CBA Negotiations: Analyzing the Asks

With the MLB and MLBPA meeting daily, this article will likely be somewhat out of date by the time you read it. Although, given the treacherously slow progress they’ve made on these discussions that may not be the case.

On 2-26-22, MLBTR Provided an update on each of the requests, this is where the quoted numbers are pulled from through-out the majority of the article. All of these are of course rumored, so take it with a grain of salt. With that said, I wanted to take a look at the initial asks / progress, and what the actual impact of each ask is.

League Minimum Salary

MLB: $640K in 2022, $650K in 2023, $660K in 2024, $670K in 2025, $680K in 2026

MLBPA: $775K in 2022, $805K in 2023, $835K in 2024, $865K in 2025, $895K in 2026

TheScore did an excellent article I highly recommend taking a look at in regards to league minimums across sports. These salaries are still very high outside of the sporting world, but here’s a look on how it compares to other sports.

https://www.thescore.com/mlb/news/2226571

It may surprise quite a few readers to see how many players are paid the league minimum. For the MLB a fairly unbelievable 63.2% of all major leaguers are making league minimum. *(data from 2019, last full year reported, 53.6% of playing time, 63.2% by count)*. If you’re wondering NHL was at 23% of players making bottom 10%, NBA it was 3%. The MLB has an interesting problem where most players do not make it to arbitration or their free agency to earn the big dollars we all are used to seeing. (Average Service Time has continued to drop down to just 3.7 in 2019).

Financial Impact:

I’d rather estimate on the high side to show impact. Beyond The Box Score had stated there were 1,267 MLBPA members in 2019 and the league minimum accounted for 63.2% of the total player count.

Current - 1,267 * .632 * $570,500 = $456,824,452

MLBA Proposed - 1,267 * .632 * $775,000 = $620,576,600

MLB Proposed - 1,267 * .632 * $640,000 = $512,476,160

MLBPA Proposed Increase cost - $163.75 Million / MLB Proposed Increase - $55.6 Mil

Proposed Cost Increase per Team: MLBPA - $5.45 Mil / MLB - $1.85 M **

** The usage of league minimum players is obviously not spread evenly by team, so will impact teams who use more league minimum players by a larger dollar value.

My Opinion: I honestly think this is the most important negotiating point if I was on the MLBPA. Analytics have shifted team’s focuses to maximizing their output from these players and the percentage of players impacted in the union is by far the greatest out of the negotiating points. I do not see the costs as overly prohibitive as I do believe even the smallest team should be able to absorb that cost, even if it does force them to have less funds available for a superstar.

Competitive Balance Tax:

MLB: Base tax thresholds at $214MM in 2022/ $215MM in 2023/ $216MM in 2024 / $218MM in 2025 / $222MM in 2026. Also proposing significant increases in tax rates on overages and new draft pick penalties. Current proposed tax rates are 45%, 62%, and 95% for each luxury tax tier, with no changes for going over repeatedly.

MLBPA: $245MM in 2022 / $250MM in 2023 / $257MM in 2024 / $264MM in 2025 / $273MM in 2026. Status quo first-time payor tax rates of 20%, 32%, 62.5% for each luxury tax tier

We mentioned the league minimums in most of the other leagues. Most other leagues have a hard salary cap and a direct revenue sharing model. This requires the leagues to open their books and everyone to focus on making the sport as profitable as possible. The owners have pushed for a hard salary cap, but have been dead-set against any element of revenue sharing or opening their books. The MLBPA has pushed extremely hard to avoid a salary cap. As of today, we have a “soft cap”. While it’s technically true that there is no cap in the MLB which allows teams like the Mets to blow past the limit, the penalties for doing so have discouraged teams enough that it acts as a defacto cap.

Last year, Spotrac showed just 3 teams who surpassed the Luxury Tax Threshold in 2021. Not surprisingly, 2 of those 3 teams are currently listed as being below the cap in 2022 (There’s still potential signings so this may change). In 2022, The Mets, Dodgers are Yankees are projected to exceed the threshold.

As for proof of teams treating it as a cap, our very own Astros ended up just $620,816 dollars below the “cap”, and I’m sure a lot of the fans on here will remember our the maneuvering that Click did to acquire assets while staying precariously under that cap.

Financial Impact:

This one isn’t as simple as the league minimum. Why? Well, an adjustment to the cap does not actually force any change from a spending perspective. MLB Owners could agree to the cap increase and make the decision not to increase their spending as it’s a team by team decision.

So why is this such an important element of the discussion? Well, overall MLB payroll has not been increasing, and that’s before you take into account inflation or the massive increases in revenues based on TV contracts (or the new projected revenues through gambling). Total MLB salary is actually lower than it was in 2015 (4.05 B vs 4.08 B), while those dollars themselves are worth ~18.62% less due to inflation.

