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Collective Bargaining Agreement

MLB Payrolls Dropped A Collective $2.47 Billion In 2020

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Per the latest report from Ronald Blum of the Associated Press, payrolls across MLB fell from $4.22 billion in 2019 to $1.75 billion during the pandemic-shortened 2020 season. The Dodgers’ $98.6MM payroll, Blum notes, clocked in as the highest mark among the game’s 30 teams. The Yankees finished second with a payroll of $86.3MM.

Of course, the 60-game season meant prorating pay, dropping player salaries by approximately 63% from the full-scale amount. The totals given here mark a roughly 59% year-over-year decrease, suggesting payrolls would have increased had there been a full season. 2018 brought the first year-over-year decrease in payroll since 2010, as Blum reported at the time.

One complicating factor was a rise in buyout options. As Blum writes, “Buyouts of unexercised 2021 options came to $58.2 million, more than double the $26.9 million for buyouts of unexercised 2020 options, a sign of expense-cutting amid the revenue loss.” That’s not a surprise, given the sudden change in expected revenues without fans present, but it is noteworthy.

Parsing owners’ financial positions after this season’s revenue losses will continue to be a topic of discussion as free agency moves forward at its glacial pace. Without transparency from owners, the exact losses are difficult to ascertain. These numbers – presuming their accuracy – do serve as a significant data point, however.

The question of finances has been and will continue to be one of the sticking points between MLB and the MLBPA as the two sides near the expiration of the collective bargaining agreement. Transparency has been at the center of the debate, as owners have resisted the call from players to make their finances public. The Braves, as a publicly traded company, are the only team whose finances are made public in the form of quarterly reports, as Fangraphs’ Craig Edwards reviewed in early December. Of course, only so much can be gleaned from a single team’s financial numbers.

MLB Will Not Make Counter-Proposal On 2020 Season

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6:36pm: An MLBPA announcement confirms the news. Per the release, the league informed the union that it will not schedule a season of over sixty games.

6:30pm: MLB has informed the MLB Players Association that it will not make a new proposal to the union in an effort to resolve the sides’ disagreement over the financial structure of the 2020 season, per Ken Rosenthal and Evan Drellich of The Athletic (via Twitter).

Just what that means for the potential resumption of play remains to be seen. One might think that commissioner Rob Manfred will simply declare a season length at full pro rata pay — the option that the league has long held in its back pocket, but which brings with it the potential for an open-ended grievance action.

Last we had heard, the league preferred not to take this step. Whether there may be an alternative means of resolving the matter is not immediately clear. Per the report, the league will consider its options over the weekend, which is perhaps yet another indication that the league believes it is well served by allowing time to trickle away.

This latest development comes on the heels of today’s run of worrisome indications that the coronavirus has already made inroads into MLB facilities even before the league has undertaken a resumption effort in earnest. Those reports reflect truly concerning developments. They also play into the hands of the owners that have evidently decided to take a hard line on the 2020 season.

It seemed just days ago that we were finally headed toward resolution on an attempted restart of the MLB campaign. Now, there’s as much uncertainty as ever — greater, perhaps, given the urgent need to launch a season in the immediate future if one is to take place at all.

Manfred: “This Needs To Be Over”

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4:34pm: Manfred evidently acknowledges that, as Clark had stated, he invited a new union counterproposal. (Via Jon Heyman of MLB Network, on Twitter.) But Manfred says he advised Clark that seventy games would be an “impossible” figure to fit in without extending play.

The league is continuing to cite concerns with extending play into November — a legitimate concern, to be sure, given the expectations of public health officials that the coronavirus threat could ramp up yet more this fall and winter. Curiously, though, Manfred indicates that doubleheaders are also deemed specifically problematic by MLB’s health advisors. Heyman explains that the concern is with “players spending too much time together,” though it’s not entirely clear why two games in one day would be different than a string of games on separate days.

4:17pm: MLB commissioner Rob Manfred has responded to the public statements of union chief Tony Clark, as Bob Nightengale of USA Today reports (links to Twitter).

“This needs to be over,” said Manfred. That statement refers, presumably, to the all-too-public spat between the league and player’s union regarding the terms by which the 2020 season will occur.

