NEWSLETTER
The sides can – and do – openly dispute the meaning of the language of their interim agreement from March, but it really doesn’t matter who is right on that front. Everyone knows that there must be a negotiation between the players and the owners about how, economically, to play this season. That doesn’t necessarily mean the owners should get precisely what they want and it doesn’t necessarily mean the players should get full salaries; it means only that those topics should actually be negotiated rather than sniped about in the media.
Thus, today is a big day, because according to earlier reports and USA Today this afternoon, MLB is finalizing its economic proposal today with their labor arm, and then it plans to present the proposal, formally, to the owners and then players on Tuesday. Given that the plan could be finalized today, and given that the owners effectively are MLB, you’d like to believe no one will be surprised come Tuesday. Indeed, you would much rather everyone involved had this weekend to digest and process. Maybe it’ll play out that way in reality, even if not formally. Once the proposal is set down today, I’m not really sure how it stays under wraps until Tuesday (and you wouldn’t want it getting to the players drip-drip style).
In any case, the point from our perspective is this: the plan, from MLB’s perspective, could be laid out today, and it is going to include a revenue-sharing component, according to USA Today. Union chief Tony Clark and super agent Scott Boras have vehemently indicated the players would not accept a revenue-sharing deal, thinking it a precursor to a salary cap. Though I’d point out that the sport effectively allowed a “soft salary cap” in the last CBA with the way the luxury tax is structured, and I’d also note that other team employees across the sport are taking salary cuts (and layoffs and furloughs).
To me, the better argument against revenue-sharing is that the players are already bearing the physical risk of the season, why ask them to also share equally in the financial risk? Share *some* of the financial risk? Maybe. Take a small additional haircut? Maybe. I’ll be honest that I don’t have a perfect answer here. It’s a shit situation, and a lot of people are going to have to figure out how to divvy up the shit sandwich.
I’ll keep an open mind until we know the full details of the proposal, as I can at least fathom versions of an offer that are technically a revenue-sharing model, but that include protections for the players (like, they don’t share the risk if the postseason is cancelled?), includes more money for the players (a much higher share than 50%), includes more health benefits for the players, and/or includes longer-term items that the players would be seeking in the next CBA.
I would also keep my mind open to the possibility that owners will be able to provide documentation to the players on those massive projected losses we learned about this weekend. I’ve dug in on the numbers as best one can on the outside, and it does square: the Cubs entity is going to lose upwards of $100 to $150 million this year, regardless of the pay structure for players. And the adjacent stuff that makes its bones off of being attached to the Cubs in some way, but is technically not “Cubs revenue” (think surrounding development, concerts, Marquee)? All that stuff is going to get absolutely hammered this year, too. There is no scenario this year where the Cubs or the Ricketts Family don’t get clobbered. It’s just a question of whether they can make a deal to play a season and get less clobbered.
None of that should be read as a woe-is-me, mind you. As we’ve discussed, part of the deal when you own a business is that you take the risks of getting clobbered in exchange for the possibility that you’ll make really, really good money. And in the sports world, it’s even less about making lots of annual money, and more about growing the equity of your multi-billion-dollar franchise. On that front, the Ricketts Family has done just fine, and I don’t think they would or should ask for any sympathy this year.
So, then, I’m left with an open mind. I really want to know what the proposed deal is going to look like. I want the players to be protected, because they deserve it. I want all the other employees of big league organizations to be protected, because they deserve it. So there’s gotta be some balance here.
To illustrate something, using the numbers we have (subject to all the caveats and questions about “revenue”):
If players receive full pro-rated salaries for an 82-game season, that would be about $2.36 billion total, and the median MLB team projects to lose about $100 million this year.
If players receive a 50/50 revenue share instead, that would be about $1.44 billion total, and the median MLB team projects to lose about $70 million this year.
So is the question, then, who should bear that $30ish million difference per team? If that were your question, you could pretty easily make any kind of argument you want (“owners take on the risk in the good times and the bad times,” or “players are at least making some money,” or whatever you want to say).
No. I think the big question is still mostly about the risk associated with revenues in an uncertain time. I understand that owners are trying to shave off expenses however they can do so in a year when they are projecting these massive losses. I think eating big losses this year is still very much worth the long-term value to the franchise and the sport as a whole, but I’ll set that aside for the moment. Shaving off expenses while simultaneously shifting even more of the risk (i.e., future playoff cancellations) to the players is where it feels like this becomes an unfair proposal. The players are already the ones taking the physical health risks of playing. They should not also be asked to take on an extra portion of the financial risk.
That is all to say, based on the numbers the AP reports from MLB’s presentation, and subject to much more financial information becoming available, it feels to me like:
• Yes, the owners are going to take massive losses this year if they play a season without fans (but they’re going to take massive losses either way, and eating it is still the wise business move in the long-term).
• Yes, it’s reasonable for the owners to try to limit those losses where they can do so in a fair, agreed-upon way.
• No, I don’t think it’s reasonable for the players to assume part of the risk for a cancelled postseason.
So, if the owners hope to get a revenue-share proposal pushed through, I suspect – after the financial investigation is complete – they’re going to have to figure out a way to not make this proposal more risky for the players. Whether that’s a minimum guarantee, some new offer on service time/free agency/arbitration, or whatever.
