Universal DH a Small Help to Player Salaries
Player salaries keep increasing, but at a pace much slower than total Major League Baseball revenue. There is little the players can do about the gap right now, but when the current Collective Bargaining Agreement expires in 2016, the Major League Baseball Players’ Association will have the opportunity to gain a greater share of revenues in the future. The players have a lot of options: increased minimum salaries, earlier free agency, earlier arbitration, and removal of the luxury tax are all monetary changes that would transfer more money from owners to players and have little to no effect on the play on the field. Two other options, a universal designated hitter and a 26th roster spot, would affect the play on the field, but would not provide the players with significant gains off the field.
As Nathaniel Grow wrote recently, the MLBPA has a problem. In his piece, Grow discussed the growing chasm between player salaries and MLB revenues.
After peaking at a little more than 56% in 2002, today MLB player salaries account for less than 40% of league revenues, a decline of nearly 33% in just 12 years. As a result, player payroll today accounts for just over 38% of MLB’s total revenues, a figure that just ten years ago would have been unimaginably low.
Grow’s piece included the following chart (Payroll data from Cot’s Contracts and USA Today; MLB league revenue data from The Biz of Baseball):
Owners are pocketing more and more money from revenues and have thus far refused to share their increased wealth. The owners and players last shared a roughly fifty-fifty split of revenues in 2005. Since that time, players have received less than one-third of all additional revenue.
In the last decade, for every new dollar that has entered MLB, players are receiving just under 33 cents. The numbers for the players have actually gotten worse during the current CBA which began in 2012.
Over the last three years, players have received less than 30% of all new revenue. In 2014, salaries would have had to be $1 billion higher for the players to receive 50% of revenues, roughly $1.3 million for every active player. The players could have received a 40% raise and still not had a greater share of revenue than they had in 2002.
Of the players’ options to increase their share of the pie, a universal designated hitter appears to be the most likely change. Adam Wainwright’s achilles injury briefly reignited the debate about pitchers hitting. Although there are bound to be many vocal critics decrying the loss of game’s purity, we are nearing 50 years of the designated hitter in the American League, which, just like now, came about at a time of offensive lows and concerns about fan interest.
The designated hitter is likely to be couched as a concession by the owners and a victory for the players, but the amount of money going to the players by adding 15 more DH slots is not likely to create a big dent in owners’ wallets. The average designated hitter this season will make $8.4 million. Assuming that a designated hitter would take the place of a minimum salaried player, that would add roughly $120 million to salaries, a little over one percent of total revenue. That would be a decent victory for the players, but that number is likely overstated.
Not counting the designated hitter, American League teams pay their four bench players an average of $1.8 million. Without the designated hitter, National League teams pay their five bench players an average of $2 million. Interleague play does constitute a small portion of the season, and NL teams still invest some money on a bat coming off the bench. This amounts to a $45 million difference between the leagues spent on the bench. Combining the salaries of the MLB bench as well as the designated hitters, the American League currently pays around $80 million more than the National League. That number is more likely representative of the amount the players stand to gain through the use of the designated hitter in both leagues. Increased competition for sluggers could drive costs up somewhat, although the stereotypical designated hitter is not all that prevalent in today’s game. The amount is not nothing, but when the players are dealing with a $1 billion gap to get to 50% of revenues, getting 8% of that amount is a minor victory and should not be considered a major concession by the owners.
Adding an additional roster spot is another potential salary gain for the players. The 25-man roster has been in place for nearly a century, but it is hardly sacred. Following strikes, teams were allowed extra spots. Teams are currently allowed an extra player for doubleheaders, and the owners had no problems reducing the roster to 24 players in the 1980s as a way to reduce their own costs. With an average salary of $4.3 million, an additional roster spot, in theory, gains the players around $130 million, but this number is illusory. The extra roster spot does not go to a starter, but to a bench player or bullpen spot. The average bench player or non-closer in the bullpen makes just $1.8 million. The added roster spot will go to one of these players and create just $54 million in additional salaries.
This is what adding both measures would have looked like over the last few years:
Those blue and green lines do not cut into the owners’ share (which includes costs), and the impact on the players is not great. As Grow wrote, the MLBPA does have a problem, and there are a lot of potential fixes. The MLBPA could choose to try and make many small gains as a way to close the gap, and making the designated hitter universal or adding an extra roster spot would help their cause. However, if the players really want to increase their share of MLB revenues, they need to take a look at other avenues to achieve their goals.
Craig Edwards can be found on twitter @craigjedwards.
No, because each year there are only 5 or 6 full-time DH’s every year, not 15. The rest of the teams rotate guys through.
And even disregarding that, having the DH be used in the NL won’t increase the roster past 25. With decreased use of pinch hitters (mostly for the pitcher) teams may very well go with one less position player (12 instead of 13) – lopping he last minimum wage guy off the bench to be replaced with the 8th guy in the bullpen. Then the #1 guy on the bench will get to start in stead of pinch hit a lot. I still don’t see any salary inflation. Ryan Howard would simply move from 1B to DH, making the same bloated salary.
In the NFL, LeSean McCoy’s 5/$66.5M deal was referred in the media to as a “massive blockbuster”. The Marlins just threw away $21M on Salty.
Salary caps are a thing. The fact that he got $25m guaranteed makes it a very large deal in the context of the NFL.
They play over 10X more games.
I don’t think the players have any means to make this happen, but what is needed is expansion. MLB could probably handle 36 teams quite well – I recall several articles here and elsewhere that have considered the revenue/team and possible markets. We’ve had massive revenue increases for a long time without any expansion, and I think that caps the players’ gains more than anything.
While that would be a good source of revenue for both ownership (massive expansion franchise fees) and the union (more roster spots), as a fan I don’t want to see it.
We already have a few franchises (Oakland, Tampa, Miami) whose revenues are too low* to provide a quality on-field product and a quality fan experience. And scanning the list of potential locations, I don’t see any markets that look fertile for another MLB team. Metropolitan areas with 2M population and no MLB team: Charlotte, Portland, San Antonio, Orlando, Sacramento, Las Vegas (not gonna happen). Who wants to see more teams perpetually lose and/or play in a dump of a stadium with 15,000 fans?
(*Yes, I know that technically the low-revenue teams COULD afford spend more money on nice things, but the fact of the matter is that owners will always choose to maximize profit over the quality of their product. That’s how they got rich enough to buy an MLB franchise.)
I covered a lot of what you mentioned just below, but I agree. I would say move the 2 Florida teams before adding new franchises. For whatever reason people in Florida don’t give a damn about baseball.
The A’s are only making $20.8m in 2015 according to Forbes, can’t get a new stadium in Oakland, and are being blocked from moving to San Jose. Where exactly are they supposed to direct this meagre profit (for an MLB team) to improve the quality of the product? If they signed a top FA, they’d be broke. They already fronted $10m to improve the stadium with their new lease. So what are the A’s supposed to do?
New York metro could handle another team.
There are definitely not 6 markets ready for MLB teams right now. Here’s the article you’re probably thinking of:
http://www.hardballtimes.com/examining-potential-mlb-expansion-cities-part-2/
The best market listed there, San Jose, is currently being blocked.
Las Vegas is second, and it’s doubtful a sports team would draw great attendance there.
Austin could work, but there’s also 2 MLB teams not far away.
Sacramento is again surrounded by other MLB teams.
Providence would possibly be blocked, and would be overshadowed by Boston anyways.
Charlotte and Nashville have bad MLB demographics.
Montreal is always mentioned, but look what happened last time.
Basically, expansion isn’t looking good.
Expansion never really looks good. Many people in Arizona were fans of Colorado or San Diego or wherever they are from, but people eventually started to come around to see the team. Although the attendance still isn’t great, it can take a few decades before a team’s fan base is established.
You need to look at the context of Montreal. The modern equivalent is Tampa Bay. That is, the stadium location played a major role in their attendance problems. And their attendance was fine while they were good as people will put up with travel inconvenience when the team is good.
In their last few years, MLB was doing its best to kill the Montreal franchise so it’s kind of hard to blame fans for not showing up.
