Yes, baseball is a game played by a bunch of kids. In MLB, they are very rich kids paid by very rich owners. As much as most of us want it to remain strictly a game, we cannot. MLB is a business played at a very high stakes level. While the face of MLB (Rob Manfred) and MLBPA (Tony Clark) are problematic (and I am being kind), the high priced legal teams behind each organization are high priced and unquestionably motivated without emotion to bring home a victory for their side. Maybe one side will get a victory, but what will that victory mean to the state of the game.
2020 season saw MLB owners allegedly incurring losses of between $2.7B and $3.1B collectively. MLB is also collectively carrying $8.3B in debt per Manfred. In and by itself, debt is irrelevant unless it is comparatively tied to assets. Most homeowners have mortgages that begin at or around 80% of loan to value (based on appraisal) without requiring additional coverage if that ratio is higher (i.e. PMI – Private Mortgage Insurance). If a homeowner has a home valued at $10MM they may have a debt up to $8MM. If another homeowner has a home valued at $500,000, their debt may be $400,000. There is a huge difference between a debt of $8MM and $400K, but it is all relative when compared to the value of the home.
The same is true with MLB franchises. I have no idea how those franchises are valued, but Forbes does a good job of estimating. Those pre-pandemic 2020 values range from NYY at $5B to Miami’s $980MM. The LAD are valued at $3.4B (#2 on the list). See complete list at:
https://www.forbes.com/mlb-valuations/list/#tab:overall
Both value and debt are the two most important considerations for the MLB owners. Owners do not look at annual operations except as short term obligations that need to be met. They are billionaires, and through debt increases and other revenue sources, they can and will meet all short term losses. However, knowing that their return on their investment will come when they sell, it is the ultimate value that dictates their overall decision making. Any associated debt will reduce the owners’ equity, thus decreasing the owner’s return on their initial investment. That will dictate policy decisions far more than short term losses. Short term losses would certainly be a consideration if the owners were looking to sell in a shortened time frame. But most owners are in for long term investments, so they should be able to ride out short term losses as the asset foundation is still solid, and the basis of the valuation should not take a huge and sustained hit.
Of course, even that scenario did not hold true for the McCourts who did their best to destroy a storied franchise into bankruptcy and potential MLB takeover, and sold the franchise for in excess of $2B.
We do not yet know what the loss of revenues due to a 60 game season will have on those values, however, both the incidental 2020 operational losses and the debt load increase have come under scrutiny of the MLBPA because the owners will not open their books. Many will say that 2020 was a unique situation and one that MLB owners should be comfortable in showing how those numbers were derived. But the owners are not going to set a precedent and open their books at this time. Once they do, the MLBPA will insist that they continue to do so for every agreement. The owners say trust me, while MLBPA says not a chance. The MLBPA considered the weeks of fighting over “daily pay” the equivalent of work stoppage. In essence, per MLBPA, last Spring’s negotiations devolved and manifested itself into a lockout.
The hope of the two sides is that upcoming negotiations are done internally without involving press conferences. The MLBPA is poised to discuss all financial matters short term and long term, but if MLB asks for concessions based on 2020 losses alone, those negotiations will go nowhere unless there is more information provided.
There are a multitude of rule changes that impacted the game in 2020. Two of which have significant economic consequences: Universal DH and Expanded Playoffs. These will be the two critical discussions in the agreement affecting the 2021 season.
Per Evan Drellich, The Athletic,
“the expanded playoffs is a heavyweight money matter, with MLB telling the union in May that it would take in $787 million in 2020 national revenue during the postseason. More games means more money for the league, as the players are well aware. More playoff teams too could mean reduced incentive for teams to compete for free agents, essentially rewarding mediocrity. A league counter-point could be that an increase in spots could have the opposite effect, more teams spending.”
All of this is to be sorted while a free-agent market unfolds. Many in the industry feel the winter will be difficult for players. MLPBA President, Tony Clark, did not say whether he expects the same.
“I think this market will serve to distinguish between ownership groups,” Clark said, “and those interested in competing versus those who are sacrificing that competition level, or winning, for the hope of maximizing short-term operating revenue.”
Clark acknowledges that both practical and economic considerations for 2021 remain due to unresolved COVID-19 concerns. But he cannot discern any changes into the current structure until all parties sit and discuss. As of right now, the 2021 season is dictated by the existing CBA. The Union expects a full complement of 162 games, but unless there are assurances of attendance being allowed, the owners will not comply. There is no Universal DH in the existing CBA, thus as of right now, the NL will not have a DH in 2021. Also, as of right now, there will be only be a 10 team playoff, as is dictated by the current CBA. The Players want the Universal DH as it means more salaries for more the tenured veteran players. The Union is not opposed to increased playoffs, but they know that this is a critical point for the owners, and they are not going to let the owners have what they want without compromise. The Universal DH is not enough of a compromise for the Union.
