Parsing MLB’s Claim of a $4 Billion Loss
Last week, MLB presented documents to the player’s union regarding the financial implications of playing the 2020 season without fans. In an exclusive report, the Associated Press has revealed a considerable amount of the contents of those disclosures. The main takeaways are in the title — “MLB projects $640K per game loss with no fans” — and the third paragraph, which reads:
Teams say the proposed method of salvaging a season delayed by the coronavirus pandemic would still cause a $4 billion loss and would give major league players 89% of revenue.
That $4 billion figure was echoed by Commissioner Rob Manfred on CNN on Friday, except that he indicated in that interview those would be the losses if no season is played. Given that these documents are an attempt to convince the MLPBA to take less money and to put public opinion on the side of the owners against the players, it is fair to take these figures with a bit of a grain of salt. Let’s try to work through the numbers and answer some of the questions raised by the information in the presentation as reported in the AP piece.
First, the big question.
Are the owners going to lose $4 billion?
No. At least, they won’t if games are played. There’s a graph in the AP piece that shows team-by-team losses from an 82-game schedule played with no fans in the stands. The losses range from $312 million for the Yankees down to $84 million for the Tigers. The total losses come to around $4.4 billion, an average of $147 million per team and a median of $135 million. But this figure is misleading as it does not include MLB’s estimate of central revenues, which amount to $1.35 billion. Even taking MLB at its word, the losses immediately move down to $3 billion.
And depending on how revenues and costs are interpreted, the losses might be considerably lighter. First, there’s the issue of amateur spending. In the March agreement, the players agreed to let the owners defer about $425 million in spending to future years, but that $425 million is still included in the loss figure for this year.
There are other ways that MLB’s loss could or will be lessened. MLB’s loss estimates are based on their local media revenue ($2.3 billion) in a normal year, which is right in line with my estimate of $2.1 billion. That estimate did not include the Blue Jays or radio. To estimate revenue for an 82-game season, MLB cut revenues in half to $1.2 billion, and indicated “rights holders have already reserved rights to stop payments or demand refunds if agreed to inventory is not delivered.” These losses might be more theoretical than actual; RSNs might choose not to alienate their partners, particularly if they don’t lose any money. Cable providers would have to seek refunds from RSNs, which might then lead to the networks asking teams to cover those losses. But there’s been little public indication that is likely to occur. In any event, nearly half the teams have an interest in their own RSN. Requesting a discount based on fewer games played could end up in the money flowing back to the team, anyway, but through a manner not considered baseball revenue.
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. That’s perhaps more speculative, but it isn’t completely unrealistic, either, and I’m not the only one questioning the numbers presented by MLB – Rob Mains wrote a piece at Baseball Prospectus that is worth a read.
Are teams really losing $640,000 for every regular season game they play?
No. For one, that figure is spread across two teams, but more importantly, it leaves out a huge amount of regular season national television and central office MLB revenue that gets distributed to teams. And that’s before we even get to the postseason. Giving the MLB owners’ presentation the benefit of the doubt, they say the cost of every regular season game in pro-rated salaries plus the actual costs of putting on the game are $1.87 million, with $1.67 million coming from player salaries. In MLB’s presentation on revenue, they include only the $1.2 billion for local television as well as about $250,000 per game in other local revenue, totaling $1.23 million per game, leaving that $640,000 deficit.
MLB again leaves out national money distributed to teams. According to MLB, those national revenues in a shortened no-fans season will amount to $1.788 billion, which includes TV money as well as money from national sponsorships and products like MLB.TV and their MLB app. Including that revenue turns the amount MLB makes per regular season game to $2.68 million, which makes MLB $810,000 per game. If we were to add an extra round of the playoffs at $250 million, MLB makes a $1 million per regular season game played.
What about MLB’s worries that it will pay players for the regular season and then miss out on the playoffs?
A considerable amount of MLB’s revenue is tied up in the playoffs. If the players were to make it through the regular season, but then an outbreak of COVID-19 prevented the playoffs from taking place, the owners would likely be denied a good chunk of their expected 2020 revenue. According the AP piece, owners are set to receive $787 million in television revenue for the playoffs. In a normal season, that leaves around $1.1 billion for the regular season. MLB has divided that number by two to around $550 million to account for lost games. Add in roughly $450 million from MLB.TV and other central revenue generators, and for the regular season only, MLB looks set to make $2.04 million per regular season game played, netting $170,000 per game played compared to not playing the games at all. Even without the postseason, playing the regular season games brings in more money than it loses, but even if it were a breakeven proposition or a slight loss, playing the regular season games and getting to the postseason gets MLB potentially a $1 billion or more to share. That certainly seems like a financial risk worth taking, and that’s before you even get to the potential marketing value of playing versus the potential backlash of not.
