The MLBPA Has No Leverage
The story of the offseason thus far has been the lack of activity on the free-agent market. As has been thoroughly covered elsewhere, this offseason is the slowest in recent memory, with seven of FanGraphs’ top-10 free agents still unsigned halfway through January.
Not only has this lack of activity generated considerable speculation regarding the cause of the offseason’s glacial pace (with theories ranging from a subpar group of free agents and a lack of competitive races to outright collusion), but it has also triggered talk about what the Major League Baseball Players Association should do in response.
Indeed, as I noted back in 2015, major-league players have seen their share of MLB’s overall league revenue plummet in recent years, with player payroll as a share of league revenues falling from a high of 56% in 2002 to just 38% in 2015. So while this offseason’s lack of activity may be unprecedented, in some respects it is simply the culmination of a trend dating back 15 years.
Various commentators have tossed out a number of suggestions for how the union might try to potentially alter this trajectory. Both myself and Travis Sawchik, for example, have previously suggested that the MLBPA should seek to create a salary floor, forcing lower-budget teams to spend more on payroll, thus increasing the amount of money flowing to the players. Travis also recently proposed the creation of a class of restricted free agents, with the thought that it would help get players to free agency at an earlier age, when they would presumably be more desirable to teams. Craig Edwards, meanwhile, has previously suggested that the union should look to substantially increase the league’s minimum salary and, just today, proposed a strategy for eliminating arbitration.
While all of these suggestions have merit, they all must also overcome a common but considerable hurdle — namely, the fact that the owners are unlikely to agree to any of these changes, at least to the extent they appreciably improve the players’ financial standing. Indeed, in collective bargaining it takes two to tango, and unfortunately for the union, any proposal that figures to substantially increase the amount of money flowing to players will almost certainly be rejected by ownership.
Although the owners’ likely opposition to these proposals is usually acknowledged in passing, these pieces (my own included) typically do not fully grapple with just how little leverage the union currently has over ownership, and thus how unlikely it is that the players could secure the proposed modification.
In order to get the owners to agree to any sort of meaningful change to the sport’s economic structure — such as a substantial increase to the luxury-tax threshold — the MLBPA would have to give something of considerable value back to ownership in return. Unfortunately for the union, there is currently very little that it could offer the owners that would entice them to substantially improve the players’ financial position.
Looking back at the main subjects expected to be addressed heading into the most recent collective bargaining negotiations back in 2016, for example, most related to concessions the union was hoping to gain from the owners. Ownership, on the other hand, was expected to ask for relatively little from the union. Indeed, the main issues the owners appeared likely to address were the creation of an international draft and improvements relating to the pace of play.
Although the owners failed to secure an international draft in the 2016 CBA, they were nevertheless able to impose stricter limits on international signing-bonus pools. While I’m sure the owners would still ideally like an international draft, at this point any such concession by the union probably has relatively limited value to ownership.
The primary benefit of a draft for the owners is to limit the amount of money spent to acquire new talent by eliminating competition for unsigned amateur players. (Rather than allowing players to negotiate with all 30 teams, a draft restricts a player’s market to a single franchise.) With strict spending limits now in place for teams signing most international amateurs, however, any additional benefit of implementing a draft would likely be modest at best for ownership. Thus, the value of this bargaining chip for the union has been significantly reduced.
Meanwhile, under the most recent CBA, the league has the right to unilaterally implement various changes intended to improve the pace of play without the union’s consent. While the league is currently attempting to resolve these issues with the MLBPA’s support, ultimately the union has little leverage in this area as well.
Even if the MLBPA were to initiate talks on what was previously unthinkable — namely, a hard cap on player salaries — it’s not clear that even this concession would appreciably move the needle for the owners. With the luxury tax now operating as a de facto salary cap for most intents and purposes, the owners are currently accruing most of the benefits of a salary cap, without having to agree to the accompanying salary floor that is commonplace in the other pro sports leagues.
Alternatively, the players could theoretically attempt to regain some leverage by triggering a prolonged labor stoppage during the next round of collective bargaining. But it’s not clear that even that alone would compel the owners to make any substantial concessions. Not only have the players shown little appetite for missing any significant number of paychecks in recent years, but the public has also historically tended to side with the owners during work stoppages, meaning that the union would likely have to withstand a potentially severe public-relations backlash during the course of the labor dispute. In short, then, the owners may very well determine that they can simply afford to wait the players out.
As a result, the players union is currently stuck between something of a rock and a hard place. The existing economic structure of the game is becoming increasingly less favorable for players. At the same time, however, the players have relatively little they can offer the owners in exchange for modifications that would meaningfully improve their financial position.
As an aside, this makes the MLBPA’s willingness to agree to a new domestic-violence policy back in 2015 all the more curious. While certainly laudable from a societal perspective, with so few other sources of potential leverage over ownership, it is somewhat surprising that the union would agree to a concession like this without receiving anything in exchange from the owners, especially just a year out from the 2016 CBA talks.
Much can change between now and the next round of CBA negotiations in 2021, of course. Just because the union’s situation appears relatively dire today does not necessarily mean it will remain so three years from now.
It’s possible, for instance, that tanking will become such a problem that the league will decide it needs to take steps to deter teams from engaging in prolonged rebuilding projects. And to do so, the owners may decide that they need to introduce additional financial deterrents to decrease the odds that teams will decide to be uncompetitive for a period of three or four years at a time, deterrents that would not only require the union’s sign-off, but may very well also themselves improve the players’ financial position.
Nevertheless, the union should probably realistically anticipate that it will need to seek some rather substantial changes to the league’s economic model in order to improve its membership’s collective financial standing during the 2021 CBA negotiations. And the MLBPA should probably also anticipate that it will enter those talks with relatively little leverage over ownership.
How the union can try to overcome this handicap will be the subject of a future post.
Nathaniel Grow is an Associate Professor of Business Law and Ethics and the Yormark Family Director of the Sports Industry Workshop at Indiana University's Kelley School of Business. He is the author of Baseball on Trial: The Origin of Baseball's Antitrust Exemption, as well as a number of sports-related law review articles. You can follow him on Twitter @NathanielGrow. The views expressed are solely those of the author and do not express the views or opinions of Indiana University.
Create a “poverty tax”, where teams that spend below this threshold forfeit a percentage of revenue sharing for each dollar their payroll is under. On principle I don’t like the idea that a team can shred payroll to an absolute and become more profitable even when no fans show up to the ballpark (see Miami).
Not sure Marlins are profitable considering they ran up $100s of million in debt prior to sale. BamTech money, and not revenue generated by the Marlins, is likely only thing that will make Jeter et al some money this season if team stays as is. That said, it would not surprise me if they did shed more payroll such that the Marlins actually were profitable. Marlins need a new TV deal.
