Maybe you were counting down the days to the March 31 home opener at Fenway Park. Well, keep counting.
The Major League Baseball owners’ lockout of players reached its 93rd day Friday, with no immediate end in sight. MLB has announced the cancellation of at least the first two regular-season series, meaning a flushed six-game season-opening homestand for the Red Sox against the Rays and Orioles.
For many if not most fans, the details are far less important than the bottom line. The cancellation of games stinks — full stop. Who cares about underlying reasons?
But with the work stoppage bleeding into the regular season, it’s worth stepping back and taking stock of how the industry got to this point.
Whey are both sides doing this?
Both sides aren’t. Owners chose to stop the business of the sport and to cancel games. Players, who want to play 162 games and be paid for them, didn’t.
Labor relations between the MLB Players Association and the owners are governed by a collective bargaining agreement (CBA) that is typically negotiated in five-year periods. The last CBA, which ran from 2017-21, expired at 11:59 p.m. on Dec. 1. Both sides have to agree to a new deal.
Owners didn’t have to impose a lockout. They did so unilaterally.
Players hadn’t voted to authorize a strike. Owners could have asked the players to make a no-strike agreement for 2022 in exchange for a promise not to implement a lockout. Even without such a side agreement (players might well have not accepted one), the sides could have kept working on a new deal while operating under the rules of the expired CBA.
It has happened in the past, most notably when the sides reached an in-season deal in 2002. Owners chose not to explore that possibility now.
Why is this happening?
Yes, there is greater nuance than that. But mostly, the negotiations come down to how players and owners slice a growing pie.
Owners have seen ample revenue growth and are poised to realize even more. The pandemic halted years of uninterrupted growth, but a massive rebound seems likely without COVID attendance caps, with lucrative new national media deals taking effect in 2022, and with new partnerships with industries such as gambling, cryptocurrency, and streaming, not to mention real estate ventures surrounding modern mall parks. Cha-ching, cha-ching, cha-ching.
Players, meanwhile, have seen their earnings fall. According to the Associated Press, MLB as an industry spent $4.05 billion on player salaries in 2021, the lowest level since 2015. The median salary — the line of demarcation between the top and bottom 50 percent of players — was down 30 percent from 2015.
Owners like the shape of the current system. Players do not. Both sides want to make more money.
Their disagreement about how to accomplish that goal takes a few primary forms.
Pay the kids
In their first few years, players make at or near the league minimum, often outperforming what they’d make on the open market by a huge margin. Owners and front offices have become ever more aware of the value of young players, and have employed practices to delay the time it takes them to get significant raises through arbitration and free agency.
More and more players are getting salaries at or near the minimum. Careers are getting shorter as players are being shuttled between the majors and minors through their mid 20s before getting squeezed out of the game entirely in their 30s.
Meanwhile, the minimum salary has not tracked revenue growth. It’s the lowest of the four major American professional sports leagues. The oft-repeated refrain of “millionaires vs. billionaires” isn’t accurate for a huge chunk of players.
Both parties made proposals that increased the money going to young players, both by raising the minimum salary ($700,000 in the last MLB offer, $725,000 in the last MLBPA offer) and through the creation of a bonus pool for players who aren’t yet eligible for arbitration.
The gap in proposals, according to MLBPA lead negotiator Bruce Meyer, is about $90 million-$100 million — just over $3 million per team, or roughly what the Sox spent to sign Marwin Gonzalez last year.
Is that really enough to shut down the sport? Probably not, particularly given that players were prepared to sign off on expanding the playoffs to 12 teams and on owners selling sponsorships on uniforms, which would bring a further windfall. Owners prefer a 14-team playoff that would mean even more money, but were most recently negotiating around a 12-team framework.
The gap on this issue isn’t overwhelming, suggesting the real fault line almost surely lies with the luxury tax.
The tax line
Imagine MLB ownership groups as 30 invitees to a high-stakes, no-limit poker room at the Bellagio. (Might as well equate baseball with gambling interests, given what lies ahead.) All 30 can afford to join; after all, they own baseball teams.
Yet some prefer to play at a table with more moderate stakes, perhaps 4-8 limit. Fair enough. It’s a free market.
Except that it’s not, because those who sit at the lower-stakes table expect to be bankrolled by the ones at the no-limit tables. Moreover, they expect colleagues who make particularly big bets at the no-limit table to handle tips for everyone in the casino.
That’s essentially MLB’s system, which features (a) revenue sharing, in which big-market teams subsidize small-market teams on top of the already massive amount of money from national media and sponsorship deals; (b) no payroll floors, allowing teams to spend as little as they want on their rosters (so long as they spend revenue-sharing money on improving their teams, perhaps through player development or the draft); and (c) a competitive balance tax (CBT) that penalizes teams for spending beyond a certain threshold.
Owners insist that the CBT is the only answer to payroll disparities. Players see big-market teams contorting to stay below the tax line — five teams spent within $4 million of last year’s $210 million line, but did not cross it — and many more teams unmotivated to spend, even as they receive tens of millions of dollars in revenue sharing.
(Also of note: The Athletics and Rays have enjoyed plenty of postseason berths despite low spending. Payroll disparity is not the same thing as competitive imbalance.)
Big-market team spending is being shaped dramatically by the CBT line. Players thus want to see owners move the tax line considerably, worrying that a failure to do so will mean that the increased money for young players will come at a cost to free agents. Owners would be moving food around plates without actually offering larger servings.
The MLBPA’s most recent proposal featured a tax line of $235 million in 2022, moving to $263 million in 2026. The owners countered with a $220 million threshold in 2022-24, moving to $230 million in 2026.
Though all issues in a negotiation are interconnected, this is almost surely the thorniest — particularly because it involves not just a conversation between players and owners, but between owners who continue to resent the idea of peers sitting at the no-limit poker table.