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.