The MLBPA Has No Leverage

The story of the offseason thus far has been the lack of activity on the free-agent market. As has been thoroughly covered elsewhere, this offseason is the slowest in recent memory, with seven of FanGraphs’ top-10 free agents still unsigned halfway through January.

Not only has this lack of activity generated considerable speculation regarding the cause of the offseason’s glacial pace (with theories ranging from a subpar group of free agents and a lack of competitive races to outright collusion), but it has also triggered talk about what the Major League Baseball Players Association should do in response.

Indeed, as I noted back in 2015, major-league players have seen their share of MLB’s overall league revenue plummet in recent years, with player payroll as a share of league revenues falling from a high of 56% in 2002 to just 38% in 2015. So while this offseason’s lack of activity may be unprecedented, in some respects it is simply the culmination of a trend dating back 15 years.

Various commentators have tossed out a number of suggestions for how the union might try to potentially alter this trajectory. Both myself and Travis Sawchik, for example, have previously suggested that the MLBPA should seek to create a salary floor, forcing lower-budget teams to spend more on payroll, thus increasing the amount of money flowing to the players. Travis also recently proposed the creation of a class of restricted free agents, with the thought that it would help get players to free agency at an earlier age, when they would presumably be more desirable to teams. Craig Edwards, meanwhile, has previously suggested that the union should look to substantially increase the league’s minimum salary and, just today, proposed a strategy for eliminating arbitration.

While all of these suggestions have merit, they all must also overcome a common but considerable hurdle — namely, the fact that the owners are unlikely to agree to any of these changes, at least to the extent they appreciably improve the players’ financial standing. Indeed, in collective bargaining it takes two to tango, and unfortunately for the union, any proposal that figures to substantially increase the amount of money flowing to players will almost certainly be rejected by ownership.

Although the owners’ likely opposition to these proposals is usually acknowledged in passing, these pieces (my own included) typically do not fully grapple with just how little leverage the union currently has over ownership, and thus how unlikely it is that the players could secure the proposed modification.

In order to get the owners to agree to any sort of meaningful change to the sport’s economic structure — such as a substantial increase to the luxury-tax threshold — the MLBPA would have to give something of considerable value back to ownership in return. Unfortunately for the union, there is currently very little that it could offer the owners that would entice them to substantially improve the players’ financial position.

Looking back at the main subjects expected to be addressed heading into the most recent collective bargaining negotiations back in 2016, for example, most related to concessions the union was hoping to gain from the owners. Ownership, on the other hand, was expected to ask for relatively little from the union. Indeed, the main issues the owners appeared likely to address were the creation of an international draft and improvements relating to the pace of play.

Although the owners failed to secure an international draft in the 2016 CBA, they were nevertheless able to impose stricter limits on international signing-bonus pools. While I’m sure the owners would still ideally like an international draft, at this point any such concession by the union probably has relatively limited value to ownership.

The primary benefit of a draft for the owners is to limit the amount of money spent to acquire new talent by eliminating competition for unsigned amateur players. (Rather than allowing players to negotiate with all 30 teams, a draft restricts a player’s market to a single franchise.) With strict spending limits now in place for teams signing most international amateurs, however, any additional benefit of implementing a draft would likely be modest at best for ownership. Thus, the value of this bargaining chip for the union has been significantly reduced.

Meanwhile, under the most recent CBA, the league has the right to unilaterally implement various changes intended to improve the pace of play without the union’s consent. While the league is currently attempting to resolve these issues with the MLBPA’s support, ultimately the union has little leverage in this area as well.

Even if the MLBPA were to initiate talks on what was previously unthinkable — namely, a hard cap on player salaries — it’s not clear that even this concession would appreciably move the needle for the owners. With the luxury tax now operating as a de facto salary cap for most intents and purposes, the owners are currently accruing most of the benefits of a salary cap, without having to agree to the accompanying salary floor that is commonplace in the other pro sports leagues.

Alternatively, the players could theoretically attempt to regain some leverage by triggering a prolonged labor stoppage during the next round of collective bargaining. But it’s not clear that even that alone would compel the owners to make any substantial concessions. Not only have the players shown little appetite for missing any significant number of paychecks in recent years, but the public has also historically tended to side with the owners during work stoppages, meaning that the union would likely have to withstand a potentially severe public-relations backlash during the course of the labor dispute. In short, then, the owners may very well determine that they can simply afford to wait the players out.

As a result, the players union is currently stuck between something of a rock and a hard place. The existing economic structure of the game is becoming increasingly less favorable for players. At the same time, however, the players have relatively little they can offer the owners in exchange for modifications that would meaningfully improve their financial position.

