MLB Takes Unusual Negotiating Tack
Earlier in the week, there seemed to be a growing sense of optimism regarding a potential deal between the players and team owners to get the baseball season started. MLB’s initial proposal may have been met with near-universal criticism, but the MLBPA’s response of a 114-game schedule, while obviously proposing significantly more games, left considerable room for negotiation. Just a day later, Jeff Passan reported that the owners were considering responding with a 50-game schedule played at the pro-rated salaries agreed to in March. The two sides were still far apart, but the players seemed willing to compromise on the playoff structure and deferrals, with the owners giving up a renegotiation of pro-rated pay; everyone seemed well on their way to somewhere in the neighborhood of a half-season’s worth of games.
Sadly, the owners never made such an offer. Indeed, they have since rejected the union’s proposal, reportedly with no intention of countering per Ken Rosenthal, who broke the news. The step back from ownership makes it difficult to determine where the parties stand on a potential 2020 season. While MLB didn’t formally propose a 50-game season, it’s apparently still a consideration for the league, as well as a negotiating tactic to get the player’s to play more games for less money per game. As Rosenthal and Evan Drellich noted in their piece on the subject for The Athletic:
Though the language in the March agreement between the parties is subject to interpretation, [MLB] believes the wording enables commissioner Rob Manfred to determine the length of the season as long as the league pays the players the prorated salaries outlined by the deal.
According to the agreement, it is up to MLB to propose season length:
using best efforts to play as many games as possible, while taking into account player safety and health, rescheduling needs, competitive considerations, stadium availability, and the economic feasibility of various alternatives.
Whether a 50-game season violates that language is open to interpretation, though the March agreement does include language discussing the potential for expanded postseason as well as playing regular season games well into October. The main question we are left with given the lack of an actual response is “Why just 50 games?” Below, I’ve tried to find some potential answers.
The Owners Are Very Conservative
According to my math (and using the owners’ own figures), a 50-game season would pay players roughly the same as the 82-game season with further reduced salaries contained in the owners’ only actual proposal to date. It is also about the same as the rumored 50/50 revenue split that never materialized. This amounts to roughly a $1 billion pay cut from an 82-game schedule that pays players pro-rated salaries. Fifty games is also roughly the breakeven point on salaries for MLB overall, before getting to postseason play. Because there’s a couple hundred million in fixed player costs that will be incurred regardless of the season’s length, using MLB’s own figures, they need to play around 50 games to break even on the regular season, as every game on that part of the schedule adds $30.6 million in revenue at a cost of $26.1 million in player salaries.
If owners stop at 50 games having broken even, they can go right to the postseason where they have $787 million in television money waiting for them. Going from 50 games to 82 might get the owners another $150 million or so in revenue after paying player salaries, but there is the risk of never getting to the postseason and its attendant TV money. The postseason money goes even higher if extra rounds are added. It’s not that the regular season isn’t profitable (in terms of game revenue minus player salaries), it just isn’t profitable enough for owners to risk losing playoff money in the event of a season cut short by another wave of COVID-19 infections. This line of thinking is made somewhat moot when comparing a 50-game schedule to an 82-game schedule if both end in late-October.
The Owners Don’t Know How to Share
While playing more regular season games is going to bring in more revenue than pro-rated player salaries overall, that isn’t going to be true for every team. Some clubs will likely lose money on a per-game basis as the season goes on, while others stand to make more. That’s going to happen when, on average, individual teams are making $150,000 for every additional game. Adding more games to the schedule widens the disparities between teams. Conversely, going straight to the playoffs after 50 games limits salaries and potential losses for some teams, while the playoff money results in an even split between them. Shortening the season is a way to limit bickering between owners about who should get what.
Owners Aren’t Being Forthright About Their Media Deals
When coming to the calculations above, I assumed, as the owners have presented, that they are all paid on a pro-rated basis for their regular season local and national media deals. When discussing MLB’s supposed $4 billion losses, I wrote the following about their media deals:
As to the other baseball-related revenue not included, the five teams taking the biggest losses according to MLB are the Yankees, Dodgers, Mets, Cubs, and Red Sox. All of those teams own a significant portion of their RSN, which means about $300 million of their combined local losses are less likely. In addition, those clubs, particularly the non-Dodgers teams, all have relatively under-market RSN deals due to club ownership that could hide half a billion dollars in profits not counted above. If teams could recover 75% of their local RSN money instead of 50%, and 75% of their $2 billion central revenues for the regular season including deals with ESPN and FOX as well as MLBAM money instead of 50%, that would drop losses down another billion dollars. If teams were able to reduce their local expenses (which are largely hidden) by 40% instead of the 25% assumed in the MLB presentation and get a few hundred million dollars for an extra round of the playoffs, then they break even.
If teams and the league aren’t being paid on a strictly pro-rated basis and they can cut their payrolls at a faster rate than their media deals are cut, there might be a level at which a shorter season makes some financial sense.
Then there’s the most likely reason…
The 50-Game Season Is Just a Negotiating Tactic
The owners know that the players want more games and that proposing a 50-game season limits the money going to the them. As noted in the Rosenthal/Drellich piece, owners believe they can unilaterally impose a 50-game season under the terms of the March deal. As Eugene Freedman recently detailed on Effectively Wild, the latest batch of proposals from the players and owners appear to be attempts to re-open parts of that agreement, with the owners wanting the pay issue renegotiated and the players wanting a season schedule that’s as long as possible. It appears neither side has budged.
There would seem to be considerable common ground for both sides to negotiate a deal to salvage the 2020 season. The players can agree to more postseason play and potentially more salary deferrals, while the owners can accept pro-rated pay and a season of reasonable length. The players moved forward earlier this week, but the owners haven’t. Rejecting an offer without countering is certainly bad news, but there’s still an opportunity to save this season. Right now, it’s up the owners to decide whether it’s important to play baseball this year, and to consider the potential long-term consequences of disappearing from the public’s sight for 18 months.
Craig Edwards can be found on twitter @craigjedwards.
Good summary… There needs to be more pressure on the owners from the media, because the default position among most non-educated fans is “both sides are wrong”, and “millionaires vs. billionaires”…
Both sides are wrong in that they have not offered something the other side is willing to accept. Owners offers are all the same low ball offer repackaged. Players offer is basically they want to be paid like their salaries are not based on the enormous revenue they generate without giving owners any monetary concession when games can’t generate revenue as well because games can’t be played normally. A small salary deferral, even though this only robs future low level free agents/arbitration players next season, in case playoffs are played is not a concession when coupled with no paycut and more games.
Nothing wrong with what you said, it just doesn’t follow the hive mentality on fangraphs, therefore you must suffer downvotes because you must be wrong.
Free thought is not welcome here
Pressure from the media? They own the media. A serious source of pressure should be from the fans, but they are too in line to even talk about these owners straight up stealing tax revenue for their own private ventures let alone actually stand up to these reptiles
MLBPA needs to start their own network, and all players would only give interviews to them. Would take revenue out of MLB networks pockets (money the players don’t see) and go straight to the players.