Even if everything goes according to plan, will the owners lose money?
Maybe. As I mentioned earlier, there are scenarios where the owners might not even lose money this year, but losses are definitely possible. Some teams are more likely to lose money than others, but the owners have the option of spreading money around to ensure that no team suffers massive losses while others profit.
And MLB’s claim of never making more than $250 million in a season?
Over the last four years, player payroll has not moved while baseball-only revenues have increased by a $1 billion, to say nothing of baseball-related revenues that have put billions more in owners’ pockets. Keeping EBITDA close to zero is an accounting strategy that reveals little about the financial health of the sport or its value to its owners. In addition to the large annual increases in franchise value, there’s evidence that owners have reaped $5 billion to $7 billion over the last three seasons above and beyond the costs of owning and operating a franchise.
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Ultimately, owners might lose money this season, but just how much is up for debate. If the teams play games, it certainly won’t be the $4 billion figure that is being floated. And even without a postseason, playing the games and paying players prorated salaries results in more incremental revenue per game for owners than skipping the season.
Craig Edwards can be found on twitter @craigjedwards.
excellent work. owners have been lying about their finances for more than 150 years. rob manfred, the car dealer’s lapdog, is the biggest liar of all. we all know how this is going to go. owner are saying, please players, please subsidize our losses, even though you’ve already agreed to forego 50%+ of your salaries, and we promise that revenue sharing will be for this year only. and the stooges on the MLB platforms will cheer them on. then in december, passan and MLB employee rosenthal will both write pieces about season ticket sale s being down, and in january manfred will have a press conference demanding that the players agree to revenue sharing another year. it’s been the wet dream of management for 35 years. and clark is right, they’re exploiting a national tragedy to get there.
One good clue that the owners are not acting in good faith is how they keep negotiating through leaks to the media and waiting for fans to put pressure on the players.
ETA – another good clue is the “entire history of organized baseball”
Management is all about privatizing the gains, and socializing the losses. Same as it ever was.
The modern American corporate strategy
Kinda one sided pro union article, dontcha think?
Craig is just writing on the facts. That all the facts are on the union’s side is evidence of management’s bad faith, not author bias.
Really? An article based on his own estimates and “ifs”? Those are not facts or evidence. Especially when Craig doesn’t have the actually numbers and contracts with the RSNs.
If you interpret a good faith analysis at un-spinning and accurate estimates as “pro union”, it might be a sign…
Do the boots actually taste good, or do you just need to tell yourself they do to stop the crying?
Rob Manfred, ladies and gentlemen!
No no no…that’s Robert Fanred
The article isn’t even about the union. It is fact-checking the claims made by ownership. It’s not like it’s blindly accepting facts provided the union (it doesn’t include *any* information from the union), and even gives the owners benefit of the doubt for claims that can’t be checked.
That you interpret that as “pro union” rather than “pro facts” says volumes.
Not fact checking. Guessing.
I agree ! Along with a bunch of assumptions taken out of thin air. I actually think the article is very misleading and poor.
Actually most Fangraph writers are putting much politics in baseball. The anti Schilling ink is deploreable….quoting the left wing fav
People don’t care who Schilling votes for, they care about his inciting violence vs. journalists and hateful racism. Those aren’t political beliefs.
Lately if I’ve been wondering if those are or are not political beliefs, but I would like to think they aren’t.
As I’ve noted before, MLB lied about changes to the ball, and they lied about the Astros cheating scandal. Why anyone would believe a word they say is beyond me.
Because they can’t lie about the overall business environment that we’re in, the scarcity of actual cash flow (as compared to Forbes “estimates” of franchise value), the lock-up of credit markets (making borrowings difficult), and the very realistic possibility that fans may not return to the stands even when stadiums are open for the spectator experience. I realize that latter point is what gives some people concern on behalf of the players that opening the door to a %-of-revenues is a really bad door to crack open in case revenues don’t actually come back to pre-COVID levels for a long period of time (such that MLB would “cry poor” and look to extend the nominal, effective “cap” beyond just this season.
It’s a bit disappointing to me to read posts here and elsewhere about the business of baseball that are devoid of context of the broader business environment in general. If one’s perspective is to paint the owners as men who’ve cried wolf previously, that’s a fair charge with plenty of support. But there’s also adequate evidence to understand that what we’re talking about right now is the potential scope of the losses, and not whether or not there will be any.
