Baseball as an Investment is Destroying the Sport

[Ted Schwerzler]

For weeks it’s been the “most important week” for baseball in regards to MLB returning to play. The can continues to get kicked down the sidewalk as side squabble over financials. It’s the investment made by owners though that is actively destroying the sport.Here’s the thing, baseball is a business for the 30 groups that lay claim to an organization. While that’s a worthwhile reality, there’s also little shred of fandom in regards to those groups as well. By and large, Major League Baseball owners are not representative of the Dallas Mavericks Mark Cuban per say. In fact, Cuban was actively campaigned against when trying to break into the ownership ranks for this sport.

 

Why does that matter? An owner like Cuban is also an active participant in the on-field excitement of his investment. While looking to turn a profit, it’s not just another vehicle to generate revenue for an owner like that. Many across baseball have a team as part of a much larger portfolio, and it’s something they simply count dollars from as a hobby. What’s problematic is that viewpoint is where these labor negotiations break down and the sport suffers unrepairable damage.

 

Though there are some hardcore fans that could be dismayed by all of this, it’s more the casual fan that Major League Baseball should be worried about. If you live, breathe, and sleep the sport you’ll also be aware that labor strife is part of it, and ownership digging in has long been part of the problem. When the rosin bag is flipped again and the pill is tossed across the dish, you’ll be there for it. The fan that tunes in because it’s a lovely Saturday afternoon however, well, they’ve now found new hobbies.

 

 

For the past few seasons, we’ve seen Rob Manfred actively seek ways to change the game in hopes of capturing the casual onlooker. How do we make it more exciting, quicker, or quirkier? Those questions have resulted in some significant shifts throughout the 27 outs we’re given, and there’s been ever more off-the-wall proposals that we haven’t seen come to fruition (yet).

 

It’s long been noted that Manfred was brought in because of his labor and employment law background. He was to be an advocate for the owners, which is understandable as it’s the group he reports to, but he’s failed miserably to connect with players and the union. While attempting to do the latter and leaning heavily towards the former, a massive chasm has been created between the two sides and it’s likely one he’s over his skis when trying to fix.

 

Despite these 2020 restart discussions having gone on for weeks at this point, it’s very clear that none of this is a result of the global pandemic wreaking havoc on the world. No, this was a jumpstart for ownership to posture in relation to the expiring CBA in 2021. Cities that are supposedly set to host games have no idea what the health protocols will actually be, and it’s been noted multiple times that health related issues (the reason we aren’t playing right now in the first place) won’t be the cause of a season without liftoff.

 

 

So, what happens from here? It’s pretty clear that no matter how many proposals MLB ownership provides they’ll continue to offer the players the same $20 value cut up in different forms of payment. Whether it’s one $20, two $10’s, or twenty $1’s, there’s been little to no progress made. All of that trends towards owners’ eventual goal of a season mandated by the commissioner. Neither side comes to an agreement, owners pay out the lowest possible amount of prorated dollars, they rake in the benefits of Postseason play, and somehow their books stay closed through all of this.

 

If, and more than likely when, Manfred must mandate a season be played we’ll be no better off than when baseball was shelved. The sides weren’t able to come to an agreement, and a year from now there won’t be a CBA to enact any sort of action at all. A global pandemic was used to truncate what could have been, and a lockout will take the damage a new step further.

 

No matter what date and time the best Twins team in recent history takes the field, or the greatest player to ever step on a diamond digs in, your die-hard fan will be there. No number of Yankees and Red Sox on Sunday Night Baseball is going to be appointment viewing for the fan this sport has yearned to capture though, and the door could be closed on that ever happening again.

 

In 2020 those who have invested the most dollars in baseball are killing the sport for anyone but those that have invested the most time. It’s a disappointing and catastrophic reality, but it’s where we are at.

 

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[mikelink45]

So true - we are at a point where the super rich only want to be richer.  Connie Mack had to sell his players to stay afloat, but never wanted to leave the game.  Pohlads were willing to participate in contraction.  George Steinbrenner was a pain, but he wanted to win, he cared about the team. Now they are faceless and indifferent to all but the bottom line. 