Let’s not get snooty about calling people who don’t share your worldview ‘non-educated’
Come on man, sure, “both sides are wrong” is a simplification, but any take on this that doesn’t include “both sides are looking out for their own self interest, and that’s how negotiating works” is hugely oversimplified as well. Every situation can’t be reduced to good guys vs. bad guys.
Not entirely, but I think there’s a valid point here in that the owners seem callous to the concept of baseball at all. The players at least are wanting to put as many games on the table as possible. Sure, it’s all in their self interest, but it’s a bit silly not to recognize that the self interest of the fans is much more in line with players than with owners right now. Fans that think the players are just “holding out” are clearly not paying attention to what’s actually happening.
Sure, I will give you that fans’ interests here align better with the players’. But that doesn’t invalidate the interests of the ownership group or make them bad people for pursuing those interests. That’s what rational actors do!
Best I can tell, them playing more games is in my best interest as well.
So, officially, I’m aligned with the player’s interests.
Maybe some of us see it as millionaires vs billionaires because that’s exactly what it is. Rich people arguing with even richer people over money. Has nothing to do with anything else. But go ahead, believe what you want to believe in your echo chamber. It’s very safe there.
This is the kind of crap holding baseball back. Take a page out of the NBA in learning how to grow the game. MLB is constantly tripping over itself. No one I speak to blames the players, we all blame the owners (and rightfully so).
You’re talking to more knowledgeable people then… A NY Giants board I frequent had a thread on this, and it’s the usual “both sides” garbage, with some people even siding with the owners, without having any knowledge of the situation beyond “both sides want more”.
The NFL fanbase is just the fucking worst, MLB owners dream of getting their alreay well managed fanbase down to that level. I used to read a Jets board where I was easily among the younger posters by maybe literally decades and basically the only universally acceptable, non-greedy, non-lazy players in franchise history are Nick Mangold, Joe Klecko, Don Maynard, Wayne Chrebet, Mark Gastineau….you might notice the theme if you know who any of these people are.
BTW if you think FA is a problem in the MLB, the NFL is having a big offseason currently definitelynotcolluding against Clowney among others
Also also the stadium situation in that league is even more gross than the MLB one…IIRC nearly every single one was bought with taxpayer money
This absolutely. I live in Texas and on a sports radio show, a guy called in and legitimately complained that a) NBA owners aren’t getting revenue, b) college donors aren’t getting their money’s worth and c) which I’ll quote “we need to get over all this race stuff”
Same type of mindset that says “both sides”. There aren’t two sides here. The owners value add is capital. Which is important, but investing capital doesn’t guarantee you shelter from risk. It’s too bad that COVID means less revenue. But how much revenue did Ozzie Albies generate vs how was he compensated? The owners can’t (shouldn’t) have it both ways.
I don’t know how it happened, but we’ve got a lot of people who seem to take the sides of billionaires and are okay with consolidating the gains at the top and spreading the loss burden down to the bottom. We have people who are essentially rooting for Mr Burns. Never thought I’d see it. Until fans give enough of a shit about how this stuff works structurally, nothing will change.
“The owners can’t (shouldn’t) have it both ways.”
No one (literally, including the owners themselves) is saying they should. But neither should the players. Their contracts are not guaranteed during states of emergency. The relevant clause is called “Paragraph 11.” The owners owe them nothing. Zero. What they’ve received so far was effectively a gift from owners. And the owners have offered them “upside” via revenue sharing, which the players refused on the dubious grounds that it would create an irreversible precedent.
I really think people don’t understand how little leverage the players have, here.
How is the Clowney situation any way comparable to baseball FA? Clowney has a checkered injury history in an off season where teams can’t bring him in to be looked at, and he was asking for $20 mil per year on a multi year deal at the start of FA. Many NFL players signed large contracts this off season, Clowney just definitely isn’t worth what he was asking for. And I say that as someone who would love him on my team (the browns) on like a 3 year, 50m deal. Baseball absolutely has FA issues with the owners colluding to keep salaries down, but I’m curious how you see the NFL as being worse.
Agree with everything else you said:)
The NBA isn’t having a long regular season with no fans either. It’s just that they had already played most of their season, so the players had already received almost their entire salaries and the owners still get to profit some from the playoffs.
This is a completely different scenario, financially, from the one MLB is facing.
Craig, what’s your opinion on whether the owners can unilaterally decide on a 50-game season? As they’ve reminded us, the March agreement is for play to resume when there are no restrictions on large gatherings which I’m assuming won’t happen soon in several states with MLB teams. Couldn’t the players use that as the basis for objecting to such a move by the owners, in addition to all the safety/testing elements that they haven’t agreed to? Setting aside the PR impact of the players reusing to play on that basis, that is.
I agree (or am hopeful) this is most likely a negotiating tactic, but I’m curious if they can even do what they’re saying.
If the owners try to impose a 50 game season I’ve got money on the players striking, which I would absolutely support even if it means no baseball until 2022.
we need to just go right into the cba. the owners have ruined the season.
Also, what is compensation for the playoffs going to be? Two issues: (1) veteran players generally are playing for a lot less money in the playoffs, but it is normally 1/7 of the season at most. (2) My understanding is that players are paid out of the gate for the first x games where x is the number required to win that round of the playoffs. If there is no gate, how is compensation determined?
You can bet your ass that the players also are not just going to accept a season of any length determined by MLB to go along with playing postseason games where they are paid little or perhaps even nothing. A first year law student could poke enough holes in that March agreement to make it unenforceable. If MLB tries this strong arm approach, there will be no baseball in 2020.
Yeah, so the owners are saying 1. The March agreement is null for the players’ demands for pro-rated salaries 2. The March agreement is in full force because it allows us to pay the players pro-rated salaries…as long as we get to pick a very low number of games.
Heads owners win, tails players lose.
Just brilliant, billionaires.
This is a really good article. That said, I think the most important issue is one that seems to get the least attention here: The fact that not every owner is going to make money on a per game basis, even as the owners collectively do. There is almost certainly a wide difference in the amount some teams are going to make versus the amount some teams are going to lose. And since some teams/owners are in a more precarious situation than others, that also makes it more complicated.
One thing that I took out of the reporting yesterday is that the league is going back to the owners. I think there’s some sense that no matter what the league decides to do, it doesn’t think it has the mandate of all of the owners. The Brewers and Reds have been signaling that they are optimistic and hopeful, while other teams are pretty clearly not in that bucket. I don’t think the owners are terribly unified right now, and they need to be for the league to do anything.
From all of this and Craig’s and Dan’s analysis, I’d guess the 50-game idea is probably a mixture of (1) some owners feel like they only want to pay players a certain amount of money collectively and that’s it–it’s the only constant thing we’ve seen so far out of them; (2) Some media deals might specify that you need at least 50 games; (3) It’s the minimum they can imagine doing before going to playoffs, which is a high priority for them; (4) It manages to minimize the losses, rather than maximize the gains, for both teams who benefit from playing more games and those who lose money by playing more games.
The only thing I’m sure about though is that this dramatically reduces the likelihood of starting games on July 1. Either more negotiation is needed or there’s going to be a bunch of legal maneuvering.