Beyond the obvious harm to the reputations of all involved, the protracted turmoil is running headlong into the realities of the calendar. If there’s any hope of launching a season of the length under discussion — the league proposed sixty, the union seventy — then a deal must be sewn up soon.

Clark insisted in his most recent statement that he did not reach an agreement with Manfred during their recent sit-down. Manfred offered his own take, though he did so in a rather circumspect manner.

Per Manfred: “I don’t know what Tony and I were doing there for several hours going back and forth and making trades if we weren’t reaching an agreement.”

It’s yet another bizarre dispute between bargaining parties that obviously have a strained relationship but no alternative partner. They are still arguing over the interpretation of the last deal they formally agreed to.

In this case, nobody claims that pen went to paper. Manfred himself stated just yesterday that the meetings had resulted in a “framework” that “could form the basis of an agreement.” But the sides evidently now disagree as to whether and to what extent they reached a handshake deal during their in-person talks.

Ultimately, says Manfred, both sides “want to play” and “want to reach an agreement.” In a statement that both contains a rather clear threat and undermines any claim that there’s already a binding deal in place, Manfred concluded: “We’re doing everything necessary to find a way to play, hopefully by agreement.”

Clark Issues New Statement On 2020 Season Negotiations

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MLBPA chief Tony Clark has issued another statement through the union’s official Twitter feed. In it, he makes clear the union’s position regarding the present state of negotiations regarding the attempted launch of a 2020 season.

Clark characterizes his recent meeting with commissioner Rob Manfred as follows:

“In my discussions with Rob in Arizona we explored a potential pro rata framework, but I made clear repeatedly in that meeting and after it that there were a number of significant issues with what he proposed, in particular the number of games. It is unequivocally false to suggest that any tentative agreement or other agreement was reached in that meeting.”

The union did make clear yesterday, as reports emerged about a potential breakthrough, that it had not reached any formal agreement or even basic understanding. Today’s statement makes clear that the union believed the number of games for the 2020 season was a specific point of ongoing disagreement.

As for recent indications that ownership was upset that the union had issued a counterproposal, Clark says it isn’t just his side’s decision. Clark claims:

“In fact, in conversations within the last 24 hours, Rob invited a counterproposal for more games that he would take back to the owners. We submitted that counterproposal today.”

This public back and forth is obviously rather tiresome to follow. But the sides are obviously jockeying not only for immediate bargaining leverage, but also for potential position in the event that talks collapse and the dispute ends up in some kind of legal proceeding.

Manfred, Clark Held “Productive” In-Person Meeting

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MLB commissioner Rob Manfred and union chief Tony Clark have held an in-person meeting in an effort to break a long-running stalemate on the resumption of the 2020 season, according to Jon Heyman of MLB Network (Twitter link). The substance of the talks isn’t yet known, but it was said to be a “productive” undertaking.

Manfred had indicated previously that the sides had not even engaged in real-time negotiations since June 7th. This unquestionably represents a big step up in communication, at a minimum. The pair’s in-person meetings began last night and continued today, according to Bob Nightengale of USA Today (via Twitter).

Yankees President Levine Calls For Resumption Of MLB-MLBPA Negotiations

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While his own history on the job includes some less-than-friendly interactions with labor, Yankees president Randy Levine believes ownership and the players can and should reach an amicable resolution of their present standoff regarding a resumption of the 2020 season. He tells David Lennon of Newsday that a deal “can get done,” calling players “the heart and soul of the game” and saying he believes both sides still have the will to get play underway.

So, what’s the path? As Lennon explains, it seems Levine — and perhaps the upper reaches of the league office — are accepting that players will stand on their demand for pro rata pay. Working from that premise, says Levine, removes “the contentious issues” and creates space for the sides to “get in a room and negotiate.”

The MLBPA’s “when and where” bargaining tactic — and associated public relations blitz — seems at least to have succeeded in gaining some level of clarity. Per Levine: “The commissioner now has the right, as long as the players get to 100% pro rata [salaries], to put a schedule together. So I don’t think that the money and the schedule —  the number of games — is the issue anymore.”

While there are still important points to be negotiated regarding the way a 2020 season would function, Levine says he thinks they all can be managed in talks. And what of the suggestion we’ve seen floated that some substantial number of owners will balk at playing a season at all? Levine says he hasn’t heard that message in his talks with other clubs.

