It’s October 2022. Normally this would be the time for the MLB playoffs and the World Series. However, MLB cancelled the World Series months earlier, due to the ongoing player’s strike, which is now nearing a year. The cancellation of the World Series had the owners and the MLBPA getting more aggressive to reach a deal. But reaching a deal has been difficult.
That same month in 2022 sees a new book being released, titled “73.” It’s about how the 2019 Pittsburgh Pirates overcame the odds and won the World Series with a $73 M payroll. There’s already an upcoming movie in the works. The tensions from the MLBPA side were already getting high heading into the 2019 season, and the win by the Pirates was the final straw leading to the eventual strike. Once owners had justification that you don’t need to spend X amount to win, it only made it easier to deny paying bigger dollars to the players.
Alright, there are probably a lot of far-fetched things in that projection, and maybe some things that aren’t so far-fetched (the strike, not the World Series win with a $73 M payroll…to be clear, I’m definitely not predicting that). But don’t focus on the projection, especially the Pirates winning the World Series with a $73 M payroll. Instead, focus on the reaction to that scenario.
The win by the Pirates, or any team in a similar situation, would be celebrated. The reactions would be of surprise and of admiration for the difficult feat the team pulled off. There would definitely be a book. And a movie. And a million articles each year during Spring Training, starting in 2020, asking “Who Will Be the Next Pirates?”
MLB would point to how their league was fair. How any team could win. They’d make a claim about how MLB saw more parity than other leagues — leagues where a championship in Pittsburgh wouldn’t be celebrated as an unexpected accomplishment. That would go against the idea that every team needs to spend, and would try to counter the idea that MLB’s big market and small market differences were significant.
Meanwhile, MLB would be continuously raking in record profits and one time mass payments to their owners, all while saying they can’t afford to spend more on players. We just saw this happen in 2018. MLB had a record revenue of $10.3 B, while team payrolls fell $115 M between 2017 and 2018. From the way the current offseason is going, payrolls could remain stagnant again, as teams continue to take a frugal approach, despite continuous revenue gains across the league.
Attendance was down across the league in 2018, but that didn’t stop the league from seeing an increase in revenues. So while lowered attendance is going to be cited by teams as a reason for a lack of spending, it clearly isn’t making a huge impact to the overall game.
MLB Has a Problem
There’s currently a lack of trust in MLB teams.
The players believe that teams should and could be spending more. The MLBPA would have some of the details to lead to this conclusion, although the reality is that they negotiated a bad deal and got into this mess, and changes probably won’t take place until the next CBA negotiations in the fall of 2021. That assumes the players take a hard stand to get more of a fair cut from the league.
There’s also a lack of trust I’ve noticed from the outside for teams across the league. More and more you see teams tanking and shredding payroll when they’re not planning on contending. It’s hard to argue against that strategy on an individual basis, but when so many teams are doing it, you see opportunities where some teams could gain an advantage by actually spending more.
There are also situations like with Bryce Harper and Manny Machado where all 30 teams could benefit from adding one of those guys, and yet only a few teams are actually linked to them. Sure, there are some teams who are tanking for 2019, and maybe 2020. But those guys are signing deals long enough that any team should envision themselves as contending at some point while they’ve got Machado or Harper.
There’s an argument to be made that every team could afford one of these players, even with a $30 M a year salary. The problem with that argument is that no one really knows for sure.
We see estimates every year about MLB revenues, by league and by team. We see payroll calculations. We don’t see a lot of the other spending, so we don’t get a full idea of the profits each team makes, and how much they have left over. Any numbers thrown out there are guesses, with some being more educated than others.
This all leads to the biggest problem MLB teams have. We’ll pick on the Pirates for a second, only because I know their history and current payroll situation best. I’ve got them at $73 M right now for their 2019 payroll. They could add Machado for $30 M a year, and only be spending $103 M on their payroll. Add some money in-season, and you finish around $110 M, which is where they were during the 2016 and 2017 seasons at the end of the year.