[Doctor Gast]

The delay really complicated things. The season where we have our greatest offensive potential will probably have very little fanfare if we have a season at all. We have lost the fair weather fans long time ago, the more serious fans will be less serious & grow less serious as time goes by & more political it becomes. Meaning less games watched, less baseball items bought, less tv packages bought & less baseball journalistic subscription bought & followed

[Trov]

Ted, you clearly are anti owners, based on this and previous articles.  I am not pro either side, but understand it takes two sides to make a deal.  You point out that all proposals given to the players are for a similar amount of total pay.  Clearly, the owners have determined that is what they are willing to pay and dug in. 

 

Well players are also dug in at full prorate for as many games as possible.  Their first proposal to owners would take season into winter months requiring games to be at neutral sites, something the players first balked at saying they want to be home with families when the all AZ or AZ FL split was mulled about.  So what changed, of they now will get paid more money.  They also want players, under their own process to allow players to opt out at full pay.  The league would have no say on who qualifies for "high risk."  What would stop every player saying they are high risk, I won't play and pay me?  Nothing under their proposal because they make the call on who is high risk.  I bet many of the high paid players that are set for free agency would take the high risk route, no short season to drop numbers but still get full pay, sounds good to me if I am a player.

 

The players are just as dug in as the owners.  You point out the owners will not open books, well they offered to do that for this year for a full 50 50 split of the revenue, that would require an accounting of revenue, and opening of the books.  The players had a resounding hell no to that.  The players want no cap but full transparency of the owners books.  What non publicly traded business gives their employees full look at the books?  You seem to forget this is a business and the owners are willing to take losses this year, but have a bottom line of that.  They can force it on the players the 50 games.  The players will cry that they want to give the fans more baseball, which the owners offered, but it would be at same pay.  So what the players really want is more money, not more baseball.  Who can blame them.

 

Both sides are so dug in and neither are willing to give.  I wish they both would give a little, but neither willing to with how the last few off seasons have gone.  You point out that it is Manfred that has led to the division, but I disagree.  I believe it is that GM's have changed the way they value players and contracts.  It used to be lets sign a guy into their late 30's for early 40's paying them top dollar, because we want them for the first few years and will accept the bad years.  Teams quickly learned, with the new luxary tax, a basic salary cap that the players agreed to, changed the way teams were willing to have dead money on players.  This led to lower and shorter contracts for most FA, only the age 27 to 28 free agents superstars were going to get the 8 plus year deals.  The deals the 30 to 31 year olds were signing and when they turned 35 or even younger became terrible contracts.

 

This division between the two sides has been brewing for years, and this just brought it to a head.  It is not just the owners fault for this, as you seem to point out.  This is both sides not willing to give anything.  I have stated for years, a salary cap would be best for them, because there would be a floor and full accounting for the revenue.  They can bicker over what is revenue, as players claim they should get their share of the land owned around the stadium that owners develop.  Personally, I find that argument crazy.  Should the players get a share of the land not owned by the owners too?  I mean how many bars around Target field are filled before the games, in normal seasons, if the owners have no investment should the players still get a share because without them no games and the owners of those bars should pony up?  

 

Players point out to local own sports channels that carry the games.  Not sure how media contract work, but players want the share of non-baseball content.  For example, Yankees own the YES network.  They have not only yankees games, but also Knicks and Rangers and other sports, much like FSN.  So yes the owners of the yankees have invested into a sports channel, but why should players get value of the non-baseball revenue?  The owners could have still started the channel and not carried the Yankees, should the players still get a share of if they dropped showing the Yankees?  What about the teams that do not have local channels?  For Twins who do not own one, despite trying to, they do not get any money from Wolves or Wild games, should players still get value there?  What about non-baseball investments by the owners or no connection to the stadium, should players get anything there?  The point is, where do you draw the line?  

 

The players are not victims of the owners.  They could choose to try and play different sports or have different professions.  The owners are not forcing them to play baseball for millions.  The owners should not be expected to operate  business at an extended loss simply because we want them too.  How many local business close because they are losing money?  How much should we expect the owners to lose before they close up?  Just because the owners have values in the billions, does not mean they are liquid for that much and can just accept losing millions upon millions.  

[Ted Schwerzler]

 

The owners should not be expected to operate  business at an extended loss simply because we want them too.  How many local business close because they are losing money?  How much should we expect the owners to lose before they close up?  Just because the owners have values in the billions, does not mean they are liquid for that much and can just accept losing millions upon millions.  

