MLB’s Latest Proposal to Players Hardly Looks Like a Winner by Jay Jaffe May 27, 2020 The clock is ticking on Major League Baseball’s return to play, at least under a proposed timeline that would allow for a three-week spring training in June, an Opening Day in early July, and an 82-game schedule that follows the rough outline of the typical baseball calendar, with the bulk (if not the entirety) of the postseason in October. Over the past couple of weeks, the league and the players have attempted to find common ground with respect to both health and safety issues related to the COVID-19 pandemic as well as the financial ones, the latter with considerably more acrimony — so much so that the threat of no baseball in 2020 still looms, even after the owners made a formal proposal to the union on Tuesday calling for the game’s highest-paid players to bear a disproportionate burden of the financial hit. Via USA Today’s Bob Nightengale: The plan, three people with knowledge of the proposal told USA TODAY Sports, does not include the same 50-50 revenue-sharing split the owners agreed on two weeks ago that was never submitted to the union… The proposal instead includes a sliding scale of compensation, guaranteeing players a percentage of their salary during different intervals of the season, while also including a larger share of postseason money. The players earning the highest salaries would be taking the biggest cuts, while those earning the least amount of money would receive most of their guaranteed salaries, with the union determining the exact percentage splits. Via the New York Post’s Joel Sherman: One person who had been briefed on the proposal said the expectation is that players due to make $1 million or less in 2020 would be made close to whole on a prorated basis for games played. Thus, if someone were making the MLB 2020 minimum of $563,500 and 82 regular season games (almost exactly half a season) were played, they would receive roughly half their pay, about $282,000. But players at the top of the pay chain such as Gerrit Cole and Mike Trout would get less. If that were in the 50 percent range — as an example — then Cole, who was due $36 million, this year would receive half of about the $18 million he would be due for half a season or roughly $9 million. This sounds more like an attempt to divide the union between the wealthiest, most highly-visible players and the rank and file, and early indications are that it has not been well-received. The Major League Baseball Players Association has not formally commented (more on which below), but as Brewers pitcher Brett Anderson wrote via Twitter, “Interesting strategy of making the best most marketable players potentially look like the bad guys.” Recall that two months ago, MLB and the Players Association announced an agreement that gave the league a great deal of flexibility in its attempt to salvage as much of the 2020 season as is feasible, while also protecting the players against the possibility that the season could be canceled entirely by addressing the question of service time. Under the plan, players were advanced about $170 million in salary — about 4% of the teams’ cumulative $4.27 billion payroll — for April and May. They also accepted an agreement that if the season did start, salaries would be prorated based upon the number of games played. While some states have begun to reopen as some of their COVID-19-related restrictions have been lifted, the reality is that with no vaccine yet available for the highly contagious virus, any return to play will have to be done — or at least begin — without any fans in ballparks, as has been the case in leagues in Taiwan (which recently began admitting limited numbers of fans again) and South Korea (which is still playing in front of cardboard cutouts, noise-making robots, and cheerleaders), two countries that did much better jobs at containing the outbreak. For MLB, no fans in attendance means considerably less revenue for teams; commissioner Rob Manfred has said that about 40% of MLB’s operating revenue derives from gate and gate-related areas — tickets, concessions, program sales, parking, signage, luxury suites, and so on. On May 11, MLB’s 30 owners approved a plan that included a 50-50 revenue split with players, something the union has historically fought against, tooth and nail. As The Athletic’s Evan Drellich explained: Historically, the union has abhorred revenue-sharing arrangements between players and teams, because in every other sport a promise of a salary floor for players comes with a maximum, too — a salary cap. The union would note that owners never share in their profits from selling teams, among other arguments. The sport’s last work stoppage, the 1994 strike, centered on owner efforts to implement a salary cap. But most germane right now might be the union’s position that player compensation for 2020 need not be reduced further following a March agreement in which the players agreed to prorate their salaries in a shortened schedule. The Players Association likely would see any attempt to adjust the economics this year — be it via revenue sharing or another method — as an attempt to help only owners’ bottom lines, not players’. Despite the owners’ approval, the plan was never formally presented to the players because it was clearly a nonstarter. As MLBPA executive director Tony Clark told Drellich and Ken Rosenthal, “This is not the first salary-cap proposal our union has received. It probably won’t be the last… That the league is trying to take advantage of a global health crisis to get what they’ve failed to achieve in the past — and to anonymously negotiate through the media for the last several days — suggests they know exactly how this will be received.” Shortly afterwards, MLB presented documents to the union regarding the financial implications of playing without fans, which according to a subsequent Associated Press report included a projection of $640,000 lost per game played without fans ($4 billion total) and 89% of all revenue going to players. But as our own Craig Edwards illustrated, those numbers weren’t all they were cracked up to be. The whole article is worth a read, but among other things, Edwards noted that the losses did not include MLB’s estimate of central revenues that get distributed to teams (around $1.35 billion), but did include deferred amateur draft bonus spending ($425 million). He also noted the potential for discounts to regional sports networks — nearly half of which are at least partially owned by teams — flowing