It does feel a bit under-reported to me that part of why the owners are asking for the “revenue share” is because – as Craig noted – the value in the revenue is backloaded rather than ratable. The players absolutely bear the health risk, and that can’t be understated. But the owners bear the risk of agreeing to a salary model for this unique season and then seeing the season and the revenue stream substantially interrupted.
I don’t agree with others that the owners are negotiating in bad faith. The clauses they put in the March agreement about lack-of-spectators were there for a reason. They specifically wanted the ability to continue to discuss this issue if the game returned without spectators and the attendant revenue, and the Union effectively agreed to kick that can down the road for the sake of an agreement in March. It feels very much like revisionist history now for people to argue that the owners negotiated in bad faith in March when what they wanted is written into the document.
[Credit to Craig, this post here is relatively balanced, and much moreso than Rosenthal / Drelich and others. ]
There’s also not enough being written about debt covenants, which I have to believe are an issue for at least a couple of owners. Too many financial projections focus just on the interest cost on debt. But loans have covenants, and – broader, in business – loans are going to get called when businesses are in breach. And in the broad business world, stress-testing for covenants doesn’t typically include business disruptions of this magnitude. Right now, after pure cash flow, debt covenants are a HUGE concern for business owners out there and I have to imagine MLB is not immune.
I wonder if at least one owner is worried that their team could get pulled out from under them to satisfy the call on an out-of-covenant debt obligation.
“I wonder if at least one owner is worried that their team could get pulled out from under them to satisfy the call on an out-of-covenant debt obligation.”
Wiiiiiiiiiiiiiiiiiiiiiiiiilpooooooooooooooooooooooooon
Quite possibly. No secret they’ve had debt issues for over a decade, and Forbes reported in December that the team was still carrying $350M in debt. I don’t imagine many sports owners have that much liquidity lying around, but the Wilpons would seem to be on the bottom of the list of likely candidates. So what are the covenants on that debt, and what is the possibility of breach? As much as people complain about the Wilpons, or other owners, I don’t think we want a scenario where banks and private investment funds take ownership or partial ownership of teams over loan calls. But I suspect that this is why the owners are handling this as they are. I have to believe that, for at least a couple of franchises, this isn’t just about losing money this year, or having negative cash flow for one year This is literally about their survival as a business owner amidst being caught unprepared for the greatest short-term business disruption event of our lifetimes.
I’ve been away most of the day but I’m under the impression that the debt is pooled between SNY and the team, and is at least 1.1 billion. They have a LOT of weird debt covenants, the Mets are just one of them. But that’s Real Estate.
Right??
Cracking up in my home office with the image of Jeff Wilpon learning to code to pay off the Mets credit card
Because the owners loaded a franchise with debt, to take money out of the business and use the interest payments to shield taxable income isnt the players problem, it’s the owners. If they can’t service their debt then they need to recapitalize.
Sure, if you want to turn this into a referendum on capitalism rather than a discussion on what’s best for the long-term health of the sport of baseball as played in the Major Leagues, that’s your right. Businesses have debt. Businesses take advantage of economic incentives offered by the government. Sports franchise owners are not different in that regard than other business owners.
I think there are smart ways to lever up and dumb ways, and sports team owners are the kind of people who are disproportionately likely to lever up in dumb ways (the counterargument is that the distribution is the same, and that we just observe dumb ones more in baseball because it’s more salient), and it hurts something people really care about.
This market correction should be a signal to the MLB and owners that the bigger fool model maximizes on finding fools, and by definition fools do foolish things- like overextend themselves. It’s ludicrous to me that baseball doesn’t do more stress testing before sales of teams.
They don’t actually want real stress testing, because all the other owners care about is pumping up the value of their own team, which is mainly based on sales prices of other teams. Some (many?) want their team’s value to increase just so they can borrow more against it.
The Marlins, potentially.
This is such an underrated point. 10 thumbs up. It’s also not necessarily a comment on the business acumen of an owner. Debt has been dirt cheap for a decade, leaving many businesses exposed to this exact threat. After all, a business can be profitable according to its accountant, but fail due to a lack of cash to pay its bills (or its lender). Owners who have levered themselves highly are likely those pushing hardest to get some kind of income flowing, and soon. I would like to think that Bill Veeck would have come up with something creative by now to fill some coffers…
Late to the party here but how are debt covenants relevant to the discussion?
If the bank takes the team back would someone else not buy it and field a squad?