Really excellent summary of what we’ve seen from the owners. Until the owners are on the same page in terms of priorities, it’s hard to see a deal getting done.
Right now it’s possible Manfred has very little freedom to negotiate. If the MLB proposal is a compromise between owners with very different interests, Manfred can’t give on any part of it without losing the support of some bloc of owners. So instead of counter-offering, he has to go back to the owners to build support again.
To put it bluntly, screw the “poor” owners who got themselves in this position. If this doesn’t kill them something else will. It was hard enough crowbarring McCourt out of the league, use this as an opportunity to get owners who can afford their teams.
On the one hand, I agree and have zero sympathy for the owners. On the other hand, what if the end result looks more like the post-Loria Marlins than the post-McCourt Dodgers? I don’t think anybody wants to see that, but it’s a likely outcome if teams are saddled with debt.
Just reading the name “McCourt” gives me baseball PTSD.
Also where is it written that these owners must make a profit every year? Are there other industries where owners cry if they suddenly go into the red for a year? You want to be a businesses person? Act like one.
I’m happy to grant the owners a profit guarantee if they’ll grant the players a profit guarantee too
I agree with all but the very last sentiment, on the basis that few can really singly afford a team any more (that would be acceptable to the rest of the owners – sorry, Cuban). More conglomeration ownership means more corporate baseball with profit margins taking priority over wins and losses.
I think the signal the owners are sending can be interpreted a bunch of ways. I think Interpretation in the article is one good one. I also think you can report these mixed signals as owner conflict. I’d have to think more about what, but it’s possible owners have wildly different incentives to do very different things.
I’m going to put on my conspiracy theory hat for a minute.
To me, part of this negotiation has always been the opening part of talks for the next CBA, which was scheduled to start in 2022. The main source of leverage* for the owners in any negotiation in any sport is that player careers are short, most of them are young men who, as a demographic, are not especially good at saving money, and they can’t afford to be without income as easily or as long as a bunch of old billionaires with decades of investments and other sources of revenue outside of baseball. Maybe the owners feel that depriving the players of some money now makes them more vulnerable and more desperate to play in 2022, which softens them up for the next round of negotiations. In short, the owners can forego a little revenue in 2020 and maybe that helps them make much more in 2022 – 27, or however long the next CBA runs for.
Maybe I’m way off base, but I can’t imagine the owners and player leadership don’t think about the next CBA expiring very soon when they consider this current deal. They can’t ALL be that short sighted.
*Traditionally, the public also seems to hold the players more at fault for work stoppages than the owners for a variety of reasons, but that tide may be turning a bit as people come to realize just how wealthy the owners are and how much they make off owning baseball teams.
Baseball players and the MLBPA are a famous example of having a big war chest and players saving a lot of money just in case there’s a labor dispute. I’ve never seen numbers but that’s always been the rumor. Baseball players are used to not having much money coming up and are told pretty aggressively to save because 1994 could always happen again, is the rationale.
Interesting thoughts. IMO, as noted in the article and comments above the owners are not operating the same business model. That’s why the MLBPA counter offering 114 games was an eff you move- some teams would make more money, but teams that lose money per game would have their losses compounded. Perhaps the MLBPA felt justified because they viewed the initial MLB offer as driving a wedge between high and low salary players. Overall, not a good approach on both sides for a time sensitive negotiation.
I’m not sure that was an f u move. Maybe it was–they asked for financial documents from the league to prove the losses but who knows what was actually shared. The logic was probably just that they wanted to make the point than an 81-game season is a concession (as that’s how they make most of their money). And whatever it was, it also involved deferrals if the playoffs were canceled or cut short. I don’t think they wanted the conversation to end, but again, we’re seeing only the tip of the iceberg in the negotiating positions.
This is nothing close to a conspiracy, it’s almost certainly a factor that both sides are taking into account.
Also, I’m still a fan of just canceling the season and just implementing a round-robin World Cup style tournament, merged with a quadruple-elimination system and a dash of super league playoffs sprinkled in.
Can we also figure out a way to incorporate a playground-style player draft? Like each team chooses three of its current players as captains, and then those players just pick teams from all the other players. Player salary is based on a combination of how early they’re picked and their actual 2020 salary, so Acuna/Soto get a raise but Pujols still gets some benefit from his contract.
I know there are many, many reasons this would never happen. But it would be fun, right?
Captain that picks first gets to pick once; captain that picks second gets to pick twice…
I’ll settle for nothing less than a Calvinball World Cup.
Or there’s Occam’s Razor… if the owners are that willing to poison the well on the next CBA negotiation, and that willing to poison the well with customers in the midst of a pandemic, and are that willing to only play a shorter season based on a fixed payroll number that they’re willing to pay, then maybe there’s some validation to how bad their economic condition is *if there are no playoffs*. I would also say that this seems to also indicate the owners’ level of concern about such an outbreak and the odds that the postseason will be impacted.
(I know this isn’t a popular opinion, but I’m saying this from the standpoint of someone who spends his days looking at a lot of financial information from companies across all types of industries and is seeing just how bad the losses are for companies that lots of folks would assume are perpetually healthy cash flow generators, how hard it is to obtain or renegotiate debt, the risk of covenant breaches on debt that causes interest payments to rise further, or additional collateral to post, etc.)
The playoff revenue is the key in all of this. The owners understand that the longer the season, the greater the risk of an outbreak of COVID, whether within baseball or in society, that threatens to eliminate the post-season revenue stream. You have to understand that for at least some MLB teams, the cost of their debt service – whether the interest rate or the encumberance of additional collateral, or the early call of principal, etc. – literally increases if there are losses. Again, it’s like saying an individual’s mortgage rate goes from 4% to 8% if that person loses their job. Right now, if some business owners post losses (or more likely significant changes to EBITDA), the cost of the debt jumps up and the losses actually grow in to the future. Every business owner with debt is trying to avoid that outcome right now.
So if you’re an MLB owner, you’re not just looking at your cash flow and financial statements… you’re looking at your pro format of what happens to your debt if you post a material change in EBITDA. You don’t want to screw your business long term. But you don’t want to risk a loss of a certain amount – or a change in EBITDA of a certain amount – that causes the terms of debt service to escalate. This is why debt service and covenants are so critical. You can run all the cash flow models you want on player salaries, estimated TV revenue etc. What you don’t know is how onerous an owner’s debt service terms become if EBITDA changes materially.
(Someone will respond then that the owners in question shouldn’t have taken on debt in the first place, etc. All valid criticisms. But we are where we are. If your home mortgage goes underwater, you may regret the commitment you’ve made but your focus is still on finding a way out, not on how you got there.)
The only reasonable outcome I can see here is a binary proposal to pay the players at or near the level they desire if the season is completed and postseason played without interruption, and a different level if the postseason is interrupted or canceled. I.E. perhaps 25% of player pay is contingent on the completion of the playoffs, such that the players get 75% of their prorated salaries if there are no playoffs and 100% of their prorated salaries if there are indeed playoffs.
Three thoughts…
I believe that was actually part of the players’ proposal to the owners.