As an aside, this makes the MLBPA’s willingness to agree to a new domestic-violence policy back in 2015 all the more curious. While certainly laudable from a societal perspective, with so few other sources of potential leverage over ownership, it is somewhat surprising that the union would agree to a concession like this without receiving anything in exchange from the owners, especially just a year out from the 2016 CBA talks.

Much can change between now and the next round of CBA negotiations in 2021, of course. Just because the union’s situation appears relatively dire today does not necessarily mean it will remain so three years from now.

It’s possible, for instance, that tanking will become such a problem that the league will decide it needs to take steps to deter teams from engaging in prolonged rebuilding projects. And to do so, the owners may decide that they need to introduce additional financial deterrents to decrease the odds that teams will decide to be uncompetitive for a period of three or four years at a time, deterrents that would not only require the union’s sign-off, but may very well also themselves improve the players’ financial position.

Nevertheless, the union should probably realistically anticipate that it will need to seek some rather substantial changes to the league’s economic model in order to improve its membership’s collective financial standing during the 2021 CBA negotiations. And the MLBPA should probably also anticipate that it will enter those talks with relatively little leverage over ownership.

How the union can try to overcome this handicap will be the subject of a future post.

We hoped you liked reading The MLBPA Has No Leverage by Nathaniel Grow!

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Nathaniel Grow is an Associate Professor of Business Law and Ethics at Indiana University's Kelley School of Business. He is the author of Baseball on Trial: The Origin of Baseball's Antitrust Exemption, as well as a number of sports-related law review articles. You can follow him on Twitter @NathanielGrow. The views expressed are solely those of the author and do not express the views or opinions of Indiana University.

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ceddy
Member
ceddy

Create a “poverty tax”, where teams that spend below this threshold forfeit a percentage of revenue sharing for each dollar their payroll is under. On principle I don’t like the idea that a team can shred payroll to an absolute and become more profitable even when no fans show up to the ballpark (see Miami).

Joe Joe
Member
Member
Joe Joe

Not sure Marlins are profitable considering they ran up $100s of million in debt prior to sale. BamTech money, and not revenue generated by the Marlins, is likely only thing that will make Jeter et al some money this season if team stays as is. That said, it would not surprise me if they did shed more payroll such that the Marlins actually were profitable. Marlins need a new TV deal.

Dominikk85
Member
Dominikk85

Question is whether they really lost money or whether Loria was using some tricks to create losses for the balance sheet to milk the team a little more.

Joe Joe
Member
Member
Joe Joe

Yep, I’m sure tricks to create losses did wonders to the sale price. I’m sure Loria didn’t mind that $100 million of the debt was assumed(i.e., immediately went to other people). The accounting tricks were so good that Sherman’s people refinanced $300 million worth at the time of the sale. Sherman et al should really have done a little due diligence before buying the Marlins.

v2micca
Member
Member
v2micca

Good luck getting the owners to agree to that provision.

LHPSU
Member
LHPSU

Well, the tax goes back into the pool, so the owners as a whole don’t lose.

ThomServo
Member
ThomServo

It would hurt club valuations while providing no benifit to owners- so a big overall loss to owners

Dave T
Member
Member
Dave T

I think there’s some benefit to owners, especially the high-revenue teams who don’t ever see themselves being in that situation.

First, there’s the impact of the visiting team on the gate (and concessions, for teams where no-shows are an issue even when sales are robust). Do you think that the 2013 Astros drove good attendance in other parks when they were on the road?

Second, I’m pretty sure that the structure of the revenue sharing formula means that any team with really poor local revenue is a bigger revenue drain on other teams, both revenue sharing net payors and net recipients.

Third, there’s a difficult to quantify but likely real negative PR impact on the sport as a whole from commentary that a team in extreme teardown mode is making a joke of baseball.

CaseysPartner
Member
CaseysPartner

Increase the MLB minimum salary to $4 million. The CBA’s are five years so $2 million in year one, then $2.5, $3, $3.5 and $4 million.

There’s your minimum floor. There is no escape.

Jason
Member
Member
Jason

The article is not short on ways to increase MLBPA’s share, the issue at hand is what can you give up to get that increase?

CaseysPartner
Member
CaseysPartner

Give up nothing.

Go on S T R I K E until the players demands are met.

That’s what a real union does. If you won’t go on strike and you can’t win a strike then you are not a union, you’re a social club.

Ryan DC
Member
Member
Ryan DC

“If you won’t go on strike and you can’t win a strike then you are not a union, you’re a social club.”

A-fucking-men

CJ311NYM
Member
CJ311NYM

That sounds more like a mafia

yankeesknicks00
Member
yankeesknicks00

Yeah, but real unions don’t have to deal with the PR disaster of a strike. Also, losing one yr of your MLB career isn’t an easy thing to do