The franchises are not in debt, it’s the ownership group that(checks notes) brings nothing to the table in almost every case, that is in debt. There is supposed to be the risk of losses in capitalism, that owner loses and the next group comes in.
Great point!
You know what would go a long way towards clearing this up? The owners opening up their books, like the union’s been asking for years.
You’re buying the narrative. The owners do present information to the Union as part of the Collective Bargaining Agreement. The MLBPA negotiated what the owners are obligated to provide. No one is presenting any claims of a breach, that the owners have not provided what they are obligated to.
Some people here seem to be misplacing their ire, which apparently should be at the MLBPA – not the players – but their union and its leadership.
Ah yes, blaming the unions has gone so well for ‘Mericans so let’s destroy another one
I didn’t suggest a problem with the concept of unions, but rather with the continued ineffectiveness of the MLBPA itself. The fact that the MLBPA acknowledges that the payroll could indeed require renegotiation under the March agreement while some players are saying “no way” is just one example of the PA’s ineffective work.
Having their schills plant the idea that a union is ineffective because they too get walloped more often than not is part of how we got to ‘Merica in the first place!
That some guys among hundreds and hundreds have a different opinion on anything is not some grand sign of ineffectiveness
I mean… The MLBPA has been hilariously ineffective over the last 6 or so years. Probably has something to do with the union appointing a guy with absolutely no qualifications whatsoever to run the joint.
1990s, Owners finally realize that being an ex-player lends no qualification to operating a front office or building a team.
2010s, players hire an ex-player (with no training) as their contracting representative
Athletes have never been good at understanding that playing the game doesn’t mean you know anything about the business.
I’m not making any comment on who “deserves” what, just saying the MLBPA is dysfunctional, and the weakness has allowed owners to trample players’ “rights”, primarily by moving new revenues to “non-baseball” revenues like real estate and MLBAM/BAMTECH, and following the luxury tax like a de-facto salary cap (colluding).
The MLBPA of the past got some of the greatest labor reforms in history, and paved the way for contract employees in all areas of the economy, not just sports. The MLBPA of today is… just toothless.
Hi, baseball does not operate within the broad, general business environment. It exists in the same world as your local bakery or whatever, sure, but shares little in common otherwise. No team or owner is in any real danger from this
so wait, the owners said that they’d lose more for playing than not playing, but at the very best, it’s a watch.
Owners are the kid who has cried wolf over and over again.
Yeah, but you know how that story ends, right? With an actual wolf. Which is what we’re, metaphorically, dealing with right now. It’s fine to characterize the owners as having cried wolf in the past, but that doesn’t change where we are at right now. The wolf is here.
What it means for this situation is that absolutely no one can trust the numbers that MLB is putting out. 5 teams that own their RSN are the 5 biggest losers? Fudge numbers much?
If only life were that cut and dried. The numbers don’t have to be “fudged ” (falsified) to be confusing. I assume no one here wants a ton of information on generally accepted accounting principles, international financial reporting standards, and tax law, but suffice it to say that numbers can be presented in a lot of different ways, and the reason for certain financial accounting treatments of items is to ensure standardization across businesses for the users of those financial statements. There’s a huge difference between “income” and “cash flow,” etc. Owners have an incentive to make financial statements look attractive for their users – including banks and non-bank institutions who loan them money. Classifying things appropriately under the discretion afforded within these rules does not equal “fudging” the numbers, as popular of a rallying cry as that might be.
When owners charge the RSN that they own a pittance of the actual value just to make it look like the team is losing money, that’s legal but it’s also fudging. And it’s a bad faith attempt to screw over players.
This here… GAAP is great and all, and yes, there are nuances to how a business classifies debt, depreciation, and revenues for the purposes of showing financials, but there has to be a basic element of good faith in the disclosures. It’s obvious here that there isn’t. “4 Billion Dollar Loss” isn’t a good faith statement about the financial state of the industry, it’s an attempt to deceive.
But we don’t care if the owners get eaten by wolves.
No but we require them to prove their numbers…. Because they you know have a way of fudging them.
Hell, we should be glad to feed them to said wolves. These likely lizard people are a drain on the American people and really human society itself at this point, not even pretending to be otherwise anymore, and getting rid of them all is probably the only effective solution
As Killer Michael of the famed hip hip hop duo Run the Jewels once rapped for one if their hit jingles: We killin’ ’em for freedom cause they tortured us for boredom…And even if some good ones die, fuck it, the Lord’ll sort ’em
Obvy this post reads and is crazy, still doesn’t take care of the legions of orcs these reptilians bred from corrupted gen poppers, but it’s probbly the most straightforward way to get rid of this relentless evil
I realize my comment wasn’t clear. I’m not calling the players “wolves” for trying to protect their health and negotiate for their compensation. The metaphorical wolf here is COVID, a true threat to the financial well-being of baseball and an existential threat to some groups of owners, who collectively face an uphill climb in the court of public opinion for their prior actions (much like the boy in the parable).