It’s far from clear that Levine’s general optimism and outlook are shared in the upper reaches of other organizations. Certainly, the league’s most prominent and valuable franchise may have a different outlook than other organizations. But the Yankees hold quite a lot of sway, both within and without league circles, so it seems rather a notable development that Levine — who says he’s in communication daily with commissioner Rob Manfred — holds these views and is willing to communicate them publicly.

MLB Collective Bargaining and Risk Sharing

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Dr. Matt Swartz is a Labor Economist who has researched and published on MLB labor markets for over a decade at websites including The Hardball Times, FanGraphs, and Baseball Prospectus, as well as at MLB Trade Rumors. Matt created the arbitration salary projection model for MLB Trade Rumors, and co-created the SIERA pitching statistic available at FanGraphs. He has consulted for a Major League team since 2013, in addition to working in his day job as an economist in the cable industry. This article reflects his own opinion and not that of any of his employers or clients.

In essence, every proposal floated by the owners has requested that players assume the downside risk associated with lower ticket revenue. Part of the reason I suspect this is offensive to players is that owners have benefited substantially in recent years from upside risk associated with television revenue, and little to none has found its way into player salaries.

To understand why, all we need is a superficial understanding of labor economics. Baseball’s free agent market follows those models better than perhaps either side realizes. Owners offer free agents certain salaries because they believe that their labor will generate as much money in revenue. Yet owners primarily get their revenue from two sources: tickets and television.

Since what free agents are actually selling is wins, the translation from ticket revenue to free agent salaries is obvious. Teams sell more tickets when they win more games. Especially if those wins push them further in the playoffs, they sell substantially more season tickets in subsequent seasons. Teams readily pay free agents with this in mind.

Yet the translation from television revenue to free agents is virtually nonexistent. National television deals with ESPN, TBS, and FOX are distributed to all teams, regardless of how many games they win. Regional Sports Networks often sign multi-decade contracts with teams to broadcast their games, which also are unaltered by win totals in a given season.

The reason this matters, and the reason this is a source of acrimony between the owners and players now, is that television revenue has grown far more quickly than ticket revenue. Player salaries have grown in magnitude about as much as ticket revenues have— suggesting this theory is likely true. Owners have seen higher profits from faster growing television revenue.

Consider my rough estimates in the graph below. Here I have used Baseball Prospectus payroll totals, approximate average ticket prices from various sources, average attendance from Baseball Reference, and Maury Brown’s (now unavailable) BizOfBaseball.com website and Forbes articles for total revenue. None of these figures are exact but they are certainly close enough that the message and pattern is obvious. Players have seen salary growth (red) almost exactly in accordance with the growth rate of ticket revenues (green), while owners’ profits have grown more quickly as they pocket the faster-growing television revenue (blue). This is not the owners pulling the wool over the union’s eyes—it is just the structure of their agreements in which the payroll share of revenue is not fixed as it is in other sports, but tied to owner incentives that have not kept up with total revenue.

If the owners want the players to accept the downside risk associated with low ticket revenue, they need to find a way to share the upside risk associated with higher television revenue.

A starting point is simple. Instead of minimum salaries defined exactly by the CBA, let free agent and arbitration prices be set in excess of the salary minimums, and set future salary minimums distributed to all players. Let those minimums represent some fixed X% of the cumulative national television deals. Bargain about that percentage, but when TBS offers 40% more in their next deal than their current deal, players will see that upside. In exchange, when future identifiable events lower ticket revenue— e.g. say government regulations of Y% reduced capacity in stadiums due to COVID-19 in 2021– the players will accept lower salaries by Z%. This gives players exposure to upside and gives owners protection from downside. Everything else is bargaining around X, Y, and Z%.

Now is the time for the players to request this. Now is the time for the owners to offer this. It need not even be for 2020– that ship may have sailed already. By right now, there is downside risk associated with empty seats associated with 2021. If owners want players to assume lower salaries in such a situation, they should make an offer to give the players a piece of future television revenue growth now. Otherwise, the players will again be asking the owners the same question next year: “Why should we accept this downside risk?”

