Part Three
Let’s continue the conversation about the major issues surrounding the current CBA talks. Addressing them will help us understand why this process has been so difficult and taken so long. And why it’s so important.
This simply isn’t about money. It’s about so much more.
A system that is being hijacked and gamed. Integrity of the sport. Power. And preserving the future for those who will enter baseball in the future.
If you need a refresher on the first two blogs of this series, here they are:
Let’s kick this off by starting with the owners and their message of financial struggles. (And no, I’m not pulling your leg.)
TEAM FINANCIALS
The drumbeat by Rob Manfred during this entire negotiation has been how difficult it has been for baseball teams to make money. He talked about hiring a (still anonymous) “really good” investment banker who told them that investing in the stock market would be better than owning a team.
A statement that is contradicted by everyone else and numerous studies. Studies showing that every organization performs better than all of the S&P 500 companies.
And that the return on owning a franchise is 669%.
Manfred is hoping that you’ll forget about the multiple bids made on the Mets and the 4 new franchise options in the pipeline with investors lining up around the block.
And now we have the financial report of the Atlanta Braves, who are publicly owned and must report their earnings.
The Braves took in over half a billion dollars in revenue last year and had a profit of over $100 million. That figure does not include any championship factors which are usually seen the year after winning the World Series. And all of this was based upon limited attendance due to Covid restrictions.
Imagine the profit if it was a regular season.
One could safely say that the majority of teams are reaping an annual profit (during a regular season) of a quarter of a billion dollars or more.
Forbes shows that MLB had 17 straight years of increasing revenue. The last regular year of games, 2019, MLB’s revenue was $10.7 billion.
All 30 teams are valued at a total of $55.28 billion. A decade ago, it was $15.68 billion. Yet, owners want to keep essentially the same financial system with players as they did 10 years ago.
After those comments, Rob Manfred’s pants should be on fire.
And for this year? MLB is expected to take in over $11 billion. That doesn’t include revenue from either gambling or streaming. (Or the latest deal with Apple+.)
So why do I mention all of this?
Because as franchise values and profits soared for teams, player salaries stagnated. And that’s why players are insisting on a change.
Let’s turn to them now.
PLAYER SALARIES
First, some misconceptions that need to be corrected.
We never read about the players who sign for minimum bucks. What we do remember are the large headline-worthy contracts. But in reality, only app. 6% of all MLB contracts are large.
If you believe the latest negotiations are simply about the players making more money, it’s not. The focus is on recognizing and rewarding players making minimum salary while under team control. And the labor union is using the Consumer Price Index as a basis for their calculations. Also worth a mention is that the minimum salary that has been in place has not kept up with cost of living increases.
Consider these trends:
The MLB minimum salary accounts for 8% of the total payroll but repped by the larges majority of players.
Last year, over 500 rookies made their MLB debut. In previous years, the norm was about 100.
And while the minimum salary for a full year is $570,500, 46% of all MLB players made under $500,00 last year.
Their salaries have gone down every year for the past 6 years.
The career of an MLB player is very short (on average, less than 5 years) and they are often unprepared to enter a well-paying career after they are finished playing.
Additionally, the players don’t receive that full paycheck amount. There are a variety of deductions, including taxes and agent fees (5-6%).
And if this player was born outside of the US, he is also financially supporting his parents, grandparents, siblings and assorted aunts, uncles and cousins on his salary. It is a cultural norm in many parts of the world but especially prevalent within the Latino/Hispanic cultures.
Translation? Most of these players who do not have significant contracts, are not rolling in the bucks.
Now, let’s turn our attention to how MLB is gaming the minimum salary rules…..
GAMING THE SALARY SYSTEM
After the last CBA, MLB hired a slew of lawyers and economists to help them take advantage of the team control rules.
This resulted in teams bringing on board more and more rookies (see above) who worked for the minimum salary. This allowed them to fill their roster but still be able to cut payroll across the board. Just look at the Tigers’ roster and salary disbursement and you will see it. Especially once again in 2 years when Miggy’s salary is off the books. (More like 3 years because the Tigers have to buy out Miggy after his contract expires and pay him $8 million.)
By cutting slightly older players no longer under team control, organizations also save on medical costs. Younger players are healthier, less often on the IL and need less medical attention.
But the biggest advantage? Minimal salary players account for a whopping 40% of their team’s productivity. For a fraction of the cost.
Buh-bye, lengthy expensive contracts!
And those minimal team-controlled salaries really pay off for owners. Increasingly so, rookies making minimum are winning Cy Young (Shane Bieber) and MVP awards. Pete Alonso and Aaron Judge were hitting 50 HRs. Last year, Vladimir Guerrero, Jr. made only $600,000 while winning a zillion awards and finished 2nd in the MVP voting. He made an estimated $54 million of revenue for his team.
That’s a nice little ROI.
The bottom line is that industry revenues grew significantly while franchise values soared. But player salaries went down every year since the last CBA was signed.
