Last week, MLB proposed that major league players take a $1 billion pay cut beyond the pro-rated salaries they’d already agreed to under their March deal. Last Tuesday’s proposal was not met positively by most players, and they had pretty good reasons to be upset. Now the MLBPA has responded to MLB’s proposal, with Jeff Passan first reporting the details followed quickly by Evan Drellich and Jared Diamond. The focus of the union’s response centers around more games, which would take regular season play into October, but it also includes potential salaries deferrals and expanded playoffs for this season and next.
On it’s face, this proposal might not look much of a step forward to getting baseball back in 2020. After all, the MLB proposal asked for a billion dollars in cuts to player pay; adding 32 games to the schedule and increasing player pay by nearly 40% means an extra billion dollars for the players. A source told Jon Heyman the deal was a “non-starter” for owners. But while the deal might not be looked upon favorably by ownership, there are several aspects of it that invite negotiation.
At least publicly, there seems to be a fundamental disagreement between the players and owners regarding whether regular season games make money for baseball’s owners without the presence of fans. In MLB’s presentation to players from last month, their claims of a $640,000 loss per game missed huge chunks of revenue that need to be included to arrive at a more realistic revenue figure. When I ran the calculations based on MLB’s own numbers, I found that MLB generally would make, after accounting for pro-rated salaries, about $170,000 per game. Those numbers actually edge slightly higher the more games are played due to MLB’s inclusion of some fixed costs, like buyouts. Even by these conservative numbers, which come directly from MLB and leave out considerable baseball-related revenue as well as marketing opportunities (or losses), that means that in 32 more games, owners make another $974 million while paying the players another $840 million or so, netting MLB another $134 million overall. While MLB’s public posture is that regular season games cost money, former MLBPA lawyer Gene Orza theorized in an Evan Drellich and Ken Rosenthal piece that Rob Manfred and the owners want more games just like the players do, but it is a better negotiating tactic to have the players ask for those games. So while more games might be something that the players have a strong desire for in order to make more money, it appears to be mutually beneficial, though certainly some teams will end up better off than others.
The players offer to stage an extra round of playoff games this year and next, as well as an All-Star Game and Home Run Derby, might put another half billion dollars or more in the pockets of the owners in terms of additional broadcast rights, though the idea for additional round of playoffs in 2020 was included in the owner proposal. Where there was a billion dollar gap in salary alone in MLB’s latest proposal, there’s an argument that the players have bridged about two-thirds of that gap in their latest offer.
Players also offered to defer to $100 million in salary if there are no playoff games. Given that the playoffs might be worth $1 billion in television rights this year, the $100 million in deferments isn’t likely to be met with much enthusiasm by the owners, but it does represent a basis from which to negotiate and indicates some willingness to compromise without opening up the March agreement regarding pro-rated salaries, per Eugene Freedman, a union lawyer and occasional Baseball Prospectus contributor. (His conversation with Ben Lindbergh and Meg Rowley on Effectively Wild is worth a listen for those wanting to learn more about the legal intricacies of MLB and the MLBPA’s negotiations.)
Most of the other aspects of the deal don’t cost anything or provide owners significant amounts of money. Players who are at high-risk, or who have family members at high-risk, of suffering negative health consequences due to COVID-19 would still receive salaries under the player proposal, but, in addition to it being the compassionate thing to do, those players would be replaced by minimum-salaried players. Players not deemed as high-risk would not receive salaries this season if they choose to opt out. Providing another $100 million as an advance in June doesn’t cost the owners extra given that it would come with a deal to play regular season games by the end of the month. Providing greater access to players in terms of having them mic-ed up during games will help MLB with its broadcast partners and helps to promote the game, but doesn’t create or relieve any direct financial burden.
As for the owner response, hopefully it will come soon. Over the weekend Buster Olney indicated that some owners were intent on skipping the season without cuts to the player salaries from the March agreement:
Sources say there is a group of owners perfectly willing to shut down the season, to slash payroll costs and reduce losses, and the disparate views among the 30 teams have been reflected in the decisions to fire and furlough.
This comes after months of owners repeating over and over again that they will lose money on every regular season game played. MLB’s first proposal catered to the big-market teams with high payrolls. What the profits and losses for this season will be isn’t clear, and how a season played under the March agreement versus there being no season at all affects revenues varies greatly by franchise. Those comments to Olney aren’t a negotiating tactic or even really a warning sign to players. They’re posturing to Rob Manfred and fellow owners on the part of those who made them that if a deal that benefits them can’t be worked out, they might torpedo the entire season for everyone. While the owners might not be pleased with the players’ offer, it is a step toward a season. Baseball’s owners have become used to sharing billions in profits over the last half-decade. This season, they need to come together and share in the losses — or at least help ensure that all teams come pretty close to breaking even — so that the sport can move forward and avoid a colossally short-sighted mistake.
Craig Edwards can be found on twitter @craigjedwards.