I continue to believe that the only way forward is going to involve salary deferrals, and I think that I am probably not alone on this point.
Overall, I suspect you may think there is more opposition to your comment than there actually is. I see this as rather compatible with Craig’s article.
I think you actually make a good point regarding how leveraged some owners might be. I’m not entirely convinced that’s the case because the owners have a history of crying poor when it suits them, but it’s at least a possibility worth considering. And while my initial reaction is to give exactly zero fucks about how bad a financial hit the owners take, the more I think about it the more it seems like it’s the players and the fans who suffer in the long run.
If there were a way to confine owners’ economic hardship to 2020, I would be the first person to say they should be forced to eat their losses. But any owner that finds themselves in a bad position financially is going to try to get out of it by cutting salaries while simultaneously trying to squeeze fans for all the revenue they can. We’ve seen the Marlins go into full debt-service mode, and it’s not pretty. As much as it pains me to say it, the players might come out ahead taking a pay cut in 2020 if it saves them from having most of the league sit out the next five free agent markets.
However, that only makes sense if the players are convinced the free agent market isn’t going to freeze up anyway. Because in that case, they might as well get what they can, while they can.
Well said.
1. It’s not clear to me how many owners have onerous debt service. Certainly some do, but not sure if it’s a significant enough group to control the owners overall position.
2. Banks will also look at value of collateral. So long as the value of the team is comfortably above the debt value, I’m not sure the individual owner can’t renegotiate the interest rate ratchet to some extent. Banks don’t want to see a Hertz/Avis used car market situation where all the teams lose massive value due to shutdown so they might be amenable to amendments that keep owners from materially higher interest costs (if they are making a good faith effort to play)
Your analysis is a good one. The great hidden value of being in debt is that your bankers force you to be rational. Companies like GE that never really had debt before they REALLY had debt are culturally unable to respond to being heavily in debt.
Thanks. The other key factor is how much of loans to private businesses are now originated by or held by private credit funds, and not banks. (Think private equity funds, but on the debt side of the investment capital structure rather than the equity side.)
Some studies have estimated that outstanding private credit and leveraged loans (i.e. non-investment grade business credit) may be close to equal to the amount of traditional bank-written loans that are outstanding. So, you can estimate that half of outstanding business loans in America are held by private investment funds rather than banks. This is because private lenders came into the market to fill capital needs that banks couldn’t provide post-GFC without impairing their own leverage ratios… but it’s also because private credit, on the lending side, has been seen as a very attractive investment opportunity for pension funds, institutions, and endowments looking for yield of their own.
All of this is to say that the party holding about half the outstanding business loans isn’t a bank, but rather a private investment fund. And where banks might be willing to negotiate terms for businesses (because banks often don’t want to actually hold the underlying collateral, which is complicated and expensive for their business model… they’d rather work the loan out on favorable terms), private investment funds might look at this very, very differently.
So, anyone who is thinking about this in terms of “banks” and typical “loans” is understating what may be keeping owners awake at nights (and is keeping so many other large private business owners concerned).
I think you’re making this more difficult than it needs to be. Most people who buy a big asset (like a home), take on debt. It’s rather dumb not to since debt (mortgage) interest is write-off-able and interest rates have been near-zero (thanks Fed QE policy!) for the last 12 years. In a business’ case, the interest on the debt shows up as an expense on the income statement. Banks can’t raise interest rates on mortgages since those terms are agreed to for years in the future, regardless of whether one loses their job. In fact, we can all buy down our mortgages and get a new loan when lower interest rates arise.
The salient and simple point is still this: if MLB revenues drop 70% and MLBPA pay drops *only* 50%, there won’t be a season. Even if MLBPA drops 67%, that still has to fall harder on the players making the most money (Progressives should love that), since the marquis teams (LAD, NYY, BOS, CHC) have a lot of these players and their revenues fund the league. I know Craig is an MLBPA activist at this point, but martyvan90 nailed it above: MLBPA’s 114 game offer was a big “F You” to MLB and that’s why MLB hasn’t bothered to counter.
You just hit the nail on the head on why this is more onerous for the owners than my mortgage is for me. I posted in one of the other comments sections – an analogy might be if my bank had the contractual right to raise my interest rate, or call some of the principal, if I lost my job. Or to force me to take on a roommate to supplement my cash flow. Those terms don’t exist in mortgages, but their comparable alternatives DO exist in the debt covenants that private business owners are facing. Covenant breaches on business debt lead to some combination of higher interest rates, penalties, collateral posts, acceleration of some principal, etc. And many of the debt ratios in those covenants are EBITDA based, where a sharp change to EBITDA risks covenant breach. (Again, I am speaking generally to large loans to private business; I don’t know the specifics of MLB team owner loans.
In fact, we can all buy down our mortgages and get a new loan when lower interest rates arise.
Yes, because refis can still happen while so long as the value of the home is stable and the borrower can still be underwritten – because the bank can foreclose and take the house as collateral if you default. Business loans are larger, harder to refinance, etc. because lenders know that every business’s revenue stream is disrupted, and no one knows for how long, or when another wave is coming, etc. What if fans aren’t in the stands next season? What if a vaccine takes closer to 24 months? Or even 18? Getting large credit underwritten on good terms right now is ridiculously difficult. You can’t refi a business loan the way you can a home loan right now.
I don’t think what you said is technically correct. If MLB revenues drop to the point where all owners lose money on a season where they pay prorated salaries, it’s obvious that they would walk. But I’m pretty sure that’s not the case here, based on both the numbers and the reporting we’ve seen on the diversity of positions among ownership.
If MLB revenues drop to the point where some owners lose money on a season where they pay prorated salaries–and this I think is unquestionably going to happen with a straight prorated salary schedule–then ownership needs to figure out a bunch of things. Right now, the media leaks are designed to suggest that they’re willing to risk not having a season at all, but that would entail every team definitely losing money and it’s possible the vast majority of teams would lose more money in that scenario than if they just played 81 games.
They could not be countering because an 81-game season is worse than no season at all, or because they think they have the upper hand if an agreement doesn’t come together and the players will cave, or because they need to go back and talk to the owners about the next course of action. We don’t know the answer to which one it is, but I’m not even sure that MLB has explicitly endorsed the first interpretation so far.
NYY is talking about $312M in EBITDA losses from an 82-game schedule, so I’m sure they think the MLBPA proposal is an FU move. The smallest loser was the Tigers at $81M. I know Craig said that MLB was exaggerating.
I don’t know what the point of discerning differences in the owners without solid numbers, but carry on if you feel it worthwhile. The key point is MLBPA made a ridiculous offer.
Right, that’s the scenario that I outline in the first paragraph. The whole thing depends on how seriously we take the argument that every additional game costs the owners $640K more than they will bring in.
I am not really convinced the owners think it’s going to be better to not play than to play on a league-wide basis, and to me the union’s offer says they don’t believe it either. But regardless of its actual truth: If the owners really believe that, and they can’t convince the union of it, then there is no path forward to a season.