If all the players played, and all the owners had to sell the teams (at reduced rates) due to debt service/cash flow issues. Nobody would notice or care, except the owners and their financial advisors.
If all the owners refused to pay the players, and instead arranged for cheaper alternatives, attendance and viewership would quickly reflect numbers seen by college baseball. Everybody would care. We watch Mike Trout play center field, we don’t watch Frank Wilpon pay his debt service.
Under your theoretical problem of owners facing insurmountable cash flow issues, the league doesn’t fold, none of the teams go bankrupt, none of the players miss time. The only thing that happens is that the owner is forced to sell his position. The fanbase/public has usually considered it to be a good thing when an owner is forced to sell the position due to financial mismanagement (see McCourt, Frank, and Loria, Jeffrey).
In addition, I find it hard to believe that any owners are actually likely to face acute cashflow issues that will force a sale. Teams have enormous access to collateral (Parking, Stadiums, Other Real Estate, Team Value, Future Guaranteed TV Revenues, BAMTECH, etc), they also have close relationships with banks and hedge funds, which are all too happy to loan money to MLB (see Wilpon, Frank), which has printed money consistently, through wars, plagues, riots, and all other manner of market disruptions, for well over 100 years running.
Fact: No person who has purchased an MLB team since 1909 has lost money on the subsequent operation and sale of the franchise… 111 years, 0 downside risk
No owner will have to sell the team because of COVID, but if they do… Boo freaking hoo.
Note of praise for Craig Edwards performing acts of true journalism every week and not just repeating PR soundbites. And it is worth noting that there’s strong forces making it hard for some major news outlets to do this in the manner Edwards does it here. Another top notch article!
Yeah, I don’t know what the sports equivalent of a pulitzer is, but can we nominate him for it?
This is good work, Craig, Obviously there’s some speculation going on, but your reasoning looks right. I’d love to see some sort of grid that might give us an idea of what the median player might make under different “revenue sharing” scenarios. Salary based on percentage of games played made sense, but if there are further reductions, what would be the real-world impact on, say, a pre-arb player, a $3M player, etc. How much more salary are they putting at risk? How much of the $4B (such as it is) does MLB expect the players to absorb?
I think this was an insightful analysis; however, the first section on potential total losses was too speculative. Also I would like to know: what is the cost to the owners in a given year for all of the coaching, training, medical care, physical therapy etc that is provided to the players at all major and minor league levels, and without which, let’s face it, none of the players would be very good at baseball?
The cost of developing the players and keeping them healthy directly benefits the owners.
It also directly benefits the players.
But the owners are spending that money because it nets them a positive rate of return.
Of course! So, it would be good to know the cost of that expense when we are being asked as fans to digest any analysis of MLB revenues. The article points out some places where the owners would like us not to focus; I am pointing out that this is one area of expense which the players never seem to mention.
Since there isn’t going to be minor league baseball this year, the minor league costs are likely to be zero or close to it.
Why? Have all the minor league players, coaches, and umpires been furloughed?
If this site wants any feedback, I would say the class warefare / anti-business undertones are a turn off.
Agreed
Real shame you’re being forced to read and comment.
fredsbank, constructive criticism is good for all of us. The purveyors of the site might want to know that not all of their readers share your political beliefs.
I see you’re a member, so not only are you here, reading and commenting on content you don’t like, but you’ve literally *paid money* to sit here, read, and comment on content you don’t like. This is wild to me. It’s your money and your time, but you may want to navigate your browser and your wallet somewhere that will give you more satisfaction. I’m sure there’s somewhere you could go to read about how great the owners are and what favors they’re doing us and how greedy the players are and all that.
I never said I don’t like the content; just some of the comments… and I don’t think trying to cyber-bully me off a site that I like is going to work very well for you. I am a baseball fan, not an owners fan, nor a players union fan, and I can think for myself about what either side says in public a lot better than you obviously can.
OK man, you do you, it’s your time and your money.
Thanks! Would that we could say the same for Rob Manfred and Tony Clark…
Never not the victims these owners and their legions
I am sure that most if not all owners are horrible human beings, possibly even “lizard people” as you suggest below; but then we could plausibly say the same about Boras et al as well. All I care about is watching competitive baseball games in a way that can be made safe for everyone.
