Player’s Union Counters MLB Proposal With More Baseball

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.

We hoped you liked reading Player’s Union Counters MLB Proposal With More Baseball by Craig Edwards!

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Craig Edwards can be found on twitter @craigjedwards.

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sadtrombone
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sadtrombone

If the furloughs represent which teams are willing to sit out, that would mean the Marlins, A’s, Angels, D-Backs, Mets, Rays, and Reds (and maybe the Nationals, depending on how you look at it). That’s interesting because I would have guessed for sure that the Cubs were part of it based on their overall cost-consciousness. and the Marlins, A’s, D-Backs, and Rays get very little benefit from the ownership proposal, and I’d expect they’d benefit substantially from the owners’ revenue sharing agreement this year (in the Marlins’ and Rays’ case, they may even make more money since they barely have any gate revenue anyway).

I’d guess the core of the cancel-season-owners includes the Angels, Nationals, and Mets, since all of them would save huge amounts of money in the latest proposal.

dl80
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dl80

It also may be just that those owners are the ones with the least available cash and the most current debts that they are not able to pay.

sadtrombone
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sadtrombone

Well, what Olney’s report said was that the owners willing to cancel the season mapped on well to the layoffs and furloughs. But it’s hard to see how that squares with the offer the league put out last week.

averagejoe15
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averagejoe15

It’s an interesting list because there are separate biz ops and baseball ops considerations. From a business standpoint some of these teams’ owners may prefer to just minimize their losses and their risk by shuttering things up instead of entering uncharted territory here.

From a baseball ops standpoint the list is more interesting. I would have a hard time believing the Reds, Nationals, Rays, and A’s would be inclined to forfeit a season rather than try and compete for some kind of championship given team control and competitive windows. Then again baseball is very different than it was 20-30 years ago and I’m not sure how much winning really matters to some of the current crop of owners.

Could make the same competitive window argument for the Angels except Moreno is the one owner that is consistently, explicitly referenced by sources as being a hardliner during proposal discussions.

martyvan90
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martyvan90

It totally matches. Whether we accept, that’s a different issue. Each team has a different balance sheet, but the basics of financing baseball are such that from a short term perspective they will lose money. Long term a different story, not playing baseball in 2020 is bad for owners, players and fans. And fans are the paying customers in case we forget… and the fans won’t forget if there is no 2020 baseball.

averagejoe15
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averagejoe15

Regarding revenue sharing (both between teams and potentially between MLB and the MLBPA), small market teams should actually be substantially negatively impacted under covid conditions.

With a covid season in play local revenues (generally making up more than 50% of shared revenue – $118M/team in 2018) will be drastically reduced for all teams (no gate and ballpark related revenue for any team, less local advertising revenue, etc.). So the only revenue to really be shared is the national revenue (tv deals and merchandizing – $91M/team in 2018). This is still a significant chunk of change, but for the small market teams who rely on both local and national revenue sharing to fund operations this is an enormous loss.

The teams that will benefit the most from the proposed revenue sharing agreements are those that own significant percentages of their cable networks (Red Sox, Cubs, Blue Jays, etc.) since that revenue is not subject to revenue sharing.

1. http://www.captainsblog.info/2020/03/07/looking-under-the-hood-of-mlbs-revenue-sharing-plan-yankees-baseball-red-sox-mets-how-does-baseballs-revenue-sharing-work/25425/
2. https://www.baseball-reference.com/bullpen/Revenue_sharing

sadtrombone
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sadtrombone

Hm. Interesting. My understanding was that the owners announced that they would share 50% of all revenue this year. That definitely favors teams who owns % of other cable networks since the money isn’t quite in that pool, but teams like the Angels I think don’t own a significant portion of it.

fjtorres
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fjtorres

Don’t forget the teams with little or no playoff hopes.
If the only real money (big if) is the playoffs, then half the teams will be happy enough to skip the season.