My Opinion: This is a difficult topic and I understand why it has been on the back-burner. To me, it would fall below the league minimums in order of priority. It’s tough to weigh in on the dollar value impact and how it would alter the league. The harsher penalties that MLB is talking about adding essentially makes this “soft” cap a lot harder and will further discourage teams from taking the jump despite the less than a handful that do so already. The MLB proposal for dollar values does not keep up with even the non-crazy COVID inflation, which makes it a bit hard to accept as a remotely fair proposal. I do think that having a cap is a beneficial thing as MLB suffers from majority disparity in their revenues and it’s not shared to the extent it is in other sports. Making a competitive playing field is tough to do when one team hosts a $42 million dollar payroll, and another pays a single player more than that or a team total of $271 million. I’m disappointed that neither a salary floor or adjustment if teams are not spending their revenue sharing on payroll seem to still be on the table.

Draft Pick Compensation:

This topic seems to somewhat be in agreement from both sides at this point. Previously, signing of a player with a Qualified Offer attached resulted in a loss of a draft pick. In theory, this makes sense to maintain a competitive playing field. The challenge that arises is the player who receives a QO has his personal value and earning potential lowered due to no fault of their own. The reported agreement would still provide a draft pick to make up for the lost talent, but would not penalize the signing team. This is great news to the players who were penalized.

Financial Impact:

Overall the impact from this is very minimal.

In 2021 - 13/14 Rejected QO (2 Re-signed with same team, 6 currently un-signed)

In 2020 - 4/6 Rejected QO (2 re-signed with same team)

In 2019 - 8/10 Rejected QO (1 re-signed with the same team).

Over the past 3 years, this had an impact on a grand total of 30 players. It’s tough to quantify an exact dollar value of the impact, but a team must consider that in addition to a player’s salary, they’re losing a pick that is worth millions of dollars. As you sign multiple, or if you have a pick within the top 10, it is a reduced lost value. This is generally more of an impact on a player like Michael Conforto, who was rumored to be looking for a 1-year rebuilding type of deal than to a Carlos Correa who will likely pull down a ~$300 Million dollar contract.

My Opinion: I understand that this was unfair to the players that were impacted by it. To me, this impacts such a small percentage of players that the overall impact is very minimal dollar value wise on both sides. I’m not surprised it’s a topic that was able to be settled fairly easily. It will be interesting to see how MLB teams adjust their strategy based on this.

Pre-Arbitration Bonus Pool:

MLB: $20MM pool. MLB has agreed to fund a bonus pool for pre-arbitration players, which would be a new addition to the CBA. They have proposed “a six-person panel — three from each side — to develop a mutually agreeable WAR statistic to allocate the funds,” according to ESPN’s Jesse Rogers. He adds, “The top 30 players in WAR and award winners would be eligible for the bonus pool.”

MLBPA: $115MM pool, distributed to 150 players.

The financial impact of this is very easy to see. Currently the MLB is proposing $20 Mil, MLBPA is proposing $115 Mil.

To explain, the overall concept is to reward pre-arbitration players for their performance. I think this is a great idea, we talked a bit about league minimum, but that would be spread equally whether you’re a player having a cup of coffee in the majors or an underpaid superstar. The concept of this bonus pool would be to reward based on the performance of said players.

While the dollar values are still light years apart, it’s interesting to see that the number of players it is awarded to is a significant issue as well. If you take into the sheer volume of players that fall into the pre-arbitration category, this impacts roughly 3.75% (MLB) to ~18.75% (MLBPA) of pre-arbitration players. If the dollars were spread evenly, it would result in a $666,666.66 Bonus (MLB) to $766,666.67 (MLBPA), essentially doubling the salary for impacted players.

My Opinion: I really like this conceptually. I personally lean towards a larger base of players receiving the bonus as it helps to limit the disparity between the top end and bottom end earners of the league. The $115 vs $30 Million is a large gap, and I’m sure it’ll settle somewhere in between, but even the $115 million is less than a $4 Million dollar impact when spread across each team.

Arbitration Eligibility

MLB: No change in which players are eligible for arbitration. In the previous CBA, the top 22% of 2+ players were arbitration eligible, known as Super Two players.

MLBPA: Top 35% of players in the 2+ service class eligible for arbitration

Super Two is a really strange rule in general. Players with the top 22% of service time between 2 and 3 years of service time become eligible to go through arbitration a year earlier. Back in 2019, I wrote an article “What in God’s name is Super 2?!” which attempts to explain the rule and it’s financial impact. Super 2 doesn’t have a hard date, but there are rough dates which you will see teams call up elite prospects in an attempt to prevent them from achieving super 2 status.