Oh yah, the trickle down evil bad guys like Boras and his clients as deemed by the owners’ legions and schills. Meh, whole thing reads like a standard target audience response, the owners and agents are not the same
It’s not good enough to say the owners and agents are not the same. Of course I agree with that. Where we disagree is that I think each side has some valid points, and some invalid ones, when they come out into public and try to elicit reactions from us. You on the other hand seem simply to be espousing the “standard target audience response” that one of the sides wants you to make. As fans we should look out for our own interests instead.
You’re talking as if this is a tit for tat game between two equally powerful parties and it’s not, not even kinda sorta close. One side literally owns a portion of the media and works with the other, maintains control of the narrative, negotiates through said media, steals public tax dollars and land for their private ventures while somehow also getting unnecessary tax breaks that further funnel revenue their way, have been caught colluding multiple times in just the past 3-4 decades, leveraged ‘Merica’s racism into buying brown teenagers on the cheap from other countries while convincing the xenophobic public that these kids are less than, and the list can just keep going on and on…They don’t even really hide it so much as just have their media squash or ignore it, something guys like Keith Law have alluded to after leaving ESPN
Fans calling owners on their shit *is* (are?) acting in their own interests
I’m not arguing with any of you about what you might think is fair or unfair, in baseball or in life. I’m arguing that in public disputes between players and owners, sometimes one side and sometimes the other attempts to manipulate our opinions. When you mention the shady tax breaks and collusion tactics practiced by the owners over and over again, I completely agree with you. However, the players union consistently protects players who lie, steal and cheat as well. When a player gambles, or does PED’s, or uses electronics to steal signs, that player is always protected by his union. You can argue that this is one of the things a union sometimes has to do; and that the owners have more powerful tools to protect them from the law; argue about those things with someone else if you want because that is not what I am arguing about. I am saying that the math in the original article is not convincing, and I suggest that might be because like you, the author has already chosen his “side.”
I genuinely cannot wrap my head around equating steroids, sign stealing, and gambling (all passively allowed by owners until a distraction was called for) with the routine stealing of hundreds of millions in public funds just up front so that some billionaire ATM and pleb management program can exist under the guise of sports entertainment
Great! As I said, I am utterly uninterested in “equating” the two either.
I mean, you did equate them 3 posts up but…yeah I think we were both out of steam 🙂
population control*…tf is pleb management…I don’t hate it but still
The politicized nature of comments is a turn off, this is a baseball site, not a political site.
DBRuns – Nothing in here was class warfare or anti-business. Drawing that generality is you using loaded political terms to expand the scope of the article from talking specifically about baseball to more generally about straw man political arguments.
SenatorGato – You’re right, the post above both reads crazy and is crazy. “Kill rich people because they’re lizards”, implying that anyone who disagrees with you is a shill for the rich lizard people, and using loaded political terms like “pleb management”, are not appropriate for this forum. You even manage to somehow bring racism into your argument.
Both of you, you may be right, you may be wrong… talk about it somewhere else.
Whoa whoa whoa…These are not rich people…neither one of those possibly….Heck, you or I could just be rich…Chris Rock has a great bit on rich
Just wondering… with half the schedule looking gone, do owners relieve any insurance claim$$ for not playing? If so, those dollars have to be shown as well IMO.
I’ve been thinking about it, but almost all insurance types specifically deny any claim due to a pandemic because it would literally bankrupt them all and they have no way to save enough for payouts.
I’m not saying there aren’t some kinds of unique “pandemic insurance” out there, but a) it would be extremely expensive, and b) I would be surprised if most owners purchased it ahead of time.
I truly love baseball. But upwards of 40 million people in this country have lost their jobs. Many people are afraid to go outside, and the medical situation seems unlikely to change any time soon. All professional sports enterprises are currently and will for the foreseeable future be designated as “inessential” by the powers that be.
How much money would MLB lose if there are no games allowed in front of paying fans for the next two years? How much would the players lose?
Also I would venture with very few other sports on TV at that time that TV revenues would be higher on a game to game basis.
Wouldn’t increased viewers benefit ESPN/Fox/TBS and the regional TV networks rather than the clubs since those contracts are already signed (full disclosure, I don’t know, I’m just speculating)?
It totally will help the networks and the regional TV networks.
The ONLY way this will help the teams is for those that own their own regional networks.
Not true. If ratings are high enough for those TV networks, they are less likely to try to claw back payments for the half season that is missed.