The non-Machado payroll might go up after the 2019 season, but the Pirates revenues should also go up with a new local TV deal. You’d also think an addition of Machado would increase revenues from attendance, but I personally believe the only thing that will get people back en masse will be a playoff team.
What we know here is that the addition of Machado would put the Pirates spending at a level where they’ve been in recent years. Attendance has gone down the last few years, taking a big drop since 2015. But league revenues have continued to go up, and you’ve got to think that the Pirates are seeing increases elsewhere to offset the lowered attendance figures.
That’s where the lack of trust comes in. The Pirates can say that attendance is down, and they need to adjust payroll in turn. And it’s not just the Pirates. Any team could say that. While we can doubt those statements, we really don’t know for sure if the Pirates or other teams can afford X amount in payroll. I can say that the Pirates should be able to spend $100-110 M because they’ve done so in the past, but I really don’t know for sure.
The lack of certain knowledge about the profits of any team could be met with two responses. One is a benefit of the doubt that they’re being honest about how they have no money left to spend. The other response is skepticism of that statement in the wake of continuous evidence that MLB isn’t hurting for money.
When you really think about it, skepticism is the only logical response here. Taking MLB teams at their word is akin to taking a car dealership at their word when they tell you that they can’t cut the price because they’re already getting zero dollars on the sale. You know that’s not how business works. You know there’s some wiggle room where they could lower the price and still be making money (or spend more and still be making money, in MLB’s situation). The problem is that you don’t know exactly how much wiggle room there is, which leads to a lack of trust.
MLB teams have extra money to spend. We just don’t know how much, and because of that, there’s no way to trust any amount that is thrown out, or any financial summary that a team volunteers without showing the work.
The Solutions to MLB’s Problem
The biggest issue here is that MLB doesn’t need to change. They continue making record revenues. The owners continue to make money outside of the game with BAMTech. The TV deals are enough that a lot of teams are paying for their team payrolls before a single ticket is sold. And even with attendance down, the league sees a rise in revenues.
There’s no reason for them to change their approach right now, because there are no deterrents. You might have more deterrents for individual teams. For example, I believe the Pirates have been impacted by their drop in attendance, probably more than other teams. But then comes the lack of trust in exactly how much they have left to spend after that drop.
The solution to the problem here, and the only way to regain fan trust, is to have total transparency about what each team can spend.
No, that doesn’t mean have every team open the books and show their exact figures. That will never happen, and wasting more than a quick paragraph on the subject would be a waste of time.
Instead, the solution is to adopt a financial structure like the other leagues have, where teams have a salary cap, a salary floor, and fair revenue sharing that allows each team to spend up to the cap while still making money. In that scenario we don’t know how much profit an individual team is making, but it also doesn’t matter. If every team can spend from $X-Y in salary, and you know where each team falls on that spectrum, then you know the only important information: how much each team has left to spend.
Getting to that situation in baseball will be difficult. There’s currently no incentive for owners to adopt that structure. They already have what amounts to a salary cap with the luxury tax threshold. That is helping to hold down player salaries. The addition of a salary floor would only mean an increase in player salaries, likely for the lower paid guys, with a possible reduction for the top guys. And fair revenue sharing would mean that big markets would be giving up some of their profits so that small markets could spend on the same level.
The only way I see this happening is if players force the issue in the next CBA negotiations and fight hard for a salary floor. The only way to make that work would be for the league to adjust their revenue sharing to allow each team to spend to the floor, and the likely cap that would come with the floor.
This would all require owners to give players a bigger share of their current revenues, and for the owners of big market teams to give more of their revenues to the small market teams to level the playing field. It would also likely require that the top paid players take a bit of a pay cut in favor of the lesser paid players to receive more.
All of this is a challenge, and if the players wanted to pursue it aggressively, then I wouldn’t be surprised to see a work stoppage as a result of the next CBA negotiations.