Question is whether they really lost money or whether Loria was using some tricks to create losses for the balance sheet to milk the team a little more.
Yep, I’m sure tricks to create losses did wonders to the sale price. I’m sure Loria didn’t mind that $100 million of the debt was assumed(i.e., immediately went to other people). The accounting tricks were so good that Sherman’s people refinanced $300 million worth at the time of the sale. Sherman et al should really have done a little due diligence before buying the Marlins.
Good luck getting the owners to agree to that provision.
Well, the tax goes back into the pool, so the owners as a whole don’t lose.
It would hurt club valuations while providing no benifit to owners- so a big overall loss to owners
I think there’s some benefit to owners, especially the high-revenue teams who don’t ever see themselves being in that situation.
First, there’s the impact of the visiting team on the gate (and concessions, for teams where no-shows are an issue even when sales are robust). Do you think that the 2013 Astros drove good attendance in other parks when they were on the road?
Second, I’m pretty sure that the structure of the revenue sharing formula means that any team with really poor local revenue is a bigger revenue drain on other teams, both revenue sharing net payors and net recipients.
Third, there’s a difficult to quantify but likely real negative PR impact on the sport as a whole from commentary that a team in extreme teardown mode is making a joke of baseball.
Increase the MLB minimum salary to $4 million. The CBA’s are five years so $2 million in year one, then $2.5, $3, $3.5 and $4 million.
There’s your minimum floor. There is no escape.
The article is not short on ways to increase MLBPA’s share, the issue at hand is what can you give up to get that increase?
Give up nothing.
Go on S T R I K E until the players demands are met.
That’s what a real union does. If you won’t go on strike and you can’t win a strike then you are not a union, you’re a social club.
“If you won’t go on strike and you can’t win a strike then you are not a union, you’re a social club.”
A-fucking-men
That sounds more like a mafia
Yeah, but real unions don’t have to deal with the PR disaster of a strike. Also, losing one yr of your MLB career isn’t an easy thing to do
As I have commented several times before on one of Nathan’s articles, his contention that the players have experienced a drastic reduction in share of league revenue is wrong (see here for why I think that is: https://tinyurl.com/yawd5cm9). As a result, the premise that the MLBPA is seriously weakened is a faulty one. You can debate who fared better under the most recent CBA (I would suggest waiting until we are more than a year in), but to argue that the players have been pushed to the point of doing something drastic is unsupported by facts. Also, suggesting that the MLBPA has no leverage is similarly shortsighted. A work stoppage would be devastating to owners, whose cash flow (and for many debt service) is larger than ever. Not having games would be a big blow, so I wouldn’t be so sure the owners wouldn’t wilt again under the credible threat of a strike.
The absolute salaries of players still go up but much slower than baseball total revenue. The percentage players share on total baseball revenue declines.
As the chart in the link shows, the percentage of revenue has been stable. Why should players care if they continue to enjoy a significant increase in salaries, but a small erosion as a percentage of revenue? If owners are growing the game, and players are getting paid, then everyone wins. Players are still hovering around 50%, so the idea that they are being deprived their fair share simply isn’t supported by evidence.
I looked at the chart. It seems to support Nathaniel Grow’s point that the players are getting less percentage of league’s revenue. Player salaries are rising much smaller than league revenues.
If you want to argue that owners deserves more share of the pie, so be it. But clearly the facts states players are getting less percentage of overall baseball income. This particular point is indisputable.
Nathan’s point is the decline has been drastic…to 38% in 2015. His basis for those numbers is flawed. I have pointed out why many times, but the claim persists. If you change the narrative to MLBPA has seen their share decline from just over 50% to just under 50%, the narrative falls apart.
Baseball Related Income is calculated differently by different people. In the graph you linked to, it went from 66% to 51%. While Grow stated it went from 56% to 38%. Either way that’s a “drastic” decrease and doesn’t really take away the overall point.
The difference between 23% and 32% is significant, but more important than the decline is the beginning and ending points. My numbers show a system that went from skewed toward the players to about even. Nathan is depicting a change from moderately pro player to drastically pro owner. That is not the same trend, and the conclusions one would draw from that progression are completely different.
Your first point is a good one though. When leagues agree to defined splits of revenue, they now have to figure out the top line. That has been a big issue with how the NFL determines its salary cap. If I was the MLBPA, I would want no part of that arrangement.
Well because baseball has never had a cap, baseball related income isn’t as clearly defined as NFL or NBA. So in that sense we are kind of working with murky numbers. I can agree that there may be some issues with the numbers. And certainly starting and endpoints maybe may be misleading. But I assume in this case Nathaniel Grow did his homework and the article you cited didn’t really offer evidence to the contrary. So I’m inclined to believe that, regardless of the exact numbers, the trend exist.
This kind of analysis has been going on for a while now and I’ve yet to see anyone offer the opposite viewpoint, one where players are making just as much or more money than they used to relative to the overall sport.
The chart shows 13 years of a stable split- that in 2004 the split was 53%, it oscillated between 54% and 59% through 2016, where it was 53%.
The estimated split in the chart for 2017 is 51%.
Part of this decline is because GMs and MLB staff are increasing the costs of people who add wins, entertainment value and revenue but don’t pitch or bat. It’s not just players v owners.
The players make millions of dollars while assuming none of the risk the business owners do. If they want a bigger percentage they should buy a team and stop crying pauper. The entitlement mentality has no basis in reality.
Players’ share has ranged between 50-55% over the last decade plus.
Exactly…why trade a cap for a floor when you’re already getting 50% or so under the current system, and history has shown there are times when the players share increases beyond that? The bottom line is the status quo has been very good for professional players and owners alike (amateurs have been shafted), and the very specific mitigating circumstances (Ohtani, Stanton, attractive trade market, Boras domination of FAs, and specter of a monster FA class next year) this off season do not suggest the game’s financial structure is at a tipping point.
“Why should players care if they continue to enjoy a significant increase in salaries, but a small erosion as a percentage of revenue”
This is the discussion of labor vs. ownership in every industry. I suggest you either read up on labor theories or peddle your pro-billionaire drivel elsewhere.
It’s not just owners v players- that’s the Boras pitch when he is fishing for 30/3 for Pedro Alvarez.
MLBAM and other major advances (i.e. professional staff) mean that high performing staff are now generating huge amounts of revenue in manners that are pretty far removed from swinging a bat or throwing a ball.
The Boras PR war is against the staff’s right to get paid instead of internships (which only end up freezing out the underpriviledged who can’t afford to work for free).
It’s also a Boras clients v amateurs matter (the more Alvarez gets, the less fairly 16 year old kids in the Dominican are treated by their MLB-partnered baseball schools), etc.
Opposing this Boras meme isn’t necessarily pro-billionaire. Revenue doesn’t have to be split only between the upper class, ie owner v free agents.