Opinion – I think the owners who would make money (and there have to be some) are unified with the owners who would lose money because the CBA comes up next year. The 30 owners will not split ranks under any circumstances this close to the CBA discussions. It’s a lot easier to keep 30 owners from splitting ranks than 1200 players on the 40-man roster. So if I’m an owner who would be profitable in 2020, I have more to lose long-term by breaking ranks and harming my negotiating position when this is all over, than I do by maintaining ranks and waving this year’s income goodbye. I don’t like it as an outcome, but I think it’s true.
I don’t think there is going to be any breaking rank publicly. Behind closed doors, though? Do we think that every owner that would make money would be in favor of canceling the season because another team would lose money? Do they have that much solidarity behind closed doors?
If there are millions to be lost now, and billions to be gained in the next CBA – yeah I think that some/most/all owners would practice solidarity.
They aren’t borrowing fixed. It’s not a mortgage. It’s mostly floating rate + an adder and the adder goes up if ebitda coverage ratios go down. Even if they hedged the floating rate, they didn’t hedge the adder.
Elliot league baseball
Good information from Tomerafan to help understand the varying impact to each team.
Jeff Passan provided a pretty good global breakdown of possible solutions to the negotiations today. Essentially, compromising on a 65 game regular season with full prorated salaries, or a 82 game season with 10% reduction in prorated salaries. Also provides for expanded playoffs in 2020 and 2021. Another twist on this proposal would be to agree to 82 game season with full prorated salary if postseason is completed or 10% reduction if postseason not completed.
There should be a path to a season this year if both sides agree to compromise.
https://www.espn.com/mlb/story/_/id/29269242/inside-mlb-financials-fight-numbers-solve-it
The problem with Passan’s article today is he assumes some things that indications suggest we shouldn’t assume (i.e players would accept an 82-game season,) and discounts the fact that the players don’t believe the $ losses the owner’s have predicted. (He then runs all his conclusions based off those suspicious $ numbers.) Its a total waste of time to read, Passan sounds like someone really really desperate to have baseball back and he doesn’t care who’s right or wrong, just everybody get over it and play already!
Occam’s Razor would generally not lead me to the conclusion that a party with a history of dishonesty and law breaking is probably behaving in total good faith this time around.
They’re not mutually exclusive. The owners can be completely untrustworthy and also deeply in debt.
Well said. Circle gets the square.
I think what’s missing is the separation of the team finances from ownership’s finances. A business that has recorded profits for decades and gets to use taxpayer funded stadiums may be over-leveraged, but these are not publicly traded companies with shareholders, they’re owned by billionaires who can probably withstand an 8 figure loss during a historically bad year.
Your binary proposal does make a lot of sense, a pragmatic solution that will let us watch baseball this year might not be fair to the players who signed guaranteed contracts.
” This is why debt service and covenants are so critical. You can run all the cash flow models you want on player salaries, estimated TV revenue etc. What you don’t know is how onerous an owner’s debt service terms become if EBITDA changes materially. ”
^Pretty much. You can’t figure it out without access to the proprietary financial information. The assumption of a positive cash flow during a normal season might even be one we can’t make. To think one has a good grasp on the depth and breadth of the situation while only using unofficial and speculative data might be a reach.
I notice the trend of many of the comments here just trying to speculate on who is “good” and who is “evil”… Too often we try to rationalize people’s thinking to this moral binary, and in doing so we assume that people don’t have the ability to think critically.
Cancelling the season for any financial bickering this season just to get to the playoffs is long term suicide for MLB. Will not be judged well, and the fact that this has already has resulted in missing their window to be the only sport on TV (as NBA will be back in July) is a tremendous missed opportunity to grow the sport. I find it amazing that as wealthy as the owners are they don’t have the collective foresight or will to see past 2020.
Presumably, the players do not get pro-ration of salaries for post-season. They get some “cut” of the revenues or a fixed post-season Share.. If that is so, skewing the season to have less season and more post-season minimizes the owners costs and risks. Everyone assumes covid will come back in the fall so they don’t want to risk losing tv revenue by extending season.
This seems like a rational approach by the owners and I don’t think you need a conspiracy theory or guessing at disparate owner outcomes or anything like that to understand their position.
If you look at the three ideas floated: revenue sharing, sliding scale pay cuts (longish season), and pro-rated salaries (shortish season ), they all are risk mitigation proposals.
My takeaway is that the owners have real concerns about hemorrhaging losses in a more normal approach as opposed to “making as much as they can”. I think everyone is misreading the owners motivations.
Thank you. I thought the same thing after reading the article. Your observation should be obvious to most, but these days internet forums seem to be filthy with cynics whose wealth-envy clouds their reasoning.
At no point in this comment is the perspective of the player even considered. It’s just saying the owners want to limit risk, which is obvious. What is less obvious to me is why investors/owners feel they have no obligation to accept downside risk (let’s share that with labor), while enjoying the fruits of the upside (this is all mine!).
See my comment below. It’s not the owners job to care about the players. The players have a union to do that. Owners care about the owners. It’s that simple.
Not to say that they don’t care about the “game” but first and foremost is running a sustainable profitable business. That to me is their only goal here
Businesses have competition. MLB franchises are licenses to a monopoly bestowed by the government.
The competition is other leagues. NBA, NFL, etc. etc.
“What is less obvious to me is why investors/owners feel they have no obligation to accept downside risk (let’s share that with labor), while enjoying the fruits of the upside (this is all mine!).”
That’s not a correct description of the situation, though. The players repeatedly refuse the upside (revenue sharing), and the owners are already taking enormous losses. The only question is whether it makes financial sense for the owners to play at all. Without concessions from the players the answer is probably “no”. The players don’t like that, but not liking it doesn’t change it.
This makes sense, if and only if, we scope these negotiations to this season. I don’t think that’s the right frame — players and owners have ongoing relationships. It doesn’t make sense to exclude the previous 2 decades of massive growth that has entirely gone into the owners’ pockets.
Also, given the previous history of the relationship (collusion, multiple times), owners shouldn’t be given the benefit of the doubt. This isn’t the first iteration — let’s not ignore the previous rounds.
No one in business cares about last year. I’ve never met any C-suite person who cares about last years results unless it helps them explain this years results. This is not a value judgement – it’s is just factual. It’s not how there people are programmed
If we can’t have a somewhat normal season, just cancel it and come back starting in March like always in 2021 and we move on from there.
Negotiating with so much at stake is supposed to be rough.
A lot of players are not “millionaires”. If MLB can drive a wedge between the high % of players who can’t afford to lose a year of income and the ultra high-end players with hundreds of millions in the bank, they can force a deal favorable to themselves.
Many MLBPA members have yet to earn much, and many don’t have a viable way to earn much after their careers are over. Many players have a 3 to 4 year window in MLB. Out 1/4 to 1/3 of their lifetime income at risk, and many of them will do whatever you want.
Every owner has a comfortable nest egg. Even if 2020 never happens, they will get by just fine.
Why not play to win?
This season is not going to happen 🙁
I think you are probably right.
I am turning my attention To baseball that is more fun – my son’s 10U travel team. I would rather watch the boys play ball than worry about MLB now.
