Universal DH a Small Help to Player Salaries

Player salaries keep increasing, but at a pace much slower than total Major League Baseball revenue. There is little the players can do about the gap right now, but when the current Collective Bargaining Agreement expires in 2016, the Major League Baseball Players’ Association will have the opportunity to gain a greater share of revenues in the future. The players have a lot of options: increased minimum salaries, earlier free agency, earlier arbitration, and removal of the luxury tax are all monetary changes that would transfer more money from owners to players and have little to no effect on the play on the field. Two other options, a universal designated hitter and a 26th roster spot, would affect the play on the field, but would not provide the players with significant gains off the field.

As Nathaniel Grow wrote recently, the MLBPA has a problem. In his piece, Grow discussed the growing chasm between player salaries and MLB revenues.

After peaking at a little more than 56% in 2002, today MLB player salaries account for less than 40% of league revenues, a decline of nearly 33% in just 12 years. As a result, player payroll today accounts for just over 38% of MLB’s total revenues, a figure that just ten years ago would have been unimaginably low.

Grow’s piece included the following chart (Payroll data from Cot’s Contracts and USA Today; MLB league revenue data from The Biz of Baseball):

Owners are pocketing more and more money from revenues and have thus far refused to share their increased wealth. The owners and players last shared a roughly fifty-fifty split of revenues in 2005. Since that time, players have received less than one-third of all additional revenue.

In the last decade, for every new dollar that has entered MLB, players are receiving just under 33 cents. The numbers for the players have actually gotten worse during the current CBA which began in 2012.

Over the last three years, players have received less than 30% of all new revenue. In 2014, salaries would have had to be $1 billion higher for the players to receive 50% of revenues, roughly $1.3 million for every active player. The players could have received a 40% raise and still not had a greater share of revenue than they had in 2002.

Of the players’ options to increase their share of the pie, a universal designated hitter appears to be the most likely change. Adam Wainwright’s achilles injury briefly reignited the debate about pitchers hitting. Although there are bound to be many vocal critics decrying the loss of game’s purity, we are nearing 50 years of the designated hitter in the American League, which, just like now, came about at a time of offensive lows and concerns about fan interest.

The designated hitter is likely to be couched as a concession by the owners and a victory for the players, but the amount of money going to the players by adding 15 more DH slots is not likely to create a big dent in owners’ wallets. The average designated hitter this season will make $8.4 million. Assuming that a designated hitter would take the place of a minimum salaried player, that would add roughly $120 million to salaries, a little over one percent of total revenue. That would be a decent victory for the players, but that number is likely overstated.

Not counting the designated hitter, American League teams pay their four bench players an average of $1.8 million. Without the designated hitter, National League teams pay their five bench players an average of $2 million. Interleague play does constitute a small portion of the season, and NL teams still invest some money on a bat coming off the bench. This amounts to a $45 million difference between the leagues spent  on the bench. Combining the salaries of the MLB bench as well as the designated hitters, the American League currently pays around $80 million more than the National League. That number is more likely representative of the amount the players stand to gain through the use of the designated hitter in both leagues. Increased competition for sluggers could drive costs up somewhat, although the stereotypical designated hitter is not all that prevalent in today’s game. The amount is not nothing, but when the players are dealing with a $1 billion gap to get to 50% of revenues, getting 8% of that amount is a minor victory and should not be considered a major concession by the owners.

Adding an additional roster spot is another potential salary gain for the players. The 25-man roster has been in place for nearly a century, but it is hardly sacred. Following strikes, teams were allowed extra spots. Teams are currently allowed an extra player for doubleheaders, and the owners had no problems reducing the roster to 24 players in the 1980s as a way to reduce their own costs. With an average salary of $4.3 million, an additional roster spot, in theory, gains the players around $130 million, but this number is illusory. The extra roster spot does not go to a starter, but to a bench player or bullpen spot. The average bench player or non-closer in the bullpen makes just $1.8 million. The added roster spot will go to one of these players and create just $54 million in additional salaries.

This is what adding both measures would have looked like over the last few years:

Those blue and green lines do not cut into the owners’ share (which includes costs), and the impact on the players is not great. As Grow wrote, the MLBPA does have a problem, and there are a lot of potential fixes. The MLBPA could choose to try and make many small gains as a way to close the gap, and making the designated hitter universal or adding an extra roster spot would help their cause. However, if the players really want to increase their share of MLB revenues, they need to take a look at other avenues to achieve their goals.