This is the largest issue I have and is assumptively incorrect. No owners are LOSING money in 2020 under the playing circumstances. They are generating LESS revenue than a traditional year, and year over year may be experience a loss, but are not operating in the red. They also have NOT opened the books, and would NOT be doing so in a 50/50 revenue split. Players shot that down because it's a cap, and the revenues are not definitively outlined. Players would be getting a 50/50 portion of whatever ownership determines as revenues. There's a reason that it's been laughed about for so long that these billionaires claim poor me on their investments. No reported number is accurate on their take because they've simply never shown any level of transparency regarding what is actually brought in.

 

At the end of the day, and it's been reported by plenty larger voices than mine, ownership is not losing money at full prorated pay for whatever amount of games they'd get in.

 

The owners have not made any different proposals from their first one that was flatly (and understandably) declined. They're waiting for the commissioner they wanted (who is laughed at universally) to enact a season in which they'll pay the least amount of salary dollars and still rake in the Postseason revenue.

 

Sorry if that stance is a silly one to have...

[Major League Ready]

Who here thinks the owners would accept a counter of 81 games at 80% or prorated salaries?

 

It should be crystal clear to the players the owners will opt for a 50 game season (roughly) if players won't move off full prorated salaries if the players in unwilling to accept a reduced rate. That option would pay the average player $725,000 for 50 games. If you believe, as I do, that the owners would accept an 81 game season at 80%, that option would increase player pay by 30% to $940,000 on average.

 

I would bet that if there was no union and the owners made it optional to return at 75% of normal compensation, 90 percent of the players would return.So, no, I am not going to blame owners if we have a 50 game season.

[Ted Schwerzler]

 

I would bet that if there was no union and the owners made it optional to return at 75% of normal compensation, 90 percent of the players would return.So, no, I am not going to blame owners if we have a 50 game season.

There is a union though, and you can't negate years worth of work by establishing a new precedent. Players are already disproportionate in their total take. Why would it be in their best interests to take concessions on that, going backwards from the labor work already done, and doing so the year before the CBA expires.

 

Owners have used a pandemic to begin the posturing that will be worse in regards to CBA discussions. It sucks, but that's where we are.

[diehardtwinsfan]

Unfortunately, I think this is the beginning of the end for baseball as we know it... and I blame both sides personally. There's been plenty of selling people out by both sides, whether that's the MLBPA selling out minor leaguers or owners selling out players and each other to a lesser extent. I'd have hoped that this would have been a time for all of them to get together, open the books if needs be, and find a way to ensure that baseball gets played with minimal losses on all sides...

 

Unfortunately not. It's looking more and more like we'll be lucky to see baseball in 2020 and even luckier if we see it in 2022.

[USAFChief]

This is the largest issue I have and is assumptively incorrect. No owners are LOSING money in 2020 under the playing circumstances.

Source?

[Major League Ready]

 

This is the largest issue I have and is assumptively incorrect. No owners are LOSING money in 2020 under the playing circumstances. They are generating LESS revenue than a traditional year, and year over year may be experience a loss, but are not operating in the red. 

 

Ted,

Obviously, the team have a huge loss for the 1st half. They absorbed all of the operating cost with virtually no revenue. This has been reported as being roughly $60M per team on average. We could debate that number but let’s just look at the 2nd half and see what the likelihood of recouping any of that “red” number.

 

We have two numbers that we can verify with relative confidence. One is that in stadium revenue is about 40% of total revenue. The other is that player salaries + taxes & benefits are roughly 52% of revenue. Therefore, your conclusion teams are not operating in the red for the 2nd half of 2020 (not 2020 as a whole) requires that operating cost not exceed 8%. If we include draft and International bonuses, I would guess MiLB operations alone are greater than 8%.

 

Of course, teams are spending much more these days on player development, analytics, technology, etc. The Cardinals went from 240 to 400 non-player employees. Travel, hotel, equipment. Target field upkeep, advertising, etc. I don’t have a problem believing teams operating costs are roughly 35% as reported by Forbes and Statistica. It does not matter, we could conclude those folks are incompetent fools and that operating costs are only 25%. Your conclusion will not operate in the red for 2020 suggests you are not willing to view the situation objectively. I will happily apologize if you can someone support that operating budgets are less than 10%. That still would not negate the 1st half losses but as Chief suggested, it is not necessary to have the financials to understand there is no way 2020 does not result in big losses for teams.