MLB and MLBPA are taking the enjoyment out of professional ball. But Remember – baseball is not the same thing as MLB. Support your local youth leagues. Even if you don’t have a son or daughter playing, it is fun to watch baseball. By 10U, they are playing real baseball – they know the game, and can really play ball. Give it a try.
My son does 15U. It’ll be a shortened 2 month season, but atthis point I’ll take anything.
Wish that this was happening in my province in Canada. No organized sports have resumed in Saskatchewan. I miss watching the kids more than MLB.
This may be way out of nowhere, so if anyone knows anything about this please let me know, but is not-playing a season due to _______ the type of thing that an owner would have insurance?
It seems like there’s an air of well, we just won’t have a season then from the owners and, well, it just conceptually doesn’t make any sense to me. Like, it is worth something to not have any games? If playing one game will make only a very small amount of money, isn’t making a very small amount of money still better than making no money at all?
In some cases, yes. But in this case, the league’s insurance policy does not cover pandemics.
Thanks for this answer.
Business Interruption Insurance specifically rules out paying in pandemics. Almost every business would make a claim now and most insurance companies and their re-insurers would be wiped out. Insurance works when idiosyncratic bad events happen, not when pervasive ones do.
MLB doesn’t have high fixed costs, only interest on stadium debt, the cost of administrative staff. MLB says that paying players 50% when they’re losing 70% means they will lose $640k/game, so yes, it’s worth it to MLB to not play. Businesses that have high fixed costs don’t have this luxury.
That makes a lot of sense. Thanks for the reply.
My reading is that this is all a negotiating ploy , even though there are real differences in which teams will make money with more games played. We will end up where this was a little while ago… 81 games starting July 4, prorated salaried, expanded playoffs, possible salary deferral.
With fans allowed back in the ballparks?
Or do you anticipate no fans?
If the COVID scare is over (which seems to be the case), then 82 games with prorated salaries seems like an easy solution.
If we stick with the idea that mass gatherings are unthinkable (aside from rioting and looting) then I can’t imagine the owners agreeing to that.
Let’s try ballparks open, but maybe limit ticket sales to 50%. Would that satisfy everybody?
Unfortunately, no fans the whole season.
I agree that 50% capacity, or even 10% of the tickets being sold would be some totally reasonable thing, far more reasonable than zero, but it is not in the cards for 2020.
An unlikely scenario I’m curious about:
What would be the ramifications of a season in which ~20 teams played, and 10 sat out? The 20 teams that played would be the ones relatively better off playing more games, and on top of that would split the national TV money between 20 teams instead of 10. Those 20 therefore could do pretty well financially and their players would be compensated pretty well.
On the other hand, it would screw baseball in 8-10 markets (the Angels and maybe Mets might sit out), which would suck long-term for the game, but not as much as if the entire season were cancelled.
Would we have a 1-year contraction draft?
Aye aye aye
That would be amazing… only the profitable 20 teams, and a 1 year contraction draft, with revenue being shared with the teams not playing. The draft would be fantastic.
I would imagine the MLBPA would never let that happen.
I imagine practical logistics wouldn’t let that happen. Who decides which teams, and by what parameters? What about coaches, staff, facilities people, etc for the teams that don’t get to play?
1 year contraction draft- whaaaa? so many players in unfamiliar situations, everyone trying to bring their own team doctor or trainer or personal catchers over, and how does anyone do advanced scouting when their rivals are on their team?
What about the fans of teams that don’t get picked, you’d disenfranchise them all. Angels and Mets are auto-eliminated because, you know, Yankees Dodgers! No one would vote for this idea.
I don’t think the owners really want to play this year, unless they can get the players to agree to a very small fraction of their salaries. It appears that the marginal economic gain per game played beyond 50 isn’t enough to warrant their attention, and the big bucks are in the playoffs. You don’t need to get into bad faith or not–these guys know how to make money and they want to be on the best part of the curve, irrespective of whether it’s “fair.” The problem the owners don’t want to acknowledge is that a 50 game season followed by expanded playoffs in a one-off cheap season that lacks legitimacy. Why bother? Even a .500 true talent team could go 30-20, just as a quality team might have a mediocre stretch. I wonder if viewership, after the first burst of novelty, won’t crater if the games are perceived as little more than exhibitions.
Good comment all around. If I had to guess, viewership will be sky high. Every game means something. Even the crappy teams can make the playoffs.
My question is how will they handle scheduling? Just play home and away in your division twice which is something like 48 games and then one series against the Others leagues geographical division to get 12 more for a total of 60? That’s a lot of divisional games. Do you never play anyone else? (Ie the Cardinals never play the dodgers or the nats?)
I get that everyone loves to rail against ownership (Yes, 50 games is pretty clearly a negotiating tactic), but I don’t see how a 114 game season with expanded playoffs is anything but a negotiating tactic as well. It’s not a legitimate offer in any practical sense. 25-30 games a month gives you something like 4 months of games. If you start on July 1, that means that 114 games brings you to the end of October.
And THEN you have an expanded playoffs. All with the threat of fall/winter coronavirus shutdowns and certain states becoming inhospitable to baseball (and life forms in general, looking at you Minnesota) in November.
MLB has signalled that it is wiling to budge on further salary cuts. MLBPA has signalled that they’re up for expanded playoffs and deferred payments. A week ago I would have been on no baseball this year, now seeing each side’s posture I am optimistic.
Another potential answer is Craig’s calculations aren’t an accurate reflection of the economic situation and the owners are indeed losing money for every game (but not $600k). The assumption in this series of articles is that that the owners will make money per regular season game and therefore there is no risk of losing money. “According to my math” does a lot of heavy lifting in these articles. Nobody has the books, so that should make us all skeptical of back of the envelope analyses as well as owners’ “just trust us” numbers.
So I actually tried to calculate this out at one point for the Tigers just to see what I could come up with, and eventually threw up my hands because I couldn’t figure out too many of the important details.
That said, the numbers were coming in the black for the Tigers. I don’t know what direction they were biased in–it’s possible they would be making more money or even losing money. But I have a strong suspicion that the $640K per game loss does not include the payouts from revenue sharing–a really important detail given that owners are pooling 50% of the revenue this year.
Yeah it’s really tough to calculate, and I don’t trust the 600k loss number either. But it’s not out of the realm of possibility that the back of envelope numbers that us outsiders are using are not accurate either.
It’s fair to say that some teams might profit this year, but that revenue sharing may not cover the overall losses. According to the MLB, the Tigers were going to lose the least money out of all teams.
Yeah, the thing is, I think that the league is right that they’re going to lose money on a season without fans. The question is whether they’re going to lose money per game–they’d be better off playing if they make money per game.
Even if we take MLB’s numbers at face value, they’re arguing that revenues are going to be $2.87 billion in a fan-less season versus player salaries of $2.36 billion in player salaries. If these were the only expenses, teams would make (if my math is right) a meager $205K per game. It’s small, but it’s in the black.
The remainder of the costs are from amateur signings (which will happen whether there’s a season or not), dues to the central office (will happen whether there’s a season or not), and the black box of “local expenses”, which probably includes both fixed costs and those that aren’t fixed.
