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Merry Lockoutmas Eve!

It’s the most wonderful season of all – lockout season!

World Baseball Classic - Championship Round - Game 3 - USA v Puerto Rico

It’s the most wonderful season of all – lockout season!

Nothing says holiday cheer like your favorite Tiny Tim baseballers squabbling with billionaire Scrooges over how they’ll play a game.

That’s where we find ourselves today as baseball’s Collective Bargaining Agreement – the contract that legally defines the relationship between the players and owners – expires tonight at exactly 11:59 pm. Make sure you set out a plate of cookies and a glass of milk for that jolly ol’ elf Saint Work Stoppage-a-Clause, who will make his first holiday appearance since 1994.

Unless an agreement is reached today – and none seems imminent – MLB owners will lock the players out of team facilities until the two sides can come to terms.

What is a lockout? In the olden days, it meant physical locks and chains on doors as unionized workers were physically kept from factories. Now it’s a bit more metaphorical. Players won’t be allowed on club facilities, but it’s already been reported that teams, like the Cardinals, have given their players whole lists of things to work on, including training plans and workout procedures. A work stoppage isn’t likely to stop much actual offseason work.

It does, however, mean a stop to ongoing official offseason activities, including the signing and trading players, the upcoming Rule 5 draft, and the Winter Meetings. That’s one of the reasons that this hot stove offseason has been a blazing bonfire of activity even in November. Teams are racing to finalize their rosters for the 2022 season before they face an uncertain future.

The Cardinals got into the action early, locking up both Yadier Molina and Adam Wainwright before the postseason ended. They followed it by re-upping with lefty reliever T.J. McFarland and inking veteran lefty starter Steven Matz.

The Rangers spent half a billion dollars over the last few days as they attempt to crawl out of the AL West cellar.

The Mets owner freaked out online over the loss of Matz and then proceeded to sign just about every free agent on the market, including Max Scherzer to a record-setting average annual value of $43.3M.

Pieces have moved so quickly that it’s been hard to track who plays where now and for how much.

This kind of unprecedented spending spree from owners and general managers signals both the good and bad of the imminent labor dispute.

By multiple reports, baseball is in a strong financial situation as the sport emerges from the COVID-fueled losses in games played and tickets sold over the last two seasons. That missed revenue could have wrecked the sport. In-the-know reporters keep pointing to the massive spending by mid- and large-market teams as the league heads into a pending lockout as a clear sign that the game has made a full and complete financial recovery. Heck, even the Marlins are bringing in pricey free agents.

Other teams, though, remain on the sidelines in the free agency frenzy, refusing to add payroll for reasons that are not tied to post-COVID finances.

The MLB draft and player development are almost universally seen as the most viable path toward future contention. Super agent Scott Boras has recently called this MLB’s “race to the bottom”. Tanking – losing on purpose to secure high draft picks – has become a viable strategy for improvement.

Even the Cardinals, who haven’t suffered through a losing season since 2007, have bemoaned the difficulty of maintaining a competitive roster when they are always drafting late in the first round. Elite players drive elite rosters. The only surefire way to get those players – besides hoping for a once-in-a-generation cycle of free agent shortstops – is to draft them.

That’s the irony in the modern game and the wrong that the MLB Players’ Association are trying to right.

The game is healthy and strong financially. Franchise values are escalating. Teams could spend and spend and spend and still turn a profit. Yet, few teams are spending to the levels of their franchise value or profit margins because doing so does not necessarily lead to increased revenue or competitiveness.

Thus, the players rightly believe that with each passing year – even with peak salaries improving – they are getting a smaller and smaller slice of MLB’s financial pie.

The Cardinals are a good example of this. Yes, they’ve suffered through lost ticket sales and likely felt the impact of COVID more than many franchises, since a relatively larger than average percentage of their revenue is tied to their gate. However, they enter the lockout with an adjusted payroll of just $143.5M.

That could increase. The team still has offers on the table, targeting relief arms. Reports have them pursuing left-handed hitting DH candidates, ranging from long-time Mariner Kyle Seager to recently DFA’ed Pirate Colin Moran.

Even if they sign a reliever and a lefty UT, it’s unlikely that they will even come close to their pre-COVID “Opening Day” payroll levels, which were nearing 170M (when calculated the same way as above).

Of course, part of that is because Mozeliak and the Cardinals have been shrewd with their roster decisions. They somehow convinced the Rockies to pay them $51M to let Nolan Arenado play in St. Louis AND Arenado himself agreed to re-structure his contract to give the Cardinals two different types of deferred salary. Take out that Colorado money and ignore Arenado’s deferments and the team’s payroll jumps quickly (which is why sites like Fangraphs and Cots have different numbers than what I’m presenting.) But it’s not real.