If it weird that San Jose is considered the best option, but Austin is a problem because there’s two other teams within 150 miles.
Expansion?! Teams are already having enough trouble filling out 5 man rotations with quality players.
How many fans would truly be upset if the Rays and Marlins folded tomorrow?
Team Contraction with Roster Expansion is what the league needs to happen.
They also need to implement a salary floor and implement a rule that you have to not only spend, but MATCH 100% of your revenue sharing money in salary or you lose it. That is the only way the players will get the money out of the greedy owners pockets.
Responding to everyone: there’s good articles with a different take: most of the expansion needs to be in the big markets. There should be 4 NY metro teams, 3 in LA, 3 in Chi, 2 in Boston, etc. It’s not going to happen because of the extended monopolies – the league enjoys an anti-trust exemption, and the teams in these cities essentially get the same privilege within the league.
But if it could happen, I think we wouldn’t see much increase in overall revenue–it would be diluted in these super-markets. But it would expand the player’s share.
I’m not convinced earlier FA would increase player salaries very much, especially if arbitration were eliminated. You might then get a 2 round draft with everybody else being a FA Who wants to invest a gigantic minor league system if you can’t control the player beyond 3 years or something? Unless you’re very close to major league ready, the team probably won’t want you. I’m not sure there’s a whole lot the MLBPA can do. I can’t see them striking to make the minimum salary $2 million or something.
The question is whether players should receive benefit from gross revenues or just local revenues. MLBAM was a venture created by MLB that has been extremely successful. It seems likely that MLB believes that revenue should be kept separate from all other revenue (as based on the fact that teams aren’t taxed on that money) and therefore you’re probably comparing apples to oranges.
Again, why should we care about player salaries? If a player goes through all six years of team control, he’ll have made more money than he’ll ever need in life, and that’s just the first three years of team contol, after that, he’ll make more money than his children and close relatives/friends will need and the salaries keep going UP! Studies have shown that after $70,000, employee happiness levels off. Letting teams keep the profits, but forcing them to reinvest them in the minors or by improving quality of life in countries that they opperate in makes more sense.
Think about it, if teams were forced to increase MiLB salaries to living wages, perhaps more players would be willing to stick with the game or would be willing to give pro baseball a shot over a ticket straight to the NBA or NFL. If every year teams were forced to give a minimum of $3 million to establish MLB training/scouting camps globally (assuming the international draft becomes a reality) it might help draw in more kids that would otherwise be playing soccer. And once established and fully funded by MLB, that $3 million min could be applied to humanitarian efforts and you can name the fund after Roberto Clemente, which would truly honor his legacy. Think about what kind of good a minimum of $90 million can bring to kids worldwide and how that kind of charity could enhance the image of baseball globally.
Efforts like these, which would help encourage kids to play baseball, and would help recruit more talent could lead to a direct benefit for teams on the field. Raising MLB minimums only increases the wealth of already wealthy players. According to CNN Money, if you make more than $400k a year (or $100k less than the MLB minimum) you’re in the top 1% in terms of income in the US, so why throw more money at players that wont bring more talent to the game? The owners will see zero benefits from this. Make owners give out their dollars in meaningful ways, we don’t need artificially bloated player salaries that will cause lower income teams to be even further away from signing free agents than they already are.
We should care about it because it has to do with the game of baseball, and this is a website about the game of baseball. This is particularly a website that (in addition to statistics) pays a lot of attention to the rules and policies and business side of baseball. So this article is a thing.
And the question isn’t whether MLB players should get more money. The question is how MLB revenue should be divided between the super-rich owners and the merely-rich players. There is no Option C where MLB revenues go to working class America.
The fact is that the, barring a class action lawsuit by minor leaguers or the creation of a minor league players union, minor league salaries aren’t going to significantly change. The players union does not formally represent minor leaguers, and the players union has repeatedly made concessions that significantly harm minor leaguers (the amateur draft, draft spending caps, international spending caps) in order to receive very small concessions for themselves. Minor league salaries are disgustingly low, and that’s a great discussion– one that has been written about before on fangraphs. But it has nothing to do with the CBA or the MLBPA.