Shouldn’t a player who was responsible for helping you win – and thus increasing your revenue and team value – be rewarded for it?
If someone does an outstanding job for you and earns you a profit, shouldn’t they get a raise instead of being replaced?
Shouldn’t baseball follow the rules of every other industry out there?
Of course they should.
But tell that to the owners who have a yearly contest about which team could cut arbitration salaries the most. They award the winning owner a replica championship belt.
Not surprisingly, crickets were heard when the media asked MLB who the winners were.
The simple fact is that younger players are much more productive than veterans and hugely underpaid for what they do. After team control, they “age” out of the team’s system and now fail to get rewarded for their accomplishments. New contracts are shorter and less expensive. If they can get them.
Their union is trying to get them more money for what they do now. They are simply trying to get them “less underpaid” with higher starting salaries and a bonus pool for the high achievers.
Because all 30 owners now build their rosters using a majority of team-controlled players while systematically cutting their payroll budget year after year.
We still have another round of major topics to identify and explain. And we’ll do that next week.
Still to come? Competitive integrity (including tanking), the CBT, playoffs, more gaming of the system (including service time manipulation) and the owners’ focus on increasing their revenue streams while ignoring the game. So please save your comments on those topics for next week.
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What did you miss on our Twitter feed yesterday? (And why aren’t you following TT yet?)
- You won’t believe who is inserting himself into the negotiations and endangering the negotiation process.
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The owners cynically turn fans against the players through their financial secrecy. The big player salaries get publicized, provoking envy that they get paid so much for a game we played as kids. While we know what the players make and do not know what the owners make, we can never ask if the owners are worth that much money like we ask about the players.
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Owners should have bubble-gum trading cards so we can study their stats.
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As Naldo and many others have said, it’s really hard to get behind anyone in this fight and, as a Hispanic American, I’m really upset about the extended family aspect being tied to Hispanics. Why should any employer pay more for employees just because (like-me) they were blessed with large families?
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Hi, Tony – Not sure how you concluded that some employers pay more for those with large families because that was never stated. The rationale used above is that the majority of Hispanic/Latino ballplayers from other countries don’t keep their paychecks for themselves. Eduardo Perez, on his show this week, talked about the norm within Latino communities, esp. for those born outside of the US, to support their families back home. (Many other cultures do it as well, but in the US, not so much.) Miguel Cabrera has talked about supporting his family back in Venezuela. I have several employees who do the same and my brother-in-law, who is from South America, helps support his grandmother, mother, brother and sister. – Holly
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Sorry as I often do, my meaning was inadequately expressed. My feeling was that it appears like the union is asking more for these players. Thanks primarily to you Holly I would never conclude MLB would pay more for anything than they were forced to.
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Holly’s long response indicates she was not advocating a sliding scale for players based on the number of their dependents. I thought her stronger point was that professional athletes have a small window for earning and may not be prepared for much outside the sport after “retirement.” What’s worse, the current system has been gamed to limit the earning years of those at the bottom end.
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Holly, as you continually peel the layers off the owners onion, I look for any hope of justification, but all I see are more and more layers of arrogance. Their apparent acceptable collateral damage is our games integrity and dissatisfied fans. How long will their arrogant behavior throw a suffocating anti-trust blanket over the CBA?
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MLB players and owners had been careful since the horrible 1994 strike which cancelled the postseason and damaged baseball’s image. Now with games cancelled again, a paradox fuels the dispute: popularity of MLB has declined compared to NFL, yet income has grown anyway. Can baseball reclaim its place as America’s game?
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Hi, MCT – I will add that only 1 owner is still here since the last strike. As for income growth, stay tuned. We’re covering that in-depth next week. Thanks for keeping the discussion going! Holly
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Potential topic for a Ph.D. dissertation? A research study to determine the top MLB salary earned, current employment status, career choice, educational attainment, annual salary, and estimated personal wealth of players 10 years after they retire from the game, or something better defined by a research committee. Try to get such a project jointly funded by the owner and players’ association.
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As Holly shows with her info about the owners ‘true world series trophy’ a competitive product for the fans and properly rewarding hard working employees (loyalty means nothing to them) isn’t in their picture.
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Bill Veeck once said that the proof baseball is the greatest game is that it survives the people who run it. I’m not sure about that right now.
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On one hand, owning a franchise is a bit like owning a farm – the full value isn’t realized until you sell and pay enormous capital gains taxes. On the other hand, much of a team’s value is due to owners colluding to limit the number of franchises. There are so many ways to look at this that it makes my brain hurt.
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I empathize with the owners in the public relations risk they have due to their players often poor impulse control off the field. I think bonuses tied in to some statistic like WAR or whatever could be awarded over the minimum salary tied to say upper quartile of performance by position etc. With so many entertainment outlets available, live events are a premium thus team equity values are soaring. It’s natural for players to want a piece of the pie!
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