The Threat of a Strike Might Not Help the MLBPA by Nathaniel Grow January 23, 2018 Last week, I took a look at the unenviable position in which the Major League Baseball Players Association currently finds itself — and, in particular, the relative lack of leverage it is likely to have over ownership during the next round of collective bargaining in 2021. In addition to noting that there are few substantive concessions the union could offer ownership, my post last week also briefly discounted the extent to which the threat of a work stoppage would benefit the players. The point probably merited further discussion, however, so this post is intended to more comprehensively explain my thinking in that regard. How a Work Stoppage Would Most Likely Arise To begin, it’s important to understand how a work stoppage would likely unfold during the next round of collective bargaining. As I previously explained back in 2016, any labor stoppage in Major League Baseball would — at least for the foreseeable future — most likely come in the form of a lockout by ownership rather than a strike by the players. From that post: While MLB’s previous labor disputes have most frequently involved the players going out on strike, that would be unlikely in this case, since a strike by the players in the middle of the offseason would give the union little leverage over the owners. Instead, player strikes are most effective when they come in the midst of the playing season, depriving the owners of valuable television and ticket revenue. This is the reason why MLB players went out on strike in August during the 1994 labor dispute, for instance. By sitting out games during the pennant chase and playoffs, the players imposed the maximum financial pain on ownership. A strike in December or January would not have nearly the same effect. While baseball has enjoyed unprecedented labor peace for over 22 years, this helps explain why all recent work stoppages in the other professional sports leagues — including the 2011 labor disputes in both the National Football League and National Basketball Association — have come in the form of a lockout, rather than a strike. Rather than allow the players to dictate the timing of the work stoppage, owners in the other leagues have learned in recent years that they are better off initiating a lockout themselves during the offseason in order to gain leverage over the players union, thereby increasing the likelihood that the labor dispute is resolved before it consumes too much of the playing season. Indeed, following the 1994 MLB players strike, the last seven work stoppages in the other three major U.S. sports leagues have all taken the form of a lockout by ownership. So if a labor stoppage is to occur in 2021, it would, more likely than not, result from the owners electing to lock the players out. That having been said, the MLBPA could, admittedly, try to get the jump on ownership by preemptively going on strike sometime during the 2021 playing season, ahead of the expiration of the CBA that December. Such a strategy would carry considerable risk for the players, however. Not only would the players have to voluntarily elect to forgo their salaries during a strike, but they’d also risk facing a potentially severe public-relations backlash by preemptively triggering a work stoppage during the 2021 season. Considering that the public has traditionally tended to side with the owners over the union during prior labor stoppages, explaining to fans why the players have chosen to endanger the end of the regular season and playoffs by striking before the CBA has even expired could be a particularly tough sell. This is especially true considering that the union’s likely motivation for the strike would be to change an economic system in the sport that many fans would view as having been quite beneficial to the players. Moreover, preemptively going on strike ahead of the expiration of the CBA would also carry some potential legal disadvantages for the players, as well, as I’ll explain in a future post. So although it is certainly possible that the union would choose to preemptively strike in 2021, any talk of a possible players strike is, more likely than not, misplaced. Instead, the more plausible scenario is that the owners would elect to lock the players out sometime during the 2021-22 offseason. To be sure, a lockout would not be entirely cost-free for owners. During an offseason lockout, for instance, teams would undoubtedly find it harder to market season tickets, corporate sponsorship opportunities, etc., for the coming season. And the longer the lockout dragged on, the more it could potentially cost the teams both spring-training and regular-season ticket and television revenue, as well. On the whole, however, owners would be expected to lose considerably less revenue during a lockout predominantly transpiring during the offseason than they would during an in-season strike by the players union. The likely timing and form of a work stoppage in 2021-22 helps inform why I believe that the threat of a labor stoppage would not, in and of itself, provide as much leverage to the MLBPA as might commonly be assumed. The Owners Are Well Positioned to Withstand a Work Stoppage Moreover, while individual cases may vary, today’s owners would appear to be, on the whole, better positioned to withstand the short-term financial losses they would sustain during a work stoppage than was the case in previous years. Indeed, today’s owners benefit from a variety of different sources of revenue that, at least in the short run, do not actually depend on any baseball games being played at all. First, unlike in decades past, today all 30 MLB teams can rely on a number of other, league-owned streams of revenue that would steadily continue to flow during a lockout. Most notably, the league’s continued financial interests in MLB Advanced Media and BAMTech — the digital media subsidiary recently partially spun off to The Walt Disney Company — would provide teams with continued sources of revenue during a lockout. Similarly, the league-owned MLB Network would provide additional revenue for teams during a work stoppage. Specifically, in addition to advertising revenue, the network is currently estimated to generate around $200 million per year in carriage fees from cable-television providers (like Comcast, DirecTV, etc.), fees that are typically negotiated on a multi-year basis, and therefore would continue to be paid during the course of a work stoppage. On that same note, a number of teams now also own their own regional sports television networks, ventures which themselves would be expected to generate advertising and carriage-fee revenue for the franchises during a lockout. Even those teams that have opted to sell their regional television rights to an RSN owned by another company may also, depending on how their contracts were negotiated, potentially continue to receive some broadcast revenue during a work stoppage. The National Football League, for instance, previously was able to require both ESPN and NBC to continue