Baseball - Labor

Baseball’s doomsday clock moves closer to midnight | Mike Maffie, Steve Mancuso and Matt Wilkes

Negotiations between baseball owners and the players have deteriorated to the point where the 2020 season may truly be in jeopardy.

Where things have fallen

For days, commissioner Rob Manfred had signaled if negotiations broke down, he would impose something like a 48-game season, at full pro-rated pay. He had been granted that power by the March return-to-play agreement. Because of that default option, at the First-Year Player Draft on June 10, Manfred stated: “We’re going to play baseball in 2020 – 100 percent.”

The owners next proposed a 72-game schedule and a guarantee of just 70% of pro-rated salaries with an additional 10% possible if the postseason was played.

The players, saying they thought further negotiations were pointless, stopped negotiations and asked the commissioner to implement the league’s default option. The players told the owners to go ahead and set the starting date and schedule that they wanted.

It turns out, the owners wouldn’t take “yes” for an answer. Late yesterday afternoon, Manfred announced the owners would not schedule a season unless the players waived their right to file a grievance. Manfred added that he now is no longer confident a season would be played.

What the grievance is

Why has the union’s right to file a grievance become a new sticking point?

The right for either side to file a grievance is established at length in baseball’s collective bargaining agreement (CBA) that covers the 2017-21 seasons. It’s the process the two sides agreed to use to enforce the CBA through private dispute resolution instead of going to court.

We wrote about the grievance in detail last Wednesday. Here’s the substance: If owners set the season at 48-54 games, the players could claim they had violated the terms of the March agreement that stipulated owners must make a “best effort” to schedule as many games as feasible.

When owners defended themselves by claiming that was the highest number economically feasible, the arbitration panel might require owners to open their books to prove it. That’s a step they would loathe to take, particularly right before the next CBA would be bargained.

The owners are faced with the real prospect of losing the grievance and be ordered to make the players whole, which might involve a payment of $800 million or more.

The owners’ grievance ultimatum isn’t serious

From the beginning, this labor dispute has been about the owners trying to get out of the terms of a contract they agreed to in March. The owners had won the power to set the schedule. In exchange for the players agreeing not to sue the owners for failing to provide their full contract pay, owners agreed to pay players on a pro-rated basis for the games that were played. The players also received service time concessions.

But then the owners decided they were unwilling to live up to this deal. After letting 41 days pass, they went back to the players and demanded an additional pay cut.

They did this without offering the players anything in return.

Yesterday’s new demand by the owners that the players give up their right to file a grievance is a further example of the owners wanting something but not being willing to give anything to their bargaining partner to achieve that goal.

It should go without saying that the union isn’t going to agree to these terms. Giving up the enforcement provision of an agreement while receiving nothing in return sets a precedent for continued losing at collective bargaining. It’s no different, possibly even worse, than giving in on the pro-rata clause for no benefit in return.

Are the owners just stalling?

The players have remained united. It’s obvious they will never agree to the owners’ new demand. So why would the owners bother?

One theory is it’s an extension of their strategy to stall.

When the players suddenly ended negotiations Sunday and asked for the Commissioner to say “where and when” they will play, it caught the owners off-guard. If they responded by announcing a calendar for the default option of a 48-54 game season, Opening Day would be around August 7. (We worked through the calendar calculations in our last post.) Training camp would start three weeks before that on July 17.

That’s a full month from now. That owners’ schedule would cause fans to rightly ask why not start training camp now? Why wait another month for Opening Day? Owners could respond to fan requests for more baseball by pleading economic feasibility, but the spotlight would be on them to prove it.

Reds pitcher Trevor Bauer explained it yesterday afternoon on Twitter:

“Players told you to set the season, but it’s too early to set the season right now, isn’t it Rob (Manfred)? Because then you’d have to explain why you’re only going to impose 50 games when we could easily play 70+ right now. The tactic is to bluff with “no season” again and delay another 2-3 weeks until you clear the risk of “not negotiating in good faith by trying to play as many games as possible” … How do you delay another 13 days? Guess we all got that answer today. Threaten to cancel the season. … All the while, hold the fans for ransom. Hold the future of the game for ransom. No one believes your bluff, bud. You’re holding a losing hand.”

Delay has helped owners all along. It’s unfortunate the situation has eroded to the point where this represents the best-case scenario.

This really can’t be about money, can it?

The amount of money isn’t that much for the average owner.

Let’s compare how much more it would cost a team to play a 72-76 game schedule at full pro-rated pay, a schedule players almost certainly would agree to, and the default owner-forced short 48-54 game schedule.