Resolving This Player-Owner Dispute Should Be Easy

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Dr. Matt Swartz is a Labor Economist who has researched and published on MLB labor markets for over a decade at websites including The Hardball Times, FanGraphs, and Baseball Prospectus, as well as at MLB Trade Rumors. Matt created the arbitration salary projection model for MLB Trade Rumors, and co-created the SIERA pitching statistic available at FanGraphs. He has consulted for a Major League team since 2013, in addition to working in his day job as an economist in the cable industry. This article reflects his own opinion and not that of any of his employers or clients.

The MLB Owners and MLB Players Association have been unable to reach an agreement for the financial terms of the 2020 season, and at this point they may not reach one at all. Both sides have focused publicly on the morality of their case, each believing they have the ethical upper hand. Neither has made proposals that reflect their actual negotiating position. That the arguments have primarily focused on morality is perhaps not surprising, but it doesn’t create fertile ground for an actual substantive negotiation. I studied bargaining theory, and I don’t remember anything about how to win a moral argument. The ethics are what they are, and any reasonable person could make either side’s case if they really tried. The union seems to be winning the PR war thus far, as fans seem to mostly blame owners, but supportive tweets from fans are not convertible into currency.

At its core, what we have is the following set up: The presumptive default position, if no agreement is reached, is that commissioner Rob Manfred will order a roughly 50-game season with full prorated salaries. If the sides do reach an agreement, they may play as many as 80 games, and be able to split the associated revenue. They also may be able to add revenue through other avenues like expanded playoffs, and they could split that revenue too. Those are the gains from a negotiated agreement. They can be split in a way to make both parties better off.

Both sides have accused the other of not bargaining in good faith, but neither side has offered the other side anything they would plausibly accept. Instead we have seen the owners repeatedly try to offer players only slightly more than the same salary total as they would with a 50-game season, effectively asking for all the gains that would accrue from a negotiated agreement while leaving the players to absorb greater output and greater risk (both from the usual risk of playing baseball and the additional risk attendant to the global pandemic). The players similarly have failed to offer the owners anything that would lead to more profit than they would accrue in the event of a 50-game season with unexpanded playoffs. It is not surprising negotiations have gone nowhere.

At this point, an agreement for a better, longer season in 2020 is doubtful. But 2021 is right around the corner, and there is no vaccine for COVID-19 yet. We may not see fans in the seats in 2021, or at least we may not see stadiums filled to capacity. So we may see a replay of this argument in 2021 as well. It’s imperative that both sides recognize their position and negotiate accordingly. This acknowledgement could easily flip the script and lead to an expedited deal for 2020 already.

Let’s start with what should be obvious and unarguable.

Unarguable Point A:

Any agreement should see the players earn substantially more than they would have in a 50-game season.

Unarguable Point B:

Any agreement should see owners make more profit than they would in a 50-game season.

Nothing floated publicly has even come close to meeting these simple criteria.

The starting point here is actually fairly simple. Forget about inching towards a middle ground when neither side is willing to budge. Instead, begin by figuring out just how much extra revenue is associated with 30 extra games and an expanded postseason. Then, split it in half. The players’ salary total is equal to that half plus their prorated salaries for 50 games. Both sides may try to argue for a bigger piece of the pie, but either side would be crazy to say no to half of this revenue—which is much more than the zero extra revenue they would see otherwise. The players don’t need the owners to open their books on any more than is necessary to estimate this amount. The owners don’t need to ask the players to sign any waivers or anything else that isn’t already negotiated. Anything on top of this baseline can be negotiated after setting the above in writing and shaking hands (but not actually).

Offers could get more complicated and cover more territory. This is especially true with the risk of no fans or fewer fans in 2021, and with the CBA expiring after 2021. But the essential 2020 issue can be resolved in a fairly simple manner that makes each side better off in the short term while limiting the long-term damage to the sport. In subsequent pieces, I’ll discuss the fundamentals of baseball’s free agent market and how players might want to approach the inequities that have arguably developed over the last couple years. But for now, let’s just agree that owners, players, and fans can all be made much better off very quickly. Get it done before dinnertime.

Heated MLB Letter To MLBPA Highlights Ongoing Acrimony

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MLB didn’t just provide the MLBPA a new economic proposal today. It also filed some fighting words in the letter delivering its latest offer for a coronavirus-shortened campaign, as Ken Rosenthal and Evan Drellich of The Athletic report (subscription link).