The key here is clearly the “local expenses” which account for about $4.7 billion in a normal year. If those costs are 0% fixed and only come from the amount of games played, in a half year that’s $2.35 billion. Now If that were the case, teams would lose (if my math is correct) about $955K per game to this nebulous expense. The total loss would be $750K per game, per team, which is only $110K over the league’s official projection–or about $135 million dollars.
MLB is arguing, in essence, that close to 100% of the “local expenses” are not fixed and can be reduced by playing more games. This seems difficult to believe. The league is saying that teams have over $5 billion in debt alone, so just paying the interest on that would get you over $135 million all by itself, unless they’re averaging far less in interest than the Padres were paying on their loans a few years back. The numbers just do not add up, even if you take the league’s numbers at face value AND ignore that at least some of the “local expenses” are operations for running a game day experience for fans.
We could solve all this guessing if the owners would, you know, open their books, and show some proof that their losses are real… The fact that they don’t tells you everything you need to know.
I respectfully disagree. Or, I think it’s not so cut-and-dried.
I don’t think that owners should have to open their books to the public. I just don’t believe in that concept. I hear the arguments about teams that have received public financing, and I get it – but TONS of businesses outside of baseball also get economic incentives from local and state governments, etc. and we’re not calling for everybody’s books to be made public.
I do think the owners have a responsibility to share information with the players. The owners have stated that they have shared all of the financial information required under the CBA. I think that’s important – there is info required to be shared, and the owners believe (right or wrong) that they are compliant. The MLBPA has not disputed this – i.e. it SEEMS they agree that MLB has provided the “minimum.” But the MLBPA has asked for more information, and the owners have told them to pound sand unless they’re willing to consider further salary reductions. In other words, effectively, “If you’re not even willing to discuss salary reductions, which we think you agreed to do in March, then we’re not giving you additional financial information beyond the minimum required in the CBA.” Which is not an unreasonable response, IMO.
Both sides have committed major tactical errors that have eroded the small amount of trust that might have existed at the outset of this.
Above all else, anyone who had a hand in writing, approving or signing the March 27 agreement should never touch another contract again in their lifetimes. The excerpts that have been published as so poorly written that it’s no wonder we are where we are.
BTW, not that anyone cares, but I am anti-incentive overall, and anti-public financing because I don’t think state or local governments should intervene in this way… but they do it all the time, for all sorts of business, far outside of baseball, and until that practice ends, baseball is no different than any other business that takes government dollars under the premise of economic impact to a community.
“Above all else, anyone who had a hand in writing, approving or signing the March 27 agreement should never touch another contract again in their lifetimes. The excerpts that have been published as so poorly written that it’s no wonder we are where we are.”
I think people misunderstand what the (clearly rushed) March agreement was about. The March agreement’s purpose was to leave open the possibility of any kind of season, not to reach a resolution on the major issues that would inevitably arise.
Had it not been reached before the MLB calendar began, the owners would have invoked the “emergency” clauses in the player contracts and not paid them anything. Which they can still do, btw, and I increasingly think they will do.
That the players think their agreement to pro-ration in March was a meaningful concession *from* them rather than *to* them is a major part of the inability to reach a deal now. They think they’ve given up a lot but in reality they’ve given up nothing.
I have been trying to make the numbers add up for a few days now and it is making me insane, so I’ll hopefully stop soon. I’ve calculated it out four different ways now, and while I can get it even lower than the $320K per game per team they say they’re losing (note: NOT $640K–that’s per game), I cannot replicate $320K, even using the league’s own figures. I can get a loss of $500K–two different ways, actually. I can get a surplus of $540K. I can get a surplus of about $200K. But a $320K loss? The math literally does not add up. Whatever is going on, I do not trust these numbers at all.
I assume that pro-rated fixed costs — like debt payments — are not part of the estimates of the per-game losses, but maybe the owners tossed them in there to stack the deck. Let’s say the real number is a $250k/game loss in the regular season. How we can get close to that? Let’s start with the fact that all regular-season tv money is absorbed by the players under pro-ration of both salaries and tv contracts. The players would actually get more than that, but let’s just start at zero. Same with all of the fixed costs they’d pay any way. We’re looking only for variable costs here.
Variable “local costs” will be higher on a per-game basis than usual (relative to revenues… you don’t have to pay ushers but you also don’t get the fans that the ushers usher; we’re starting from zero). You have to add that in. There are several key components, most related to health and safety: testing, housing/transportation while maintaining quarantine/distancing, and personnel.
First, on personnel: rosters will now be twice as high as before (30 active players, 20 in reserve that stay with the team). That means higher payrolls, but I’m not even including that for now. Just focused on the extra 25 guys that need to be housed/fed/tested under the health+safety agreement..
Second, more staff will be required than usual: lots more custodial work to clean everything after every use, many more health care professionals, plus the usual cost of umpires/ballboys/etc. I assume all of these people will have to be quarantined too, and the players definitely aren’t paying for that.
Third, construction costs and security needed to get every stadium up to code for the health+safety regulations.
This stuff adds up. Let’s say they need 100 rooms for players and staff in the local Hilton every night… that’s $25k per day right there, probably even more (lots of players have suites in their contracts, which I assume they’ll still want especially if their families are staying with them). I assume the players will get a per diem while in quarantine too, at least on the road but probably everywhere, so possibly the room+board cost is more like $50k per day. Then there’s the cost of the testing. Medicare is paying about $100 per test, so if every player is tested every day that is $5k per day. Then add in the coaches and staff (they also need to be tested) and that number probably doubles or triples.
Let’s say we’re at $60k total so far for just housing and tests, and that’s probably low. We haven’t paid any staff salaries at all, yet. We haven’t done any clubhouse construction, yet, much less paid for any adjustments needed to practice social distancing in workout rooms, batting cages, and media boxes. We haven’t paid for security at the team hotels or stadia yet. We haven’t paid for the food that the teams give players and staff yet. We haven’t paid for transportation yet, which will also be more expensive than usual because of social distancing.
It’s really not hard to imagine how the per-game losses could easily get into the six figures per team for the regular season games. What the exact number is unknowable ex ante, probably, which is why I prefer to just look at the revenue sources (tv) and costs that we know about (player salaries). From just that it’s pretty clear that regular season games lose money in aggregate even before you add in the new costs.
I want to believe the owners are not completely rapacious because I like to think the best of my fellow man… but then they come out and remind us that no, they ARE nasty lizard people. It makes it so painful to follow these “negotiations.”
Like we all do not have enough stuff going on in the world to piss us all off.
Quite frankly, I don’t believe a thing the owners of MLB baseball teams say regarding their revenues and profitability, and haven’t for quite a long time. Owners have been crying poverty since there has been professional baseball.
I started watching baseball before there was free agency for players. Even before it happened, and especially afterward, all we heard for years from owners (and sadly, many of their mouthpieces in the sports media) was how this modicum of financial leverage for athletes who are indispensable to the business would destroy the game. As player salaries rose, fans were subject for decades to a terrible hue and cry from owners (and, again, their media mouthpieces) to the effect that those increasing salaries would lead to the destruction of professional baseball.
