My Plan for a New CBA Part One: Salary Floor

Let’s start off with the obvious. I’m in home loans not labor negotiations. The baseball CBA is complex and no editorial is going to fix it all. However, there are some skills I use daily that could be of some use here.

First, when negotiating I always try to decipher the primary motivation of each party involved. Then I look for a “yes.” Something, anything that gets a “yes” from each party and builds some common ground to lead to another “yes” and ultimately a deal. I look for something that is a win for as many of the parties involved as possible then build on that.

The primary motivation in the CBA for all involved is clearly money. The players postulate that the game is awash in money yet they are receiving a smaller portion of that money than ever. They see teams willingly avoiding contract extensions and free agent signings so they can tank and rebuild. The free agent contract, the lifeblood of the economic livelihood for players, is weakened and altered through no fault of their own.

It is easy to take the players side here. We’ve never paid to watch an owner pitch or a GM to take an at bat. But as the son of a small business owner, I realize businesses have expenses and exposure many outside the business world don’t realize. Baseball owners hand out massive, fully guaranteed contracts. Chris Davis sucks? Gets every dime. Trout is injured and the stadium is half full? Gets every dime. The RSN in Dallas goes bankrupt in 5 years? Seager and Semien get paid every dime. That’s the type of risk that is non existent in most business settings.

The players are smart in positing tanking as a competitive issue. After all, fans want to see good baseball whether they live in Pittsburgh or LA. Kids want to watch their favorite players for years to come. A salary floor should be the first yes and can be done to the benefit of the players and the vast majority of owners.

Take a look at this breakdown on revenue sharing in MLB. Granted 2020 took a massive hit to this but in general this is how the game has been funded for years. Here’s the highlight:

In Major League Baseball, 48% of local revenues are subject to revenue sharing and are distributed equally among all 30 teams, with each team receiving 3.3% of the total sum generated. As a result, in 2018, each team received $118 million from this pot. Teams also receive a share of national revenues, which were estimated to be $91 million per team, also in 2018.

Now take a look at the actual MLB payrolls for 2018. There were 9 teams that spent less than the revenue sharing allotment of $118 million. The total difference between what they took out from the pot and what they paid to players was $262,000,000 in a single year. I’ve gone back a year and forward a year and to the best of my ability it appears certain owners typically combine to pocket about $250 million to $300 million per year of other owners money. And that’s not even counting the additional $91 million received from MLB.

It should be a no brainer to attach a salary floor to the revenue sharing sum. After all, this would not affect the bottom lines of the large market clubs. This is money they are already contributing. It will give a boost of a quarter billion dollars per year or so to the players. The only people who suffer are a handful of owners, most of whom are quite frankly bad for the sport. Bob Nutting, the owner of the Pirates, tends to pocket $30-$40 million of other teams money year after year.

My suggestion would be to set the payroll floor at the two year average of the revenue sharing pot. That way as new streams of revenue are created the players get a share of that automatically. Also the two year average gives teams enough runway to be able to set up their payroll a year in advance.

I think this also makes the players and owners partners in growing the game. When revenues go up, they each stand to benefit. It isn’t hard to see the players take on a bit of risk here, too. As the regional sports network landscape changes and streaming takes off there is a chance local revenue drops and so would the salary floor. Additional talks will be needed if/when that happens over the next few years.

The players are smart in saying teams like the Pirates are undermining the competitive nature of the game. But this argument also leads to something the players don’t like: luxury tax thresholds. If their goal is truly to make a more competitive game we can’t have a massive spread from bottom to top. My solution here is to make the luxury tax lines based on a percentage of the salary floor.

I’ll break down my luxury tax ideas in another article very soon. And there will be subsequent pieces on other aspects of the CBA such as arbitration and roster construction.

But for now, let’s get that first critical yes out of the way. Make the owners spend what are literally termed “Competitive Balance” funds on players. It benefits the players. It doesn’t impact the big market clubs bottom lines. The only losers are a handful of cheap owners who will either pay players or sell and get out of the game.

This one should be pretty easy if the owners and MLBPA are actually working together in good faith.

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2002heaven
Trusted Member
5 months ago

A floor should be tied to scouting and player development.
So that certain bigger market teams can’t be miserly in this area. Maybe how about a spending limit on star hitters? Both in length and yearly salary, including bonuses, stock options, or back-ending.

jco
Member
jco
5 months ago

Good work. I really like the concept and the parties could be negotiable on the % of revenue sharing. I also think it might help competitive balance.

Jim Atkins
Trusted Member
5 months ago

Excellent work. I agree, unspent revenue sharing funds must be returned to MLB. No rewards for shorting players. Those funds could be allocated somehow to benefit MILB.

AnAngelsFan
Trusted Member
5 months ago

I also think a salary floor = revenue sharing might be a bit too high to start. I would go with a floor of 80% averaged over 2 years.

Then, what happens to teams that don’t meet the floor? I proposed for every $1 dollar a team’s budget is below that amount, they get $1 less. That $1 is placed into an injury fund which will be distributed to teams based on the amount of payroll they payed to players on the IL during the season.

matthiasstephan
Trusted Member
5 months ago

Thanks for a great piece.

I get that the Orioles are on the hook for an underperforming Chris Davis, but is Arte equally on the hook for an injured Trout? I thought there would be insurance for that kind of thing – meaning (perhaps with Arte’s out of pocket logic) that ‘Trout money’ didn’t pay out last year, in the same way. (Sure, Trouty gets paid one way or another – but it matters from whom, imo). Am I wrong in this?

(I know this doesn’t impact the floor suggestion – just something that struck me from the article).

matthiasstephan
Trusted Member
5 months ago
Reply to  Jeff Joiner

It does, but one built in upfront, and already accounted for.

Can’t imagine Arte didn’t insure Trout – though perhaps they don’t someone like Barria who is shuttling back and forth (how much would insurance be for him? – can’t be more than having to pay even league minimum, I would think).

In any case, I was just thinking that any year in which insurance was picking up large portions of salary (Trout, Rendon) would actually represent a year of relative savings for Arte, that he *might* be willing to spend in the year directly following (paying for the year of Thor?).

gitchogritchoffmypettis
Super Member

Does anyone know, does MiLB seasons start in April with or without MLB games starting?

It would be awesome if the result of any overbickering on the part of the MLB was that people in 100 other towns realize MiLB baseball is friggin cheap and friggin great and just started following their Dayton Dragons and New Orleans Baby Cakes…. their mascot is so terrifying it will toughen your kids right up too.

Mas_Angeles
Member
5 months ago

I’ve also wondered if some of the revenue sharing money couldn’t be earmarked for minor league salaries. But minor league living conditions is definitely a separate can o’ worms.

gitchogritchoffmypettis
Super Member
Reply to  Mas_Angeles

You wanna see the swift and fiery death of any “we are all caring people who care a lot and just want the owners to care too so we tweet to signal that we care a lot and want to help people who need help to get help…” bullshit from the players? Tell the MLBPA that you want to take a few million dollars that would have gone to their members and pay it to guys like Stefanic. It will be gold.

GrandpaBaseball
Super Member
5 months ago

Good work on the research here. These negotiations are going to be tough. I hope this mess is cleared up soon after the first of the year so we can get back to enjoying the team(s) we support and the game we love.

Fansince1971
Super Member
5 months ago
Reply to  Jeff Joiner

I’m saying April/May. 100 game season starting in June.

red floyd
Super Member
5 months ago

I got ST reservations and tickets. I just made damned sure that I got a refundable rate on my hotel room.