Exactly, it’s not about giving the players more money because they’re poor, it’s about giving them more than 1/3 of the revenue teams are making. Considering the players are what the fans, who supply a significant of money to the teams, really care about it, they’re underpaid in regards to revenue. Of course everyone knows MiLB players are treated poorly, but for the near-future this won’t be changing.
Raise their salaries and suddenly, the fans who are tied more to their region than to the players, have a harder time paying to see their team, their RSN becomes more expensive, perhaps MLB.tv’s prices go up, and the with low incomes have less to spend on acquiring better talent. Sure, that sounds exactly like what the fans want.
I think you’re missing the points. Nobody is saying for the public to put more money into the game. The issue is with more of the money that’s already in the game going to the players who are actually creating that money. It doesn’t matter what the actual dollar figures are, it’s that 30% of revenue to the players is unbelievably low.
Players aren’t putting money into the game, fans are. Raising player salaries can hurt the fans by increasing the amount that they need to spend to be able to watch the game. Because here’s the deal: If owners are forced to spend more per player, they’re getting nothing extra out of it and will raise ticket, merchandise, food costs, etc in order to make it the loses. You make them put those profits into a charitable foundation and it’s a right off! They don’t need to worry about it because they don’t actually lose anything, and to increase MiLB salaries to living wages would cost them much less than giving every rookie $700k just because.
If MLB players were struggling to make ends meet, I could agree that they need a larger share of the profits, and this is where I think you’re missing the point, because that’s not the case, players make more than 99% of Americans, and Americans are essentially the 1% of the world. These guys are the 1% of the 1%. They don’t need more money because they want it, they get pay raises every year once they hit arbitration, and most FA contacts have built in annual raises, oh, and MLB players get an automatic cost of living raise. Yeah, why are we throwing more money at them to not improve the product that they deliver?
Owners didn’t decrease prices when their revenues went way up despite keeping salaries lower. Teams charge what they can charge regardless of what they pay the players. Rising player costs has little to do with ticket prices.
End of year 40 man payroll for the Yankees in 2007 was $218,311,394, at the end of 2014 it was $218,457,904. Ticket prices over that span have increased 56%. The spike started in 2008 after the A-Rod extension, spiked after the NYS was built, and have stayed level around $51 since then, so it appears that they do raise ticket prices based on expenditures, which they should, and they don’t reduce them when those expenditures drop, which is smart. So long term player wage increase can lead to long term ticket price increases that should not be expected to come down when teams spend less.
Who suggested this mythical Plan C? I sure as hell didn’t. My suggestions were focused on recruiting and retaining players, not giving money away to Americans. Players don’t need more money, and Baseball, as a socially conscious business has very real, and very significant issues to address that will better benefit player well being and retention.
My coworker tells me stories about his father who was a minor league player in the Cards organization. He eventually left because he needed to support his family. Another friend of mine, his brother was a MiLB player (I think with the A’s), and he quit professional ball because of the lack of money and the hardships of the lifestyle (apparently he’s now a laywer). My cousin was scouted by the Rockies while in prep school as a SS, he declined all their advances and became a lawyer.
None of those guys probably would have made it to the majors, but if they had a living wage, maybe they could have become decent depth pieces, but we’ll never know. Small investments like that could improve the quality of the on field product, and would be in the owner’s best interests and it’s not like the article wasn’t discussing how to improve the on field product.
This would be the biggest thing that the players (and owners) could do to advance the game. Hell, double the salary of all minor league players and you will reap the benefits of not only fewer good players washing out for financial reasons, but you will gain the services of more/better athletes who dont have to sacrifice for 8+ years to finally get the financial windfall that they could have with other sports more immediately.
If we’re talking about growing the game, especially within the African American community, this is a perfect place to start. We already know how hard it is to make the majors as is, this will make the try a financially viable option for most players. The growth of this option is best for all parties involved.
The larger point here isn’t just about handing the players more money, it’s about taking that money out of the owners pockets.
What have the owners done to deserve a larger cut of the profits over the last 2 decades other than sit there and collect it?
Raising the major and minor league salary levels are not mutually exclusive. There is plenty of money to do both.