Per Tony Clark,
“At this point, our players expect to be in spring training in February. Our players expect to play 162 games under the rules of the current collective bargaining agreement, that’s our expectation at this point. Unless or until the league presents something different that requires further discussion.”
Clark also acknowledges that if the Players want additional time off for COVID-19, they will not bail on the 162 games with full pay simply for the owners’ benefit.
The Atlanta Braves are owned by Liberty Media, and have filed their statutory quarterly financial statements. For the three months ended September 30, the Braves had an operating loss of $16MM compared to a $21MM profit over the same three month period in 2019. The team revenues were cut nearly in half, from $212MM in 2019 to $110MM in 2020.
MLBPA is expected to file a grievance against MLB claiming that the agreement stipulated that MLB was required to make best efforts to play as many games as possible in 2020, and the MLBPA alleges they did not comply. We will see where that goes. That ruling could impact the makeup of the 2021 season.
Neither side figures to meet until the Owners have their meeting, and the Union holds their annual meeting, both of which are scheduled for this month. Without a definitive plan moving forward, FA will be an afterthought except for a handful of very motivated and well financed teams.
Good write-up, Jeff.
The Atlanta Braves numbers are interesting, probably reflects many organization’s financial situation. But there are no doubt differences, depending on television deals. Not sure how the Dodgers television revenue stream is impacted by the shortened season.
Less games, less money? That would be my guess. If not, the Dodgers have a massive advantage going into winter. Even with less revenue from a limited season, the Dodgers are still far better off than other teams. That’s why they could move forward with a Mookie Betts deal.
Not a fan of the expanded playoffs from a baseball perspective. I think it worked this year because there were far less games and the toll on pitching arms was greatly reduced. But with a full season and expanded playoffs, that might not be the case.
The playoffs certainly didn’t benefit division winners. That would need need to be remedied.
What does 2021 look like? Fans need to be back in the seats. The vaccine and other treatments will no doubt offer an opportunity to fully reopen. But you have a new administration and realistically, the winter will see an increase in virus cases. Will they push another lockdown? I would hope not.
If they can pack mask people in airliners, why can’t you have fans back in the stands, 25 to 50 percent capacity? I realize logic doesn’t play into many of these virus related edicts. But, depending on the situation in April, MLB may have to push this approach. It might prove critical to revenues.
But how do you factor that into the upcoming season, revenues and labor negotiations?
Interesting times ahead, but at this point I’m not quite sure how all this plays out.
I watched a little of the Army-Navy game yesterday and the seats were packed.
No masks and no mention of them.
In contrast Mark, there were no fans at the coliseum for USC-ASU. Totally unreal to see that stadium empty during a USC game.
You didn’t watch Army vs. Navy as a live game. They typically play in December. Perhaps it was a replay of a prior year telecast
Thanks for another informative post. Labor negotiations always seem like a cluster**** to me (sorry, but that is the only work I can think of that adequately describes the situations). This offseason negotiation looks primarily to be battlefield preparation for the new CBA.
No wonder few teams seem interested in spending money with the added contentiousness of labor negotiations on top of the inability to predict the near future due to COVID etc.
I have to say Jeff, many of your articles are better written and more informative than much of what I read on the Athletic.
I think many of the top free agents are going to be very disappointed at what the market has to offer. There aren’t going to be but a few teams able to financially make long term commitments. The top FA may just be interested in signing a one year contract and wait to see what happens with the virus issues and/or MLB negotiations. If that’s the case, it might be good for the Dodgers to load up on pitching or RH hitting for 2021. It may cause some of the youngsters to have a year in the Milb or go over the salary limit for a year. But, for a year it might be another approach to consider. Just a thought. Anyway, it will be very interesting for all of MLB and the fans.
Indeed and simplified enough to make me better to understand. It seems not a great time to be a franchise or player. But both are not seeing things the way we have to. To us 0 means an empty wallet and not what the difference of what was the year before or what we would of made had things stayed as they were. I mean it’s pretty likely both sides would be in worse shape if there were no baseball at all in 2020. For us fans, especially us Dodgers fans, we suffered nothing really and it tells us how much power we could control if we had a mind to. To me 2020 was a great season but those not being a Dodgers fan may have a different opinion. It’s clear owners and players didn’t get what they signed up for, but wouldn’t it had been worse for all if there was no 2020 season at all? I just wish I owned 1/10 of 1% ownership and I’d make it through winter just fine….. and all my winters forward.
I didn’t see the Army-Navy game but I have seen a couple of games at College Station on TV. They claim the attendance cap is 25,000 folks, mostly ROTC cadets in uniform. There are no masks visible, zero social distancing and the lower part of the stadium is packed. It doesn’t look like 25K to me. It looks very much like biz as usual at A&M. Compare that with the poor PAC-12 starting up. There are NO fans in attendance. Different leagues, different rules, different states. Most of the SEC faithful appear to have no time to interfere with their football for some stupid virus.