The reality? Revenues and profitability (as shown by ever increasing prices paid for franchises) have gone up astronomically over the decades. Oh yeah, all those poor, poor baseball owners.
Owners have resorted to illegal collusion, hiding their financial statements like they’re the holy grail, blackmailing cities and states across the country, greasing the palms of politicians and much else to aggrandize their financial position.
And of course, let’s not forget that baseball has a legal right to operate as a monopoly under its antitrust exemption, a status granted it by a Supreme Court decision that is widely viewed by legal scholars as one of the most patently wrong decisions in American history.
So, yeah… they’re a bunch of greedy, lying bastards as far as I’m concerned.
The owners remind me of the film “The War of the Roses”. They seem willing to destroy baseball,
just so that the players don’t win.
I resigned myself to the fact that there will be no MLB in 2020 a few days ago. I have moved on and I’m immersing myself in the KBO.
I still can’t believe that the players expect to be paid the exact same amount on a per game basis when there are no fans in the stands and the owners are without a huge chunk of their revenue. Pathetic.
Oh, well… Go Doosan Bears!
If I were the player’s union, I’d sit tight. Owners still have stadium and other expenses to pay and boards to whom they answer while they’re not playing games and making money. It’ll break them at some point.
This might work if the owners would make money from playing. It will not work if they wouldn’t.
The owners certainly don’t look desperate to play this season.
I dunno. If I were a team owner and my choices were making A) some money, or B) no money (or, looking at it from the opposite angle, the choice between losing some money or all the money), I’m pretty positive I’d choose A.
Also, showing desperation in a negotiation is essentially telling your opponent that you capitulate. I’d bet there are a lot of sweaty collars behind doors.
Right. It might work if the owners would make *some* money. It wouldn’t work if they expect not to make any money.
Every proposal the owners have made is inconsistent with them expecting to make money in the regular season (which is where player salaries come from). Why would the owners propose the fewest number of games possible if they expect to make money on the games? Why would the owners propose revenue sharing if revenues are going to be high?
The owners clearly expect to lose money on the regular season, but make money on the playoffs, and that has been true since early April. The players should’ve realized this in April and been negotiating for playoff revenues the past few months. The only way to do that is with some form of revenue sharing, since players don’t receive their per-game salaries in the playoffs (mostly because not all players play in the playoffs). Instead they drew a stupid line in the sand by refusing any/all revenue sharing, which all other major US sports have.
They could’ve gotten 50% of all revenue including playoffs, which is probably going to be $4.5-5bn. That’s how valuable the playoffs are to the sport. That’s revenue, not profit, so regular season losses by the owners wouldn’t count against that. Let’s call the player’s hypothetical payout under revenue sharing $2.2bn, even though it would probably have been more than that. After paying the players and covering costs (stadium payments, safety protocols, etc), the owners’ profit would still have been pretty low, but enough to make it worth their while.
That $2.2bn is about the same amount the players would’ve gotten with pro-rated salaries over half a season of games (which is what the players ultimately ended up pushing for, since that 110+ games proposal was not even possible given the calendar when it was proposed). I.e., the players have been negotiating this entire time over approximately ZERO dollars.
That seems like not the best strategy, especially since it maximized ownership’s losses with the most regular season games possible given the calendar. The players getting the same with the owners getting less is a really dumb proposal. But that’s become the players’ position.
And because they’ve botched it up so badly, instead they’re probably going to get about 30% of their expected full salaries, assuming the season ultimately ends up being 50 games at pro-rated salaries, or roughly $1.3bn. Put another way: the players are probably going to cost themselves $1bn relative to the very first offer the owners made. (All of the other owners’ offers have been for about the same total amount of money, just arranged in different ways.) If they refuse to play under the owners’ next plan they’ll lose that $1.3bn too, *and* the owners will use the lost playoff revenue to justify the worst FA markets in history over the next few years, since they all will have taken major financial losses on this season. And the owners won’t even be wrong!
Plus, the players will then have to go into the next CBA negotiations with their players having been paid nothing in a year, without having accrued service time this year, with a union leadership that just collectively cost them over $2bn for no real reason, and with MLB revenues down 100% in the previous year (so every owner in the league will be having major cashflow problems). Sounds like a great way to lose even more, even before the owners win the PR battle by saying they offered a 50/50 revenue split during a global pandemic and economic depression and the players refused to even discuss it.
All of this was obvious a long time ago. Passan wrote an article with the basic math back in early May. (Before you say that we don’t know the owners’ revenues, remember that all of the mysterious stuff is not in play right now. All that really matters is salaries relative to tv contracts, and we know pretty much all of that.)
Why the players have ever thought that this would go well for them is truly beyond me.
sad what these owners are doing to the game. I wouldn’t play at all if i was the players the way the owners are acting….lets just go right into the cba.
Frankly, Its time for the players to start their own league. These owners don’t own anything when you think about it, they only own a logo basically. The players are the league. If players were to start there own league, the owners would have nothing and all the tv dollars would go straight to the players pockets. Could even start the MLBPA network. 100s of empty stadiums to play in, could even rent the stadium they play in now back since no one would be using it. Players have all the control. I wouldn’t budge one bit for these owners the way they are negotiating in bad faith.
I thought about this once, but then went through all the logic and found it is dumb. Not having a central decision maker would be highly problematic. The players decision-making in their union are run by veterans. What decision would the players of a team make when it comes to re-signing (or prioritizing playing time, etc.) a highly respected but declining veteran in their own locker room?
And as much as the owners are adverse to risk in the event of massive losses, how would a group of players react if they were the decision-makers? There’d be a lot of disparate points of view.
They’d vote for the gm and manager of the club yearly. Need x amount of votes. Would easily work…..owners would try to use replacement players but all that would do is turn them into xfl league/minors. People pay to watch the best.
This site has really fallen to shit, hasn’t it. Look at the comments….you aren’t welcome here if you have an opinion that opposes a particular party.
Being respectful and making cogent points go a long way. Dismissiveness, ridicule, and butthurt attitudes don’t, usually.
These type of comments are so tiring and stupid.
It is like if you are against WAR then you are no good for the entire site.
40MM Americans have lost their jobs and the players can’t agree to earn multiple millions instead of tens of millions.
Unreal.
You often hear that owners run their teams “like a business,” which is fair, but the question should be “Which business?”
It usually seems like most owners run their teams more like Macy’s or IBM, closely focused on near-term financials, and less like Amazon or Tesla, where near-term losses from investing in growth are acceptable in exchange for hoping to grow the long-term value of the business.
The growth trajectory of MLB has been negative for a long time. Much of that is due to the short-term profit seeking of owners, who are willing to take reputational hits as long as they are profitable, while not investing in growing the customer base. As the sport with the most fame for breaking the color barrier, which was a change from its status quo thinking, MLB should now be racing to be in front of current and potential customers to market its legacy and future, with the goal of reinvigorating its long-term growth. Instead, owners are stuck again in status quo thinking about their short-term profits.