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Trying (and Failing) to Make Sense of MLB’s Proposal to Resume Games

Can the owners afford to pay the players their prorated salaries without any ticket income? We look at all the confusing details and reach no satisfying conclusions.

St. Louis Post-Dispatch

I’m confused.

If you’re capable of a moment of honest introspection I think you would admit that you’re confused, too.

Confusion is a sentiment that applies universally these days.

Our current state of mass confusion stems from the disappearance of normalcy coupled with the daily bombardment of “new”. New data. New information. New policies. New opportunities. New requirements. New responsibilities. New experiences. All of this “new” affects us; it challenges that sense of rightness that we’ve worked into our routines and comforts over a lifetime of personal development.

Surrounding by nothing but change — new — and flooded with confusion all that change elicits, we find ourselves searching for a constant. Some kind of stable force, however small or insignificant, that we can re-center ourselves around.

Something like baseball.

A proposal was leaked earlier this week that would bring baseball back to home ballparks by the first week of July.

Sure, the game itself would have to change in order to work, but there would at least be green grass and wooden bats, pitchers and batters, home runs and strikeouts. For a few hours a day, things would almost feel right again. It’s enough to make me wax poetic.

Except now the owners and the players are going to ruin it.

Because money. As usual.

We just want baseball! Instead, we get what we need the least: more confusion.

At the time of this posting (and I guarantee this will change between the time I hit “submit” and you read this), MLB presented a plan to owners that outlines how baseball can return for the 2020 season. VEB writer Tyler Kinzy outlined the initial details here. Jeff Passan has been the go-to informant over at ESPN, and he summarized the proposal into nine easy to digest points (read his article) and 20 questions. The one that matters to us today is the first point: MLB is proposing “a 50-50 split of revenue from the 2020 season.”

As Tyler described, under the current Collective Bargaining Agreement, player salaries are not determined by any kind of percentage scale. Salaries are what they are regardless of the amount of revenue generated by the league. Since the 1990s, the MLBPA has gone to war against any proposal that could potentially limit salaries.

Then the pandemic hit. Back in March, the owners and players agreed to guidelines for how to deal with player salaries for canceled games. In exchange for one year of service time and prorated salaries when games resume (presumably with fans), the players agreed not to sue the owners for the full amount of salaries lost.

This was a shocking compromise for the Player’s Association, but it made sense. MLB had no revenue source. If players had demanded their full salaries in the middle of a global health and financial crisis, they would have looked greedy and could have caused some low-revenue clubs to fold.

MLB now believes games can resume in a little less than two months, but not with fans in the stands. This might bring baseball back but only with a significant loss of revenue.

You can see what MLB was thinking. Limited revenue minus high expenses = a financial loss. Since the players were willing to compromise for the good of the game in March, wouldn’t they be willing to do the same in July? Isn’t getting paid something better than getting paid nothing?

A 50/50 revenue split means everyone wins, right?

HA! Wrong.

The Players’ Association took one look at that proposal and said, “THAT’S A SALARY CAP! TO ARMS!”

The response that Tyler predicted pretty much went as expected. Lines were drawn and the internet became an ugly place as union reps, state governors, ex-club officials, the media and fans began to line up behind their favorite side: “The owners are greedy!” “The players are against baseball!” “Shut up and play already!”

The reaction was so immediately divisive that when MLB met with the player’s union on Wednesday, they didn’t even bother to present their financial proposal.

While fans were busy publicly yelling and the principal parties were privately avoiding the subject, I tried to take a step back to carefully consider the issue. My thoughts centered around one question: can the owners afford to pay the players their prorated salaries without any income from ticket sales?

I wanted to avoid the obvious answer: “of course they can, they’re billionaires!” That’s simply not how this works. Instead, that one question sparked about a dozen other questions. Including (but not limited to):

  • How much revenue will teams actually lose with no ticket sales?
  • What percentage of revenue does payroll occupy in team budgets?
  • How much does it cost a club to operate?
  • When will the Chinese restaurant near my office reopen?

I got almost nowhere with any of these questions.

The problem is that MLB owners do not make their books public. The information we do have — from sources like Forbes — is based largely on educated guesses and comes with a sizable range of margin.

Just take ticket sales. Revenue from ticket sales varies from franchise to franchise. Some clubs, like the Cardinals, are more dependent on gate revenue than others. I’ve seen reports that estimate ticket sales accounting for 30-70% of income for clubs.

With no fans in the stands, does that mean the Cardinals would lose a higher rate of revenue than many other clubs, potentially as much as 50-60% of their total income?

No. Because revenue sharing has to factor in. When you buy a ticket and some over-priced beverages at the ballpark, the Cardinals don’t pocket everything you spend. About half of that revenue is shared between clubs.

The Cardinals won’t lose 50-60% of their income with no fans. Instead, because of revenue sharing, they will lose 25-30% of their local revenue plus one-thirtieth of one-half of every other teams’ local revenue, give or take the actual revenue sharing rules.

Confused yet? Keep up, now!

That makes the next step obvious. I just have to find out exactly how much revenue each team makes and the fine print rules of revenue sharing and big-bang-boom, I’ll know exactly how much revenue the Cardinals will have and will lose this season with no fans!

But that’s just revenue. How much does it cost to operate a baseball club?

This is a simple matter of calculating day-to-day operating costs, including utilities, travel, mortgage, and non-union employee payroll. Does anyone know how much Busch stadium spends on wifi? Grass seed and dirt for the grounds-crew? Capital expenses? Debt service? Does Mo dry clean his tweed jackets himself or do the equipment managers take care of that? (Oh and I guess I should add some costs for Clorox wipes and a few bottles of hand sanitizer. Player safety first!)

Once I’m able to gather all that revenue data I don’t have (minus ticket sales and revenue sharing info I can’t get) and then accumulate the expenses that I don’t know, I can then prorate all player salaries (plus further prorating the prorated salaries of the taxi squad players) to 82 games (minus the advance the owners offered players in March) and then I can tell you exactly how much teams can afford to pay players in a season without fans!

So, what is it? What’s the answer? Can the owners afford to pay the players their prorated salaries without ticket income? Yes or No?

I have no idea. No one outside of the accountants closed up on Clark Street can tell us whether or not the Cardinals can pay players their prorated salaries without sinking deep into the red.

The best I can offer you is three possibilities:

  1. It’s very possible that shutting the game down for the season is a better financial move for the owners than trying to pay players prorated salaries without fans.
  2. It’s also possible that the owners are just being greedy and are trying to bully the players into taking a larger share of the financial risk.
  3. It’s also also possible that the owners leaked this plan for revenue sharing in order to make something simpler — like deferred salary payments to lessen costs in 2020 — more palatable for the players. (Pay attention to this one.)

Which of these possibilities is right? Which is wrong?

I wish I had more answers for you. I tried to make sense of MLB’s proposal to resume games. I failed. Instead, confusion reigns. That’s just the world we live in now. And the comforting, centering role that baseball plays in our lives will be delayed at least a little longer while people who know way more about this stuff than me break out their calculators.

Here’s hoping that somehow the owners and the players can figure this out and that the game returns. Soon. Safely. And with everyone getting paid what they deserve.

For more: Jeff Passan offers his take on ESPN’s “Get Up”: