ridiculously, ludicrously overpaid. Zero sympathy.
Bottom line: we have union/management peace, no strikes or lockouts, and even the MLBPA admits that the players are getting a fair share of pie.
Nothing is broken. For God’s sake, don’t try to fix it.
Its not that teams are smarter. Its that MLBPA allowed them to penalize the big spenders and cap their spending, and introduce a tax on Free Agents with the compensation, and perhaps even try their hands at collusion again. You look at the Red Sox and Yankees for example, both teams have limited spending over the past decade so that they have not kept up with payroll inflation, let alone revenue growth.
MLB never was a profit center, it was always about franchise valuations growth, tax write-offs. Now you have team owned/invested RSN’s and MLBAM revenue made possible by their anti-trust exemption. Add profit to that and you are talking about pure greed. Even without profit much of a teams revenue is independent of fielding a winning team , so why risk any losses with a chance of a bad (big)contract. Being average aint so bad. Enough Fans still show up or tune in and RSN’s still pay out big bucks, shared revenues, cities building them brand new stadiums with tax payer dollars, etc
The additional nunber of playoffs teams also reduce the number of wins a team needs to make the post season. Average can make the post season once in awhile. Now you can try ans build a team to win 90 instead of 95. Thats 20 million a year in payroll saved right there. Being a great team does not guarantee post season success or more than paltry post season earnings. Thats why the Yankees were basically able to field a mediocre team for 4 years while looking to reduce payroll. They just werent leaving much on the table by not winning
And look at what minor leaguers are paid. Absolute disgrace. The decline started with free agency (kids subsidizing the MLB players). Now even the top prospects don’t have much of a bonus to get them through the lean years being paid less than minimum wage. Before FA young players would get big raises after a good rookie or sophomore season. Multiples of a much lower minimum. Those days are gone.
Players are somewhat to blame. There seem to be far more FA contracts paid to stars that turn out to be busts even in the early years. Is this because they slack off in conditioning or stop PED usage? I dont know. Might be worth a study to do quantify the bust rate over time.
Fans dont realize it but the hey day for star players relative to team revnue was in 2000-2001. Contracts to Jeter, Arod and Manny would be 40+ million AAV deals today adjusted for payroll inflation. Teams were happy to pay the middle class in the interim and fuel growth there since they arw far less risky, but now its war on the middle class too. The lower class (young) aren’t doing great either. Minimum is relatively flat and AAA-team shuttles delay free agency till they are too old to get market value
Weak MLBPA leadership and player complacency are as much to blame as MLB greed and FA busts. At some point players will wake up and then you will see a work stoppage or maybe an attempt at another league
I am still trying to figure out what total MLB revenues, and particularly things like MLBAM have to do with player salaries? People like Boras and their desire to line the players pockets with money that has nothing to do with them disgusts me. Obviously he is just doing his thing, but you want to give that money to labor, give to to the goddamn MLBAM employees, or the scouts/interns/minor leaguers working for basically free.
Not some cartel of players holding a different cartel of owners hostage.
I am no fan of the draft, or the league’s anti trust exemption. It should need to make a binding decision about whether it is 30 competing businesses, or 30 divisions of one single business (and be treated accordingly in all ways).
But forgive me if I don’t see a pressing need to make sure that this totally separate line of business that the owners built gets some extra slice siphoned off so fucking Boras and a 40 year old Miguel Cabrera can add another few tens of millions to their paychecks while Ohtani gets peanuts and the minor leaguers get less than peanuts.
The sports unions actually provide the perfect example of why unions are generally ill advised. As much effort goes into creating barriers to entry and hurting future employees for the benefit of current employees as goes into anything else. Medieval guilds dressed up in another name.
Why do you see it as Miguel Cabrera versus minor leaguers, instead of Miguel gets paid versus owners pocket money?
Revenue split between ownership and players has been steady for quite some time. The more egregious issue is owners and wealthy MLB players colluding together against underpaid baseball players and staff.
Why do you care so much if money goes to Magic Johnson and Derek Jeter as opposed to Miguel Cabrera- who already has roughly $500m in MLB earnings plus endorsements? Nearly every commentator in this section is singing the same song: reform so that minor leaguers and early MLBers, plus staff, get more money, avoid fake ‘reform’ like a salary floor that simply exacerbates the problem (and probably is a back door invite for a harder salary cap).
Basketball’s floor system is partially responsible for the number of albatross contracts that are severely impacting team quality. Teams have to hand out more money than there are players who are worth it, so random non elite guys get big bucks.
The only market rational solution is to tackle the rookie contract and arbitration systems. If teams are focusing on squeezing value out of young players, it’s those guys who aren’t being paid market value, not some 34 year old free agent. Reform the arbitration system and major league minimums and you are increasing players’ portion of the pie in a spot where people aren’t being paid market value in the first place. Simply demanding free agents get more money is an arbitrary windfall for players who aren’t likely to deserve more than they are getting as is.
But it won’t happen, because every players union in sports focuses myopically on benefiting tenured players disproportionately.