Relax there, McNulty. I don’t think william is necessarily saying the current situation is ideal, just that it’s not so bad that the players are at a tipping point. With that I agree. While I may complain as a player, I’m happy enough with my current situation where I don’t strike and risk potentially hurting my own position drastically in some way.
Saying Group X has had it “good enough” is generally a really bad argument regardless of the context or industry.
Even using the numbers from your link and even using their weasely net revenue number instead of total revenues, the MLB players recieved 49% of the pie for 2017. Compare that a 56% split of the revenues in 2002 and even you can’t deny that the pendulum has swung increasingly in the owner’s favor.
What is “weasely” about using net revenue? Also, Nathan’s numbers also exclude things like benefits and postseason shares, which are not insignificant numbers. If anything is “weasely”, it is comparing only salaries to gross revenue.
Yes, since the current dynamic implemented by the 2003 CBA went into effect, the scales have gone form heavily weighted toward the players to about even. I am not denying that. What I am refuting is the notion that the scales are now heavily tipped in favor of the owners. As I contend, a fair distribution suggests neither owners nor players will seek drastic changes.
You might want to re-read that article. He explicitly includes players benefits and postseason shares and still comes up with a 49% split. And using net revenue is weasely because it deducts stadium debt from total MLB revenue. Hell, as of the last tax revision, homeowners don’t even get to do that for income tax anymore.
That’s my article. Nathan’s figures are where those items are excluded.
And why isn’t it fair to exclude stadium debt? If owners are building new stadiums to increase revenue, isn’t sharing the net increase fair? If owners have more incentive to increase revenues, players win. I know I’d rather share 50% of a larger pie than get 60% of a much smaller one.
Referring to your article:
When combined with the $408 million players receive in benefits and $84.5 million cut of post season receipts, the players’ share of the MLB revenue topped $4.7 billion.
The 4.7 billion is still only 49% of “net revenue”
And I take umbrage with net revenue because stadium debt is an arbitrary cost to exclude. Owners have a laundry list of expenses to keep an MLB franchise running. Utilities for the stadiums, marketing and promotional costs, interests costs on leveraged loans, travel costs, ect. Why does stadium debt get treated differently as an expense and get deducted from overall Baseball revenue? Particularly when owners can and do continue using the stadium as a revenue source outside of Baseball operations.
Because paying utility bills and travel costs are constant and don’t impact revenue differently based on location. A new Stadium, however, does generate more revenue, so if the players are asking for a set share, it stands to reason that some accounting for the increased financing costs related to the increased revenue should be incorporated.
Even if you disagree with this particular offset, it’s an important consideration, especially if comparing to other leagues, which either segment revenue before sharing, or exclude certain items. By taking MLB’s reported gross income, and using as the denominator distorts the comparison.
And, by the way, the revenue figures I use, which are from Forbes, do include “non-baseball stadium events like concerts and soccer games”, so it doesn’t allow teams to double dip (offset the stadium financing expense and ignore the other related income).
The Forbes numbers are considered to be wildly incorrect. Which is not surprising since none of these teams have publicly available books.
@Brad – no, the Braves have publicly available financial information because they are publicly-traded. They’re owned by Liberty Media, which has a “Braves Group” tracking stock and therefore breaks out segment financial results for the Braves (which also include the club-owned minor league teams and the teams’ ownership in real estate projects near their new stadium) – http://ir.libertymedia.com/financials.cfm
Given record average and median player salaries and the increase of MLBPA salaries across the board and at the top end of the scale(e.g., look at the growth of the qualifying offer amount since its inception for clear evidence of that), the idea of a player strike is, frankly, stupid. Any lawyer who’d advise the players strike under the current circumstances is an amateur.
And as I’ve repeatedly explained to Bill, the basis of his disagreement boils down to a main couple points. One, he prefers net revenues as a denominator while I used gross revenue. Reasonable minds can disagree, but it doesn’t meaningfully alter the trend line, just the resulting percentages.
Second, mysteriously Bill thinks the relevant time period begins in 2003, while my comparison is to 2002. The players struck what was, in hindsight, a lousy deal in the 2002 CBA. Bill wants to have that away by insisting that 2003 to present is the only relevant frame of reference, but it’s not at all clear why that would be. From the players’ perspective, their financial position has deteriorated significantly since 2002 under either set of numbers (~14% in Bill’s ~18% in mine).
So at the end of the day, I stand by my interpretation of a clear and unmistakable trend.
That is a misrepresentation of my disagreement. What it boils down to is:
1) I believe the data is flawed because it uses a mix of USA Today and Cotts instead of MLB official payrolls. It also excludes benefits and post season shares. Finally, it fails to consider revenue offsets. I believe stadium debt is a relevant one, but even if one disagrees, this should at least be examined, especially when comparing to other league splits because they often do segment revenue.
2) Regardless of the trend, or the beginning point, what matters most is the current split, and what conclusion can be drawn from that. My contention is applicable revenue is being split fairly, so neither the players nor owners have cause to upset the status quo. Nathan has repeatedly argued that because owners now enjoy over 60% of revenue, the players need to take drastic measures, including accepting a salary cap for a salary floor.
I don’t understand the resistance to the issues summarized in item #1. The best data is needed, not the most widely available. As it appears that Nathan is aware of why I think his data is flawed, it would make sense to either address those items, or at least argue why, for example, player compensation shouldn’t include benefits and PS shares.
The issues summarized in item #2 are more debatable, but it is disingenuous to argue that the similar direction of a trend is more important than the magnitude and the end point (also using percentage point to compared figures is misleading; the better way to compare the decline is by percentage itself). My numbers suggest the players have gone from an outsized advantage to parity (while still seeing overall increases because revenue growth has been so strong), while Nathan believes owners now enjoy the lion’s share. That’s a significant divergence, and the conclusions that can be drawn are not the same.
If Nathan’s conclusion is that players have ceded revenue share over the last decade-plus, then we agree. However, in this and past articles he has stated that the share has “plummeted”, the players did poorly in the latest the CBA, and they now have “no leverage” going forward. I find those to be all exaggerated conclusions unsupported by credible data.
This post raises legitimate points imo- would be interested and grateful to read a counterpoint response.
I agree that data including benefits and postseason shares is more complete. I compiled the best data I could find back in 2015, but admittedly it was not complete. But I don’t really see the relevance here, as the inclusion of that data doesn’t meaningfully change the greater point, which is that players’ share of profits have declined rather precipitously over the last ~15 years.
For the second point, I’m not sure what the basis is for concluding that only the raw percentage matters, and not the trend. There’s nothing written in stone that says that ownership deserves any particular percentage of revenues. If I’m a player, the question of whether my share of revenues has dropped from ~65% to ~50%, or from ~56% to ~38% isn’t particularly significant. Nor is the difference between a ~14% drop versus an 18% decrease. Instead, what matters is the trend line overall.