to pay the league its television rights fee even in the case of a lockout. Any MLB team that negotiated a similar provision with its RSN could thus potentially continue to receive some or all of its regional television money during a lockout that extended into the regular season. And if MLB itself negotiated similar protections into its league-wide, national television contracts with ESPN, Fox, or Turner, then teams could potentially continue to receive a share of those revenues as well. Meanwhile, because a number of teams have recently invested in real-estate developments surrounding their ballparks — such as The Battery outside Atlanta’s SunTrust Park and the Ballpark Village in St. Louis — these clubs would presumably continue to collect rental income from the bars, restaurants, and shops renting commercial space from the team under preexisting leases. Finally, today’s owners are, generally speaking, wealthier and possess more diverse business interests than in prior generations. These varied business interests would also, at least in theory, provide a potential buffer on which owners could fall back for a few months, helping them weather the storm during a lockout. In short, then, unlike a generation ago, MLB teams today can depend on a variety of durable streams of revenue that would likely continue to flow during the course of a work stoppage. And while it is certainly true that some teams are also carrying higher debt levels today than in years past, these varied sources of revenue would help these owners continue to service their debt and other operating expenses during a work stoppage. Perhaps even more significantly, it is also important to note that the owners have a particularly strong financial motivation to reach as favorable a deal as possible with the MLBPA in order to help ensure that the long-term value of their franchises continues to rise. Given the steady escalation in team values over the last few decades, ownership interests in MLB teams have effectively become predictably appreciating assets in their own right. While a number of factors ultimately affect a franchise’s market value, the relatively stable and predictable nature of the profits that the sport’s existing economic model allows teams to generate is certainly an important component. As a result, the owners have a strong incentive to oppose any CBA terms that would shift a significant share of league revenues to the players. Indeed, any short-term losses experienced by the owners during a work stoppage would likely pale in comparison to the long-term impact of a CBA that allocated hundreds of millions of additional dollars per year to the players, with such concessions potentially affecting both teams’ annual profit margin and the longer-term value of their franchises. Admittedly, if a work stoppage dragged on long enough, then the short-term revenue losses and overall damage to the sport would, at some point, inevitably change this financial calculus for the owners. And to be sure, fault lines could develop between various groups of owners (large market versus small market, those continuing to receive RSN revenues vs. those that do not, etc.) should a labor stoppage persist too long. Nevertheless, while reasonable minds could certainly disagree, it appears that, on the whole, MLB owners have both the incentive and resources necessary to withstand a work stoppage, potentially even a relatively lengthy one, without incurring too much financial pain. The Players’ Resolve Is Less Certain The question then becomes whether the players are likely to have the necessary resolve to withstand a lengthy work stoppage, as well. In recent years, the union membership has appeared to prioritize creature comforts such as chefs in the clubhouse and extra elbow room on spring-training buses over securing the most favorable financial terms possible from ownership during collective bargaining. Thus, preparing the players to dig in for a protracted labor dispute will, as Craig Calcaterra recently noted, likely require a considerable effort by union leadership both to educate its membership regarding the importance of the financial matters at stake and convince players to sacrifice a half-season or more of their relatively short playing careers (and accompanying unmatched earning potential) for the greater good. Building this sort of unity is often easier said than done, especially among a union membership that spans a much more diverse array of income levels and cultural backgrounds than was the case in prior generations. The immediate financial toll that a prolonged work stoppage would have on players making the league minimum salary, for instance, would likely be quite a bit different than for those players with tens of millions of dollars in the bank. Similarly, a lengthy labor stoppage would have different potential career ramifications for players nearing the end of their playing days than for those solidly in their prime or in the early stages of a big-league career. Meanwhile, because free agents will be unable to negotiate new contracts during the course of the labor dispute, these players may be left in a particularly anxious state of limbo. And without any games to play in the U.S., some international players could potentially face visa issues arising from an extended lockout or strike. Moreover, should the players wish to meaningfully improve their financial position in the next CBA, then they will be in the unenviable position of either having to try to claw back compromises to which they’ve already agreed in prior CBAs (such as by pushing for more substantial increases to the luxury-tax threshold than in recent years, or a shorter amount of service time before a player becomes eligible for free agency), or else trying to extract entirely new concessions from ownership (such as by introducing a salary floor). Securing meaningful changes like this will often prove more difficult than simply holding the line on the status quo, as the MLBPA did in prior rounds of labor strife when it vigorously opposed the introduction of a salary cap into the sport, for example. Despite these potential impediments, it is certainly possible that the players could nevertheless remain unified throughout the duration of an extensive work stoppage. The union could help matters, for instance, by beginning to set aside money for a lockout fund to provide income to players during a labor stoppage. But given the recent bargaining history between the parties, as well as the owners’ various financial resources discussed above, it wouldn’t be surprising if ownership decided to test the players’ resolve for a while should the 2021 CBA talks hit a snag. Thus, it would appear that the mere threat of a work stoppage alone by the MLBPA is unlikely to provide the union with considerable leverage over ownership. Instead, the union membership would likely have to be prepared to dig in for a particularly lengthy and painful work stoppage, or else incorporate other strategies should it wish to substantially improve its membership’s financial standing.