The other sport to look at is perhaps the NHL, which has the simplest system and mostly develops its own players as well. From the salary and bonuses, a cap number (the same for every year of the contract), is determined. Hard cap, hard floor, much earlier free agency (basically remove 1 arb year and two pre-arb years), and a guaranteed piece (written in the CBA) of the pie to players through an escrow system (part of the players salary is retained, then distributed after final calculations of the actual leagues revenues…they may actually receive more money, but I don’t think that has actually happened yet, but neither have the players lost money due to faulty predictions).
Another part of the players that would benefit from a payroll floor are the younger players. It’s insane that players like Correa can play 7 years without reaching free agency, or even 4 years of MLB star play (including his rookie of the year season) without becoming a millionaire. Just opening up the arb years to free agent offers (the restricted free agent part of the NHL, where another team can sign a RFA, but the team has the right to match or receive compensation. It’s usually draft picks, the value of which are determined by the value of the contract…those offers are rare and seen as hostile, but you do see trade of RFA rights because players have a right of negociation).
If teams are forced to spend for their younger players, then the actual free agents will perhaps look more interesting.
The starting point has to be , what percentage of the take, should the players get? Then you need to decide what constitutes a player, and finally how to allocate between players
The players are criminally underpaid since the television deals exploded. The minor league players get slave wages which needs to be addressed and the major league players are indentured servants too long.
They should institute minimum wages at all levels, reduce arb years making more players eligible earlier and add a major league taxi squad like they have in hockey where you can have 5 eligible scratches every game which would create 150 more major leaguers
Interesting thoughts, but five eligible scratches every game really needs to be thought through for baseball. It could have a pretty significant impact on structure of the game and pace of play.
Right now every team pretty much has four players unavailable each game (the other 4 starting pitchers) and often at least 1 reliever who isn’t available due to recent workload. That’s a roster structure of usable players for each game that’s different from healthy scratches in the NHL or the similar idea of inactive players for each game in the NFL.
So we’d almost certainly see teams put the other four starting pitchers as four of the five eligible scratches each game. Of the five extra spots, I think that we’d generally see teams try to fill three or four of them with additional relievers to create massive bullpens available for each game. There could, of course, be a problem finding that many additional quality arms. That directly feeds into making games longer, though, because a logical way to get value from a greater quantity of mediocre bullpen arms is by using more of them as LOOGY’s and ROOGY’s, meaning more mid-inning pitching changes.
The data provided above is misleading for several reasons. On the player compensation side, as noted, things like benefits, non-40 man payroll, minor league admin AND postseason revenue payments, are excluded. Those are significant additions that absolutely would be included in a contractual establishment of a floor. Also, the $10.5 billion of revenue cited is a gross industry figure, and does include MLBAM revenues paid into the clubs (as opposed to retained by entity, which going forward will be less relevant due to Disney’s acquisition). For salary cap/floor purposes, a net figure would be used. Though the NFL and NBA caps purport to use gross revenue, in reality, complex formulas determine what is included and how it is weighted. Assuming that 100% of MLB revenue would be weighted equally further biases the analysis toward players receiving a lower percentage. An analysis I have done, shows players receiving a steady share of revenue since 2004, and there’s an argument to be made for focusing simply on income growth anyway (i.e., if owners keeping a higher percentage encourages them to generate more revenue, players get richer without increasing their rate). See: https://tinyurl.com/zkdgnsh
The validity of the numbers aside, negotiating a floor would require a trade off, and the value of that would have to be weighed against the potential benefit. Also, the players would put themselves in the position of having to better police the far from transparent financial side of the game, which isn’t an enviable position to assume.
Finally, there is the question of industry health. If a floor basically exists to make the bottom level teams spend, it could lead to inefficient spending, which could hamper growth and lower the player’s share of the pie (imagine the Brewers constantly spending at $130mn and being a perennial 75-win team with little interest instead of rebuilding and creating windows where ticket sales/ratings spike). On the flip side, if the top 5 or so teams are forced to spend less (presumably because a hard cap is the trade off for a floor), then that could trickle down to the middle tier teams who no longer have to keep up with the big boys. If you pull the bottom teams up, but suppress the spending of the top and middle, the gain could be canceled at despite the cost paid to get the floor.
The MLBPA has always said it rejected the idea of a floor because it believed in the market, and history, even to this today, has proven that. Should MLB players’ share decline meaningfully, or income growth stagnate, they might want to revisit that position, but now is definitely not the time.
I wonder how far it’ll have to go before a bigger market team decides they can complete a third of their roster in free agency again. Build strong young core at several key positions. Fill in a hole bunch of pieces with known quantity, mid-tier free agents, and voila…
the gap between the value of a marginal win (peaks out at $6.5) and the cost of a free agent win for mid-tier free agents (higher than $9m) would have to close.
It has been widening for quite some time. Travis’ “teams need to spend more on mediocre free agents” narrative is simply anti-empirical.
As an accountant, nothing triggers me faster than when people use a percentage of gross revenue to measure “fairness” to employees. The employees of these teams earn a multiple of what the owners make.
Unless the players want to share the cost of operations, the fairness of what they make should be measured against the net income of the team.