In hindsight I wish I’d omitted the specific numbers from my 2015 post in this one, simply because they are irrelevant to the larger point and have become a red herring.
The point of the piece is that the MLBPA currently has very little to offer ownership in return for any significant economic concessions, a point that I don’t think was being fully appreciate at large. As Jeff Passan’s excellent piece from last night makes clear, those both inside and outside the industry increasingly realize that the sport’s economic system needs tweaking. But the union is very poorly positioned to secure meaningful changes in this regard due to an overall lack of leverage.
Whether the players are currently receiving 50%, 43%, or 38% of net or gross revenues is completely irrelevant to the point of this piece.
There is no evidence presented, though, that the MLBPA lacks leverage.
Furthermore, split of net revenue helps define what leverage means in this negotiation. Ultimately, the question of leverage is ‘what could the players give up that the owners want.’ A greater share of net revenue is one answer.
If players actually get only 38% (which is unsubstantiated so far as I can tell), then implicitly one might think ‘well they make such a poor split that they have nothing left to give up.’
If that’s not true, however, and MLB-represented players make 51%, then maybe they have 1% of net revenue to bargain with.
Merely citing that owners publicly requested little from the players in the last CBA, doesn’t mean that owners wouldn’t highly value certain concessions from MLBPA- they would just all be steps backwards generally for players. Owners have asked for more blood testing in the past, or an actual hard cap (we do not have a hard cap.
This series of articles by Travis, yourself and Craig, all make the incorrect argument that MLB basically has a hard cap. 6 clubs were over the cap in 2017. 0 clubs are over the cap at the moment but Boston is expected to go over with Martinez and the Giants might as well, so 1-2 clubs will go over this year. Several teams will blow by it next year, so that 4-6 clubs are over the cap but manage their payrolls to dip below the cap once every few years so as to reset the penalties. Surely none of you would recommend and over/under line for a betting company that 0 clubs will be over the cap in 2018 and 2019- I suspect that even a conservative over/under you guys would set would be 2.5 or higher for the next two season combined.
There are numerous things that owner would likely agree to and offer consideration for- screwing over international players, amateur players, staff, minor league players, etc., or peeling back any of the advances in player rights that have occurred since Curt Flood. Owners agree to non-guaranteed salaries.
A pro-sport union has plenty of leverage short of going on strike- social justice protesting could be one, only fulfilling minimal contract duties, with the union also having tremendous influence with some of MLB’s key sponsors.
If players were making very little, and had nothing to give up left, and had a hopeless leader in charge of MLBPA- sentiment to strike would be strong, and the owners would be enjoying such a windfall that they would be looking to ensure labor peace and worried about a stoppage. So the issue of how much the players have (i.e. net revenue split) is inseparable from the issue of how much leverage the union has vis a vis ownership.
I wasn’t suggesting only raw percentage matters. I was point out that using percentage points instead of percentage is misleading. For example, a decline from 98% to 96% is double the percentage point decline of 2% to 1%, but only 2% vs. a much greater 50%. In other words, it isn’t 18% vs. 14%, but 32% vs. 23%. That’s really just a minor point though.
I also disagree about the irrelevance of the percentage the players are getting because if they are getting 50%, then they have no incentive to seek economic concessions from the owners, so do not have to worry about leverage. My argument is that after an initial correction following the 2002 CBA, share has been stable. You are suggesting that share has been in a steady steep decline. The implications of those conclusions are vastly different.
The link is a more formal explanation of why I disagree with the notion that the baseball business model is broken, and the players are getting the short end. Bottom line, I think you (and the nervous players and agents in the Passan piece) are over-reacting to short term events and relying on misleading data: https://tinyurl.com/ybdxrgpb
I’m going to strongly disagree with the idea that 50% is fundamentally fair. I don’t see any reason why that should be true except that people like round numbers. This came up a lot in the last NHL work stoppage and it was maddening. Skilled workers in other industries regularly make far more than 50% of revenue, not because the workers are dominant (in IT, for instance, this is laughable) but because the structure of the business works that way.
As far as I know there’s no reason to believe that the structure of sports as a business happens to support this particular conveniently round number.
I used the Liberty Media link provided by Dave T above to look at their 10Q. It does include SiriusXM and Formula One as well as the Braves so it’s not perfect. I find the owners’ profits to be about 21.7% of revenues ($734M of $3.45B over the years 2015 & 2016. I subtracted D&A of $320M and added taxes of $258M back in to revenues to try to home in on the labor portion.) Microsoft’s gross profit is about 20% ($17B of 2016 revenues of $85B) as a point-of-reference. So maybe you can allocate 8% of revenues for non-labor items such as ballpark food/drinks/promotions, corporate supplies, and 3rd party services. That leaves you with 70% going to labor — 50% to the ball players and 20% to MLB, ballpark, corporate, and minor leagues personnel.
The Braves are only a tiny fraction of what you looked at in the Liberty 10Q. Sirius is a vastly bigger business, and F1 is also bigger.
Page F-26 of Liberty’s 2016 annual report shows Braves financials: http://files.shareholder.com/downloads/ABEA-4CW8ZW/5889985052x0x939098/1C27769C-3DB3-4A14-A1F9-46D36F66D5E7/Liberty_Media_Corporation_-_Complete_2016_Annual_Report.pdf . These also include five owned minor league teams and (going forward) will include a stake in a mixed-use development next to the owned stadium.
Summarizing, these results show the Braves in 2016 with $262 million in revenue, an operating loss before interest, depreciation, and amortization (EBITDA) of $20 million and a total operating loss (EBIT) of $61 million. There’s some allocation of Liberty corporate overhead costs to the Braves but the annual report appears to say that it’s pretty modest (about $3 million in 2016).
It would be much more helpful, imo, if you would make it clear that this major change happened in 2002-03, fifteen years ago.
Are you arguing that MLBPA represented players should get 66% of the net revenue- and that if Tony Clark cannot deliver this he should quit or the union should consider striking? That seems unreasonable, as revenue generated by MLB staff outside that represented group has skyrocketed.
From reading this series of articles, the focus is put very much on now, and Tony Clark’s leadership, and this offseason in particular- and will someone please think of David Freese! There is also a large emphasis in this series of articles that current split is less than 50-50, with a dichotomous suggestion that it is owners v represented players who must split it all- which invokes a sense that out of ‘fairness,’ owners should get no more than 50%. But as William shows with a more reliable citation than yours, MLBPA represented players have and continue to get 50%+ since 2003.
It seems a bit packaged to be honest- there are a few articles pushing this meme on fangraphs every week, and yet none of them have really put the focus on 2002-2003. Since then the split has been consistent with a basically flat trend line, as WilliamNYY has pointed out with a citation. Your citation to bizofbaseball no longer works.