For an Astros specific example, Yordan Alvarez was called up June 9, 2019, resulting in him achieving 2 years, 113 days of service time. The Super 2 line came in at 2 years, 116 days of service time. By holding Alvarez down for additional time, the Astros were able to save themselves likely 15-20 Million dollars (which Alvarez unfortunately will not recoup in any way).

The MLBPA proposed initially 100% of players, then dropped it to 80% then 75%, and most recently has dropped it to 35%. The MLB has not moved from the 22%. It’s easy to understand why, as for top players - the potential impact to owners is massive, with star players being able to earn millions to tens of millions more. MLBTradeRumors did a whole article in regards to the financial impact of the proposal (this was done when 80% was the request).

Now you may think the MLBPA’s ask is unfair, but up until 1985 all players 2+ were eligible for arbitration. As for a percentage change it was increased from 17% to 22% in 2013, so none of this is unheard of.

My Opinion: I dislike this rule as a whole. It’s in a team’s best interest to attempt to manipulate the most elite prospects to prevent them from falling into this category. You can argue the morality of it being wrong, but it’s by far in the best interest of their business/team to do so. The MLBPA started strong on this position, but the owners have not moved an inch as the potential financial impact is very significant. The MLBPA’s new proposal doesn’t eliminate this concern, although it will be tougher to hold players down simply for this reason with the increase (as well as a larger base of players achieving another round of arbitration).

Service Time Manipulation

MLB: Offering two draft picks within the player’s first three years if he finishes in the top three in Cy Young, Rookie of the Year or MVP voting (per Jesse Rogers). A player finishing first or second in Rookie of the Year voting would receive a full year of service time.

MLBPA: Players receive a full year of service time in their rookie season if infielders, catchers, and designated hitters finish among the top five for their position in WAR in each league, with outfielders, relief pitchers and starting pitchers finishing among the top 15, per Evan Drellich of The Athletic. “The union also said it would accept a modification of MLB’s proposal that would reward draft pick compensation to teams whose players finish among the top three in the Rookie of the Year, MVP and Cy Young voting.” (per USA Today’s Bob Nightengale on 2-1-22)

The MLB’s proposal is somewhat convoluted but has two primary parts. 1.) Rewarding teams if one of their players finishes in the top 3 of Cy, RoY, or MVP. This is intended to encourage teams to promote earlier and offset the value they lose by not manipulating service time. 2.) Awarding the player a full year of service time if they are 1st or 2nd in RoY voting.

On the MLBPA proposal, it’s a bit simpler. Essentially if the player is in the top 33% of their league performance wise at the end of the year by WAR they are awarded a full year of service. (Top 5 / 15 teams = 33%, although technically it’s higher since there will be a lot more than 15 who play at each position). They agreed to the draft pick compensation as a way of persuading teams for earlier call ups.

My Opinion: The owner’s proposal in my mind is so limited in scope it barely exists as a rule. There will be 4 players who achieve the RoY regardless, the number that will achieve top 3 in RoY, Cy, MVP at absolute max impacts an additional 18 players per year. Here’s the past 3 years - 2021 -MVP - 1 (Vlad), Cy - 0, RoY - 4. 2020 - MVP - 0, CY - 0, RoY - 4. 2019 MVP - 0, Cy- 0, RoY - 4. Literally in the past 4 years, other than the top 2 in RoY, Vlad Jr would be the only player impacted, although he already would have already achieved a full year.

On the players proposal, I don’t know which iteration of WAR they are using, but it’s easy to assume that a much larger chunk of players would be impacted. Their model makes sense in my opinion, if you were one of the top performers in your league despite a lesser play time (WAR is a counting stat, so more time at the same above average performance= higher value), earning a full year of service time does not feel inappropriate in any way. I could see an argument for it being less league specific particularly with the universal DH seeming to be a lock.

Anti-Tanking Measures

MLB: Lottery for top four picks. Attempting to tie draft proposal to 14-team playoffs

MLBPA: Lottery for top seven picks. All teams that did not qualify for the postseason in the preceding season would be part of this lottery. So in a 12-team playoff field, 18 teams would have a chance at the #1 pick. In the MLBPA’s proposal, the odds for the #1 overall pick would be as follows:

Team 1: 15% (the team with the worst record in baseball)

Team 2: 15% (the team with the second-worst record in baseball)

Team 3: 15%

Team 4: 12.5%

Team 5: 10%

Team 6: 8%

Team 7: 6.5%

Team 8: 5%

Team 9: 3.25%

Team 10: 2.25%

Team 11: 1.5%

Team 12: 1.25%

Team 13: 1.12%

Team 14: 1%

Team 15: 0.88%

Team 16: 0.75%

Team 17: 0.625%

Team 18: 0.375%

My Opinion: Another interesting topic on the table. The actual lottery does not have a “financial impact” in the same way the other elements of the CBA negotiation do. The goal of the negotiation is to limit the benefit of tanking for a top draft pick. I remember the days of “Rodon watch” as we hoped to be the worst team in the league to achieve the top draft pick on TCB. Making this alteration would limit that benefit in a hope of encouraging the tanking teams to spend more money and actually attempt to win more games. The difference between the top 4 and the top 7 is not insignificant but not game changing to me.