Back to baseball. After Andy Messersmith and Dave McNally got a favorable ruling in The Seitz decision on December 23, 1975 on the matter of free agency. everything changed. I remember Pete Rose saying before this ruling that he wanted to be the first singles hitter to make $100,000 a year. Superstar money at the time. After the reserve clause was gone, players were no longer owned and salaries suddenly added a zero. Rose, and others, went from $100,000 to a million. I thought for a long time that there had to be a ceiling, eventually, on player salaries. It never happened due to reasons we all know. I don’t bat an eye now at a $30 million a year contract. Who would have thought?
We all can see that hammering out a new agreement between the MLPA and MLB will be a bloodbath. And the losers in these deals, as in 94, are ultimately the fans. I half jokingly suggested 25 years ago there needs to be a National Fan Association who gets a voice in the matters. Collect dues. Have an organization with a seat at the table that represents the Fan’s Interests.
Just like the elimination of 42 minor league teams, this is a perfect time for MLB to pull off changes due to current conditions. The same environment applies to fan bases. But I can see less passionate fan bases than the WS winning Dodgers, not caring about the new agreement and not giving a rat’s ass if their team plays or not if these negotiations drag on and ends in a stoppage other than Covid related. Fans are used now to not going to games and have little regard for rich owners battling it out with rich players. The fans just walk away. At least enough to make an impact. And neither side seems to care.
The 1994 strike was very damaging and a 2021 strike would be as well. But it might be much easier in this environment for fans to just say screw it.
I was at the A&M Florida game in College Station. There were no more that 25k fans in the stadium. Any reports to the contrary are fake news. And there were ushers continually walking around in the stands telling everyone to put their masks on. I will say the students did not do a very good job of staying in their assigned seats and all tended to cluster in the student section so there were some sections that were more crowded than they should be while other sections were empty. It must be nice to be young and invincible. I guess we were all there once.
If attendance is below normal, ownership will operate at a deficit if they have to pay full salaries. If owners will want to play less games if costs are higher than revenues for each game played and players will want to play all games if they get paid by game played. Teams won’t open their books.
To keep baseball popular there would seem to be a need to play at least half the season or 81 regular season games.
The big issue this time around is going to be changes to player compensation and length of team control in light of the way that players are now evaluated.
Gone are the days when a journeyman professional player stands to obtain a good contract via free agency. Almost everyone believes that players reach their peak sometime between 27 – 29. If you make it to the big leagues at, say, 24 and the teams have 7 years of control, you aren’t a free agent until you are 31, past your peak. The chances of getting a big contract are much smaller.
There will be a few superstars who continued to get the big bucks but they are the exception and not the rule. More teams will look to bring up players from their farm systems (who work cheap for 7 years) rother than sign a 30+ year old to do something similar for $5MM/year.
The only way to fix the system is to reduce the number of years of team control. That’s going to be the big issue, or at least one of them, with the next CBA.
why is my comment being moderated?
Everyone’s comments are being moderated, including Mark’s and mine. It is automatic due to a system glitch. I believe Mark is looking into it. I think that the site has been hacked again. There have been a lot of spam comments that needed to be trashed. I am sure Mark will research and get back to all of us. In the interim, I have been coming back to the site more often than usual and releasing everybody’s comments. I apologize for any inconvenience.
I do not know all of the financial ramifications. I am no genius when it comes to that. I am simply a fan and when one of my main forms of entertainment is ended, I get a little testy. I have already lived through every strike against the game that there has been. And I have enjoyed none of it. When this season was cut short by the Covid, that I could understand. The disease has hit all of us in many ways. American’s are without jobs, theaters are closed down. major sports are allowing limited numbers of fans into the parks. There are many who are still in what would be considered lock down mode. So excuse me if I am a little tired of people who make more money in a year than I have in my lifetime wanting more. I cannot really know for sure how much money I have spent on the Dodgers over my lifetime. But it is quite a bit. I probably would have a more comfortable retirement had I put that in some sort of savings plan. I think, and this is my own opinion, that baseball players anymore are mere entertainers and are paid as such. The top tier of recording artists and movie stars make a lot of money. No where near what elite athletes make, but a lot. Players like Jordan and James, and others make more money on top of their salaries in the form of endorsements. The rich get richer and we fans keep on spending. If the fans really wanted to send a message that all this is getting old, they would boycott the games. But like truckers back in the day, getting all of them to agree to go on strike is an impossible task. We can only hope that common sense prevails and the players and owners realize just how much the fan base is fed up. Another strike, or lockout is going to create some really bad blood. I will always love the game, that does not mean that I have to like the leadership or those who make the game a royal pain in the ass every time the CBA is negotiated. They, like the politicians in this country have forgotten the word compromise. If fans were on the panel, they would demand it so they could enjoy the game they love. This season was hard to enjoy, but we were glad to have at least some baseball.
