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.