It is also a bit misleading to gross revenue when, please correct me and apologies if wrong, but the CBA split deals very specifically with net revenue.
It seems extremely unlikely, based on an AP article from 2016 that cites numbers back to 2006, that the trend from percent of gross and net revenue looks similar – http://www.chroniclet.com/national-news/2016/03/21/AP-study-players-share-of-Major-League-Baseball-revenues-remain-stable-over-past-decade.html
Tony Clark is quoted in that article saying that the MLBPA reviews the numbers and basically agrees that the share of net revenue going to players had been fairly constant since 2006.
In that article, Scott Boras cites a percent of “gross revenue” similar to Grow’s figure (43%). The article notes that one big difference is whether that includes gross revenue from MLBAM and the MLB Network or deducts the expenses of running these operations. MLBAM was founded in 2000, and the MLB Network launched in 2009. So MLB Network didn’t even exist for much of the period in question back to 2002, and MLBAM has grown fairly dramatically during the period.
Boras’ position isn’t intellectually coherent. It’s pretty obvious that the non-trivial direct operating expenses of running a large streaming operation and a cable network (production costs, on-air talent, etc.) should be deducted before arriving at the revenue figure that’s relevant for thinking about the player’s share of revenue. MLB didn’t even own 100% of the MLB Network at the time of that article – several cable and satellite operators own about 1/3 of it.
It’s also debatable to claim that MLBAM’s various revenue/profits from deals with HBO Now, the NHL, etc. should be thought of as “baseball-related income”. These non-baseball BAMTech operations pretty much turned into a venture capital deal for a streaming company that just happened to be owned by baseball team owners.
I can certainly see looking with a skeptical eye at operating expenses for MLBAM and MLB Network to make sure that they are as claimed by MLB and that rights fees and income received from them are calculated reasonably. There should be some third-party validation for both, however, now that Disney owns 75% of BAMTech (and has owned 1/3 since 2016). As I previously mentioned, third-parties have already owned 1/3 of MLB Network since around the time of its launch.
Did Hosmer and Cobb really turn down the rumored contract offers? If yes, no sympathy. Turning down 7 years/$140 million because one wants 8 years is just ludicrous. Also…
Has anyone explored the implications of so many players being represented by one agent? Especially Boras? Negotiations for one player can be shared with the agent for many other players. Because it’s all the same agent. If teams shared negotiating positions, players would cry “collusion!”. It’s just as likely that Boras is “slotting” players as it is the owners.
I am pretty sure that concentration of players among agents is much less than the concentration of players among teams. And if Boras really was screwing his less valuable clients to slot players, they would drop him like a rock.
Would they even realise they were being screwed?
The only way for MLBPA to have any leverage is to stockpile money now for a potential work stoppage. May be a PR nightmare, but it is only leverage besides for lobbying Congress to remove MLB protections against anti-monopoly regulations.
There are way too many angles to this for me to think I know the answer, but I suspect there’s a lot of truth to what you say. I think the players need to start preparing now to “go to the mattresses” in 2021.
Stockpiling money is one part of that. I think strategic PR is another. I don’t take it as a given that the public is inclined to side with the owners. A smart, targeted, multi-year effort at messaging the players’ point-of-view could be invaluable in preparing the battlefield.
I don’t know who you hire to do that. Maybe create a DNA hybrid of David Axelrod, Scott Boras, and Jared Kushner to do advance psych-ops.
How receptive would the MLB rank and file be to going on a war footing in preparation for a labor stoppage in 2021? It doesn’t seem like there’s a huge amount of discontent out there.
Let’s see almost an entire generation of free agents repeatedly hold out for better deals that never come, before we talk about a lack of discontent.
MLBPA has a ton of leverage precisely because of how prosperous MLB has become. If there are no games, owners would forfeit large amounts of revenues. They would also face lots of pressure from their business partners who depend on the rich content MLB provides every day. If we accept the premise that the status quo is so great for the owners, why on earth would they jeopardize that with a lockout?
The article argues that Owners would be able to weather the loss of revenue from strike far better than the Players. The advantage swings further in their favor if they dictate the terms of a work stoppage with a Lockout, much like the NFL and NHL have done recently to great effect. The players will also lose the public relations battle (don’t ask me to explain the flawed mentality behind this but the public will turn on the players far more than the owners) So to answer your question, a work stoppage would represent a calculated risk to the owners to maintain the current advantaged position. But in the long run, the loss of revenue from a partial season of work stoppage (lets be honest, that is the longest it would last) would be a fraction of the benefit of maintaining near status quo for the length of the next CBA.
While I agree, the problem is that for such a strategy to be truly effective for the MLBPA, they need to get guys currently in the minors and pre-arbitration onboard with this strategy. The same guys they have been selling out for the benefit of the veterans for the past two decades. May be a bit of a hard sell.
This is a major weapon for the union and they should always be stockpiling for a potential work stoppage. But there are other ways to make the owner’s lives miserable during a negotiation. One is “work to contract”, and their are antagonistic legal maneuvers that could be a PR nightmare for the owners. And they can subtly note that a good relationship is good for solving in-season issues.
I also don’t think the MLBPA has been unsuccessful at achieving small objectives through regular bargaining, although the commenters here generally think they are focusing on the wrong priorities. Winning smaller victories that add up to a big one eventually is the only way you’re going to get any new system, and it will probably take a while.
Interestingly, I think the MLBPA’s strongest PR move would be to advocate for improving wages of minor leaguers. A number of highly sympathetic stories in the press on poor baseball players struggling to get by in the minors for below minimum wage would elicit sympathy from the public in favor of the players. I think they’d have a hard time winning a PR fight in a major leaguers vs owners fight. That would just turn into a spat between mutli-millionaires. The general public already has a distaste for collective action, and would increasingly lose interest if the personal face were guys justifying why they need $10m instead of $5m to play a game.
Nathaniel – Elated that you’re back. You are a great asset to the site, and your unique viewpoint has been sorely missed.
At a minimum, the MLBPA should replace arbitration w/ incentive-based compensation. For the 2-3 years of arbitration eligibility, have players paid at $8mn/WAR. In addition, if I were the MLBPA, I would try to reduce league minimum years from 3-4 years to 2-3 years. The other long-term goal for the MLBPA should be to reduce Team control from 6 years to 5 years.
AFAICT the union is indifferent to the interests of younger players. It’s run by the older players who’ve already reached free agency.
Now, you can’t actually threaten a strike without younger players on board, but they’re not the group the union really cares about.
But they do need a reduction in league subsidies for low spenders, set up similarly to the luxury tax for high spenders. You need both a floor and a ceiling, and the incentives at both ends should be similar, and I suspect that the public would be sympathetic to a claim that an owner should be spending at least as much as what he gets in league revenue and revenue sharing on the actual team on the field.