Im not sure that is entirely true. Players as a group make more than ownership, but Im sure each owner would be the highest paid person in the organization by a sizable margin, and that is probably before considering appreciation in franchise value.
Most teams operate out of stadiums financed by taxpayers. Many have revenue for RSN’s not counted as team revenue. MLB never was a profit center and most companies try to minimize profits anyways with ludicrous accounting rules that hide revenues and inflate costs to avoid taxes. The real value in MLB ownership is the spiraling franchise valuations. They are now somehwere around 4-5 times GROSS Revenue (not profit or even EBITDA)
Players would be better off setting up their own league and cutting the owners out. Lot of rich ex-players out there looking for investments
There is literally zero evidence at all that player share of revenue is declining (as you mentioned, the data you cited is just payroll and not benefits, bonuses, costs, etc). MLB has very specifically refuted this claim and stated- without any disagreement from the MLBPA- that the current split is the 50-50 you are saying is fair. Boras can only make the claim by including revenue from IP that has been 100% developed by non-playing staff- often underpaid.
Why is fangraphs pushing ‘spend more money on mediocre players’ articles twice a week lately? Much of the best work on this site previously was geared in the other direction – towards avoiding over payment of mediocrity.
Pay stars more- sure, which means avoid a salary cap and salary floor so real superstars can actually make what they are worth. Pay minor leaguers a living wage? Of course, it’s inhumane not to. Get rid of 6-years of cost control, limited minor league options, and the 40 man roster? Of course, that will help expand MLB’s true middle class. And while we are at it let’s increase the pay for all the brilliant MLB staff that have spearheaded a massive IP/software revenue stream for MLB.
But why is fangraphs citing Scott Boras of all people to carry the water for him on urging a huge overpay on mediocrity- as if failing to spend more in free agency is threatening baseball itself? The union is not about free agency, its about players’ rights- it could do well to start focusing on a living wage and less onerous initial terms of contract.
Efficient spending is- contrary to what you’ve written- a friend to the player, artificial restraints that underpay young talent and overpay mediocrity are not. The value of added marginal wins does- contrary to what you’ve written- serve as a mechanism forcing owners to spend (or to loss profit). The value of an added marginal win tops out around $6.5m currently, so if the free agent market is charging roughly 50% more than that value, clubs are doing well for everyone to allocate resources elsewhere (like IP development) to generate revenue effectively. Doing otherwise will shrink the pie for everyone.
This twice-a-week lamenting for the Chris Carters and Kyle Lohses of the world is anti-empirical and wrong minded for the game’s best interests- and comically tone deaf for some sort of ‘plight of the middle class’ or ‘workers of the world unite’ type argument. There are much better ways for the MLBPA to serve their members than to push for a spending floor.
MLB player payroll dwarfs bonuses and benefits to MLB players and should rise in proportion to revenue unless you have evidence bonus and benefits are rising at much faster rates than payroll or revenue. Unfortunately for analysts, MLB treats financial data as top secret and the only accurate data at our disposal is payroll and revenue (even that we have to take MLB’s word).
Minor league spending on players outside the 40 man roster also has not risen with players being paid much less than the mid 70’s in real dollars and making less than McDonald workers. Those on the 40 man roster but not on the 25 man roster make 1/4-1/7 the MLB minimum. Bonuses have been cut for amateur free agents and draft picks so only fuzzy math or a faith in magic numbers can support your case.
MLBPA leadership has obviously been coopted as thats the only explanation for their performance the past 3 CBA’s
Hammering away at MLBPA leadership- while getting the specifics wrong or revenue splits wrong- is likely counterproductive. Co-opting union heads happens frequently- so I don’t dispute that it is possible now and likely over any lengthy period of time that this occurs in MLB- but the evidence that Clark and these recent CBAs are worse than previous is very thin.
Standard bonus/incentives and benefits (housing allowances etc) in MLB contracts can run around 10% of the value. MLB cut down on the value of these perks/bonuses in 2012, but many of the contracts that brought about that change were active in 2015 (where the questionable 38% number in the article is from). The higher the penalties for violating the luxury tax, the more clubs are trying to artificially depress hard payroll numbers via ‘marketing’ and ‘personal service’ fees, etc. This is a major reason why payroll numbers, particularly from the first part of this decade, will understand actual player revenue split.
Literally no one in this whole comments section is against diverting more money from the wealthy who rig the system, evade anti-trust law, leave tax payers hanging, and screw over young players, minor-leaguer players and under paid staff. I don’t think any commentators are in favor of reduced payment to minor leaguers or international free agents- all agreed. But that does not mean that Tony Clark is lying to say that the revenue splits have held steady at 50-50. And it certainly doesn’t mean that a payroll floor will help instead of hurt.
I would like to see a bigger piece of the pie go to minor leaguers–a lot bigger. Also MLB ought to have a better retirement and medical plan for their lifers–coaches in the minors.
Seems obvious to me that they’d be bargaining for a product of lesser quality.
When players stop getting paid full salary of millions of dollars for being injured or under-performing, then I’ll care what % of revenue they get. Give me contracts that are 50% based on performance and a sliding scale when they are injured more than 30 days. Then revenue sharing is worth talking about.