[jkcarew]

 

This is the largest issue I have and is assumptively incorrect. No owners are LOSING money in 2020 under the playing circumstances. They are generating LESS revenue than a traditional year, and year over year may be experience a loss, but are not operating in the red.

No matter how many express this opinion, it doesn't make it a fact for all teams...or even most teams.

 

Teams will incur costs that are greater than a prorated per-game level (for a deal where owners have to pay prorated per-game major league salaries)...easily greater, since you have to factor admin, on-going minor league costs, servicing fixed assets, and rent/debt, etc. Meanwhile, owners will realize revenue that is less than a prorated per-game level, given little to no gate, concessions, parking, merchandise...clearly.

 

In all of the major sports in America, the owners enjoy what amounts to a legal monopoly. But in modern times, the players unions amount to the same on the labor side. If the owners have significant money on the table, they can share it with the union, or get nothing (worse than nothing) if the union strikes, or foregoes all offers. The MLBPA is the most powerful of unions, and dominated by those at the far right-hand side of the salary bell curve. The playing field isn't nearly as sloped as suggested here.

 

Also, Mark Cuban?? Really? An obsession with thrusting your name and likeness in front of any and every camera in sight 24x7, and inventing more and more new ways to draw attention to yourself at any cost says absolutely ZERO about your commitment to the game you represent. And much about your commitment to...yourself.

[DocBauer]

While owners, and ownership partners, make money off MLB, the very fact that CAN buy a team (in any professional sport) means they have the financial ability to do in the first place from all their other business and investments. Yes, they make a profit off that team, but they generally buy said franchise for the sporting/fun aspect or ego, or both.

 

While it is very possible ownership cooks the books to some degree...not saying yes or no...the basic financial numbers don't appear to be in dispute. A full, normal ML season brings in around $10B. Half a season is around $5B. That's just easy math. No fan attendance would be anywhere from 25-40% of that revenue depending on what source you cited. So $5B easily becomes something like $3B, once again just doing basic math.

 

There will be no milb season, yet many teams, including the Twins, are still paying their players. A pittance? Perhaps, but as pointed out, they are also still running their franchises and paying personnel, including a lump sum to the players previously, with ZERO $ coming in.

 

Tell me again how there is no red at this point?

 

The owners have every right, as owners of a business, entertainment or otherwise, to at least mitigate their losses for 2020. And let's be clear, not all teams and all financial situations are equal. Due to media deals and the such, it's possible teams like the Yankees or Dodgers, etc, might eek out a profit or break even without fans. Maybe. But what about the Twins, the Royals, etc, that are mid or small market teams?

 

Ownership is going to lose money. Period. They are willing to do so because they also want baseball and none of them seem to want to sell. (Though this would be a poor time to do so if they did). But all that being said, they also can't expect their primary employees to play for 15% of their contract. (The Trout example of $30M being only $5M on the initial proposal).

 

For the good of the sport, for any HOPE of harmony in the next CBA, they need something better than their initial sliding scale offer to the players.

 

BUT, it is also on the players to decide getting paid is better than not getting paid. It is on the players to have a better grasp of the situation in the world taking place and to offer their own olive branch toward the people who pay them to keep their sport solvent and viable going forward. Are they so naive as to believe a world wide pandemic and a CBA around the corner, much less next offseason's market aren't going to be affected by all of this? Do they want baseball to be kicked in the shins and take multiple years to recover? Or would they rather join in the effort to make any financial losses, including to them, be short term vs long term?

 

Sorry, but this is a 2 way partnership and a symbiotic relationship. Not picking a side, this is just reality.

 

Both sides can play this smart for the good of careers and earnings and the continuation of the sport. OR, they can do what they have mostly done for my lifetime and bicker and argue about who "wins".

 

If and when this gets settled and we have baseball in 2020, the best thing BOTH SIDES could do is look to the NFL and NBA with their revenue sharing and cap situations, whether hard or soft. The health and growth of those sports simply can't be ignored by MLB and the union any longer. And I put the onus on both sides, but more so on the players. It's time for a cap that also comes with a floor. But it also means even more sharing of revenue by ownership. Both sides have a lot to lose and so much to gain.