Well first step is firing Tony Clark
RE: The 2015 domestic violence concession….wouldn’t that just a really bad look for the union to push back on that? I don’t feel like the owners had to negotiate a concession on that one, since the union would’ve been crushed from a PR perspective if it looked like they were protecting domestic abusers
This is a very fair point. I don’t think the union would have sustained that much PR backlash if it had said it wanted to fold domestic violence negotiations in with the rest of the talks surrounding a new CBA in a few months time. But it’s possible they decided otherwise.
Unions almost always take a public relations bloodbath when they push back.
The Union bungled the last set of negotiations, and has generally been too concerned about the needs of the elite free agents at the expense of younger players, those who come through the draft, and minor leagues. We now have de facto salary ceilings without floors, and an acceptance of even the largest market teams tanking, if they want to. I agree they have little leverage. But what they need is better thinking.
I don’t understand how the players let the luxury tax become such a rigid cap right under their noses without ever doing anything about it. I agree with some others that the leverage of a work stoppage is given pretty short shrift in this article. I’m not sure the public would be so pro-owners, especially if the union has a coherent PR strategy.
Once upon a time the MLBPA had tons of leverage.
And they used it to push for ever higher peak salaries for veteran players. They succeeded in their goal: it is quite conceivable that we will see a $500M free agent deal sometime soon.
Along the way, the union has neglected minor league pay, agreed to heavy drags on draft signing bonuses, and pretty draconian limits on international signing bonuses.
The current system works beautifully for the top ten players in the game and dreadfully for minor leaguers. The bulk of the rank and file? It’s all about “paying your dues” and hoping for a pot of gold in free agency.
The old warning seems to apply: “Be careful what you wish for. You might get it.”
The union fought to maximize peak free agent salaries and got it. And in the process gave up the moral high ground and most of their future leverage.
They painted themselves into a corner.
The only way out now is a full reset via strike.
No leverage is right.
The thing is, a work stoppage now would be just as damaging to the owners now as previous work stoppages were. Maybe moreso, since the owners are making even more money now.
The reason the union appears to have no leverage now is that no one thinks that today’s players would be particularly interested in going on strike. Maybe that’s inevitable when you have a unionized workforce with a median salary of $4.5M a year.
First, bad facts make bad law. The current slate of top FAs is (relatively) not very good, and it is likely that there is a disconnect between agents’ asking prices (especially Boras) and teams’ perceptions of the FAs’ respective values. Evidence of this disconnect could be found by referencing any, good projected WAR/$ model. The articles hypothesizing labor problems from the relative delay in signing top FAs are both premature and unlikely to address any real problems.
The second issue is that the trope that the players’ proportion of revenues have gone down significantly is not supported by the evidence. http://www.chroniclet.com/national-news/2016/03/21/AP-study-players-share-of-Major-League-Baseball-revenues-remain-stable-over-past-decade.html
Of course there’s leverage, just get creative. For example, why not announce that the MLBPA is considering going to bat on behalf of minor league players, in court if necessary?
Or threaten that you’ll file grievances about every post super 2 or arbitration cutoff on the grounds that the system is being gamed (which everyone knows it is, so that’s plausible).
“the MLBPA should seek to create a salary floor”
I believe you mean, “the MLBPA should seek to increase the salary floor, which is currently a ridiculously low $12,687,500.”
‘BizofBaseball’ is a defunct site, so your original and fundemental premies about player payroll share shrinking to 38% is unsubstantiated. As Travis mentioned, Boras said in 2015 it had fallen to 43%, but that is only if you include MLBAM. I think this underscores how hard it is to get the relevant data.
IMO, you, travis and Craig are writing with a bit of a bias on this topic- and perhaps inadvertantly carrying the water for the agents by not squarely discussing MLBAM and the difficulty of getting accurate data.
This seems to be a coordinated series with some talking points, aand to me comes off as tone deaf about which group of MLB employees deserve more revenue- compounded by a now missing citation to underlying evidence, and a specific policy agenda of a salary floor (why not more roster spots, fewer cost controlled years?).
There is a lack of clear data showing that the revenue split has changed without including MLBAM revenue. The argument that the players should get some share of the value created by MLB’s tech arm makes some sense, but there is a much more obvious case to be made that non-player staff should get that share. MLB paying revenue from MLBAM to non-player staff will diminish the player share. It’s not just ‘player v owner’ as it’s often said to be- it’s playing staff v non playing staff (and amatuers/intls) as well.
IMO, Scott Boras is on a campaign to highjack the FA market this season so as to push his agenda against Tony Clark and against non-playing staff being paid for the massive revenue they created in MLBAM- all so some 0.2 WAR guys with names from 5 years ago can get paid 8 figures instead of 7. It is notable that the series you, Craig and Travis are writing is very similar to the series on ESPN with Buster Onley and Scott Boras- really pushing – not so much for improved employee rights- but for forcing teams to spend more in free agency. There seems to be a big PR push against Tony Clark, that doesn’t really address the issue of whether the actual player share of revenue has fallen below 50% when MLBAM is not included.
I’m certainly not saying the owners are more entitled to MLBAM money- I’m just not sure Boras’ FAs are the ones we need to help with a salary floor and running out Clark. Paying MLB staff living wages, paying minor leaguers living wages, reforming the intl draft, fewer years of cost control, more 40 man roster spots, more minor league option years, and helping Tony Clark instead of always taking aim at him as feckless or having no plan/leverage, would seem to do more good for the game, whereas a salary floor is akin to creating a ‘Pedro Alvarez slush fund’ for the unwanted name FAs in March.
I can assure you I haven’t spoken to Craig or Travis about this piece. I cited their earlier work as examples of prior proposals that could help the players. I’d have cited articles referencing your proposals if I’d known about them.
I actually viewed this piece as supportive of Tony Clark on the whole. I don’t necessarily agree with everything the union has done under his watch, but I think he gets too much criticism on the whole. As I said in the piece, these trends started long before Clark ran the union, and in many respects there’s relatively little he could have done to correct them in the last round of CBA talks given the union’s unenviable position.
Is Clark qualified for the position?
Thanks for the clarification- agreed on Clark being too heavily criticized, and also appreciate that you are exploring potential ways for labor to get paid more fairly.
If people agree that (apart from this year) there will be some clubs regularly over the luxury tax- then the situation for player’s hasn’t gone backwards under Clarks’ watch so much as commonly portrayed.
If there were a PR campaign to shove him out – by either Boras or the owners- prior to the next CBA, and I’d worry that exaggerations of a hard cap and inconsistent accounting on net revenue split could be the themes used to drive him out – potentially setting player interests backwards while some slick Boras or MLB stooge comes to the rescue with a meaningless salary floor (which the league already has de facto, having several times warned teams against spending too little).
“IMO, you, travis and Craig are writing a bit disingenuously on this topic”
What exactly is your basis for accusing them of intentional dishonesty, and what is their motivation?
