Basic economics says deal between MLB and players should get done
MLB Commissioner Rob Manfred speaks at the National Press Club July 16, 2018 in Washington, DC. Credit: Getty Images/Win McNamee
Decades of mistrust, open hostility and backroom fighting over billions of dollars again has sown fear that Major League Baseball and the Players Association could collectively torpedo the 2020 season, just like the 1994 World Series.
Tuesday’s events didn’t do much to soothe those concerns, either, as MLB’s opening proposal of a sliding pay scale, with extreme salary cuts, infuriated the union.
But in this time of overheated negotiations, it’s easy to get caught up in the percentages and the rhetoric, to use a ruler to measure the canyon-sized gulf between the two sides rather than see the big picture. So as the union took Wednesday to huddle over MLB’s first pitch, I asked Andrew Zimbalist, a Smith College economics professor and nationally renowned authority in sports business, to handicap the situation for me.
Zimbalist has authored a number of books on the baseball industry, so he’s very familiar with the labor warfare. In this fight, however, he isn’t worried about either side going with the nuclear option.
“The players are going to put forward another proposal, and they’ll be miles apart, and then they’ll bargain, and you’ll meet at some point in between,” Zimbalist said Wednesday during a telephone interview. “I think that’s the most likely outcome.
“Because for the players, the alternative is to sit home and watch television and earn nothing — so the players obviously want to play. And for the owners, the alternative is to get America really [ticked] off at them and end up really weakening the sport going forward. So I think there’s a strong incentive on both sides.”
In other words, no one gets a "W’' here if negotiations fall apart and the season is canceled.
Zimbalist emphasized that Tuesday’s proposal was merely a jumping-off point. He said he can envision a scenario in which a sliding scale might work if the Players Association gets a more favorable adjustment to those percentages.
“I think so — a version of it that’s much, much more moderate,” Zimbalist said. “Their slide was very steep. And it’s got to be a lot flatter.”
According to ESPN, players who earn more than $20 million would be paid roughly 30% of their prorated salaries, based on 82 games. For example, Mike Trout, who was due $37.6 million for this season, would see his $19 million whittled down to about $5.7 million, with a chance to make another $2 million-plus from the playoffs. Players at $1 million or below would make 72.5% of their prorated salary, an income bracket that represents 65% of the league. By my count, 47 players were set to make $20 million or more this year.
“You could have a little bit of a rebellion within the Players Association,” Zimbalist said. “So you can look at this as a divide-and-conquer strategy on the part of the owners. But it’s pretty clear, at least initially, the powers that be in the union have resisted that, and they’ll probably be successful at continuing to resist it.”
Zimbalist also believes that the sliding-scale system was devised to help the larger-market teams because they stand to lose the most with zero attendance, as The Associated Press recently pointed out in listing the top losers: the Yankees ($312M), Dodgers ($232M), Mets ($214M), Cubs ($199M) and Red Sox ($188M).
The part that seems irrefutable is the significant financial wallop created by the lack of gate-related revenues this season. Zimbalist believes the owners did in fact leave themselves a clear path for further salary negotiations in that March 26 agreement if games were to be played without spectators. Also, if MLB is losing up to 50% by staging games in empty buildings, he expects that to be passed on to the players by whatever system they ultimately agree on.
“So it only makes sense in my view for the players to accept something like a further reduction of 50%,” Zimbalist said. “There are nuances and innuendos and other fine adjustments that could be made, but basically I think that’s just straight economics. There’s no ideology or politics there. Baseball doesn’t have a salary cap, so salaries are based upon the owners’ assessment of the players’ value in the marketplace, and that value is based on how much revenue they generate.”
As for other options, could deferring a percentage of the players’ prorated salaries to subsequent years provide a solution? Zimbalist didn’t think so.
“It doesn’t help the owners very much,” he said. “If the problem was overwhelmingly a problem of cash flow and not a problem of income and costs, then that would solve a cash-flow problem. From the owners’ point of view, the problem isn’t really a cash-flow problem as much as it is they don’t want to lose money. A deferral might be a sweetener here. It might lubricate a deal, but it won’t be the basis for a deal.”
David Lennon is an award-winning columnist, a voter for baseball's Hall of Fame and has covered six no-hitters, including two perfect games.