The interesting part is tying this to the expanded play-offs. This has two elements, one it does increase the number of teams that will attempt to get to the play-offs, as it’s much easier to be a .500 team than overcome a powerhouse like the Astros, Dodgers, etc. This should encourage spending for the lower and mid tier teams. On the other hand, it does limit the benefit of truly striving for greatness.

As for the financial impact, the addition of playoff games brings huge financial benefits. The play-offs are a huge driver of revenue, particularly from TV rights. Forbes shows the current Fox deal as $5.1 billion for 2022-28 ($728 mil/year), Turner for $3.74 billion for 22-28 ($535 mil/year) and ESPN’s renewed at just $550 mil annually, but took less games leaving an open slot for what is estimated to be another 300+ mil. (The increases for Fox - 39% and Turner - 65% were huge jumps from their last deal). These deals surprisingly included the expanded play-offs which have not actually been negotiated into the CBA yet. I am trying to see if I can find some of the deals from the previous expanded play-offs, if someone posts them I’ll add them to the article.

The players do get a portion of this revenue:

“ ”The Players’ pool is created from 60% of the total gate receipts from the first four World Series games; 60% of the total gate receipts from the first four games of each League Championship Series; and 60% of the total gate receipts from the first three games of each Division Series. The pool is distributed as follows: World Series Winning Team: 36%; World Series Loser: 24%; League Championship Series Losers (two teams): 12% each; Division Series losers (four teams): 3% each; Non-wild Card ssecond-placeteams (four teams): 1% each.” - Investopedia

In 2019, this resulted in $80 mil. Roughly $29.1 for the Nationals, $19 for the Astros and the remainder spread out across the remaining teams as per the above. It should be noted this is purely of gate sales, but is still a big benefit to the players.

Other topics:

The MLBPA has pushed for a revision to incentivize small market teams to put more of their revenue shared dollars towards payroll. Additionally, There is on-going discussion about an international draft.

Agreed To:

They have reported agreed to the Universal DH and limiting the number of minor league options in one season to five.

Overall Opinion: The MLBPA has fought long and hard to prevent a hard salary cap in the sport. Other sports have it, but they also feature open books, larger revenue sharing between teams and between owners/players. In doing so, they made some major missteps as the league adopted to analytics and utilizing pre-arbitration players to a greater extent. To that end, while MLB revenues have sky-rocketed with TV deals, and look to do so again with gambling as the next frontier, payrolls are actually lower than before. Unfortunately, the “soft” cap has essentially been used as a hard one by the majority of teams, so while the MLBPA won the battle, they lost the war. In this round, the harsher penalties only make the cap “harder” while maintaining the illusion of not being capped. The MLBPA has softened significantly on their stance in the past few days, and while the MLB is making very mild concessions particularly in the places where it will not cost them actual dollars, it seems be still be at a stalemate.

I do not think any of the proposed changes above other than the alteration of arbitration and the CBT have huge financial impacts, and I believe should be somewhat easier to resolve. Technically the CBT does not have a financial impact as the owners could essentially just choose not to pay higher salaries (although that is unlikely to be case, unless the MLB owners decide to collude again). It’s intriguing to me that it has been highlighted as one of the primary sticking points.

I’m very disappointed on the MLBPA’s selection for the negotiating committee as the group of players are very heavily leaned towards the top end of players. If they were concerned about experience, having a second generation such as Biggio, Vlad Jr, or Bichette would allow for exposure as a league minimum and a voice of reasoning they trust. The PR alone is poor, although admittedly it has been fairly terrible on both sides.

I’m truly hopeful that they can overcome these final humps as the earnings from the expanded playoffs more than off-set any of the other changes in the CBA. I feel that I’m in the minority as I do not believe the owners were in the wrong for locking out baseball (the risk of a strike would have put leverage into the players hands). Baseball as much as we hate to think of it this way, is a business. Manfred, who is simply an elected official representing the owner’s interests, may be hated, but is doing what he is elected to in the efforts of making the businesses as profitable as possible. Personally, I think the owners are being extremely short sighted in a lot of their decisions and have far too great of a focus on the immediate profitability compared to the long term health of the sport.

Let me know your thoughts. What did I miss? Where does your opinion differ from mine? On each of the topics, which side’s proposal do you believe is fair?

Looking forward to the conversation.