IMO it is disingenous to pretend that there has been a recent decline in player revenue share.
The legitimate sources indicate that this is not true-
http://www.chroniclet.com/national-news/2016/03/21/AP-study-players-share-of-Major-League-Baseball-revenues-remain-stable-over-past-decade.html
https://tinyurl.com/yawd5cm9
the significant decline happened in 2002-2003, fifteen years ago, dropping player share from 66% to around 50%.
The original ‘38%’ claim seems to be supported by the now-defunked website BizofBaseball, whereas the above cites provide more verifiable and contrary information.
Opining that an author came up short on presenting info fairly isn’t out of bounds.
I don’t like the idea of a floor. What problem is that really solving? The only problem I think that’s solving is requiring the owners of some teams to direct more of their expense into ‘Bucket A’ which probably widens competitive balance more than it narrows it because that money is now coming out of ‘Buckets B-C-D’. It won’t change what that owner is going to pay or earn. Competitive windows may alter an owner’s willingness to pay out, but not a salary floor. Also, just a week ago, I sensed that this site’s commenters were lauding the current sensibility of owners and FA signings. Right now, the Pirates were forced to realize that even adding a big salary OR EVEN TWO wouldn’t have changed their competitive outlook for 2018 so they maneuvered to hopefully launch a new window rather than just load up on salary for naught. 4 weeks from now we’ll be panning how the Hosmer deal cripples whichever team writes it. A salary floor would ultimately REQUIRE albatross contracts from many more teams.
Alternatively the salary floor could work like the NBA’s (http://www.businessinsider.com/nba-salary-cap-floor-is-meaningless-2013-9), where any team below the floor can choose to reach it by paying out the difference to its current players, rather than signing additional players to contracts that, as you said, would likely be albatrosses
How does the drop in percentage look if we exclude MLBAM?
the MLB and Tony Clark have both said that it doesn’t-that splits have stayed around 50%.
Welcome back, Prof. Grow!
I disagree on the public siding with owners this time around. There is much more discontent with the “asshole billionaires club” and with the downturn in faith of the mainstream media (also owned by “asshole billionaires”), the public is more likely to form their opinion from the horse’s mouth.*
With the right leadership, the MLBPA could win that battle over Twitter, Reddit, and forums like this. Players’ opinions are much more accessible now. In the past, we were subjected to a couple sound bytes from the labor chief, and highlights of Rasheed Wallace saying things like “CTC.” Now almost any player would sit down for an AMA or get something thrown up on Players Tribune, and while some of the candid stuff that come out of that could be disastrous, it’s better than letting the owners accuse the vast majority of players skirting the minors and 25 man roster of “being greedy.” (Insert Rachel Phelps quote here)
* Apparently, there was some research done when sourcing potential expansion cities that the average age of a person likely to watch a baseball game is 57 or some crazy number like that, so maybe the social news theory is not going to work here.
Sadly, they brought this upon themselves with poorly-run MLBPA negotiations within CBA talks over the years.
Great points…
…and I think the MLBPA’s lack of leverage at least partially stems from the notion that the players are both with very diferent Life Experiences and at very different points in their careers–so the players don’t push for a strong union.
Compare the MLBPA to, say, a state Teachers’ Union.
The teachers may be different ages and have somewhat different financial situations but they’re all graduates of the College Rat Race and likely have a similar set of workplace related concerns. Top earner is making maybe 3x what the new hire makes.
The MLBPA has…
–Some guys who went to college with a post-baseball career mapped out in case their ceiling was AA; some guys who may be really bright (not claiming they are not) but dropped out of school at 16 and are working in a foreign country in a foreign language and foreign culture… who may not feel they have rights and feel that baseball is their one and only shot;
–some guys dirt poor; some guys who show up financially set from Day 1 because of huge signing bonuses, a career in Japan, or whatever.
–Guys on the MLB minimum; Mike Trout; Pablo Sandoval; Clayton Kershaw; Dellin Betances…in short, guys at totally different points in their career with totally disparate earning power going forward.
How can you get such a disparate group of guys to sing from the same hymn sheet?
If they’re not unified (this is 1975! We ALL need free agency! We need it NOW!) they’ll never have leverage.
This is the bigger issue with the strike option. A long strike would be wildly effective. Right now, the union cannot even credibly threaten to strike. They need to start taking some steps such as buffing contributions to the emergency fund so it at least looks like they’re getting ready.
I think you underestimate the nuclear option. Media seems increasingly friendly towards players’ issues, and the owners are the ones who most acutely felt the pain of the last work stoppage. Attendance was down for years following the strike. A lot of revenue is at stake – far more than what’s at stake for the players. It’s very much in the owners’ best interest to avoid a lengthy work stoppage.
^^ this. The public mood toward sports has changed a lot since the last prolonged strike. People are more aware of stadium scams, understand that owners routinely cook the books to make their revenue / profit numbers look worse than they actually are, etc. Plus changes in the media ecosystem make it easier for commentary and investigative reporting that’s not friendly to team interests to get out to the masses.
Maybe the casual fan doesn’t care and just wants the team to play, but if there’s a strike, I think an increasing share of fans are going to side with the MLBPA this time around.
The media will change their tune if the owners want them to. You really think the board of Disney and Fox are going to side with the help ?
Collusion would be a total loser of a claim.
When Tim Raines won his collusion case, it was because he couldn’t get a contract that didn’t on its face ridiculously undervalue him.
Look at this offseason – J.D. Martinez apparently have a 5yr/$100mil offer from the Red Sox. Projections have him floating around 2-3 WAR/year, so at $8 million/WAR that’s pretty dang close. Hard to make a case for collusion when players are receiving market value offers.
It is difficult to have any sympathy for the MLBPA when the top players make fifty times the minimum and the AA and AAA players make approximately nothing, creating an enormous incentive to cheat. The focus seems to be on getting more money for their wealthiest members (how can we forget the oppression of the qualifying offer!) and rarely for anything that I recognize as fairness or a safety net. Perhaps loss of fan support is a factor in why the union has no leverage.
Major changes to a CBA won’t happen barring some sort of major financial catastrophe from either the owners or players. Declining percentage of revenue when player salaries are at an all time high is simply not a huge rallying point. So within the current model and the incremental change that is likely to occur the players should do this:
1. 26 player roster (30 extra players paid) this was discussed during the last CBA and is framed around protecting player health.
2. Structured Pre-Arb minimums like 600k 1st year, 800 k 2nd year, 1 mil 3rd. This would have an effect to drive arbitration salaries higher as well.
3. increased salary luxury tax above the rate of revenue growth.
You don’t need much leverage to do this, just building on the history of past CBA’s and the precedent they set. If the owners refused the players would likely view it as unreasonable since there isn’t anything radical in it and it builds on the discontent of the pre-arb players that lingers even after they get huge paydays.
Replace the leadership structure of the MLBPA first, they really should have a labor lawyer leading this group with a player as his VP that can speak the players language but isn’t directly in charge of negotiations.
It seems the only option the MLBPA has at this point is to start a public relations campaign of poor MLBPA v. Billionaire owners leading to an eventual 2021 strike, it will be very hard to get the average Joe to agree with millionaire players in a labor dispute and you will need to start now. The only leverage the union has is solidarity and the fact that they are the product and eventually empty stadiums and television blocks needing to be filled, merchandise collecting dust and so on will be a real problem for the owners because their bottom line is red, in addition to the hopefully successful public relations campaign.
I question Grow’s claim that the owners don’t have much lose from a strike, which he doesn’t examine in detail.
First, it’s contradicted by his overarching claim that the owners are doing well financially under the current arrangement. I agree that teams are generally doing quite well financially (albeit not due to the revenue split trend that Grow claims, per a prior comment and my prior link to an analysis that was also previously linked by Johnny Dickshot).
Second, Grow ignores that over 2/3 of teams have debt ( per Forbes – https://www.forbes.com/mlb-valuations/list/#header:debtValue_sortreverse:true ). In some cases its relatively modest stadium-related debt, and in some cases its far more substantial and tied to recent team purchases. Five of the last six purchases of MLB teams (Marlins, Dodgers, Astros, Rangers, and Cubs; the Padres were the exception) involved substantial debt to fund the deals. Leverage is part of how MLB teams are typically bought these days. The thing about debt is that it needs to be serviced – almost always at least interest – and shutting down the cash flow from your baseball team for even part of a season means that ownership needs to find that cash somewhere else. Putting one or more of the most recently purchased teams in a financial bind due to a lockout or strike isn’t a great look for finding new owners willing to keep paying up for MLB franchises, which is a shared interest of all owners.
Third, we’re in new conditions since the 1994 strike with teams collectively owning 2/3 of a cable network (MLB Network), teams collectively owning a streaming operation, and about half of teams owning at least some percent of their respective affiliated RSN’s. There are lots of potential cash flow impacts here ranging from declines in ratings and ad revenues to loss of MLB.tv subscribers who would need to be lured back. And, for any team that owns part of an RSN with its cable carriage deals up for renewal – I’m speaking here of RSN deals with cable and satellite operators, not the teams’ contracts with RSN’s – does it really want to add losing part of a baseball season to the ongoing challenges of cord-cutting, skinny bundles, and plenty of pushback on sports channel cable carriage fees?
Fourth, we’ve seen quite a few owners/teams become involved in real estate development projects next to stadiums. The Cubs have their projects around Wrigley, the Cardinals have Ballpark Village, the Giants have a $1 billion+ development underway next to AT&T Park, the Braves are part of a mixed-use development next to their new ballpark, and the Rangers have an entertainment district under construction (plus a new stadium due to open in 2020). The common theme of these various developments is that they’re mixed-use or entertainment projects that are tied to the idea of being next to a ballpark where people attend 80+ games per year.
There’s also a general trend that we’ve become a society with a lot of viewing and entertainment options, so I don’t know that I’d want to take the risk of lasting damage to my franchise as some fans find other ways to spend their time and simply don’t come back.
Add it all up, and owners have plenty of reason not to want a strike. The players have their own desire not to forfeit paychecks, of course. But I think that the players getting some combination of a jump in the luxury tax line (perhaps with future growth pegged to total league revenue), an arb process that yields somewhat higher salaries, and a fairly big boost in minimum salaries is achievable. Or maybe they focus instead on adding a 26th spot to rosters, or some adjustments around the edges of the revenue sharing formula that penalize teams for cutting payrolls to very low levels (as Grow mentions, the league and some teams could see merit in the latter to eliminate the PR headache of extreme teardown/rebuilds). I don’t think that they’ll get all five of these in a single CBA negotiation, but their leverage to get some of them is that the owners don’t really want a strike either. And maybe the owners would see some value in those arb process changes also shifting toward more of a modern, WAR-based framework, which I think would be divisive within the MLBPA membership.
This is an excellent (though too long, just kidding) post that is buried at the bottom of the comments section. Specifically, I think a closer look at the debt and ancillary losses would be helpful. I wonder how many contracts teams like the Cards and Braves have that are contingent on baseball actually being played?
Thanks. I actually agree that it is too long. Summary TLDR of why owners are highly motivated to give on some points in the next CBA negotiations to avoid a strike:
(1) Teams are generally doing well financially (though I differ with Grow’s view on the player’s revenue share).
(2) Most teams have debt service (at least interest), some of them quite a lot.
(3) The league collectively (MLBAM and 2/3 ownership of MLB Network) and about half of individual teams (partial ownership of RSN’s) have cash flow at risk in business arrangements that differ from 20 years ago. Loss of RSN carriage by cable/satellite operators is a looming fear in particular – even without a strike – and losing part of a season could be a catalyst for RSN problems.
(4) Several teams/owners are turning their stadiums into the centerpiece of real estate/entertainment developments. That doubles down on prior points about cash flow streams at risk and debt service costs.
(5) The proliferation of viewing and entertainment options increases, in my view, the risk of lasting damage to MLB’s business from a strike. Some fans find other things to do with their time and don’t come back. That also ties back to point 3.
Regarding the latter, I’m pretty sure that it’s impossible from the outside to know how team’s local TV rights fees contracts would exactly deal with a work stoppage. Logically, I can’t imagine that the contracts simply pay the teams for games that aren’t played. I’d think that the most team-friendly terms (that are plausible) would be something like a partial payment of TV rights fees for missed games that is then clawed back by some reduction of fees over the rest of the contract. Basically, the RSN fronts the money but gets “paid back” over a long period of time. The least team-friendly version of it would presumably be “no games, no rights fee payments.”
As for debt, the Forbes list ( https://www.forbes.com/mlb-valuations/list/ ) has estimates for those numbers. It’s a bit screwy to quantify dollars because Forbes lists debt as percent of franchise value, but it looks like the Dodgers and Cubs have the highest dollar amounts at a bit over $400 million. Eyeballing the list, it looks like 18 teams have over $100 million of debt, which includes stadium debt where applicable. There are only six teams listed as debt-free.
And I’ll emphasize again the point on how teams are bought these days and how that’s helped drive the big franchise sale prices that we’ve seen. Debt is used to fund a portion of almost all of these franchise purchases. What lenders crave is certainty and limited downside risk. Right now what lenders (and prospective owners) see is a sport whose teams almost all have solid financials and that hasn’t had a work stoppage since 1994. I don’t think that a relatively brief offseason lockout or strike changes that view too much, but missing a meaningful number of games (i.e., revenue and profits) could negatively change that perspective.