The chasm between MLB and their players is jagged and deep. Here we are a month later and still fighting over money with no start to a 2020 baseball season. This feels more like a divorce than a reconciliation.
All of this is being played out on social media with official statements and leaked emails and memos. On one side is the active 1,200 members of the MLBPA and on the other side is the 30 principal owners who are the employers of those 1,200 employees. There is a contract in-place signed back in March which is still being debated after weeks of arguing to nobody’s liking on how to restart the work. The faces of the tug-of-war has Tony Clark of the MLBPA on one side, and Rob Manfred of MLB on the other.
Every 8.1 days wasted in the haggling is another 5% of the season lost off of the calendar which has a finite number of days. We are now exactly 108 days to October 1st. Waste another 8.1 days and we are under 100. Carve out of those 100 days another three weeks for some “Summer Training” and we have about 79 days to October 1st. And yes, Spring is over next week as the summer solstice begins, making it inaccurate to call a second round of preseason training, “Spring Training”.
As COVID-19 restrictions ease, baseball could be in-play in almost every American city now. But instead we wait as the MLB owners and the players’ union cannot decide on the central point of pay-for-play compensation.
The contract in-place that was agreed to between the owners (MLB) and the player’s union (MLBPA) in March, shortly after baseball stopped in its tracks due to COVID-19, reportedly had a prorated salary structure agreed to that players would be paid whatever percentage of the games were played. Now, the latest disagreement seems to center on the owners stating they had an understanding dependent upon fans in the stands which now looks doubtful now (except in Texas), and hence they want to renegotiate a lower salary percentage. The players have said there was no “understanding” of no fans in the stands.
There could also be legal action if the owners try to enforce that contract and set a 50-game season as the union could try to get an injunction which could derail the season because there is a clause that says “play as many games as possible” in the agreement. Define “possible”?
Two owners have spoken to the media on the impasse. Two weeks ago it was Cubs owner Tom Ricketts and this past week it was Cardinals owner Bill DeWitt. Ricketts spoke to ESPN Chicago and DeWitt did his speaking on a radio show. Both have painted a dire picture of the financial situation for baseball.
“Here’s something I hope baseball fans understand,” Ricketts said to ESPN. “Most baseball owners don’t take money out of their team.”
“The industry isn’t very profitable, to be honest,” DeWitt said on 590TheFan in St. Louis. “And I think they [the players] understand that. They think owners are hiding profits. There’s been a bit of distrust there.
“It’s a bit of a zero-sum game. They have by far the best deal of any players in any sport.”
In perfect timing, news leaked about a long-term multi-billion dollar deal between Turner Broadcasting and MLB for postseason TV rights indicating a 43% increase in annual rights. That revved up the players on their social media.
From Trevor Bauer of the Reds: “Oh good so … we can play now, right? Seems there is plenty to go around here. Seems there is plenty of money being made by the league and the teams. Given tha(t) players are the product, I’m sure some of this can be distributed to them, right? Yay for baseball.”
From Andrew McCutchen of the Phillies with some humorous emojis: “bUT bAsEbAlL iS dYiNg!”
From San Francisco Giant shortstop Brandon Crawford: “ThE iNdUsTrY jUsT iSnT tHaT pRoFiTaBlE.”
Yes, not great timing to cry poor and have a lucrative TV deal leaked. We can debate the points by Clark, Manfred, Ricketts and DeWitt, but if you believe Forbes Magazine is accurate on their estimates on profits for all the teams then the answer is that teams make small eight-figure profits in good times and losses in the bad times Of course the word “small” is relative. The Washington Nationals did not even make more than their highest paid player (Max Scherzer) last year after winning the World Series according to the magazine. Forbes calculated that the Nats made $27 million last year. The team was headed to a huge loss after regular season revenues fell due to attendance plummeting from 2.530 million in 2018 to 2.260 million in 2019, and were saved by a late surge in attendance and the postseason grand prize when they won the World Series.
“[Teams] raise all the revenue they can from tickets and media rights, and they take out their expenses, and they give all the money left to their GM to spend,” Ricketts continued.
Not all of their money Tom, but yes, most of it goes to the GMs to spend on salaries which is the largest expense for baseball franchises. Teams do expect to turn a small percentage of revenue into a profit so lets state that again. Also, more to the obvious points to students of the business side of sports for baseball, but that formula is different in football that makes most of their money from their national network TV deals and a much smaller percentage of money from ticket sales to fans. Baseball is very dependent on ticket sales as well as TV revenue, and they need both as well as the profit sharing from MLB’s corporate deals for national TV rights and merchandising like the Nike deal for uniforms. Ricketts continued his education of the financial side for the owners.
“The league itself does not make a lot of cash,” Ricketts said. “I think there is a perception that we hoard cash and we take money out, and it’s all sitting in a pile we’ve collected over the years. Well, it isn’t. Because no one anticipated a pandemic. No one expects to have to draw down on the reserves from the past. Every team has to figure out a way to plug the hole.”
Again, I think Ricketts is telling the reality of today’s situation not only for baseball, but for most business owners who have fallen into dire straits amidst this pandemic. You hold reasonable cash reserves and move forward to your next fiscal year. It is a lather, rinse, repeat cycle you anticipate if you have a healthy business, and the business of baseball was very healthy in terms of revenues even though fan attendance had fallen before the pandemic. This pandemic has to be costing teams tens of millions if not hundreds of millions if you believe what commissioner Rob Manfred is selling. Okay, Ricketts will tell you losses for teams could be in biblical proportions, and maybe you better get Noah’s Ark at the ready.
“The scale of losses across the league is biblical,” Ricketts claimed. “The timing of the work stoppage, the inability to play was right before the season started.
“We’re looking at 30 teams with zero revenue. To cover the losses, all teams have gone out and borrowed.
“There’s no other way to do it in the short run. In the long run, we may be able to sell equity to cover some of our losses but that’s in the long run.
“Who would invest at the moment?”
To answer Tom Ricketts, there is Alex Rodriguez and Jennifer Lopez who will invest. When we actually see teams selling shares in their teams, then we will believe it. Yes, we know it is bad, but could it be as bad as Ricketts paints it? If it is so bad, is this not the time that owners should open up their books and show their fans and employees (the players)?
Making claims is easy to do, but maybe it is time to back it up with facts. My calculations say the owners and players are arguing over compensation between splitting $1.44 to $2.07 BILLION spread over the league. Obviously the largest percentage of those dollars will be paid by the teams with the largest payrolls. If you use Spotrac as your guide, there are nine teams committed to $190+ million in payroll if a full season was played. In healthy times, baseball generates near $10 billion in revenues. Of that amount $3.96 billion was paid to players in 2019 according to USA Today, but that does not include salaries for the front office, coaches, support staff, and office personnel. The numbers are staggering.
There is also the risk to players’ health with few rest days during a truncated season is dangerous and a shortened off-season could have negative repercussions especially on pitchers in the following season(s). The wild card in all of this is there is still a risk of a COVID-19 outbreak in a second wave and what happens if more than one active player on a team is infected. What then?
In the general population, there is a greater chance of a larger second wave of COVID-19 or a COVID-20 mutation. Baseball could start and come to a screeching halt and that is part of the unknown.
Add in how all of this could alienate more fans and shrink the population of baseball fans some more and you have to think both sides really need to look at the bigger picture here. Come up with an 81-game plan to play a half-season or don’t do it. Don’t be penny-wise and pound-foolish.