Deputy MLB commissioner Dan Halem suggested the union has not acted in good faith in negotiations, hinting at the league’s possible stance if and when this matter ends up before an arbitrator. By Halem’s framing, labor is taking an obstructionist stance as the league provides what it labels a “final counterproposal” for a 72-game season.

That the sides are now exchanging angry letters, even as the clock ticks on squeezing in games, is to an extent merely confirmation of that underlying state of affairs. But there’s also a nod to a serious escalation lurking just beneath the surface. Halem hints less than subtly at a possible effort by the league to disrupt the sides’ late March agreement, claiming the union has “purposely failed to fulfill its obligations” and “deprived the Clubs the benefit of their bargain” in the contract.

No doubt the league already anticipated the likely outcome when it sent this shot across the bow. The union is expected to decline, and do so before the league’s appointed Sunday deadline, per Bob Nightengale of USA Today (via Twitter).

While the overall MLB salary offer has morphed in kind and crept up in value, the league’s bargaining posture remains the same as ever. The same holds true on the players’ side, where full pro rata pay has long been seen as a sine qua non.

The league begins from the premise that it can force a greatly truncated season with the players receiving pro rata pay for a third or less of a normal slate of games. Anything more? That’s gravy for the players, so they should be glad to get a marginal return for additional games played, particularly since the league is willing to dangle some added payment for an expanded postseason slate (should that prove possible). Cardinals owner Bill DeWitt laid this out rather forthrightly in his eyebrow-raising recent interview.

The players come from quite the opposite direction. By their view, the sides’ late-March agreement provided for pro rata pay for any games played. While that deal also contemplated the sides “discuss[ing] in good economic feasibility of playing games in the absence of spectators,” the players don’t believe that disrupts the salary clause.

Given those radically different viewpoints, it’s not hard to see why this dispute seems to be so intractable. Indeed, Halem now asserts in the letter that the players have no initial right to pay in the first place. While many are playing under guaranteed contracts, Halem notes that the league could have suspended them upon the declaration of a national emergency. Of course, Manfred didn’t take that course. The late March agreement reportedly requires the commissioner to exercise good-faith efforts to stage as many games as possible, as Baseball America’s JJ Cooper notes on Twitter. And a players’ association source tells Rosenthal and Drellich that the league’s own attorneys acknowledged in letter correspondence that “players are not required to accept less than their full prorated salary.”

As we’ve pointed out here previously, it’s completely absurd that the sides remain entrenched in a disagreement over an agreement they signed in late March — one that was intended to deal with the COVID-19 shutdown. Perhaps that’s the best way to understand the acrimony and distrust: the sides evidently never really saw eye to eye even as they signed that agreement.

Latest On MLB-MLBPA Negotiations On 2020 Season

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Major League Baseball and the players’ union met yesterday to engage on a possible restart to the pandemic-paused 2020 season. While the talk in the run-up to the sit-down surrounded economic disputes, the sides seem to have started the conversation in less contentious realms.

Yesterday’s chatter involved matters that might seem mundane, but which matter quite a bit to the hot stove. Roster and transaction rules were on the table, as was with the plan for a second Spring Training, per ESPN.com’s Jesse Rogers.

Also under discussion was the complicated matter of health and safety, though it sounds as if there’s much more to come on that score. The league is preparing a lengthy presentation on all sorts of measures and protocols for dealing with the coronavirus pandemic, according to Ken Rosenthal of The Athletic (subscription link).

It sounds as if the approach is to lay some groundwork before moving on to the owners’ desire to further pare back payroll. Yesterday’s meeting did not include any discussion of player earnings, per Rogers.

Players have already agreed to a game-for-game reduction in salaries. With something like a half-season on the table, they stand to sacrifice about half of their anticipated annual earnings even without taking further cuts. But MLB is reportedly angling to limit salaries to 50% of certain league revenues — it’s not clear what would be included — in order to boost team balance sheets.

If that’s the final and most difficult question to be answered, it’s not the most important. Finding a path to play that’s responsible to participants as well as the general public remains the primary challenge. The league has obviously done a lot of groundwork; Rosenthal adds that several agents have arranged briefings for players from disease experts.

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