Even if you accept the owners’ numbers about how much money teams will lose by playing each game (and you shouldn’t because they don’t include baseball’s core revenues like from national TV contracts), the difference is only about $10 million per team.

Let’s do a back-of-the-napkin sketch of the Reds situation. The Reds are a middle of the road team in terms of payroll and local media payments. The club has agreed to a $144 million payroll in 2020 for a 162-game season. 74 games would be about 46% of a full schedule and represent $66 million in payroll. A 54-game season, about a third of the season, would cost $48 million. The difference in player payroll expense between the two seasons is $18 million.

But even without fans, the Reds would have offsetting revenues. FSO pays the Reds for the right to broadcast games. We don’t know the exact terms of the Reds deal with FSO, but an educated middle-range guess would be about $65 million per year. If FSO pro-rates its payment, they would pay $30 million to the Reds for a 74-game season and $22 million for a 54-game season.

That extra $8 million reduces the difference between the two seasons to $10 million. But we aren’t finished. Baseball teams receive a share of the sport’s core revenue from national TV contracts, Facebook, streaming services, etc. That amounts conservatively to $2 billion. The Reds equal share of that the difference between 74-game and 54-game seasons would be $8 million. That’s another conservative assumption because the Reds get more than an equal share for being a small market team.

So before we get to revenue from radio broadcasting rights, Reds swag sales, in-stadium advertising that would be visible on broadcasts and streaming, the difference in net profits for the Reds between the commissioner-forced default option of 54 games and giving the players what they want, say 74 games, is about $2 million.

That’s right. $2 million.

To be sure, that figure is nowhere near exact. But you see the point. The owners are risking massive long-term damage to their sport, poisoning labor relations for what is to them a flyspeck. The sport’s revenues were nearly $11 billion last year. This December, owners earned $1 billion by letting Nike add its swoosh to the MLB uniform. Last week, owners signed a deal with Turner Broadcasting for nearly $3.3 billion to broadcast a few of the postseason games. That’s a 40% increase in payments.

The average MLB organization is worth well over $1 billion and that number has increased by $80-100 million a year for the past decade.

If it isn’t about money for the owners, what’s going on?

When this process started about a month ago with both sides staking out aggressive positions, it looked like a typical starting point for hard bargaining. The two sides had settled the most contentious parts of the return-to-play negotiations – salary and schedule – in March. All that remained were health, safety and roster rules.

But as the drama has unfolded, it has become clear the owners were never aiming for a reasonable conclusion. The players had made concessions by agreeing to pro-rata salaries. The players agreed to an expanded postseason – an enormous moneymaker for the owners – in 2020 and 2021. They offered to play a Home Run Derby and All-Star Game. All those revenue enhancers relate to the economic feasibility of a season with no fans.

The owners responded by conceding basically nothing and demanding more. Hiding behind the commissioner, they repackaged their request that the players give up something valuable in return for nothing – a request the players had no obligation to negotiate given the March deal.

Players were never going to agree to another round of cuts based on economic feasibility without seeing financial documents. The MLBPA requested that information in March and again recently and haven’t received it.

The foot-stomping, table-banging ultimatum yesterday that the season itself depends on the players giving up their right to file a grievance makes plain to any objective observer which side is to blame for the collapse of comity and talks. You don’t try to stop the other side from filing unless you think there’s a good chance you’ll lose.

Throughout the process, the owners negotiated through the media with shameless attempts to turn public sentiment against the players. They’ve tried to weaken the union’s resolve heading into the looming CBA negotiation after the 2021 season. For some, this is an ideological anti-union battle.

It’s hard to avoid the conclusion the owners have become emotionally involved. The long-term costs to the sport, which reverberate most on them, are objectively nowhere worth the small amount of money at stake in this mess.

Fighting like this isn’t rational if the owners’ goal is to maximize profits. Making pointless and provocative offers designed to be rejected simply to delay the season makes it clear they have little interest in the cities they represent, those same communities that allowed owners to rake in a record bank roll.

Either the owners as a group are so rich the money isn’t a factor and they can afford to fight for ideological or eccentric reasons, or they have gotten themselves dug in publicly (abetted by certain national baseball writers) and won’t back down.

Baseball’s owners are behaving like a group of billionaire bullies who aren’t used to anyone standing up to them. Like people who are so rich and so isolated they’ve lost touch with or quit caring about their baseball hobbies. Even the torrent of bad press they’re receiving may not break through the alternate reality billionaires can create for themselves. They are now paying the cost of being dumb early. The fancy academic term for that is “path dependency.” Negotiations stand where they do as a result of the colossally mistaken path they’ve chosen since March.

