No Fans, No Deal Between Players and Owners?

The end of March featured a bit of relatively good news on the baseball front, as MLB and the MLBPA agreed on a deal that appeared to address issues like service time and player compensation during this unusual season, allowing for a smooth path forward once and if it is safe to begin play. (Amateur players, who saw the rounds of the June draft dramatically reduced, got a far less good bargain.) The deal looked to be a good compromise from both sides, seemingly ensuring that labor questions would not get in the way of an abbreviated season. However, recent reports, which keyed off comments from Mets owner Fred Wilpon to New York governor Andrew Cuomo, indicate that the peace is not quite as secure as was once thought.

As initially reported, the deal seemed fairly straightforward. The players would receive a salary advance of $170 million that would not need to be paid back in the event of a cancelled season. In addition, the players were to receive service time consistent with what they had accrued in 2019 if no season was played. The players and owners agreed that player salaries would be pro-rated to the number of games played, with service time calculated in the same fashion. The owners received a guarantee that players would not sue for their 2020 salaries. The owners were also given the ability to defer more than a quarter of a billion dollars of draft and international bonuses to future years while the reduction in rounds would eliminate between $50 million and $100 million from the draft pool entirely.

But now there is division between the two sides over whether the deal assumed that games would be played in empty or full stadiums, which could result in further player salary concessions. Wilpon’s comments to the governor, which were then relayed to the governor’s brother on CNN, indicated a belief the players would need to agree to take less money. In a piece by Ken Rosenthal for The Athletic, agent Scott Boras indicated those details had already been hashed out and that the contract language already considered the possibility of games played in empty stadiums. From Rosenthal’s piece:

A separate section of the deal, listing the conditions for games to resume, says the commissioner’s office and the union “will discuss in good faith the economic feasibility of playing games in the absence of spectators or at appropriate substitute neutral sites.” Similar phrasing exists in other parts of the agreement as well.

Jeff Passan, who read the agreement, previously reported some of the details of the conditions necessary to start the season, noting:

• There are no bans on mass gatherings that would limit the ability to play in front of fans. However, the commissioner could still consider the “use of appropriate substitute neutral sites where economically feasible”;
• There are no travel restrictions throughout the United States and Canada;
• Medical experts determine that there would be no health risks for players, staff or fans, with the commissioners and union still able to revisit the idea of playing in empty stadiums.

The AP summary of the deal at the time echoed the language in the ESPN report:

There must be no government restrictions on mass gatherings or travel restrictions throughout the U.S. and Canada, provided the commissioner will consider ‘appropriate substitute neutral sites where economically feasible.’

Reading the plain language of the latter two quotes, in particular the word “where,” there’s no apparent consideration of re-opening discussions, as the condition of economic feasibility would already have been met. That the language is in the section on conditions to start the season, and includes mostly safety considerations, doesn’t leave much room to argue that the phrase means that other provisions of the contract would somehow be superseded or require additional negotiations other than whether the parties would be willing to start the season with bans of mass gatherings still in effect.

The language in the Rosenthal piece is slightly different. It requires the parties to do something, namely to have a good faith discussion about the economic feasibility of playing games without fans. It is this language that deputy Commissioner Dan Halem argues would require a re-negotiation should it be determined that empty stadium games are necessary. From the AP:

“In the agreement reached earlier this spring, the commissioner’s office and the MLBPA agreed that the season would not commence until normal operations — including fans in our home stadiums — were possible,” deputy commissioner Dan Halem said in a statement, going on to cite the provision for future talks. “If circumstances require, we will, consistent with our agreement with the union, negotiate in good faith over a framework to resume play without fans that is economically feasible for the sport.”

Generally, any good faith duties will not overrule other specific provisions in an agreement. In this instance, the union can argue that the specific, separate provisions regarding compensation would take precedence over any generic duty to negotiate in good faith. As Tony Clark responded:

“Players recently reached an agreement with Major League Baseball that outlines economic terms for resumption of play, which included significant salary adjustments and a number of other compromises. That negotiation is over,” union head Tony Clark said in a statement Monday.

So on one side, we have the league saying more negotiations are needed, while on the other, we have the union arguing that compensation has already been decided. Clark has previously indicated that players are willing to consider playing in empty stadiums and to discuss such a possibility with the owners. The players could argue that playing in empty stadiums is a concession given that other parts of the contract within the same section discuss concerns for player safety. The players could ask for greater allowances to help keep families together and safe. It likely doesn’t take a whole lot for the players and owners to satisfy the requirement of good faith discussions about playing in empty stadiums. Ultimately, it doesn’t really matter who has the better legal argument regarding the contract. The players are likely going to be able to reasonably refuse any request by owners to reduce pay beyond what was previously agreed to, take their $170 million, and head to the next offseason. If either side wants to make more money, they will have to play the games.

As a practical matter, the players and owners could end up with difficult decisions. When or if it becomes apparent that the only feasible way to start the season is to play crowdless games, the owners will have to do some difficult math. Rob Manfred has indicated 40% of revenues are home stadium-related, in line with Forbes’ figure of around $4 billion. As to how that $4 billion figure might be made up, we already have the players discounting their salaries. If, for example, 100 games are played, players are giving up more than $1.6 billion in salaries. As mentioned above, players made amateur spending concessions that come close to $400 million this year. Expenses will likely go down if games are played in empty ballparks or at neutral sites (one estimate was by as much as 40%), and if teams can save even 25% of their expenses, that might mean another $1 billion dollars. Factoring in 2019 team profits of $1.5 billion per Forbes, and the league as a whole might end up turning a profit if they can keep all of their television revenue.

We don’t know what circumstances might be required to ensure that teams and the league get their television revenue, but they aren’t in trouble, yet. They will likely need to play a lot of games, though. Unless the league and teams can keep some or all of their television revenue without actually playing, the owners will have a very strong incentive to get the players on the field and get as much television money as they can. With $2 billion in local revenue, plus additional money from network ownership stakes, another $2 billion in national deals, and additional revenue from MLB.TV, there are considerable sums that would potentially be left on the table if games aren’t played. The owners could play hardball with the players and request additional financial concessions and hope the players blink, but there are a huge financial disincentives to risking an entire season. Hopefully, it doesn’t come to that.