Have you seen the profits that the A’s are projected to have by Forbes? It’s $20.8m, so lets say that we give every arbitration eligible player on that roster $800k more and every minimum wage player another $400k more. In this case, the arbitration eligibles earn a total of $9.6m more. Add in pre-arb players and that’s another $6.4m. Now you just ate $16m of the $20.8m because you gave everyone a decent raise. Are the players happier? According to studies, no. Did you just destroy 77% of the team’s profits? Sure did! But what did the owners gain?
What have the players done to deserve guaranteed retirement if they get hurt in their first MLB game and never play another? What have the players done to even more ludacris amounts of money for playing a game? The owners put in a HUGE financial investment, the A’s cost the current ownership $180m. The owners, depending on their involvement, can be very involved or hardly involved. It’s their money that gets spent when they sign free agents, it’s often their money that goes into improving their stadium, it’s their money that signs draftees, it’s their money that upgrades spring training facilities, it’s their money that allows the team to travel, they pay for almost everything that they need for the team to play. Without that money, there is no team. You could replace an entire MLB roster with MiLB players, and people will still watch, not as many will, but they still would. If all MLB players died tomorrow in some catastrophic event, people would watch entire MiLB teams playing in their MLB team’s stadiums and uniforms.
It’s not like these guys aren’t getting raises or are paid poorly. There’s no incentive for owners to pay more for the same quality of the product, and it’s not fair for those prices to come back on the fans in the way of merchandise, concessions, and ticket prices. It’s not fair to ask low revenue teams to all of the sudden increase payroll nearly 16% because other owners make too much. It’s not fair to further price those teams out of free agency because overpaid players some how deserve to be even more overpaid.
These aren’t WalMart employees living off of food stamps while the company they work for earns hundreds of billions annually. These are millionares working for billionares who want more because they don’t make enough millions relative to their billionare bosses.
Great ideas!
Plate Appearances for batters 14-27 by year
2014 80423
2013 84525
2012 78465
2011 81758
2010 80603
2009 79388
2008 80841
2007 76641
2006 71286
2005 66139
2004 68777
2003 74198
2002 71534
There appears to be a trend towards younger players. There is just too big a gap between $/WAR for FA players and players under club control. Veterans are losing their jobs because there is a excessive supply of cheap labor. Making FA sooner isn’t going to help. Young players need a bigger piece of the pie or there is little incentive for MLB teams not to go with young backups over veterans.
Also, additional wild cards, teams are just trying to play to the middle. This makes it even less of an incentive for teams to over pay $/WAR. This doesn’t affect the stars, but the lower tier guys just trying to win a backup spot.
Basically, arbitration needs to be sooner or some other solution to shrink the gap between FA and club control player salaries. I don’t see moving up FA as a solution as it is just going to cause more guys being held back like Springer.
The trend you are seeing could be (and probably is) a direct result of drug testing. There are simply less physically capable old players in the game taking up 25-man roster spots, those spots could only be filled by younger players.
It certainly has nothing to do with “excessive cheap labor” but a lack of quality veteran labor in general.
I agree drug testing is likely a big reason that percentage of veteran PAs appears to be going down. Whether veterans are scarce or club control guys are excessive cheap labor….it is saying the same thing…there are a ton of young guys that can produce as well if not better than old guys. Young guys cost less.
If the players feel they are not getting paid enough, the MLBPA should push for stock options in the contracts. For the long term that would help the owners and players see eye to eye better. Minor league players will probably never organize because they don’t see themselves as in for the long haul and can too easily be replaced. The suckers are the fans, who are paying way too much to go to a game. They will stay home and watch on TV or internet or go watch HS, college or minor league games if they are smart. A fan boycott of MLB until prices come down would be a good move. Perhaps if FA time were reduced farm systems could be wound down in favor of more independent baseball. Perhaps the English football system of promotion and relegation instead of expansion would be a good idea. But instead of basing it solely on W-L performance, the promotion/relegation should be based on a combination of performance and attendance. A city that could get into the Majors without being dependent on the whims of the MLB owners would be interested in upgrading its stadium to be competitive.