Their behavior is even more unforgivable because all this angst may be made moot by the ongoing pandemic. We were given a stark reminder of that reality yesterday by the Associate Press report that several baseball players and staff members have already tested positive for the coronavirus.

It’s hard to envy Rob Manfred, who has to win over at least 75% of this gang for any offer or agreement to become final. If eight owners don’t want to play, that’s the ball game. Doomsday for baseball fans.

What a way forward would look like

Here’s what the owners need to say today:

“We have decided for the good of the country and our sport to mend relations with players and loyal fans. We’re announcing a 76-game season, paying the players their pro-rated salaries agreed to in March. Training camp starts in a week. Opening Day is July 10. We hope this lays the groundwork for an exciting season and productive negotiations going forward. Let’s play ball!”

This, of course, would be another way to prevent players from filing a grievance.

That we find a public-minded statement like this so impossible to imagine shows how far skewed the calculations of major league owners have become. We fans don’t seem to enter into their equation at all. Based on the way they’ve negotiated, it’s not clear the men who own baseball teams have any interest at all in baseball.

Steve Mancuso is a lifelong Reds fan who grew up during the Big Red Machine era. He’s been writing about the Reds for more than ten years. Steve’s fondest memories about the Reds include attending a couple 1975 World Series games, being at Homer Bailey’s second no-hitter and going nuts for Jay Bruce at Clinchmas. Steve was also at all three games of the 2012 NLDS, but it’s too soon to talk about that.

6 Comments

  • RMR

    Great article, Steve. I’d propose a reason behind the owners’ intransigence that is all about money. But your note about path dependence is the key idea. Owners are investors playing the very long game, as successful investors do. This negotiation isn’t about this season; it’s about setting precedent in advance of next year’s CBA negotiation. Specifically, it’s about the same thing every other demand from ownership is ever about: securing further cost reductions in the form of suppressing labor costs. To the owners, the cost of loss revenues in 2020 or resulting from a few years of angry fans and slightly depressed attendance pales in comparison to the benefit of eventually getting a salary cap in place. The benefit of that is just not just annual revenues but the further spike in franchise values associated with that cost certainty.

    I agree they still are acting out of hubris regarding the ever growing value of their investment and the risk to that growth posed by dragging the sport through the mud. But I think it’s helpful to appreciate that the owners likely aren’t actually thinking about this in terms of netting out even in 2020, even if that appears to be the logic behind their various “flavors of paying you for 50 games” offers.

  • Brian Van Hook

    Strong analysis and comment about a sad situation.

    Owners are counting on the hard-core baseball fans to always come back. They’re the ones who spend the money. The strife of 1994 didn’t kill the “golden goose,” so would this season turn off fans? Especially if we go through some version of this again next season? Given how far down the popularity ladder baseball has fallen compared to other sports, it’s hard to fathom a willingness to let this happen. It’s like the owners are just daring fans to go away and stay away. “Can’t do it, can ya?”

    I’d be disappointed if there is no season, but this 48-or 52-game nonsense would be such a farce of a season that I can’t call it a big disappointment.

    Side note: I can just imagine players reporting for camp (if if happens), and suddenly having mysterious injuries crop up that take a long time to heal. Or a few weeks into the season, especially if a team gets off to a bad start, those bumps and bruises that a guy typically plays through? Maybe not this season. …

  • borchard504

    Disturbing to think owners are scheming to scuttle the season. And I did not know about the Nike $1B agreement, wow.

    Looking forward, the next CBA negotiation will be ugly. Great article Steve, easy to read through the details. Keep up the good work.

  • Brian Van Hook

    And … the players go from ‘tell us when to show up’ right back to ‘negotiating.’ I swear, I wish fans were allowed to file a formal grievance in this process.

    • Steve Mancuso

      It’s frustrating this has taken so long, but it’s in everyone’s interest for the owners and players to reach an agreement rather than having owners impose a schedule. It may take a few extra days to get there, but they will now that the owners have started negotiating with full prorated salaries. As we’ve been saying for a while, the March agreement stipulates that and the hold up has been the owners trying to renegotiate that. The players wouldn’t give in, believing it was already settled. The owners last proposal of 60 games was at full prorating, which is why the players started negotiating again.

      • Brian Van Hook

        Thanks, yeah, I get that part of it. It’s just maddening that it has taken this long. 60 games, 70 games, plus however-many other issues are still in play. … Now they’re arguing over how much was accomplished when Clark and Manfred met one on one. They can’t even agree on that? And on and on it goes. I suppose this back-and-forth will last until there is only enough time left to play the 60 games from the owners’ proposal.