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MLB Has A Big Money Problem

MLB, impressively, has enjoyed labor peace longer than any of the other major North American sports. (Judging by this site’s readership demographics, it’s about 50/50 whether you even remember the 1994 strike. Christ, that makes me feel old.) But the current CBA is up after next season, and while no one’s worried yet, it’s clear that the biggest battle between the owners and the union is going to be about the most fundamental grievance. There’s more money in baseball than there’s ever been, and the players are getting the smallest share they’ve ever known.

The best bellwether of pending labor fights isn’t the MLBPA, which has an interest in keeping its cards close and its rhetoric private. Instead it’s the agents, especially Scott Boras, who is powerful and tenured enough to share his opinions on MLB financial issues without fear of offending (because he’s already offended everyone over one thing or another). Boras held court yesterday, going after the Marlins, urging the Dodgers, Tigers, and Red Sox to spend on his clients, criticizing MLB’s qualifying offers, service-time manipulation, and incentivization of tanking. But it was his comments on the revenue split that were the most telling.


It wasn’t even a decade ago that players were earning the largest piece of the revenue pie. Here’s a chart put together by FanGraphs’ Nathaniel Grow before the start of this season. (You should definitely read the accompanying article for an overview of what’s going on.)


(These numbers don’t exactly match Boras’s, and may not be 100 percent correct, because they come from figures that are publicly reported but not necessarily official. Still, they’re close, and accurately depict the trend.)

So, what’s the explanation? I can think of a couple. Most immediately is the luxury tax, an end-around on a hard salary cap that has had the double effects of discouraging cash-rich teams from spending, and distributing the collected money to various MLB programs that would have needed to be funded from elsewhere. Another is that teams are getting smarter: in the analytics era, no one is giving an aging player four years and $50 million for coming off a single aberrationally good season.


But the simplest and biggest reason for the spike in owner profits is the rise of regional sports networks, often partially owned by the teams themselves. The money has come in comically oversized lumps—the Dodgers’ 25-year deal with Time Warner is worth more than $8 billion, for example.

That influx of cash has not been paced by a commensurate increase in spending on payroll. More money is coming in, and much of it is staying in the owners’ hands.


Previously, revenue was largely tied to performance. If your team was good, you made more on tickets and merchandise sales. But these RSN contracts are locked in; that money will still flow over the course of the deal no matter how a team does in the standings. There’s less incentive for owners to spend more on players, and that’s borne out by the unassailable fact that they aren’t.

There is perhaps a silver lining for certain classes of players. With more money being available, and the RSN tap guaranteed to flow for years to come, teams appear to be signing players to longer-term deals than they have in the past. “The top players have traded in part of the overall salary increase for extended long term security,” FanGraphs’ Dave Cameron put it. “The best players in the game are choosing years over dollars.”


Over email, Cameron argued that a specific lower-mid tier of players—he mentions platoon outfielders, innings-eaters, top bench guys—are also getting longer contracts than they would have before, because teams are willing to commit more money to future seasons. (I would add that current team-building philosophy also values locking up useful players at affordable rates, rather than regularly having to replace those skills on the open market.)

“I think we’ve seen more inflation in years committed than in annual average value,” Cameron says—but still, neither have kept pace with the increase in overall revenues.


Here’s the big problem for the MLBPA: it can’t just tell owners to spend more money. This isn’t collusion; there’s no concerted effort to depress player salaries like there was in the 1980s. This is the free market at work: the influx of TV changed the calculus on how much teams had to spend to be comfortably profitable.

What the union would need is a guaranteed revenue split put into the next CBA, like the one so fought over in the last NBA lockout (it’s currently settled somewhere around 50/50, a big win for the owners from the previous deal). But what works in other sports isn’t an option in the sui generis economy of baseball. The only way to make absolutely sure MLB owners share a certain percentage of revenues with players would be to install a salary floor, and require them to spend a certain amount on payroll. That won’t fly, because owners would never accept a salary floor without a salary cap. That won’t happen, because baseball players enjoy the biggest and longest guaranteed contracts in sports. A salary cap will never be on the table.


“Players historically have suspected that the request for a salary floor is a precursor to a request for a salary cap,” late former MLBPA executive director Michael Weiner said upon his 2009 election, “and you know what the position of this union has been on salary caps.”

There are more modest and realistic ways to spread the wealth around, involving some of the artificial limits on payouts for younger and mid-tier players, and you can probably expect the MLBPA to push for them over the next year. A raise in the minimum salary, which has risen 365 percent over the two-decade span that saw MLB revenues increase by nearly 550 percent. Changes to Scott Boras’s pet peeves like qualifying offers and service-time rules that delay players from reaching free agency paydays. A reduction of the luxury tax.


All of which sounds good for the players, but there’s no reason the owners would go along with it. They won’t mess with a good thing, not without major concessions from the players. And the second-biggest bargaining chip the players have—a salary cap—is one they’re apparently not prepared to use. (It was a cap, along with revenue sharing, that spurred the 1994 strike.) The union’s biggest bargaining chip? A labor stoppage. No one expects that to happen, but without the players enacting or conceding to something tectonic, they’ll be stuck waiting another few decades for the TV deals to expire. In the meantime, it’s good to own a baseball team.

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