I have no prediction as to what may happen if the stadiums will not be allowed to be filled. I believe the MLBPA felt that they were wronged last year, and will not fall for any promise to “play as many games as possible” this year. The MLBPA will insist on a full 162 game pay even if there will not be a 162 game schedule. It is apparent to me that there is some real room for compromise if the two sides wanted to compromise. However, there is no trust of either party.
I doubt that there will be any agreement until the Union’s grievance is heard and ruled on. Why should they?
I heard a MLB Pipeline Podcast this AM and both Jim Callis and Jonathan Mayo believe that the ML portion of the Rule 5 Draft will be very very light this year. Last year there were 11 draftees in the ML portion of the draft. Both Callis and Mayo predict no more than 6 this year. At first glance, most might think that it is a relatively inexpensive cost for MLB ready or near MLB ready players. However, because there was no MiLB season, there was no scouting of these players, and apparently that worries teams more than the slight cost.
I just hope the minor leaguers have a season in 2021. This losing a year has not been good for them, I would think. Tony Clark is MLB’s rep. Does he represent the minor leagues also or is someone else responsible to speak for them?
Minor League players do not have a representing body.
What a shame. In that case, I nominate you, AC.
I am not an attorney, but I would be their strongest advocate.
Minor leagues do not have a players union. And they can’t join the MLBPA until they make the major league roster. I think it would be a great idea for them to have some sort of representation. They live close to the poverty level unless they recieved some sort of signing bonus.
It is very ambiguous, but part of MLB’s contraction plan is allegedly to pay minor leaguers much better.
I have not seen anything concrete…
Being on the 40-man roster gets you entry to the MLBPA.
“Who is eligible for membership in the Association?
All players, managers, coaches and trainers who hold a signed contract with a Major League club are eligible for membership in the Association. In collective bargaining, the Association represents around 1,200 players, or the number of players on each club’s 40-man roster, in addition to any players on the disabled list.” https://www.mlbplayers.com/faq
I will have our IT department work on why all comments are going into “moderation” including mine.
Patience grasshoppers!
I am sure that the “fix” is “more money.”
Will there be any winter leagues this year?
SoCalBum, I know Taylor also plays the outfield, but he is an infielder first. And he is their main utility guy unless they use McKinstry in that role, or resign Kike. Carrying only 3 natural outfielders is something they have never done. They have always had that 4th guy. I do not think any of the players on the roster MLB came up with fill that role. Some have said they will resign Joc. That is entirely possible. So far none of the prospects on the list look like they are MLB ready yet. I think Beaty is a good player, and yes he has options left. But they are lefty heavy, and if he is not used in a trade of some sort, I do not see him cracking the roster next year. They need another RH bat. One reason I believe they will bring JT back.
It’s honestly hard to fathom the complexities of professional baseball: the competing interests; and figure out a solution. Curt Flood made it a little less like indentured servitude, but then young pre arbitration and pre-FA players are beholden to their teams, and teams can manipulate the system to increase the MLB service time, as what happened with Chris Bryant.
What if the MLBPA successfully limits the service time commitments and younger players are able to hit the FA market when they are much younger? How would that alter the player development system. Teams have infrastructure in place to scout, sign, and develop young players that takes years until they are MLB ready, and most never make it. Shouldn’t they get a reward on their investment?
It’s like the pharmaceutical industry. No one really likes drug companies, but to be fair, it takes years, millions and sometimes billions of dollars, and the stamina to get past trials and the FDA to finally bring a drug on the market. Patent law gives them an exclusive right to that formula for X number of years to allows them to recoup that investment. Most potential drugs, after millions spent, never make to the market.
There’s already that disparity between baseball’s haves and have nots. Why would a small market team want to develop players just to have them sign with rich teams? They should have a patent on that product for a predetermined time.
I really don’t know, but thoughts:
Limit contract length. 10-12 year contracts just block younger players who would often outperform an aging star. Albert Pujols should’ve been out of baseball four years ago. He has been a below replacement level player for a long time and he’s only playing because the Angels are paying him 24 AAV and his name maybe still has some draw. That means there a younger player languishing in the Angel’s system who could have replaced him and been compensated for it. It is a free market, and Arte Moreno is free to throw away his money (Pujols was only worth his contract in 2012, his first year after signing it), but if baseball, which is its own weird sanctioned monopoly, is free to create arbitrary rules such as the CBT, then you could do this. The union would probably oppose, but maybe you could make the case that, without baking in the anticipated decline into the contract, AAVs would be higher.