back to clubs in a manner not considered baseball revenue. Baseball Prospectus’ Rob Mains, a former Wall Street analyst, poked many a hole in MLB’s presentation as well while noting that its various issues “portray MLB as sloppy, ignorant, and/or deceptive… You can get away with this sort of thing if you’re doing PR. It’s unacceptable in a negotiating document. The presentation that AP reported is full of omissions and misinformation. It’d be rejected by the professional investors I knew.” (Additionally, here it’s worth remembering the words of former MLB CEO and president Paul Beeston, who in the late 1990s boasted, “Under generally accepted accounting principals, I can turn a $4 million profit into a $2 million loss and I can get every national accounting firm to agree with me.” In other words, even if all of the numbers are above board, it’s easy for the owners to conceal their profits and cry poor.) While the union points to the March 26 agreement as having settled the matter regarding salary reductions, the AP report says that the deal “is contingent on playing in front of fans at regular-season ballparks.” Given that won’t be the case, the agreement committed both sides to “discuss in good faith the economic feasibility of playing games in the absence of spectators or at appropriate neutral sites.” It’s against that backdrop that MLB has presented this latest proposal. Along with his colleague Jesse Rogers, Jeff Passan laid out what the sliding scale would look like in a report yesterday for ESPN: The formula the league offered, for example, would take a player scheduled to make the league minimum ($563,500), give him a prorated number based on 82 games ($285,228) and take a 10% cut from that figure, leaving him with a $256,706 salary. The scale goes down as salaries go up, with every dollar: $563,501 to $1 million paid at 72.5% $1,000,001 to $5 million paid at 50% $5,000,001 to $10 million paid at 40% $10,000,001 to $20 million paid at 30% $20,000,001 and up paid at 20% Under a schedule such as this, the top paid players, such as Trout ($37.7 million according to RosterResource) and Cole ($36 million) would be paid less than a quarter of their full-season salaries (or less than half of their prorated ones, though for clarity I’ll stick with the first construction). Trout, again per Passan and Rogers, who would “make $19,065,843 on a prorated basis over 82 games, would have a base salary of $5,748,577 — though players would be paid for only games played. Trout could make upward of $2.5 million more under the proposal if the league completes the World Series.” As Passan and Rogers noted, 65% of all major leaguers make less than $1 million, an imbalance that has the potential to set off infighting among the players. While this proposal does bear some resemblance to a progressive taxation scheme, the question that needs to be asked is why it’s the millionaires, whose careers have limited windows, bearing the brunt of the economic impact instead of the billionaire owners for whom annual profits — and for MLB, which has seen revenues grow for 17 straight years, there have been a whole lot of those — and losses pale in comparison to escalating franchise values. That’s without even considering the disproportionate risk the players are assuming by returning to play amid the pandemic. It’s not just their livelihoods that are at risk, it’s their lives. They can’t write those losses off. Per Sherman, MLB’s proposal does call for players “to receive a financial bump if the postseason were played to conclusion, since MLB receives its largest share of national TV money from the playoffs.” Per Passan and Rogers’ report, that amounts to a $200 million postseason bonus pool: “$25 million for the completion of the division series, $50 million for the league championship series and $125 million for the World Series. A significant amount of the postseason bonuses would go to higher-paid players, with minimum-salaried players receiving $5,512.” According to the AP report, the postseason brings in $787 million in additional money; via Nightengale, that “would be inflated to about $1 billion with the postseason format expanded to 14 teams instead of 10.” This proposal hasn’t been greeted with enthusiasm by the union. Also via Sherman: The MLBPA says the proposal involves massive additional pay cuts and the union is extremely disappointed. The union also says the sides are far apart on the health/safety protocols — Joel Sherman (@Joelsherman1) May 26, 2020 The union is not commenting on if this is a dead end to negotiations on this concept or if there is room to bargain. — Joel Sherman (@Joelsherman1) May 26, 2020 Unfortunately, the delay between the owners’ vote on the 50-50 scheme and the formal arrival of this much different looking proposal has run precious days off the clock, quite possibly by design in order to pressure the players into taking any deal that will get the season underway. The union, which will share the plan with the players, will quickly have to decide whether this is a framework that allows room for negotiation or whether it, too, is unworkable. It’s possible, for instance, that the players could counter by setting higher percentages than the above, ones that still represent reductions from the prorated salaries, but with a significant amount of the money deferred. Here it’s worth noting that for the amateur draft, the current plan calls for those who sign to receive a maximum of $100,000 this year, with 50% of the remainder payable on July 1, 2021 and the rest on July 1, 2022. For the players making higher salaries, the money could be deferred across longer timelines, perhaps even veering into Bobby Bonilla territory, as the New York Post’s Ken Davidoff suggested. Beyond haggling over the prorated salaries, both sides could seek concessions in other areas. The latest AP report suggested, for example, that players could propose a longer season that would include more doubleheaders and thus a higher starting point for prorating; that they could propose suspending the luxury tax for 2020 and ’21 to give higher-revenue teams more money to spend; and that they could propose that lower-revenue teams receive additional competitive balance picks in the draft. Right now, however, all of this has a very 1994 feel, with two entrenched sides playing chicken as the clock runs down. At the moment, even without considering the various needles that need to be threaded with regards to the health and safety protocols, the possibility of a 2020 season may be slipping away.