MLB owners claim they’re in financial trouble again

We are just about to begin the first “normal” Spring Training in four years. To recap, the previous three were interrupted by:

• 2020: Shortened due to the COVID-19 pandemic
• 2021: Rescheduled and played before reduced crowds due to the COVID-19 pandemic
• 2022: Shortened and rescheduled due to the owners’ lockout

So this is cause for celebration, right? There’s a CBA in place, we’re ready for a normal baseball season and...

MLB owners say the sport could be in financial trouble. First is the possible bankruptcy filing by Diamond Sports Group, which runs the Bally Sports Network channels that collectively cover games of about half of MLB’s teams, and other payments possibly being missed or reduced by some of the AT&T SportsNet channels that cover the Rockies, Astros and Pirates.

This might wind up being a good thing for Major League Baseball, as Commissioner Rob Manfred hinted in his Cactus League Media Day news conference last week that MLB is preparing to take over these broadcasts and send them out themselves — potentially without blackouts — if those RSNs can’t:

Manfred said, “No matter what happens with Diamond, we want to make sure the games are available.” Pressed further on what that might mean if Diamond was unable to broadcast games at all, Manfred said that it’s MLB’s expectation that Diamond would pay the clubs and continue as they have been, but if not: “We’ve been really clear that if Diamond doesn’t pay, for every single broadcast agreement, that creates a termination right.” The rights would thus revert to the clubs, and Manfred added, “If MLB stepped in, we would produce the games, using MLB Network, and then go directly to distributors like Comcast or Charter. and make an agreement to have those games distributed.”

This is a complicated matter and the best thing I’ve seen written on it is by Maury Brown at Forbes. Brown is a longtime expert on the business of baseball. The entire article is worth reading, but I wanted specifically to call your attention to his conclusion about RSNs:

What seems certain is that the collapse of Bally Sports will change the RSN model. Should MLB walk away and take their media rights back, it leaves a gaping hole in Bally’s programming. Baseball is by far the largest inventory group of all the major sports given its 162-game schedule. With little else during the summer for Bally to plug in, the overall structure of the RSNs seems destined for collapse.

There’s no doubt we sit at the crossroads of a big change in the way TV — and not just sports TV — is consumed in this country. Cord-cutting is accelerating and so the RSN model, the backbone of televised baseball for 30 or more years, is likely broken and not coming back. Streaming appears to be the future of television, and that includes baseball.

However, there is likely to be a painful interregnum while all this gets sorted out. As Brown writes:

On MLB’s side, one wonders whether there’s supreme faith that going it alone – while painful financially in some way – it may not be in others. After all, if Manfred and the league saw this coming, owners have been as well. Quietly the league created an Economic Committee and with it, the change in the RSN model has to have been front and center. Could changes in revenue sharing be discussed? Could efforts to find new centralized revenues take more prominence?

The key words there are: “Quietly the league created an Economic Committee.”

Oh. Yes, this was pretty quietly done, but Evan Drellich of The Athletic wrote up some further details about this plan Sunday:

The new group, however, is not producing a report, Manfred said, and is exclusively made up of owners.

“No report,” Manfred said. “It’s a vehicle for owners to talk to owners about how they see the game and what solutions they see. And then try to use that group to go more broadly with the group of 30.”

Mark Walter of the Dodgers, one of the sport’s largest market teams, is chairing the economic reform committee, a person briefed on its formation said. Chris Ilitch of the Tigers, John Henry of the Red Sox and Dick Monfort of the Rockies are among the members of the new committee as well.

What impact the committee will have is to be seen. It could provide a vehicle for MLB to eventually propose major changes to the Players Association, be it in revenue sharing, a formal salary cap or other major modifications.

Oh. Again. These are some of the issues that produced the lockout last year and made for some very contentious negotiations before we got a CBA — likely days before a major chunk of the 2022 season, if not the entire season, might have been lost. Now, with four years to go on the current CBA, these issues — note the words “salary cap” in there — are rearing their ugly heads again.

Ken Rosenthal addressed some of this in an article in The Athletic this morning:

Major League Baseball sought to eliminate salary arbitration in the last round of collective bargaining. The players balked at the league’s proposal of an inflexible wage scale and free agency at 29 1/2. And in response to the latest complaints about the process from the players’ side, the league essentially is saying, “You don’t like the system? We don’t like it either. Let’s get rid of it.”

On balance, the Players Association does like the system, which enables those between three and six years of service, and some with two-plus years, to fight for their own salaries.

All of that is true and it’s one reason the last CBA negotiations got so contentious. Rosenthal goes on to describe some of the bad blood that was raised during arb hearings this year — players won six, owners won 13 — specifically about what the Brewers did to Corbin Burnes during his hearing in which the difference between the asked and offered salaries was $740,000, just a bit more than MLB’s minimum salary.

Rosenthal then goes through a detailed description of how arbitration has worked, both when it began and now, which is definitely worth reading in detail. He concludes:

In the opinion of one player representative, “there could be something bigger at play.”

“MLB in the last round of bargaining made a proposal to get rid of salary arbitration. I’m sure they’re going to come back in the next round seeking the same thing,” the representative said.

“I believe there could be an effort to make salary arbitration for players as unpalatable as possible, so the next time they come around, maybe players are thinking, ‘This system does stink and we need to do something else.’”

Which would translate to trouble brewing. Again.

It’s very clear that owners want a salary cap, in part to prevent one of their own (Steve Cohen, let’s name names) from going way over the luxury tax levels because there’s simply no limit to what an owner can spend if he wants to.

The counterpoint to that is that despite the RSN troubles, Major League Baseball is awash in money and should continue to spend it. Meanwhile, owners are trying to stop their colleagues from doing this and as Rosenthal notes, this will likely cause the next CBA negotiations to be even more contentious than those that caused a lockout and nearly cost us some games a year ago.

This tweet sums things up, I think:

I will leave you with these comments from Phillies owner John Middleton, who has spent quite a bit of money on his team:

“How much money did the ‘27 Yankees make? Or the ‘29 A’s? Or the ‘75-76 Big Red Machine?” Middleton said. “Does anybody know? Does anybody care? Nobody knows or cares whether any of them made any money or not. And nobody cares about whether I make money or not. If my legacy is that I didn’t lose any money owning a baseball team on an annual operating basis, that’s a pretty sad legacy. It’s about putting trophies in the cases.

“If your ambition is to be good, you don’t make those decisions [to sign Turner]. If your ambition is to be great, you make those decisions. It’s about desire, really. I just want to win.”

Three cheers for John Middleton. Every baseball owner should feel that way about his team. Certainly Tom Ricketts should. There’s still tons of money in the sport. I don’t want to hear team owners crying poverty.