The Cardinals’ actual payroll outlet remains lower than it could be or should be relative to their talent but they aren’t in any hurry to spend.

Take their contract with Steven Matz as a case study. Based on projected performance and role, Matz is similar to the Cardinals’ signing of Mike Leake back in 2015. Leake – a more consistent starter than Matz is now – got $75M total. Over half a decade has passed and Matz got just 4 years and $44M; the Cardinals will only pay him $8M next season.

Wise financial management? Yes. A good signing for the Cards dollar-for-dollar? Sure. But it does illustrate the limited growth in salaries that less-than-elite players have experienced throughout MLB.

Further to the point, the Cardinals – with significant salary room available to them relative to revenue and recent spending – targeted the discounted Matz, even with higher-end fits like Marcus Stroman available and very interested in playing in St. Louis.

The Cardinals, a healthy, winning, growing, and wildly profitable model franchise in MLB, have helped limit spending on players by leaning heavily into a draft and development strategy, and targeting blue-light values while avoiding full retail price.

“It’s just good business,” DeWitt would say. “And we’ve won a lot of games.”

“It just unfair for the players,” the MLBPA would argue. “And you could win more.”

Knowing the game is profitable and that owners are willing to spend excessively for the right kind of players, the Players Association would be wise to focus on improving the earning environment for their most profitable assets: young players.

The Cardinals – and a dozen other smart organizations out there – won’t get engaged with the likes of Max Scherzer at over $40M per season as he nears his 40’s. They would, however, willingly pay productive young stars like Dylan Carlson, Tyler O’Neill, or Jack Flaherty more than they currently are.

While very little has leaked from the player’s side of the negotiations (leading me to believe that they simply haven’t made any significant proposals), indications are that the players union is focused on improving the earning environment for young players, while also hoping to extend opportunities for veteran players through free agency.

The owners, on the other hand, have allowed information to filter out on multiple proposals that would somewhat address the financial gap between young players and veterans and tanking. In my surveying of Twitter, ESPN, and CBS Sports, these proposals have included:

  • A pre-arbitration salary structure for players that assign contracts based on Fangraphs’ WAR values.
  • A minimum and maximum payroll structure that would start at $100M and climb to a luxury tax level of $180M. That high-end level is lower than the current thresholds.
  • Expanding playoffs to 14 teams, with three division winners and four Wild Card teams per league. The Wild Card round would include division winners picking their opponents for a three-game series. The top seed in each league would get a bye to the Division Round.
  • Permanent Designated Hitter in the National League.
  • Draft lottery system that determines the top 3 draft picks by drawing and not by record.

Reaction to these proposals among, well, everyone, has ranged from “absurd” to “ludicrous” (with some allegations of plaid mixed in.)

Regardless of what you think of these proposals, try to see them for what they are: initial proposals!

I’ll give the owners credit here. While the Player’s Association appears to have chosen a reactionary position, MLB is at least willing to throw some stuff out there. That stuff – as ludicrous as the proposals might seem – provides the groundwork for actual negotiations rather than perpetuating a long-term staring contest that could cost actual games played and checks lost.

Representatives from the owners and the players have been meeting. Yesterday they were in a room together for a whole 90 minutes! They are meeting again today. They will likely continue to meet, even though there is no optimism that a deal will get done soon.

How will this end?

Your guess is as good as mine.

There are some things I think are near certainties, especially the DH and expanded playoffs. Those are points of contention that the players and owners only pretend to disagree about. While I’ve heard some claim that the players should oppose expanded playoffs because it would incentivize mediocrity, that argument doesn’t hold water. There is a clear historical connection between league revenue and payroll spending. A dramatic increase in revenue by adding up to 18 additional playoff games will lead to higher payroll on average.

I also think that a salary floor is a compromise the owners are going to be willing to make, provided it comes with changes to the luxury tax structure. This is a move that the owners have already proposed though it is very much pro-player. Budget busters like the Dodgers would still be able to overspend if they desired but a whole host of teams would have to raise payroll by tens of millions to stay above the floor. Why would the owners agree to such a proposal? Because competition is good for the game. And they would use it to get a bunch of other things they want out of the players – like expanded playoffs. Or continued cost-control over young players.

For now, all we have is speculation and guesswork. We’ll have more on this subject as the lockout begins and negotiations progress. In the meantime, merry Lockoutmas Eve to all and to the owners and player, a good fight!