Ummm… the networks and RSN’s (at least, the one’s that aren’t team-affiliated) are going to negotiate in their own best interest, which is a whole ‘nother discussion still to come. They will talk abut declining ad rates and ad revenues, etc., even in light of more eyeballs watching the screens.
Interesting read but a lot of this seems more like back of the napkin math rather than anything based on real numbers. I don’t doubt that they are exaggerating things some but I find it hard to believe that this is the true number either. Kind of like those awful Forbes profit numbers that they base on guessing expenses every year that are incredibly inaccurate. The truth is likely somewhere in between these two realities.
Not disagreeing, but this is an article that breaks down the owners proposal from a 20,000 foot view. Back of the napkin math is acceptable for this purpose. The issue I see is that the owners also used back of the napkin math in their proposal, and it is very unacceptable for that purpose.
Craig, could you do a piece on team-by-team debt, as well as the ways in which debt is accumulated and how it’s paid off? My general sense is that the teams most likely to be in the negative are teams that need to pay down substantial amounts of debt, but wouldn’t that apply for both a no-fans and a cancelled season? Basically, just trying to add to the picture of which teams are most affected since the numbers in the AP report are obviously way off
I don’t know whether to hope this idea could occur or lament the amount of time that would have to pass for Craig to decide it was worth it to write 30 team capsules of debt lol
the Braves alone reported $60+ million in profit each of the last two years… The rest of the teams must be horribly inept at running themselves if they have never reached $250 mil total.
It may just be me, but i have zero faith that Tony Clark can safely and fairly negotiate a great deal for the players in this environment. This is way above his head and the players union….too complicated for him to navigate successfully.
The main problem with MLBPA is that it has no idea what it wants.
More money for the players, sure.
But more money for who?
40 year old Pujols is receiving $29M while 22 year old Soto gets $600k and minor leagues need to work a side gig to make a living.
Not saying that it is entirely MLBPA’s fault, because it is not.
But the players are always a step behind on identifying what really matters and two steps behind on how to address that issue.
Frankly, I don’t see that changing in the near future.
Fundamentally, it breaks down to two things.
1. Owners are a pretty uniform entity with similar interests and MLBPA is decidedly not.
2. Owners have become owners through various business negotiations. MLB players have become MLB players by playing baseball really well. Is it surprising the former is much better at negotiation?
Imagine a pre-Arb union chief; that’s the only way things will happen, I worry
Couple thoughts.
I’m not worried about the attorneys reaching a deal……attorneys do that all the time…let them hash it out. The main issue for the players union is understanding the financial implications of each decision. This has been a thorn in their side for decades.
The owners have a whole a whole army of fiancial ivy league mba ex private equity/hedge fund sharks on their team crunching numbers and modeling out scenarios and the present value impacts of each decision they make. These financial sharks in NYC, well it is pretty much common knowledge they are the best and brightest in the world. They are running a business. Does anyone know if the players union has any financial teams? Or just attorneys?
The MLBPA needs to better understand the financial implications of each decision they make…..can’t really do that with just attorneys. They need to treat it like a business. It needs to have a financial vision that starts with the finance team and is then pushed to the attorneys to make that deal happen.
Long summary: Rich guys erroneously cry poor in order to gain concessions from less-rich guys and/or the general public in order to hoard more money for themselves whilst simultaneously putting their employees’ health at risk.
Short summary: ‘Murica.
Every time the MLB says something like this, all my union ears hear is: If you’re this desperate, then we have way more leverage than you and we’re going to get something really, really good out of this.
I think they’re probably lying, but if they really are this desperate let them prove it by showing what they’re willing to give up.
Why are you commenting on any financial issue relating Covid when you’re cyber begging on my favorite and most sacred website and you couldn’t even figure out how to get a PPP loan. I am not a troll, I read this article, I read most articles on this site… it’s just you seriously need to stop. You have a complete blind spot when it comes to the heap you’re shoveling on Covid finances.
I personally don’t believe anything the owners and their lackeys say. Pro sports is run like a big cartel where the owners can do and say pretty much whatever they want with little to no backlash. And because of what our society has been conditioned to believe, the owners get the benefit of the doubt by the vast majority of people while the players are painted as out of touch primadonnas.
Sorry if this had been covered, but on what basis do players not just get their full salary? The teams signed contracts. lot’s of people have rental agreements that they signed that we maybe wish we hadn’t now and we don’t get to suddenly renegotiate, that money is due.
Paying for a restaurant space because it has good foot traffic? Yup, you still owe that money. Paying on a contract to an employee? MLB says maybe you don’t owe that money.
Really the only way a player doesn’t get paid according to his contract is if the team files bankruptcy. If this thing lasts through next year it wouldn’t put it past me to see some of these sharks/owners start to file bankruptcy to clean the books. The owners accounting practices make it so easy for them to do this….as craig stated above the manipulation of ebitda.
Remember when the rangers filed bankruptcy, i believe arod got screwed out of a ton of money. Anyone remember exactly what happened to arods deal?
I’m certainly not a lawyer, but I would think this would depend on what’s actually stipulated in the contract: paid for the season vs paid on a per-game basis, while simultaneously acting on a good faith basis.
With regard to your restaurant comment, yes the restaurant owner would still owe rent, but the landlord, knowing the current circumstances, may choose to offer a temporary reduction/deferral in rent if he/she feels they are a good tenant.
This topic will definitely be of note for us at the Jersey Shore, where renters are already pushing back on their commitments due to lack of seasonal beach badges, closed amusement parks/boardwalk rides, and the potential for the re-closing of beaches and boardwalks if there is an uptick in cases.
Hopefully we continue to show enough progress that the above scenario doesn’t happen.
Rent on a restaurant space isn’t collectively bargained with a union the way baseball contracts are. Baseball contracts (sports contracts) have a clause that allow for the suspension of player contract payments if the season doesn’t happen (strike, act of God like an earthquake, pandemic, etc.). This was the whole reason for the March agreement. If state governments came out and said that pro sports could not be played, and there was no season, then the players would not be entitled to anything (beyond the minimum pay in the March agreement). This type of a labor deal is very different than a rent contract.
Either way, this is collectively bargained with the Union. This is not MLB saying “maybe we don’t owe that money.” All sides agree – without dissent – that if there is no season there is no player paycheck. What they’re arguing about is the clause the owners included in the March agreement that said that player salaries would be revisited again based on the economic feasibility of a season if there are no paid spectators (and concession monies, parking, etc.). The owners say their intent was clear. The MLBPA doesn’t argue that the language isn’t there or couldn’t apply; rather, the MLBPA is arguing that the owners haven’t shown that economic feasibility has been impaired.
So, very different than paying rent. The better analogy would be if a team played in a stadium that it didn’t own, but rather paid rent on. Would that contract require rent no matter what, or would it agree that there is no rent if there is no season? Or would it agree to renegotiate the rent rate in the short-term if the season is interrupted, etc.?
I was wondering about the estimated losses. The dark side of business coming out in force for the good side of the game we love.
One. The agreement a month ago claerly stated:” with fans” No fans, no agreement.
Two. Any agreement now can clearly state: ” one time agreement only. Not precedence.”
Three. Sharing the revenue is American as apple pie. 401Ks …
Four to infinity: PLAY BALL
Give me a break, like you have any contracts or management expertises.
Just another example of privatize the wealth, socialize the losses. I guess they wouldn’t try if it didn’t work time and time again. People are dumb!
Not dumb but rather ‘Mericans
Anyone else ever read their own post after some time and see the dull, repetitive, dipshit inside? My life is really cool so I don’t don’t but the thought occurred running into this post that maybe someone else has
If I’m reading it right, this might be the best comment I’ve ever read… Heres to your apparent self-awareness.
The owners are of course bending the truth in every way possible to make themselves look sympathetic. One thing that caught my eye in the AP article that was not covered in this FG post:
“The New York Yankees alone would have $312 million in local losses when calculating their earnings before interest, taxes, depreciation and amortization. New York’s figure includes about $100 million toward the bonds that financed new Yankee Stadium, money that already has been paid for 2020.”
Umm, there is no way that payments made towards re-paying debt can be counted as an expense in EBITDA. Perhaps there’s more going on there (like another entity took out the bonds, and the Yankees are paying $100 million in rent). But as reported there, the Yankees and MLB are making up accounting rules that are inconsistent with the rest of the world. When the loan was first taken out, did the Yankees book billions of dollars of revenue in that year for the borrowed money? Of course not, and it’d be the same thing as counting the payoff of that debt as an expense now.
(The payments figure into cash flow, but this is *specifically* reported as EBITDA. )
Given the size of the Yankee bond issuance, this could be largely interest expense rather than principal. Of course, interest expense would not go into EBITDA either, but that makes me wonder if this is a flaw in the AP writer’s understanding of the facts rather than the Yankees making an assertion.
This is correct. A lot of times the properties will be owned by a seperate LLC that is owned by the same owners as the team. But the team turns around and leases it from that seperate LLC, but both LLCs are owned by same people. So the teams books have huge lease expense lowering ebitda.